In This Newsletter
EO Reports
This month, the White House released a series of reports in response to the Biden Administration's March executive order (EO) on the responsible development of digital assets. The Office of Science and Technology Policy (OSTP), Department of the Treasury, Department of Commerce, and the Department of Justice released reports. In this week's issue, we are diving into key policy objectives and findings from a selection of these reports.
The OSTP released its report on the Climate and Energy Implications of Crypto-Assets in the United States. The report estimates that the United States hosts about a third of global crypto-asset operations, which currently consume about 0.9 percent to 1.7 percent of total US electricity usage. This range of electricity usage is the equivalent of all home computers or all residential lighting usage in the United States. The report calls attention to Bitcoin's proof of work consensus mechanism as the largest contributor to electric usage. The report recommends policies to reduce greenhouse gas emissions, collect data on the environmental impacts of crypto, and transparent reporting by crypto firms on their energy usage and efficiency.
The Department of Commerce released its report on Responsible Advancement of US Competitiveness on Digital Assets. The report focuses on the role of digital assets as they relate to US trade. The Department of Commerce highlighted the potential benefits of technical interoperability between international payment services to reduce friction for international trade. The document calls for the Commerce Department's Minority Business Development Agency (MBDA) to publish a report in the coming months that focuses specifically on digital assets' potential as a vehicle for financial inclusion. The MBDA report will also consider the dangers of predatory inclusion.
The Department of Justice published The Role Of Law Enforcement In Detecting, Investigating, And Prosecuting Criminal Activity Related To Digital Assets. The department's report focuses on anti-money laundering and combating the financing of terrorism protections. The report reiterates and expands on some of the objectives and concerns outlined earlier this year in the How To Strengthen International Law Enforcement Cooperation For Detecting, Investigating, And Prosecuting Criminal Activity Related To Digital Assets. The focus in both reports is on cases of successful interagency cooperation. This demonstrates the administration's willingness to regulate the digital asset space through enforcement action in the short and medium term.
The Treasury Department's report on The Future of Money and Payments considers the recent innovations in instant payment settlement offered by digital ledger technology. It also considers the technology's potential to advance financial inclusion in the US. The report recommends that the administration studies a potential US Central Bank Digital Currency, encourages the use of instant payment systems, establishes a federal framework for consumer protections, and works to improve the efficiency of cross-border payments.
A complete summary of the reports is available on the White House's website.
Web3 IRL
The FinTech team participated in Web3 IRL, an event hosted by Coinbase where web3 startups conducted live demonstrations of use cases for their products and services. The event showcased applications and use cases for utility tokens, local currency, and decentralized exchanges.
Filecoin is a decentralized storage platform where users can offer spare storage space in their hard drives. Proactive Investors describes it as crypto's answer to Amazon Web Services. In exchange for offering storage space, users receive Filecoin tokens. These tokens are generated using the Ethereum blockchain. Customers can buy access to this storage space with the Filecoin token, which can be bought and sold on third-party digital asset exchanges.
The Filecoin Foundation presented its partnership with Starling Labs tracking evidence of war crimes in Ukraine with its decentralized storage protocols. The initiative demonstrates the power of decentralized storage to protect the private information of vulnerable people. Decentralized storage limits the ability of perpetrators to destroy evidence by eliminating the vulnerabilities of a single point of failure. Multiple copies of the evidence are stored on different drives throughout the global network to prevent tampering.
Celo and $OAK presented their unique use cases for local currency. The idea of local currencies predates the advent of blockchain. They are unofficial currencies widely accepted by participating merchants in local economies and, in some cases, issued by trade associations and community groups. Local currencies aspire to promote development and growth by keeping money circulating inside the community while avoiding interchange fees charged by third parties. New experiments in local currency have been taking advantage of blockchain's transparency, interoperability, and digitization.
The mobile native blockchain Celo has partnered with community banks in western Massachusetts to create a version of the longstanding local currency Berkshares on the blockchain. Celo demonstrated how to buy and exchange its digital Berkshares at the event. The over 400 merchants participating in Berkshares hope that transitioning to a cryptocurrency will make it easier for community members and tourists to convert cash to Berkshares.
On the other side of the country, the local currency $OAK is under development in Oakland, California. The platform has a mission to further financial empowerment and inclusion by keeping more money circulating in the local economy and reducing transaction costs within the community. $OAK will offer a merchant payments network, a community governance system, and a community ownership tool to keep value and governance inside the Oakland community.
Another use case demonstrated at the event was the algorithmic crypto swapping platform Uniswap. This platform enables crypto traders to exchange their crypto for a different digital asset of equivalent value without having to surrender custody of that asset to a third party or exchange. The protocol enables trustless exchanges between different cryptocurrencies without the need for centralized intermediaries such as exchanges or hosted wallets. This results in low fees, increased security, and improved decentralization.