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O crypto tree, O crypto tree

Chew Sutat
Chew Sutat11/3/2021 02:54 PM GMT+08  • 7 min read
O crypto tree, O crypto tree
The regulated space, especially in the Wild West, may not be the best assurance for relying on crypto or capital markets
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Q: Facebook has already morphed into Meta, have you missed a beat?

A: There is a certain Jomo, but for those who need to scratch that itch, perhaps there are alternatives beyond crossing into the Metaverse directly!

Christmas came early for crypto enthusiasts last week. No, I wasn’t referring to Bitcoin’s quick recovery from its one-day fall from US$61,500 to US$58,000, which then just as inexplicably bounced back by the weekend to where it started.

Rather, on Oct 27, a Bloomberg report had the headline, “Singapore minister sees a place for crypto in Asia hub”. The report, quoting Senior Minister Tharman Shanmugaratnam, was widely carried by the mainstream media, and received further amplification within the echo chambers of the legions of crypto and blockchain enthusiasts, who truncated the already unqualified headline to extrapolate into every murky corner of service or coin they were peddling.

Perhaps it was this butterfly that was stepped on that helped lift the Bitcoin price. Perhaps not. But who knows, really? It could have been the Bitcoin ETF launched the week before on Nasdaq, aggregating more participants, or not.

At first glance, such headlines rekindled 2018 and 2019 memories of the fake websites and social media ads, including one with a quote falsely attributed to Tharman exhorting Singaporeans to invest in Bitcoins.

For those who did go in then, they would have made lots of money — that is, if they were not among those who lost their passcodes to their digital wallets, had their coins mysteriously drained from dodgy exchanges, or remained unscathed from the spate of ICO (initial coin offering) scams.

Some have since gone on to even greener pastures over the rainbow bridge like Crypto Alt’s, or NFTs (non-fungible tokens). Others tout the virtue of safety in Coinbase (now listed in the US), stablecoins backed purportedly by real US dollars like Tether, or local financial institutions like DBS which have waded in to offer custody services, so the forgetful can also have peace of mind over the potential loss of crypto keys.

Stable — they are not

Interestingly for the (mainly responsible) media, a line attributed to Tharman in the Oct 27 article, “Stablecoins, for example, can have a role in traditional payment systems”, was corrected to: “Stablecoins, for example, can have a role together with traditional payment systems”.

Of course, the further you go from the mainstream and generally well-behaved LinkedIn “shares”, and into the darker corners of the web, that’s the kind of little detail that will be selectively lost in translation.

Before one marvels at the “returns” from Bitcoin, they should know about Shiba Inu (SHIB) — which is a coin, not just a cute Japanese dog. Since it was created last August, this increasingly popular coin has returned some 60 million per cent. Bitcoin, over the same period, was a pathetic five-bagger.

The one quadrillion SHIB coins owned by the roughly 800,000 holders are worth some US$35 billion ($47.2 billion) — equivalent to the value of the top 10 stocks of the Straits Times Index. Like Dogecoin, SHIB rises every time Elon Musk (who has adopted a Shiba Inu called Floki) tweets.

Calls to have it listed beyond the usual suspect crypto exchanges — to be available for trading on Robinhood, for example — had fuelled the late October surge.

The fact that SHIBSwap, a decentralised exchange that allows “investors” to stake their SHIB to generate interest, is akin to the relatively more conventional DEFI (decentralised finance) like the USD Coin has merely egged on punters even more.

This logic and gravity-defying surge in the value of something created as a joke does make one question where financial regulators in the West are in this picture, or the morality of platforms that offer this casino claiming the virtues of decentralised finance.

In a notable example of self-restraint (or self-policing), Ethereum co-founder Vitalik Buterin, who was gifted a large quantity of SHIB, sent 400 trillion SHIB coins to a dead blockchain address, effectively reducing the circulation of this coin.

Furthermore, instead of just “burning” his coins, Buterin is trying put this wealth to proper use by donating 50.7 trillion SHIB coins to the India Covid-Crypto Relief Fund. Yet, at some point, this may fall like a house of cards, and one could be quite literally be left holding on to the dogs. Or puppies may spawn.

Meanwhile, there are signs of closer scrutiny. Take for example Tether, described as one of the most important “stablecoins”, with the supposed backing of real assets justifying its US$69 billion market value.

In an expose, Bloomberg Businessweek followed the money trail of Tether, which was created by folks who were targets of a criminal investigation by the US Department of Justice, and questions are left unanswered.

If Tether reaches the end of its, ehrm, tether, or is tethered by the Federal Reserve, could that be the Lehman moment for crypto?

The central bank-backed and regulated stablecoins, like the project in Singapore, China or the US, may right-size these cowboys in time using the applications of regulated FinTech and technology, rather than rely on the intrinsic value of purported puppies, kittens and memes.

Jomo

In response to my article, The Fear of Fomo (yes — two negatives may make a positive) in The Edge Singapore (Issue 1007), I have been introduced to the concept of the Joy Of Missing Out (Jomo). In investments, as in life, time will indeed tell. I was nonplussed about the NFT that was sold for US$532 million, but it was subsequently established to be just classic round-tripping at play.

Just like how the media writes about companies delisting from Singapore in favour of foreign shores, there is hardly any follow-up on what happens after those record NFT sales.

Likewise, I missed out on the Digital World Acquisition Corp SPAC which soared 1,200% on plans to merge with Donald Trump’s (announced but not set up yet) new business to rival Twitter and Meta (Facebook’s newly renamed holding company). I was mildly amused that it had corrected only around half of that in a week. After all, many of the new SPAC investors have probably “donated” to the various scandals that are unravelling through the court by his team and affiliates anyway.

So here is this week’s public service announcement. The regulated space — especially in the Wild West — may not necessarily be the best assurance for relying on crypto or capital markets. It is predicated on caveat emptor plus class-action lawsuits — after the blow-ups.

In Singapore, increasingly there are platforms that are properly licensed by the Monetary Authority of Singapore. That does not mean you will keep your shirt if the investments sour. However, it does mean that these platforms and promoters are more likely to have certain standards and processes that warrant the trust mark. That’s why the amendment of “in” with “together with” in the line attributed to Tharman is significant.

If you must, digital assets including coin investments that are professionally managed offer an added layer of security. If they seem a tad more boring, for example, giving “only” double digit returns like what some crypto arbitrage funds promise, then by all means go direct — through a legit platform. Just don’t moan about it when gravity or common sense catches up.

Chew Sutat retired from Singapore Exchange (SGX) in July this year. He was senior managing director of SGX, and member of SGX’s executive management team for 14 years. He serves on the board of ADDX and chairs its Listing Committee. Chew was awarded FOW Asia Capital Markets Lifetime Achievement Award this year.

Photo of Dodgecoing by Executium on Unsplash

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