White House Feels the Pressure of Cryptocurrencies

March 22, 2023
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white houseHouston, we have a problem. That’s the takeaway about cryptocurrencies from the White House’s most recent Economic Report, a historically dry book produced annually to comply with the Employment Act of 1946. The President’s 2023 report, however, is markedly different from 2022 or any previous year in that it laboriously bewails the persistence and pervasiveness of cryptocurrencies. For example, the report uses the word crypto 255 times in its 2023 report compared to zero times the year before.

The report labels crypto assets as “speculative investment vehicles” that “generally do not perform all the functions of money as effectively as sovereign money” that can also be “harmful to consumers and investors.” Despite this, the United States government is finally being forced to contend with the reality that cryptocurrencies continue to enjoy a collective $1 trillion+ market cap despite all the scams, collapses, price declines, and rug pulls. Bitcoin and Ethereum combined are $775 billion at the time of this writing, something that the White House has apparently given little thought to in previous years. In 2022 neither earned any mention at all.

Annual Report Year Mention of crypto Bitcoin Blockchain Digital Asset
2023 255 75 61 45
2022 0 0 0 0

Finally trying to play catchup, the White House leveraged its criticisms of crypto to pitch its own centralized competitors in the works, the FedNow Instant Payment System and a Central Bank Digital Currency (CBDC). The challenge with FedNow is that it can’t be implemented by force of the government alone.

“FedNow requires commitment and active engagement by the private sector to make it interoperable, which means connecting and communicating with other payment services,” the report states. “While noting that interoperability can take different forms, the Federal Reserve has maintained that it alone cannot fully establish the interoperability of FedNow; achieving this will require active partnership and collaboration with the financial industry.”

“Certain innovations, such as FedNow and a potential U.S. CBDC, could help bring the U.S. financial infrastructure into the digital era in a clear and simple way, without the risks or irrational exuberance brought by crypto assets,” it concludes. “Hence, continued investments in the Nation’s financial infrastructure have the potential to offer significant benefits to consumers and businesses, but regulators must apply the lessons that civilization has learned, and thus rely on economic principles, in regulating crypto assets.”

Merchant Loses Whole EIDL After Attempting to Earn High Yield On It

July 25, 2022
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money bombIt’s a tale of Covid EIDL relief gone wrong. A small business owner in Colorado Springs, CO is begging for his funds back after taking the entire lump sum of his EIDL funds ($525,000) and depositing them with a high-yield non-FDIC insured cryptocurrency tech company. The tech company, Celsius, declared bankruptcy less than two months later, yanking the merchant’s EIDL funds with it. Celsius was not a bank, the arrangement not a true deposit account, and the funds not FDIC-insured.

In a letter submitted by the merchant to the bankruptcy court, he says that he deposited the funds there to “earn an APY to help pay back the 3.9% on the loan…” He further added that he believed his account to be safe because of the site’s Terms of Use.

“The funds in my Celsius Custodial account are not mine, they are the US Governments and I my entire business is secured and backed by these funds,” he wrote. “If they are not returned, my business would go bankrupt, my 15 employees would be let go, and 14 years of my life’s work lost and at the age of 49 years old, I would have to start over with nothing.”

Prior to the bankruptcy, Alex Mashinsky, Celsius’ CEO, oft touted the phrase: “banks are not your friend.”

Be Careful When “Financial Consultants” on LinkedIn Offer Crypto Advice

June 28, 2022
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LinkedInAccording to CNBC, fraudsters are disguising themselves on LinkedIn to trick users into financial schemes. What may seem like a simple networking conversation could be a tactic to develop trust until the mark is presented with a fraudulent crypto investment opportunity. These fake accounts on LinkedIn often pose as financial consultants. In an interview with CNBC, a group of victims that came forward revealed they had individually lost $100,000 to as much as $1.6 million from such scams.

LinkedIn claims they removed 32 million fake accounts just in 2021 alone. There are several warning signs listed on the site that give examples of a scam message including grammar mistakes, messages that ask for personal information, offers that seem too good to be true and if they are not addressed to you personally.

