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July 7, 2022 // David Baum and Shaina Anderson  //       //  Opinion

Dispatches from the Crypto Revolution: Winter is Coming

At a critical junction of cryptocurrency history, the industry faces its largest shock to the system. The recent collapse of stablecoin Terra Luna triggered an industry-wide run on cryptocurrencies, with the bottom yet to be determined.

Amidst this seismic drop in value, calls for regulation continued to pick up momentum as federal regulators testified before the U.S. Senate that the decline of Terra Luna represents the dangers of unregulated financial products. This period of downturn and cultural discussion occurred just as senators Kirsten Gillibrand, D-NY, and Cynthia Lummis, R-WY, released a bill attempting to address how regulators will treat elements of Decentralized Finance, otherwise known by the shorthand "Defi." 


This downfall of the markets comes hot on the heels of one of the largest crypto events in the world – the Consensus 2022 event in Austin, Texas, where the Lummis- Gillibrand bill and the Fed's evolving fiscal policy were front and center. The bill attempts to set the framework for important issues in the industry, including digital asset exchanges, taxation, stablecoins and conformity with laundering laws. The centerpiece of that is the bill’s attempt to the clarify an issue that has vexed governments and regulators in the United States and other countries. Are these assets considered a security or commodity?  

Determining that question has broad implications. Under the proposed framework, most altcoins will be deemed securities and fall under the regulatory purview of the SEC. However, two of the biggest coins, Bitcoin and Ethereum, would be deemed commodities and be regulated by the CFTC. Regulators will make that determination for the thousands of coins in circulation and the thousands yet to be created through the lens of the “Howey Test” – a long-standing precedent established by the U.S. Supreme Court that determines if a transaction is an investment contract.  

If the coin passes the Howey Test, it is considered an investment contract called a security –traditional finance or “TradFi” would consider stocks and bonds as securities – and the coin is overseen by the SEC.  

However, this turns out, it is abundantly clear the Federal government is not sleepwalking on this, and it is a matter of “if” not “when” regulations will be established.  

Blockchain spans a broad range of topics, and there was no shortage of talk tracks during the multi-day event, which included everything from politicians and business leaders' predictions to daily mental health led by blockchain CEOs. One highlight was Jill Madrino with Nasdaq’s “Trade Talks” presentation called “Biggest Takeaways From Consensus and Bitcoin is Reacting to the Latest Inflation Data.” She interviewed industry leaders about important trends, notably CoinDeck U.S. Markets Reporter Helene Braun.  

Braun proudly proclaimed the Consensus conference showed that people, “Don’t care that the markets are down, that Bitcoin is down… just a lot of like-minded people coming all together in one room...” This showed a togetherness and a strengthening of the cryptocurrency and blockchain industry. It is easy to work together during calm seas, but will that sense of community hold during this recent market turmoil?  


In addition to blockchain and hedge funds, the excitement of new technologies heavily revolved around discussions about what comprises the Metaverse and the development of NFT (non-fungible token) technology. Genesis' Leon Marshall was the moderator for "The Institutionalization of NFTs,” in which Meta4 Capital Managing Partner Brandon Buchanan and Arca Manager Alexander Fleyshman led the discussion on how digital ownership is developing out of NFT technology.  

The real takeaway of their quippy, fast-paced discussion was their mutual agreement the “aha!” proclamation moment of Consensus was that NFTs demonstrate the overall, crypto-environmental strengthening of digital ownership. According to Leon and Alexander, for the first time in history, digital authorship is a certain and very realizable goal for blockchain. 


Many early-stage companies attract their customer base by leveraging NFTs as Trojan Horses for bringing in new clients and businesses to the crypto scene. A challenge for NFTs and Web 3.0 offerings is linked to the asymmetry of information, which made it difficult for newbies to experience and take to heart blockchain. In other words, no matter how bold and innovative the technology is, without clarity of message, investors and users will stay on the sidelines.  

Miami office General Manager David Baum works at the crossroads of technology, business, and politics and serves as a valued strategic advisor to CEOs, entrepreneurs and founders. He oversees the Agency’s global corporate blockchain team from its Miami HQ. In 2020, PRWeek selected David to its “40 under 40” list.   Director Shaina Anderson, based in Chicago, is a former university Professor with years of experience in back-end data theory, block-chain and machine learning projects in Silicon Valley. 

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