Plus, Facebook’s Terrible Idea for a “Zuck Bucks” Digital Currency
Welcome to your Sunday digest…my weekly breakdown of the things we’re thinking about and talking about in the Global Intelligence world.
First up this week…Treasury Secretary Janet Yellen has made quite the U-turn on crypto.
For years, Yellen has expressed skepticism about crypto in general and bitcoin in particular.
She’s previously described bitcoin as highly speculative and “an extremely inefficient way to conduct transactions.”
That, of course, is entirely missing the point about bitcoin.
Gold is also an extremely inefficient way to conduct transactions. That’s what bitcoin is: digital gold. No one is paying for their coffee at the Stop-N-Go in tiny pieces of gold. And no one should be paying for it in tiny pieces of bitcoin, either.
Anyway, this week Yellen was wheeled out by the Biden administration to give a major policy address on crypto…and the tune sounded decidedly different.
In the wide-ranging speech, Yellen called crypto technology “transformative” and said that a digital dollar—a new version of the U.S. dollar based on the same blockchain technology as bitcoin—could become “trusted money comparable to physical cash.”
Yellen did not commit to developing a digital dollar, but said the U.S. would continue researching the matter and that any development process would take years.
She also said that regulation must keep up with innovation…indicating that the U.S. is planning to develop clear guidelines for trading crypto assets.
My take on all this: Yellen was laying the groundwork for two things: the regulation of the crypto sector (which has already begun behind the scenes and is a good thing), and the launch of a digital dollar, also known as a central bank digital currency.
On the first point, regulation is something that crypto has needed for years. It will only make crypto stronger. At the moment, the sole reason everyday Americans keep their money in Main Street banks that offer 0% interest, rather than crypto-banks that offer 10% interest or more, is the lack of clear regulation and consumer protections. As regulations continue to unfold, much of the traditional financial sector will be gobbled up by crypto.
On the second point, the U.S. will have to develop a digital dollar. Biden knows this. Yellen knows this. Republicans know this. America cannot stand still while the rest of the world pushes ahead. (China’s digital currency is already being rolled out.) Banks and traders know what Yellen’s coded language about researching a CBDC really means—Get ready, a digital dollar is coming.
This speech was the U.S. government acknowledging that it will have to embrace the crypto future. 2022 is gonna be a big year for crypto.
Speaking of backtracking on crypto…Jamie Dimon.
Regular readers will know that I harbor particular disdain for the hypocrisy of JPMorgan’s CEO.
For years, he’s slammed bitcoin as a “fraud” that will eventually blow up, and criticized cryptocurrencies like bitcoin for “having no intrinsic value.” All while his bank sells bitcoin to its wealthy clients.
But this week, like Yellen, he was singing from a different song sheet…
In his annual shareholder letter, Dimon wrote that “decentralized finance and blockchain are real, new technologies that can be deployed in both public and private fashion.” (Decentralized finance, or DeFi, is traditional finance services, but conducted using crypto technology on the blockchain.)
“JPMorgan Chase is at the forefront of this innovation,” he added, highlighting the bank’s blockchain network Liink and its cryptocurrency, JPM Coin, which JPMorgan clients can use to transfer U.S. dollar deposits.
Oh, I get it, Jamie.
When it’s JPM Coin, it’s a useful technology. But when it’s a crypto that you don’t control like Ethereum or bitcoin or Solana, it has no function or intrinsic value.
This is the problem with our financial system.
The moneyed elite that Dimon is part of do everything they can to keep the newest innovations and opportunities for themselves and their wealthy friends. Only when the period of real growth and gains have passed will they let the little guys access whatever scraps are remaining.
It’s the same system they use with initial public offerings of stock. Ordinary investors are locked out of the best IPOs, so that wealthy investors can hover up all the big, initial gains.
Don’t let the elite class scare you off crypto…it’s the future.
I mean, that’s what they’re telling their own investors.
Finally, this week…grandpa Facebook has a terrible idea.
According to new reports, Facebook—or Meta, if you want to follow its idiotic rebranding—plans to launch a new currency that would be usable only on its platforms.
The unofficial, in-house name for this currency is “Zuck Bucks.”
That catchy name, after the company’s definitely-not-an-android CEO Mark Zuckerberg, is about the only thing that makes sense about this idea.
You may remember that Facebook previously tried to launch a cryptocurrency in 2019, called Libra, later renamed Diem. That failed.
This new money would not use blockchain technology (the secure, public ledger technology that all cryptos are based on), but would be controlled by Meta directly. This is not a cryptocurrency. It’s just Disney Dollars…but digital.
To be fair, Facebook has had success with this kind of funny money before.
The social media company launched Facebook Credits in 2009. These were used for in-app purchases in games like FarmVille. And there were successful. In fact, Facebook ended up shutting down the Credits service because it became too popular overseas, which led to big problems with foreign currency conversion.
Still, I expect any new Zuck Bucks initiative to fail, if and when it’s rolled out.
Back in 2009, Facebook was fun, cool, useful. People under 40 actually used it.
Today, none of those things are true. So, yeah, I’d pass on Zuck Bucks and keep my money in real cryptocurrencies.
That brings us to the end of this week’s digest. Many thanks for being a subscriber. And if you have any feedback or questions, reach out through the contact form on the Global Intelligence website.