Sean Ragan, the FBI’s special agent in charge of the San Francisco and Sacramento field offices, said “It’s a significant threat. This type of fraudulent activity is significant, and there are many potential victims, and there are many past and current victims.”

New Owner of Loan.eth Says its Worth Millions

June 8, 2022
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make money!Less than two months after spotlighting a new domain name market linked to the Ethereum blockchain, the name loan.eth was sold on a secondary market for the equivalent of $45,000. It’s not a website domain like one would expect with a .com or a .net, but rather a crypto wallet address shortener that can double as a screen name and authentication service on web 3.0. That’s just the tip of the iceberg of the utility that a .eth domain can offer.

Although most people may not be familiar with .eth domain names, the new owner of loan.eth, who goes by @BloomCapital_ on twitter, is so confident that such names will be adopted in the future, that he believes the value of this one will be many times what he paid for it.

“Just so it has to be said, Loan.eth won’t be sold for less than $10M,” Bloom wrote. Bloom said he considers loan to be the top .eth name that he has.

Senior Business Lending Exec of Square Has Moved to Coinbase

May 16, 2022
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coinbaseRonak Daya, who spearheaded several of Square Capital’s lending divisions, including “head of product for business lending” and “head of product for external lending and partnerships,” announced on twitter that he had moved on from the company. He had been involved in SMB lending for 7 straight years. His new role? Head of Financing Products at Coinbase.

If you thought Coinbase was just about buying Bitcoin, you’re wrong. Daya announced that he’ll be leading a team “to build lending and financing products both for consumers and institutional clients.”

“As I explored what came after Square, my primary focus was on challenging myself to go in a fundamentally new domain/area, and build for a new customer,” Daya wrote. “The priority was learning. Learning by building in domains that I am passionate about, but know little about.”

Convinced that the world is moving towards becoming a crypto-native economy, Daya added that he wants to “play a part in using trust, ease and education to onboard the next billion customers to a new financial system.”

Currently, Coinbase already offers a lending product, loans up to $1 million at 8% APR with monthly payments and no credit check. Though Bitcoin is used as collateral, payments are made by monthly ACH debit or through a linked USD wallet.

Join the deBanked Team in NYC for a Night of Networking in Web3 & Crypto

May 8, 2022
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The Refinery Rooftop NYCThe team behind deBanked is hosting a 3-hour open bar in New York City this Wednesday night on May 11th from 6-9pm. It’s called deCashed. deBanked readers interested in Web3, NFTs, and crypto are welcome to attend the event being held at The Refinery Rooftop.

Sponsored by Artchive and designated as the first in-real-life meetup for enthusiasts of the Ethereum Name Service’s recently formed “10KClub,” deCashed intends to bring crypto-capable folks together for a night of fun, networking, and cocktails.

“I think there is a big misconception among folks who associate crypto with things like the value of bitcoin,” said Sean Murray. “In my opinion, cryptocurrencies are not investments. They’re payment tools and a means of identity. If you’ve soured on crypto because you were told a coin was going to go up and then it went down instead, that is unfortunate because the actual use-cases for crypto are just starting to be used and are on the verge of mass adoption. You don’t need to invest in any coins, just be knowledgeable of the infrastructure.”

Twitter, for example, has already implemented a limited Web3 mechanism in which ethereum-based NFTs can be used as profile pictures for users that connect their wallets. Instagram too is slated to roll out integrations with ethereum, solana, flow, and polygon THIS WEEK as social media the world over begins its slow evolution forward. Coinbase too rolled out its own social network last week. Similarly, a handful of non-bank lenders have already pivoted to smart-contract-based loans in which lenders are effectively 100% insulated from loss.

Seven years ago there was a big rush for small business lenders to incorporate social media activity into the underwriting process with the premise that much could be learned by what businesses say, share, and present themselves as on social media. Today, social media users are slowly gravitating toward a blockchain-based experience connected to their digital wallets in which their bank statements and their online photos are effectively accounted for in the same system. Do you know how to examine that?

