Category: Web/Tech
India Should Embrace Not Ban Crypto
Should India ban crypto in a return to foreign currency regulations of the past or embrace cryptocurrency? Shruti Rajagopalan has an excellent column reminding us of India’s old system of currency control under the License Raj.
If India proceeds with a rumored ban on cryptocurrency, it wouldn’t be the country’s first attempt to impose currency controls. This time, however, a ban is even less likely to succeed — and the consequences for India’s economy could be more dire. The country shouldn’t make the same mistake twice.
In the 1970s and 80s, at the height of what was known as the License Raj, Indians could only hold foreign currency for a specific purpose and with a permit from the central bank. If a businessman bought foreign exchange to spend over two days in Paris and one in Frankfurt, and instead spent two days in Germany, the Reserve Bank of India would demand to know why he’d deviated from the currency permit. Violators were routinely threatened with fines and jail time of up to seven years.
Imports required additional permits. Infosys Ltd. founder Narayana Murthy recalls spending about $25,000 (including bribes) to make 50 trips to Delhi over three years, just to get permission to import a $150,000 computer. Plus, since any foreign exchange that the company earned notionally belonged to the government, the RBI would release only half of Infosys’s earnings for the firm to spend on business expenses abroad.
Naturally a black market, with all its unsavory elements, emerged for foreign currency. The government doubled down, subjecting those dealing in illicit foreign exchange to preventative detention, usually reserved for terrorists. Businessmen selling Nike shoes and Sony stereos were arrested as smugglers.
The system impoverished Indians and made it impossible for Indian firms to compete globally. There’s a reason the country’s world-class IT sector took off only after a balance of payments crisis forced India to open up its economy in 1991.
…While details of the possible crypto ban remain unclear, a draft bill from 2019 bears eerie resemblance to the 1970s controls. It would criminalize the possession, mining, trading or transferring of cryptocurrency assets. Offenders could face up to ten years in jail as well as fines. Such a blanket prohibition would be foolish on multiple levels….
A related problem is that you may think you are banning a cryptocurrency but if you are banning something like Ethereum or Elrond what you are really banning is an experimental workspace, a platform capable of supporting an ecosystem of innovations in finance, art and new forms of cooperation and organization. As I said some time ago:
The Decentralized Autonomous Organization (DAO) is a new organizational form potentially as important as the creation of the corporate form in the 1600s.
and that’s just one example of how crypto will–in one form or another–under-gird much of our life in the 21st century in ways we don’t yet fully see. Banning is premature to say the least.
Moreover, the irony is that India has one of the world’s most advanced identity and payments systems, the India stack. By integrating the India stack with crypto systems regulated similarly to foreign currencies under India’s Foreign Exchange Management Act, India could become a leader in fintech. Balaji Srinivasan presents practical steps forward:
Basically, India doesn’t need to take a risk with a novel ban on the financial internet. It can just modify FEMA to regulate decentralized cryptocurrencies and national digital currencies as foreign assets. A 64-page report by the Indian law firm Nishith Desai Associates outlines in detail how that could work. In brief, the report recommends:
- Treating crypto as a foreign asset. FEMA provides language that could be used to expressly classify digital assets as “securities”, “goods”, “software”, or “foreign currencies” depending on their features and attributes.
- Regulating exchanges with startup-friendly licensing. RBI could use FEMA to regulate crypto exchanges as “authorised persons” per the Act, thereby permitting them to deal in foreign currency. Some provision would need to be made to accommodate startups, perhaps by monitoring small new licensees under a regulatory sandbox framework. By repurposing this well-established regulatory mechanism, crypto-assets become subject to all the existing safeguards that the Act provides, including RBI oversight and KYC/AML.
- Adopting KYC/AML rules. Most developed jurisdictions, including Australia, Canada, the EU, Japan, South Korea, and the US, have brought crypto-asset business activity within their AML regimes. Such an approach has also been recommended by the FATF. India can do this with a simple Central Government notification under the Prevention of Money-Laundering Act.
The FEMA-based model (or a close alternative) would allow us to turn all licensed, regulated Indian exchanges like CoinDCX, WazirX, Coinswitch, Zebpay, Unocoin, and Pocketbits into well-lit venues for trading cryptocurrency. Over time, they will also become huge drivers of remittances for Indians abroad performing remote work, thereby bringing capital into India.
