News: no crypto in 401(k) retirement plans, more Bitcoin ETF rejections, NFTs on Instagram, Jamaican CBDC

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Senior twilight stock replacer

The US Department of Labor has warned financial advisors that they’d better not dare add crypto to a 401(k) retirement plan.

Specifically, this week’s Compliance Assistance Release on 401(k) Plan Investments in “Cryptocurrencies” — the title of the official notice puts the word in quotes — “cautions plan fiduciaries to exercise extreme care before they consider adding a cryptocurrency option.”

The reasons are the obvious ones — cryptos are speculative, risky, brittle, ill-regulated and volatile as hell.

It’s incredibly unlikely for a retirement planner or their client to be equipped to make an informed decision — and including crypto will come across as endorsing cryptos as being solid investments, in ways they just aren’t.

“Especially given some of the wildly inaccurate legal advice offered to cryptocurrency and other fintech firms,” the Department says in its official compliance voice.

A retirement advisor’s duty under law is to work for the best interests of their client having a stable and conservatively-constructed retirement income — and not for their own interests. Even if they personally think bitcoins are the greatest invention in human history.

The Department will be asking advisors promoting this radioactive trash just what on earth they were thinking:

EBSA expects to conduct an investigative program aimed at plans that offer participant investments in cryptocurrencies and related products, and to take appropriate action to protect the interests of plan participants and beneficiaries with respect to these investments.

The plan fiduciaries responsible for overseeing such investment options or allowing such investments through brokerage windows should expect to be questioned about how they can square their actions with their duties of prudence and loyalty in light of the risks described above.

If you’re a hopeless case, you can probably fill your 401(k) with altcoins and monkeys if you really want to — but selling this garbage to mom, dad and grandma will not be happening. [Blog post, compliance assistance release]

ROU Per My Last Email

The SEC rejects proposed Bitcoin ETFs from NYDig and Global X, for being written in crayon not resolving any of the issues with previous rejected Bitcoin ETFs.

A proposed ETF must show that its exchange “has a comprehensive surveillance-sharing agreement with a regulated market of significant size related to the underlying or reference bitcoin assets,” to avert manipulation So the CME Bitcoin futures get an ETF, because CME is well-regulated; these don’t, because crypto markets are ill-regulated.

NYDig and Global X both claim that Bitcoin is, somehow, uniquely un-manipulable — I can hear you giggling already — and so it doesn’t need surveillance-sharing.

The SEC still doesn’t buy the claim that the slightly better-regulated exchanges are somehow insulated from the effects of the unregulated offshore casinos plagued with wash trading, Tether — which is called out by name, again — and other manipulations. Page 18-19 of both replies is the list of manipulations in the Bitcoin market that this proposal fails to deal with just as all the previous proposals did.

I suspect the SEC takes so long on this endless barrage of very stupid and bad ETF proposals because nobody can be arsed to go through this week’s rewrite of the previous dumb proposals. [SEC, PDF; SEC, PDF]

No Xmas for John Quays

Crypto press headlines last week: $25 billion of Mexican drug money laundered via bitcoins. Huge if true!

These stories were based on misreading the 2021 annual report for the International Narcotics Control Board. Section 16 of the report (p16) talks about the use of cryptocurrencies as a possible channel for money laundering. In the middle is the sentence: “Mexican cartels are believed to launder an estimated $25  billion a year in Mexico alone.” But $25 billion is the estimated total of all drug money laundering — not the total done with bitcoins. [INCB]

The report sources this claim to a December 2020 Reuters story, which says: [Reuters]

The sums involved in the few cases uncovered are typically thousands or tens of thousands of dollars. They represent a drop in the ocean compared with organized crime’s hard cash laundry — estimated at $25 billion a year in Mexico alone, according to the government and financial-intelligence firms.

So the crypto press misread a report as implying $25 billion being laundered in bitcoins, when the original report said “tens of thousands” — and not for one moment did they pause to think, “does that number even make sense?”

English scheme

Here’s a fun* little scam:

  1. Register a company at a fancy west London address you have no connection to.
  2. Set up a website offering crypto investments, and put up the PDF of your company registration from Companies House as proof of your existence.
  3. Shut up shop before the letter that Companies House sends to verify your presence at that address is returned to sender.

Also, it turns out you only have to register as a bank with the Financial Conduct Authority if you want the word “bank” in your company name. [Times]

* not intended as entertainment advice

The FCA is looking for a Head of Department, Digital Assets — “to build and lead a new crypto department that will lead and coordinate the FCA’s regulatory activity in this emerging market.” The closing date for applications is 3 April 2022. [LinkedIn, archive]

Putta block

If you enjoyed the written version of David S. H. Rosenthal’s incredible smackdown of everything to do with blockchains and cryptocurrencies, here’s a video of the talk as delivered: “Can We Mitigate the Externalities of Cryptocurrencies?” Questions start around 35:00. [talk; YouTube]

The only point in the talk that I might take issue with: David says that what we now know as “permissioned blockchains” are thirty years old — and he should know, ’cos he worked on a pile of this stuff himself.