See you at the deCashed three-hour open bar this Wednesday night in NYC at The Refinery Rooftop from 6-9pm if Web3 and crypto appeals to you. Please register in advance. If you need help, e-mail or call 917-722-0808.

deBanked Spins Off Crypto News into a Separate New Brand

February 28, 2022
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deCashedMove over de-banked, one segment of fintech is becoming completely de-cashed as crypto transactions continue to flourish. The universe of bitcoin, ethereum, blockchain, smart transactions, and NFTs only scratch the surface of the innovation and potential that could one day replace the financial system as we know it.

deBanked began reporting on crypto in 2014 in the early days of Bitcoin and since then, through fits and starts, has increased the amount of coverage in that space. After much internal deliberation, our team decided at the end of 2021 to create an off-shoot brand focused entirely on crypto-related news, deCashed.

deCashed will cover everything from crypto-lending to fintech to smart contracts to NFTs. deBanked launched its own NFT smart contract on the Ethereum blockchain last September and deBanked Chief Editor Sean Murray will be speaking at NFT NYC in June 2022.

“Everything with the deBanked brand and business will remain the same,” said Murray. “I’ve been using and following cryptocurrency for eight years at this point. deCashed will finally provide us with the journalistic runway to expand our horizons into a market we already know and one that has so much untapped opportunity.”

As independent media, deCashed is still in its early days. “It’s live already but stay tuned,” Murray said. “We’ve been talking about doing this for a really long time.”

Flash Loans: The Seemingly Risk Free, Instantly Repaid Lending Trend Taking Over DeFi

January 27, 2022
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EthereumIt’s a loan that can never be defaulted on, is paid back in seconds, and brings massive return potential. There are no qualification minimums for the borrower, no collateral needed, and minimal risk for the lender. That’s because the loan is funded and repaid in the same transaction.

This type of lending is highly prevalent in the NFT market, where JPEGS are being bought and sold for hundreds of thousands, sometimes millions of dollars, according to a source close to deBanked.

The source, who recently made the switch from nearly a decade in traditional finance to being a major proponent in the web3 online community, said that this type of funding is particularly dominant with the purchasing of CryptoPunks—  a collection of ten-thousand NFTs that can cost upwards of $10 million each.

A flash loan is atomic, meaning that it is indivisible. In computer science, things are atomic when they must be executed in full in-order for a particular thing to take place.

Due to the way smart contracts on the blockchain work, if the contract is broken, it’s nulled. With flash loans being written on smart contracts, the funds are immediately sent back to the lender if anything out of the ordinary occurs in the funding process. Thus, the loan can never be defaulted on. 

A hypothetical real-world example of this could be an auto dealer flipping vehicles. If a dealership borrows money to purchase two-million dollars of inventory that they already have buyers for, they could work it into the contract with the lender that the only way the funds would be released is if every car in that inventory is sold for a predetermined amount. If the lender, dealer, and buyers all hold up their end of the deal, the funding can instantly take place and then be repaid.

In what some have called ‘lending on steroids’, the movement of money in flash loans is tremendous. According to Aave, an open source and non-custodial liquidity protocol, flash loans as high as $200,000,000 have been reported as funded and repaid.

It’s seemingly a lender’s dream, a set-it and forget-it smart contract that does all the work without risk. But the purpose of the loan may not be known. For example, a flash loan for $532 million last October had the appearance of being used to finance the most expensive NFT purchase in history. The problem? Both the borrower and the lender were the same person.

Which all begs the question, why is a loan necessary in the first place if the borrower can repay it in the same transaction? Perhaps because it eliminates counter-party risk in a type of transaction considered among the most risky, crypto. The cost of a flash loan, borrowing funds for mere seconds, is probably more attractive than a flash loss, in which the other side doesn’t live up to the terms of the deal and in a flash… is gone.