Zero price markets in everything
Had enough Zoom meetings? Can’t bear another soul-numbing day of sitting on video calls, the only distraction your rapidly aging face, pinned in one corner of the screen like a dying bug? Well, if so, then boy do we have the app for you. Meet Zoom Escaper: a free web widget that lets you add an array of fake audio effects to your next Zoom Call, gifting you with numerous reasons to end the meeting and escape, while you still can.
You can choose from barking dogs, construction noises, crying babies, or even subtler effects like choppy audio and unwanted echoes. Created by artist Sam Lavigne, Zoom Escaper is fantastically simple to use. All you need do is download a free bit of audio software called VB-Audio that routes your audio through the website, then change your audio input in Zoom from your microphone to VB-Audio, and play with the effects.
Here is much more, via Schaffin and also Michael Rosenwald.
Those new Filipino service sector jobs
In the Philippines, one popular blockchain-based game is even providing pathways out of poverty and helping spread the word about novel technology. Created by Sky Mavis, a Vietnamese startup, Axie Infinity is a decentralized application (dapp) on the Ethereum blockchain where players breed, raise, battle and trade adorable digital critters called Axies.
Ijon Inton, an Axie player from Cabanatuan City, which is about 68 miles north of Manila in the province of Nueva Ecija, first learned about it in February of this year when his friend stumbled across an explainer video on YouTube. Intrigued by the “Play to Earn” element of the game, he decided to give it a go.
“At first I just want to try its legitimacy, and after a week of playing I was amazed with my first income,” said Inton, who is currently earning around 10,000 PHP ($206) per week from playing the game around the clock.
Inton soon invited his family to play, too, and after a few weeks, he also started telling his neighbors. A crypto trader since 2016, Inton helped his friends set up a Coins.ph account so they could buy their first ETH and get started. Now, there are more than 100 people in his local community playing to earn on Axie, including a 66-year-old grandmother.
Here is the full story, via Nicanor Angle. How would you have responded to these sentences a decade ago?:
“We definitely want to get people who are outside of Ethereum, outside of the dapp space, outside of NFTs, into Axie,” Jiho said. He has observed other Axie play-to-earn community clusters in Indonesia and Venezuela, but thinks this might be the first evidence of a multi-generational household of dApp users.
What lies next in store for us?
No you are not insane, yes you are allowed to giggle
An artwork by Beeple which exists only as a digital file and was sold as a “nonfungible token” for a staggering $69.3 million at an online auction handled by Christie’s on Thursday was bought by an investor known only by a pseudonym and who paid for it with cryptocurrency, the auction house said Friday.
“It feel like I got a steal,” said the buyer, who goes by the pseudonym Metakovan, in a Google Meet interview (without video) that was arranged by Christie’s.
Metakovan, the founder of the Metapurse, a fund that collects “nonfungible tokens” or NFTs, said he would be paying for the work and Christie’s fees in Ether, a cryptocurrency. “As we speak, I’m sending the last transaction,” he said.
The work he bought, “Everydays — The First 5000 Days,” is a collage of all the images that the digital artist Mike Winkelmann, known as Beeple, has posted online since 2007. The image had been specially created, or “minted,” by the artist for Christie’s timed one-lot online auction as an NFT. Such digital collectibles have no physical existence, but are given proof of ownership and authenticity using blockchain technology. “Everydays,” a JPG, was the first digital-only NFT auctioned by Christie’s.
Here is the full NYT story. Here is Metakovan speaking, along with an image. And here is Metakovan (“King of meta”) on his own identity, he is a Tamil living in Singapore.
The new version of “throwing away the key” — our prison regulatory state is failing us
According to Arizona Department of Corrections whistleblowers, hundreds of incarcerated people who should be eligible for release are being held in prison because the inmate management software cannot interpret current sentencing laws.
KJZZ is not naming the whistleblowers because they fear retaliation. The employees said they have been raising the issue internally for more than a year, but prison administrators have not acted to fix the software bug. The sources said Chief Information Officer Holly Greene and Deputy Director Joe Profiri have been aware of the problem since 2019.
