Bitcoin Ain't Real, Bud
  What you need to know today in crypto and beyond April 27, 2021 Sponsored By:  If you were forwarded this newsletter and would like to receive it, sign up here.
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Today's must-reads Top Shelf  SOLD OUT? Tesla sold 10% of its bitcoin stash for $272 million in fiat, it said during its Q1 earnings call, after purchasing $1.5 billion worth of the cryptocurrency in February. The sale accounted for nearly a fourth of its total profit in what turned out to be a record-setting quarter for the electric car manufacturer. NEW POLICY: South Korea's financial watchdog said crypto trading taxes are "inevitable." A previously floated framework that would impose a 20% tax on crypto profits above ~$2,250 is set for January 2022. That hasn't stopped young South Korean workers from ditching traditional jobs to explore day trading (leading bosses to offer raises and block exchange websites at work). Meanwhile, in a policy reversal, Iran's central bank will allow financial institutions to pay for imports in crypto from sanctioned miners. LEGACY FIRST: Minneapolis-based U.S. Bank, a wing of America's fifth-largest bank, unveiled a crypto custody product. It also announced it will administer NYDIG's bitcoin ETF, which is currently being reviewed by the SEC. Separately, Gemini revealed that Mastercard will power its soon-to-debut crypto rewards card. FUNDING NEWS: Canada-based blockchain infrastructure provider Figment has launched a $16 million investment fund, Figment Capital, to support decentralized protocols such as Cosmos, Terra and Livepeer. Anoma, a layer one blockchain in development, raised $6.75 million from Polychain Capital, Electric Capital and Coinbase Ventures. Finally, wallet provider ZenGo closed a $20 million Series A.
– Daniel Kuhn
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Overheard on CoinDesk TV Sound Bite  "I believe that bitcoin is too big to fail now and too big to be banned … even in India."
– Neeraj Khandelwal, CEO of CoinDCX, on CoinDesk TV's "First Mover."
A message from CoinDesk  CoinDesk Research: Does Bitcoin Have an Energy Problem? Is Bitcoin bad for the environment? This CoinDesk Research report looks at the data behind the most common critiques and shows that, while Bitcoin uses a lot of energy, the mix is evolving toward renewables. Bitcoin also incentivizes investment in clean energy sources, can convert pollution into value, and redistributes wasted power production. Download the free report.
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- D.K.
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Read more about CoinDesk Indexes, the industry standard in crypto benchmarks. Putting the news in perspective The Takeaway  Is Bitcoin Real Money? These days it's become common for people to ask, what is money? It's a fair question. There've been more than a few events this past year that have complicated, if not outright challenged, the usual, everyday, whip-out-your-credit-card-and-pay mentality when it comes to spending. The U.S. monetary supply has expanded by 30%, for instance. Can money just expand like that? Then there are all these acronyms for new financial tools: NFTs, SPACs, DOGE. At the very least, these things cost a lot of money.
The usual line economists take is that money serves three functions in an economy. It's a medium of exchange, store of value and unit of account. It's a simple checklist to determine if some asset has the right attributes and can rightfully be called money. In 2014, NYU professor David Yermack called bitcoin a "marginally useful," money-like commodity popular among hackers and "opponents of the banking system." Just yesterday, a fifth NFL star announced he'd take at least a portion of his compensation in BTC. Bitcoin has escaped from its nerdy, anarcho-capitalist roots and entered the financial mainstream. It's accepted as payment at Tesla and WeWork. Institutional giants are buying and holding bitcoins. At least some things – usually other cryptos – are natively priced in bitcoin. So is bitcoin money? Here are three views:
1. Money itself is a collective fiction, and so is bitcoin
Money is and has always been, as CoinDesk's Chief Content Office Michael Casey says, a collective imagination. There's no intrinsic aspect that makes money, money. Instead, it is whatever object on which we can all agree has steady, transactional value. Yap stones, gold and fiat. Bitcoin is the latest chapter in this shared imagining, a new, digital good that bypasses the sovereign issuer and presents the world with a freely accessible standard. Bitcoin, under this framework, is money when it crosses some undefined, ineffable standard of adoption, such as when there are finally enough people that say, "sure, pay me in bitcoin." No one knows where the line is, but this weekend's New York Times ran a story with the headline, "We're All Crypto People Now." So it's possible we've crossed it.
In 2018, at the tail end of that year's supercycle, the St. Louis Federal Reserve raised the question, is bitcoin money or a financial instrument? "The line between money and financial asset [sic] is not clear," the economists wrote. "People's actions often reveal the role the asset is playing in the economy." Although introduced to the world as digital, peer-to-peer cash, bitcoin had not yet taken up that role, the Fed economists said. Instead, it was a "highly speculative asset." A potential bubble. An inadequate currency due to its price fluctuation and limited liquidity, that few were actually using "to buy goods and services."
Three years on, there are still more than a few people who take this view. The journalist Brett Scott argued that bitcoin has been successfully branded as a deflationary good by financially conservative fearmongers. Although bitcoin may be used to purchase goods, that wouldn't be proof a cash-equivalent transaction had taken place. Instead, it would be a countertrade between two assets. Just think about where you're likely to come into possession of BTC: by buying from a crypto exchange.
That said, bitcoin is different from other commodities. It was designed to be fungible, to be broken down into small units of account and to be easily transferable and stored. Perhaps that's what Scott means by "ornate digital collectible." But few other digital goods have all those cash-like qualities. The Federal Reserve hasn't released an accounting of the current crypto supercycle, yet, so it's difficult to say whether the central bank's thinking on bitcoin has changed. But it has published a DeFi explainer. 3. Bitcoin is...
It's possible bitcoin is all of these things and more. It functions like cash. It also functions like a speculative asset. People are buying it as an inflation hedge as well as for its volatility. It's a burgeoning global reserve currency and a distributed ledger on which to run decentralized applications.
The question whether bitcoin is real money is reductive. This is especially the case when you consider its metaphysical properties. Bitcoins don't exist in the world, but to what extent do they exist at all?
Northern Illinois University associate professor Craig Warmke pushes back against the idea that bitcoin exists as a chunk of code. It isn't real. Instead, he argues, Bitcoin is "a fictional substance in a massively coauthored story on a network."
In other words: "Bitcoin just is."
– D.K.
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