$33 billion now? [*upgrades estimates*]
PitchBook stated 2021 VC investment in digital assets and blockchain startups was ~$30 billion. That was already a big number, although PB’s report was released before 2021 had even drawn to a close. According to Galaxy Digital, the total was in fact $3 billion more, with over $10.5 billion invested in Q4 2021 alone, a record investment quarter that exceeded the whole of 2020. It’s easy to understand why so many top-performing executives and leaders in their fields are being lured away to join the wondrous world of Web3, where they will become not only contributors but also co-owners and voters. Read-Write-Own-Govern.
Newsflow is back in full swing this week: PayPal’s leaked stablecoin plans, crypto payments [plus some more CBDC chatter] and a sizable crypto VC investment into major TradFi. While the *WE’RE RAISING* cacophony is quieter this week, the subtle message of legacy and new infrastructures moving closer together can be heard. New terminology emerging too: RDeFi [Regulated DeFi], which is definitely coming into vogue and an area we are further building upon as part of our new roadmap!
Much to unpack, much to digest, let’s DO THIS.
Welcome back to DeFi Insights.
1. BRB just launching a stable…
Stablecoins have been a major growth driver in digital assets over the past couple of years with total s/c supply now above $150 billion.
As fungible digital representations of various global currencies [mainly the dollar], these stablecoins come in a myriad of forms. Many are pegged to fiat currencies and are either 1:1 backed [USDC - regulated], partially-backed [DAI] or algorithmically-backed [FEI] [uncollateralized]. Stablecoins have served as the gateway to DeFi and continue to unlock big yield farming opportunities across multiple chains within the ecosystem, although their use for everyday payments isn’t widespread [yet].
This is why PayPal’s announced exploration into launching their own regulated stablecoin is worth a mention. Not only could there be an opportunity to bridge the ‘PayPal Coin’ into the DeFi ecosystem, but it could also be a fully integrated payment method accepted by millions of retailers around the world. Endless. Possibilities.
According to Statista, PayPal’s total payment value was ~$311 billion in Q2 2021 [+41% YoY]. Conservatively, USDC transaction volumes [see Messari below] look to average ~$5 billion a day, which would be ~$450 billion a quarter.
The emergence of a ‘PayPal Coin’ could bring some considerable competition to the regulated stablecoin that now accounts for ~30% of the total stablecoin supply [$44.1 billion]. Don’t forget their transaction settlement partnership with Visa last year. It will be interesting to see how quickly these private businesses will grow, especially as the chatter about CBDCs increases…
2. CBDCs incoming?
This brings us on to US Fed Chair Jerome Powell confirming a digital dollar CBDC report will be published in the following weeks. We spoke about Central Bank Digital Currencies last week when the Chinese social media platform, WeChat, pledged to support the digital Yuan. This week, US CBDC explorations are back in focus. Expect to see a [possibly heated] debate between the Web3 protagonists, Status Quo Defenders, Libertarians et al; CBDCs are quite the divider - especially in Congress.
Even if the report [promised back in February 2021] is more of an invitation for public comment than a declaration of how things will be, it will be important to gauge sentiment. In this week’s discussions, Senator Toomey asked whether a well-regulated private stablecoin could coexist with a CBDC, and Powell said it could. So a two-tiered system could be possible, similar to today’s digital user experience but running on digital infrastructure. Potentially exciting; we will have to see. Either way, Visa has partnered with ConsenSys to develop a CBDC-onramp tool [after speaking with 30 central banks about their digital currency plans] and SIX Digital exchange has trialled a wholesale CBDC with five commercial banks on its SDX platform. So the overall signal here is many central banks must be considering launching their own centralized digital currencies.
3. Two worlds moving closer
Maybe the biggest news this week was Citadel Securities preparing to receive its first outside investment from a cryptocurrency investor; Paradigm. Matt Levine wrote an illuminating insight [as he always does] on the implications of the investment, his anecdotal conclusion reading as follows:
“The sidewalks in crypto are carpeted in a layer of $100 bills three inches deep! What kind of lunatic would run a high-tech global multi-asset automated trading firm and not get into crypto?”
Matt’s insights are well worth following. However, there were a couple of other inferences:
1) Crypto has some proper firepower and continues to find its way onto the map.
2) Two rather separate bifurcated worlds of legacy and natively-digital infrastructure ecosystems have the potential to move closer. Much like partnerships, alliances and investments from the non-chain world building their presence on-chain, there are also synergies to be found in reverse.
And now, time for some Epic Entertainment.
By now you are all aware of our admiration for Bankless content. This is a multi-utility guide featuring an experienced thought leader in the space, Cobie. This video may be of use for any aspiring Web3 adherent-readers out there. Enjoy!
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Also, be sure to check out our just-released roadmap announcement, discussing the projected v2 whitepaper & release, utility and DeFi Standards as part of the RDeFi movement!