The Arizona Department of Corrections confirmed there is a problem with the software.
As of 2019, the department had spent more than $24 million contracting with IT company Business & Decision, North America to build and maintain the software program, known as ACIS, that is used to manage the inmate population in state prisons.
One of the software modules within ACIS, designed to calculate release dates for inmates, is presently unable to account for an amendment to state law that was passed in 2019.
Senate Bill 1310, authored by former Sen. Eddie Farnsworth, amended the Arizona Revised Statutes so that certain inmates convicted of nonviolent offenses could earn additional release credits upon the completion of programming in state prisons. Gov. Ducey signed the bill in June of 2019.
But department sources say the ACIS software is not still able to identify inmates who qualify for SB 1310 programming, nor can it calculate their new release dates upon completion of the programming.
“We knew from day one this wasn’t going to work” a department source said. “When they approved that bill, we looked at it and said ‘Oh, s—.’”
Here is the full story, via Zach Valenta.
Causes of the sex drought
Among young men, declines in drinking frequency, an increase in computer gaming, and the growing percentage who coreside with their parents all contribute significantly to the decline in casual sex. The authors find no evidence that trends in young adults’ economic circumstances, internet use, or television watching explain the recent decline in casual sexual activity.
Here is more from Scott J. South and Lei Lei, via the excellent Kevin Lewis.
Singapore sentences of the day
Singapore has developed a “globally inter-operable” standard based on blockchain technology to facilitate cross-border verification of health documents, such as pre-departure COVID-19 test results, said Minister-in-charge of the Smart Nation Initiative Vivian Balakrishnan on Friday (Feb 26).
Speaking at the Committee of Supply debate for the Prime Minister’s Office, Dr Balakrishnan said that these notarised pre-departure test results will be available on the SingPass mobile app. The Government will also look into extending this to vaccine certificates.
Here is the full story. Of all those sentences and catch phrases, perhaps “Committee of Supply” is my favorite.
“Beeple is an artist”
Beeple is an artist.
He makes digital art—pixels on screens depicting bizarre, hilarious, disturbing, and sometimes grotesque images. He smashes together pop culture, technology, and postapocalyptic terror into blistering commentaries on the way we live. A recent frame depicted Donald Trump wearing a leather mask and stripper’s pasties, taking a whip to the coronavirus bug (title: “Trump Dominating Covid”). On the day Jeff Bezos announced he was kicking himself upstairs, Beeple imagined the Amazon founder as a massive, threatening octopus emerging from the ocean as military helicopters circled above (“Release the Bezos”).
Beeple has 1.8 million Instagram followers. His work has been shown at two Super Bowl halftime shows and at least one Justin Bieber concert, but he has no gallery representation or foothold in the traditional art world.
And yet in December the first extensive auction of his art grossed $3.5 million in a single weekend.
Here is the full Esquire article, do check out the accompanying images. The reproduced image is for sale here for one dollar. Here is the home page of Beeple. Here are more images.
The new world of digital art on the blockchain
In the 10 years since Chris Torres created Nyan Cat, an animated flying cat with a Pop-Tart body leaving a rainbow trail, the meme has been viewed and shared across the web hundreds of millions of times.
On Thursday, he put a one-of-a-kind version of it up for sale on Foundation, a website for buying and selling digital goods. In the final hour of the auction, there was a bidding war. Nyan Cat was sold to a user identified only by a cryptocurrency wallet number. The price? Roughly $580,000.
Mr. Torres was left breathless. “I feel like I’ve opened the floodgates,” he said in an interview on Friday.
The sale was a new high point in a fast-growing market for ownership rights to digital art, ephemera and media called NFTs, or “nonfungible tokens.” The buyers are usually not acquiring copyrights, trademarks or even the sole ownership of whatever it is they purchase. They’re buying bragging rights and the knowledge that their copy is the “authentic” one.
Other digital tokens recently sold include a clip of LeBron James blocking a shot in a Lakers basketball game that went for $100,000 in January and a Twitter post by Mark Cuban, the investor and Dallas Mavericks owner, that went for $952. This month, the actress Lindsay Lohan sold an image of her face for over $17,000 and, in a nod to cryptocurrencies like Bitcoin, declared, “I believe in a world which is financially decentralized.” It was quickly resold for $57,000.