But I think that’s not the right way to look at the term. Sharing Merkle-tree ledgers is thirty years old — but the word “blockchain” is a marketing pitch. “Blockchain” promises to let companies into the magical world of Bitcoin, where you can get results for free — and it inherited those promises from Bitcoin.

The term “permissioned blockchain” is claimed by Monax in 2014, back when Preston Byrne was still COO. To be clear, Monax had a real product, which became Hyperledger Burrow — and it didn’t make nigh-magical promises. And Byrne is very clear on blockchain’s non-magical nature. [LetKnowNews, 2018; Project Syndicate, 2018]

But enterprise use of the word “blockchain” follows from the cryptocurrency world. And you can tell this because it’s promoted as enterprise magic by the same people who promote Bitcoin as financial magic, it’s promoted this way in the same venues, and the promises are literally the Bitcoin promises with the buzzword changed.

Fol de rol

NFTs are coming to Instagram,  because Mark Zuckerberg feeds on your suffering. “We’re working on bringing NFTs to Instagram in the near term,” Zuckerberg said in an interview at SXSW, an annual Austin festival of crypto pumpers and other grifters that had something to do with music and culture at some point in the distant past. “I would hope that you know, the clothing that your avatar is wearing in the metaverse, you know, can be basically minted as an NFT and you can take it between your different places,” he said, in his capacity as a vampire sustaining himself on misery. [Engadget]

Author Tiffany Hutchinson attempts to get clarity from a supposed “book NFTs” project. She describes the white paper as “misinformation shoddily thrown together under a trenchcoat” [Twitter thread]

I don’t think I mentioned how my wife, Rose Gerard (Arkady Rose), had art lifted from DeviantArt and put up on OpenSea as an NFT in January. It’s become such an epidemic that DeviantArt has started notifying artists whenever a DeviantArt image shows up on OpenSea. We DMCAed the copy of the image at Google, who took it down in two days; OpenSea finally acted on their DMCA notice and took down the listing after Google had deleted the image. So we’re not in the least surprised that over 80% of NFTs on OpenSea are stolen or spam. [Motherboard]

Central banking, not on the blockchain

Jamaica’s CBDC, JAM-DEX (Jamaica Digital Exchange), is launching soon — and the first 100,000 Jamaicans to sign up after 1 April will receive a JMD$2500 (US$16.35) signup bonus.

JAM-DEX is not based on a blockchain at all, and works using the existing JamClear real-time gross settlement network. JAM-DEX wallets will be custodial — the Bank of Jamaica is working through commercial bank partners as much as it can. So your JAM-DEX “wallet” is zero-interest deposits with a phone app. [BOJ; BOJ; BOJ]

Those without bank accounts can sign up with basic identification. JAM-DEX also promises to work phone-to-phone. It’s not clear if the system will work offline. [Jamaican Information Service]

JAM-DEX is being run by eCurrency Mint, who claim to offer “CBCC as a digital bearer instrument” — which isn’t at all how the Bank of Jamaica describes JAM-DEX as working. [eCurrency Mint, archive]

To keep cash flowing during the invasion, funds from Ukraine’s card-based COVID support programme ePidtrymka can now be spent on any products or goods. You can also move funds between cards. Functionally, this is almost a CBDC cash programme. []

Things happen

“Bitcoin fugitives from China” made Kazakhstan a big name in crypto. Unfortunately, it turns out that cheap electricity isn’t enough to make it big in Bitcoin mining — you also need a reliable electrical grid and political stability. “We have not been able to operate properly since October 13, when the first power cuts hit us.” So sad. [Rest Of World]

I’m sorry to say that there’s more news in Kleiman v. Wright. Judge Beth Bloom has awarded another $43 million in pre-judgment interest to W&K Info Defense Research’s $100 million judgement against Craig Wright. Drooling idiots are already claiming this proves that Wright is Satoshi. [Reuters; amended final judgment, PDF]

Kimbal Musk at Ethereum Denver: yes, sorry, you know what my brother Elon’s like, he’s a goddamn idiot. Not that we regret Tesla buying bitcoins or learned anything, of course. Kimbal “hopes that the broader blockchain industry can move to more environmentally friendly infrastructure.” [TechCrunch]

From 2002, here’s a thread from Usenet group proposing a currency system that will be quite familiar to anyone here. [Google Groups, archive]




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