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Logos of FTX and Binance, crypto exchange competitors.

Reuters

What We're Watching: Crypto chaos, China-El Salvador trade, inflation across the Atlantic, Biden-Xi meeting

Is this crypto’s Lehman moment?

The crypto market’s bad run got even worse this week after FTX, a major crypto exchange, imploded. Headed by billionaire crypto-star Sam Bankman-Fried, FTX was revealed to be in a dire financial position earlier this week, and Binance, the largest exchange and an FTX competitor, considered bailing FTX out, but dropped the idea at the eleventh hour when it became clear FTX was insolvent and its customers couldn’t withdraw assets. Federal investigators are now looking at Bankman-Fried to find out whether his company violated financial regulations. Not only did Bankman-Fried lose more than 90% of his $16 billion fortune in mere days, but the news also sent the broader crypto and stock markets into a tailspin. Bankman-Fried, a big Democratic donor, had been making inroads in recent months with lawmakers on Capitol Hill to shape regulation with favorable terms for the crypto industry. But lawmakers and other crypto lobbyists will now want to distance themselves from the crypto king facing serious allegations of financial impropriety.

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A woman holds a black cross with a sign against Bitcon during a protest against President Bukele's government in El Salvador.

Reuters

Hard Numbers: Salvadorans snub crypto, Chinese heart QR codes, Nigerians go cashless, Europeans shop online

2: El Salvador's crypto bro President Nayib Bukele has gone all in on Bitcoin, but his citizens are not yet sold on crypto for remittances, a lifeline for the economy. So far this year, only 2% of the money from Salvadorans working abroad was sent to their families using digital currencies.

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Aadhaar logo seen displayed on a smartphone.

Avishek Das/SOPA Images/Sipa U via Reuters Connect

What We're Watching: Digital money experiences in India, Togo & El Salvador

The advent of digital IDs

In poor countries, many are born without birth certificates or identification, a problem that leaves them unable to participate in modern society because they can’t prove who they are. Those without papers can’t open bank accounts, and governments can’t track transactions conducted entirely in cash, meaning they can’t tax people they can’t find. In turn, this lost revenue makes it harder for countries to provide much-needed public services. Before Aadhaar, a biometric ID system issued in India, more than one billion people in that country, and the government in Delhi, faced this very challenge. The Aadhaar system uses thumbprints and iris scans to establish identities and bring people onto the grid. It provides a unique 12-digit number to every user and allows authorities to transfer funds for state pensions, fuel subsidies, and other government help directly into bank accounts created for people who’ve never had access to such things. In important ways, this system is a triumph in human development, but there is a potential downside: In a country where rule of law isn’t firmly entrenched, if a government can put money directly into your bank account, it can also withdraw it. That power could one day become a tool of coercion that political leaders in countries that use similar ID systems can use to enforce obedience from millions of people. There is also the risk of hacking and identity theft, a problem that can only be managed gradually as problems emerge. These are risks we’ll see in many developing countries in the coming years.

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ECB President Christine Lagarde during a news conference in Frankfurt, Germany.

REUTERS/Wolfgang Rattay

Hard Numbers: ECB hikes rates, US seizes crypto-ransoms, Argentina plays with fire, jet stream breaks up

11: Faced with the highest inflation in the EU’s history, the European Central Bank on Thursday raised interest rates by half a percentage point. It’s the first hike in 11 years, bringing the rate to zero (the ECB had been running negative rates for almost a decade to spur sluggish growth).

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El Salvador's President Nayib Bukele present the plan of "Bitcoin City."

REUTERS/Jose Cabezas

What We’re Watching: Bukele’s crypto bomb, Somalia needs a president

Has El Salavdor’s crypto experiment bombed?

Mass protests erupted last fall after Nayib Bukele, El Salvador’s youthful, tech-savvy president with an authoritarian streak, announced that the country would begin accepting Bitcoin as legal tender. Many Salvadorans said Bukele’s embrace of the volatile currency would spur inflation and financial instability. Those warnings have proven prescient. In recent days, the crypto world has been caught in a tailspin, in part because global inflation has lowered investors’ tolerance for risk. Bitcoin and Etherium, the biggest cryptocurrencies, have both declined in value by 20-25% this week – and El Salvador is recording losses of about 37% based on what it forked out for crypto in a series of purchases. This has proven to be a disaster for Bukele: two major credit rating agencies predict El Salavdor will default on its loans. San Salvador has an IMF repayment due in January worth a whopping $800 million, and amid ongoing negotiations earlier this year the international lender warned that “Bitcoin should not be used as an official currency with legal tender status.” Still, the enigmatic Bukele continues to double down: this week, he released plans for the Bitcoin city he touted last fall – a smart city based on the use of the flailing currency.

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Much Ado About Crypto | GZERO World

Crypto fans ignore its ups and downs

In the past few weeks, the value of cryptocurrencies has been slashed by half over fear, uncertainty, and doubt (aka FUD) of US interest rate hikes and new regulation.

That means NYC Mayor Eric Adams, NFL quarterback Aaron Rodgers and basketball star Klay Thompson all face pay cuts because they get their salaries in crypto.

Yet, the crypto bros out there have not lost faith.

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Challenges and Risks Associated with NFT | Cyber In :60 | GZERO Media

NFTs: Hype, mainstream growth - & implications

Marietje Schaake, International Policy Director at Stanford's Cyber Policy Center, Eurasia Group senior advisor and former MEP, discusses trends in big tech, privacy protection and cyberspace:

How wild is the NFT art world? And are there any loopholes behind the trend?

Well, to start with for me, the prices are insanely wild. It looked like a small circle of already wealthy fans are enjoying this new type of speculation. And while I love art, I think there's a world of difference between the Bored Apes and Van Gogh. And I have not quite discovered any appealing cutting-edge creativity in the NFT space. And meanwhile, the loophole are many, there is unauthorized use of images for NFTs, but also risks of money laundering and inflating prices artificially. And the whole hype reminds me a bit of Tulip mania, when in the Netherlands between 1634 and 1637, bulbs were sold for as much as 10 times the annual salary of a skilled artisan.

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Representation of Bitcoin cryptocurrency and Indian flag.

Jakub Porzycki/NurPhoto

Hard Numbers: Indian crypto tax, Peronistas vs IMF, Guinea-Bissau coup attempt, Austrian vax mandate

30: India plans to introduce a 30% tax on capital gains from trading cryptocurrencies and non-fungible tokens. Last November, the government threatened to ban all crypto transactions after the central bank warned they pose a risk to the country's financial stability.

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