Blockchains of course are being used to designate which copy is the authentic one. Is it such a big step from photography to this? Here is more from Erin Griffith at the NYT.
Addendum: The next step presumably is to introduce some price discrimination. Yes, there can be a “most authentic” original copy. But after that, how about some intermediate categories? “Well, this is the almost-original copy, defined on the “brother blockchain” here is another, somewhat closed related copy, defined on the “cousin blockchain,”” just as Japanese prints had different editions, etc.
Profile of Youyang Gu, data scientist
In mid-April, while he was living with his parents in Santa Clara, Calif., Gu spent a week building his own Covid death predictor and a website to display the morbid information. Before long, his model started producing more accurate results than those cooked up by institutions with hundreds of millions of dollars in funding and decades of experience.
“His model was the only one that seemed sane,” says Jeremy Howard, a renowned data expert and research scientist at the University of San Francisco. “The other models were shown to be nonsense time and again, and yet there was no introspection from the people publishing the forecasts or the journalists reporting on them. Peoples’ lives were depending on these things, and Youyang was the one person actually looking at the data and doing it properly.”
The forecasting model that Gu built was, in some ways, simple. He had first considered examining the relationship among Covid tests, hospitalizations, and other factors but found that such data was being reported inconsistently by states and the federal government. The most reliable figures appeared to be the daily death counts. “Other models used more data sources, but I decided to rely on past deaths to predict future deaths,” Gu says. “Having that as the only input helped filter the signal from the noise.”
The novel, sophisticated twist of Gu’s model came from his use of machine learning algorithms to hone his figures.
Here is the full Bloomberg piece by Ashlee Vance, I am especially pleased because Youyang was an Emergent Ventures winner. Here is Youyang Gu on Twitter.
Diem is getting underway
Diem has been through several iterations since it was first announced in June 2019, with adjustments not being limited to just a change of name. Now those behind the project are beginning to reveal where they expect Diem to sit within financial markets and how the stablecoin will overcome regulatory and structural hurdles as it enters use.
On 11 February, an OMFIF audience heard Diem’s plans of becoming a bridge between traditional banking and new, digital assets. Christian Catalini, chief economist at the Diem Association and co-creator of Diem, tackled many of the concerns surrounding it, presenting it as a tightly regulated organisation that is also incorporating some of the best features of new digital currencies.
Diem had already made the transition to focus on single currency stablecoins fully backed by reserves, concentrating on the Diem dollar initially and abandoning a move toward a permissionless system in the future. Catalini went further at the OMFIF meeting, detailing how Diem will not allow the stablecoin to be fractionalised or leveraged elsewhere.
In his session with OMFIF’s Digital Monetary Institute, Catalini also gave new insights into the ongoing regulatory process. Diem, in its payment license application, is essentially being treated as a new bank by its regulator, the Swiss Financial Market Supervisory Authority, Catalini said. Diem’s reserves follow closely Basel III’s capital requirements and incorporate additional buffers to account for redemptions…
Diem has always maintained that there will be no fractionalisation of reserves, but concerns about how to enforce this have lingered. Even without lending by the issuer, virtual asset service providers, such as wallet suppliers or operators, could engage in fractional reserve banking with the coins as collateral. Catalini revealed that Diem will address this risk with new requirements for these service providers to back liabilities fully with Diem coins.
This makes ‘Diem different relative to any stablecoin today’, Catalini said.
Developing…one lesson is never underestimate projects initiated or sponsored by Facebook! And more generally, the continued interest in stablecoins (which are not appreciating, by definition) shows there is very real interest in some kind of direct digital transfer mechanism, call it money if you wish. So I am happy to see some major players moving to fill this space and in a manner designed not to collapse once the regulators get their paws on it.
Here is the full story and further detail.
