MARCH 13, 2022 | Issue 06
ARE YOU FEELING UNSETTLED ABOUT THE FUTURE OF THE US DOLLAR?
I am. The more I read about how the US economic sanctions against Russia could shake the entire global money system, the more concerned I become.
I wrote about this last week after Biden announced the freezing of Russia's central bank reserves.
The past week, I read several articles that I wanted to share with you. Here are a few highlights.
Nic Carter, general partner at Castle Island Venture and cofounder and chairman of Coin Metrics writes:
"It’s important to untangle the perceived morality of this action – a reaction to an unjust invasion – and its prudence. While seizing Afghan or Russian reserves may feel righteous and just, the immediate effect of such actions is to completely undermine the credibility of dollar debt as an international savings device."
Credit Suisse interest rate strategist Zoltan Pozsar wrote:
"Bretton Woods II was built on inside money, and its foundations crumbled a week ago when the G7 seized Russia’s FX reserves.” Federal Reserve Chair Jerome Powell said in response to a question about China and Russian relying less on the US dollar:
"Over time though, I suppose it would diminish our status as the reserve currency. It’s also possible to have more than one large reserve currency, and there have been times where that was the case. So it’s not really clear.” Where does this leave bitcoin? Bitcoin supporters believe a fractured monetary system will drive more interest in gold and bitcoin. Time will tell. Thanks for reading Crypto News for Realtors and telling your colleagues about it. I'd love to add them to the email list. Send their full name and email to richard.hopen@compass.com. Let's keep growing our community of crypto-savvy agents! As always, reach out to me. I love meeting new colleagues around the US. I'm here to talk about any crypto issues you're contemplating. Enjoy the newsletter, have a great week, and stay crypto curious! Rich Hopen PS. You can find all CNR newsletters here.
CRYPTO REAL ESTATE NEWS
▶︎ Are Real Estate NFTs Impractical?
The seller of NFT-backed Tampa house said that a traditional sale would have been more profitable.
In a fascinating interview with The Block reporter Anushree Dave, the seller, Leslie Assandra, explained why she sold her house as an NFT.
Assandra started a crypto business and she wanted to "show people a practical example in real estate."
Instead of minting her own NFT, Assandra hired Propy to mint the NFT, market the NFT, and manage the NFT auction.
The cost for Propy's services was $14,700 plus additional fees. The winning bidder's auction price was $653,163 (210 ETH), but the property's reported MLS sale price was $631,790. The $21,373 difference covered Ethereum "gas fees" and other undisclosed fees.
The property was also listed on the MLS with real estate broker Amy Heckler. Assandra and Heckler agreed that Heckler would receive a commission even if the seller accepted an NFT bid.
Heckler's MLS listing language explained that the seller would defer accepting any offers until after the NFT auction.
There was an open house and it was well attended. Several strong offers were submitted.
Once the auction ended and a winning bidder was chosen, all NFT fees were paid. It then became clear to the seller that she would have made significantly more money if the sale was a traditional sale.
When the seller was asked if she'd recommend selling a property as an NFT, she said, "The system is still clunky... you're doing it because you want to be part of that development process."
After the auction ended, Assandra didn't sell her ETH cryptocurrency. She watched the crypto price take a wild ride as geopolitical events influenced the market.
Between the NFT auction and March 8, 2022, Ethereum dropped in price from $3,110 to $2,2498. Her net NFT proceeds decreased by $124,327.
Assandra said, "[T]his isn't for the faint of heart."
CRYPTO NEWS
▶︎ Biden Issues Executive Order Requiring US Departments and Agencies To Study Crypto
The crypto industry has been under a cloud of regulatory uncertainty because federal agencies and politicians have different interpretations of crypto. There is also jockeying for regulatory authority, a lack of understanding, and minimal department coordination.
An executive order was issued this week that takes a big step in solving these problems. It lays out a path for the federal government to study an array of issues and produce reports.
The order identified the administration's key priorities:
Protecting US interests
Protecting global financial stability
Preventing illicit uses
Promoting responsible innovation
Promoting financial inclusion
Promoting US leadership
I'll touch upon a few items. If you want to read more about the executive order, see Biden Issues Long-Awaited US Executive Order on Crypto by Nikhilesh De. ▸ Central Bank Digital Currency CBDCs were frequently mentioned in the Executive Order. A CBDC is digital currency issued by a country's government and produced by its central bank. It doesn't fluctuate in value like crypto currency and it's not held in a bank account.