Cybercrime and Punishment
Ye Hong and William Neilson have solved for the equilibrium:
This paper models cybercrime by adding an active victim to the seminal Becker model of crime. The victim invests in security that may protect her from a cybercrime and, if the cybercrime is thwarted, generate evidence that can be used for prosecution. Successful crimes leave insufficient evidence for apprehension and conviction and, thus, cannot be punished. Results show that increased penalties for cybercriminals lead them to exert more effort and make cybercrimes more likely to succeed. Above a threshold they also lead victims to invest less in security. It may be impossible to deter cybercriminals by punishing them. Deterrence is possible, but not necessarily optimal, through punishing victims, such as data controllers or processors that fail to protect their networks.
Via the excellent Kevin Lewis.
Vaccine access toolkit
In order to break down the information barrier, I partnered with my local faith community to set up a vaccine outreach program. We have a dedicated vaccine information email address and a website consolidating information about vaccine eligibility, sites, and benefits. We call community members who don’t have email, offer personal assistance making appointments and connecting to ride services, and provide information about best practices for riding safely in a car with masks and open windows. After vaccine appointments, we check in to see how they are feeling, make sure their second dose is scheduled, and offer to drop off comfort foods. One recipient replied, “It makes this daunting time just a little easier knowing there is someone out there to guide one through this process. My technology skills are minimal!”
By Margaret Scharle, for Oregon. We need much more of this.
My Conversation with Brian Armstrong
He is the co-founder and CEO of Coinbase, here is the video, audio, and transcript. Here is part of the CWTeam summary:
Brian joined Tyler to discuss how he prevents Coinbase from being run by its lawyers, the value of having a mission statement, what a world with many more crypto billionaires would look like, why the volatility of cryptocurrencies like Bitcoin is more feature than bug, the potential for scalability in Ethereum 2.0, his best guess on the real identity of Satoshi, the biggest obstacle facing new charter cities, the meta rules he’d institute for new Martian colony, the importance of bridging the gap between academics and entrepreneurs, the future of crypto regulation, the benefits of stablecoin for the unbanked, his strongest and weakest interpersonal skill, what he hopes to learn from composing electronic music, and more.
And an excerpt:
COWEN: Recently, you cited an estimate that if bitcoin were priced at $200,000, that about half the world’s billionaires would be from crypto. How is that world different? What does it look like? How does it feel different from the world we have?
ARMSTRONG: That’s a big question. I guess the most honest answer is, I don’t know for sure. One thought I’ve had, though, is that if there are more people who generate a lot of wealth with crypto — which I think is already happening, and it will probably keep happening. Most of the people who bought crypto early on — they’re believers in the power of technology to change the world. They’re interested in the ethos of crypto in many cases, and I suspect that they would allocate their capital towards more things in that vein.
You could almost have this — I don’t know if you’d call it a renaissance or a golden age or something, of people who are technology believers. They want to see a better future coming from science and technology, and they’re going to use their capital for good in that direction. That could be one outcome.
There is much more at the link, interesting throughout.
The ascendancy of Clubhouse
That is the topic of my latest Bloomberg column, here is one excerpt:
If you don’t already know, Clubhouse is a year-old social media service consisting of virtual “rooms” where people can talk to each other — by voice. That may not sound impressive, but many users swear by it, seeing it as a communications platform that could help restore peaceful discourse and civility rather than exacerbate tensions. I think of Clubhouse, which I joined last summer, as somewhere between talk radio and a dinner party.
Back in the 20th century, famed communications theorist Walter J. Ong suggested that oral cultures are more aggregative, more redundant, more conservative, and more openly questioning and dialogic. Given the social turmoil and polarization that the U.S. is going through, that all sounds pretty good.
To me, a lot of Clubhouse sounds like elders chatting around a traditional campfire, with many of the younger people listening in (noting that “elder” here is defined more by status than by age). Extra points go to those who are genuine, engaging and good at thinking out loud and leading a group. There is a subtle but definite set of hierarchies, though to the benefit of the conversation.
And:
One of the great strengths of Clubhouse is its celebrity-friendliness. If you are a major tech executive, why not speak in a Clubhouse session rather than to a journalist? The assembled crowd will spread your message, and can vouch for what you said and its context. It would not surprise me if Clubhouse soon becomes the major conduit for news about tech and tech executives, perhaps for Hollywood stars too. The one group that seems most out of place on Clubhouse are the journalists, who possess no special status and are discouraged.
There is much more at the link.