Think of it as cash in your wallet, except it would be held in your digital wallet. Your digital cash balance is maintained on a digital ledger that is on a blockchain.
Some opponents of a CBDC argue that the private sector should create digital currency. They point to PayPal, Venmo, and Zelle. However, these payment companies have transaction costs and can take three days or more to settle.
Some crypto advocates point to stablecoins as a solution to crypto's volatility.
Stablecoins are cryptocurrencies that are pegged to the dollar. Regulators are wary of stablecoins because there is a lack of transparency and consumer protections.
Unlike the US, China jumped into CBDC and its digital currency, digital yuan (e-cny), received a lot of attention at the Olympics in China.
The US Department of Treasury was tasked by the President to submit a report by late September on the future of money, payment systems, and CBDCs.
▸ Investor Protection
The call for investor protection acknowledges that the government must understand the technology behind cryptocurrency and the problems with the current financial system.
The executive order acknowledged that the current financial system isn't meeting the needs "in a manner that is equitable, inclusive and efficient."
According to a senior administrative official on a press call, "Over five percent of American households are 'unbanked.'" Unbanked refers to those who do not use a bank or financial institution. He added that the US has the "highest percentage among G7 countries." (The G7 include: Canada, France, Germany, Italy, Japan, the United Kingdom, the US, and the European Union.)
The barriers to banking in the US explains why 37% of underbanked people (bank customers who rely on cash) and 12% of unbanked own crypto.
▶︎ Justice Department Will Pursue People, Banks & Crypto Exchanges Who Aid Sanctioned Russians
In response to concern raised by US elected officials, DOJ set up a task force to pursue those who help sanction evaders. This puts crypto exchanges on notice.
It is interesting that this announcement comes after the Treasury released its annual National Money Laundering Risk Assessment and stated that moving funds through crypto exchanges is not an attractive option for sanctioned Russians.
On March 17, 2022, the Senate Banking Committee will hold a hearing on sanction evasion. Jonathan Levin, the co-founder and Chief Strategy Officer of Chainanalysis will testify. Chainanalysis works with banks, business, and the government to analyze blockchain data.
CRYPTO CLASS - Smart Contracts
A smart contract is a computer program that automatically executes a transaction when certain conditions are satisfied.
A simple smart contract metaphor is a vending machine. The buyer selects an item, inserts payment and the machine delivers the item.
Smart contracts on the blockchain could include registering a vehicle, sending notifications, issuing a ticket, or even transferring ownership of real estate.
When the transaction is competed, the blockchain is updated. Parties to the contract determine the rules that control the transaction and define a framework for resolving disputes.
There are multiple benefits of a smart contract:
▸ Speed, accuracy, and efficiency. The contract is executed immediately after the conditions are met. Since there is no paperwork and no errors to correct, smart contracts are faster and more accurate.
▸ Transparency and trust. Since there are no third parties and all documents are encrypted, no one will question whether the information was altered.
▸ Security. Blockchain documents are encrypted and distributed. They are safe from hackers because a hacker would need to alter the entire chain to change a single record.
▸ Savings. There are no third parties, such as lawyers or banks, involved in the smart contract. This reduces transaction costs.
Ethereum is the most popular smart contract platform.
INFLUENCERS - People to follow
Nayib Bukele – @nayibbukele
El Salvador President Nayib Bukele led the effort for his country to be the first one in the world to adopt bitcoin as its legal currency.
Bukele argued that crypto would allow 70 percent of El Salvadorians, whom don't have a bank account, to be part of a country's formal economy. It would also enable cheaper remittances from abroad and reduce the country's debt with the International Monetary Fund.
RESOURCES – Books, websites, podcasts, articles
Bloomberg Crypto This mainstream business publication keeps current on crypto issues. They also have a free email newsletter.
CRYPTO WORDS – HODL, HODLER, HODLING
In December 2013, BTC had fallen from $716 to $438. GameKyuubi was on a Bitcoin forum and he drunkenly announced, "I AM HODLING." Hodling became crypto slang for holding during price drops.
OH, ONE MORE THING –
Thanks for reading! See you next week.
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