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Blog Post | May 24, 2022

The Crypto Reading List

ClimatecryptocurrencyFinancial Regulation
The Crypto Reading List

Crypto’s ongoing blitz of advertisements that package speculation and fear of missing out (FOMO) in glittering terms is a danger to consumers all over the world. Below is a list of resources that will help the public see beyond the marketing hype and garner a true understanding of crypto assets and the industry at large. 

Stablecoins 

  • An in-depth Bloomberg investigation into Tether’s (lack of) U.S. Dollar Reserves. 
  • Law professor Arthur Wilmarth proposes three regulatory approaches towards stablecoins: The SEC should regulate stablecoins as securities; the DOJ should designate stablecoins as ‘deposits’ and bring enforcement cases to prevent issuers from unlawfully receiving deposits; Congress should adopt legislation mandating all stablecoin issuers to be FDIC-insured banks.
  • Raul Carrillo examines how Facebook’s then proposed Libra stablecoin project posed significant privacy, competition and macroprudential risks. 
  • The STABLE Act which would require stablecoin issuers to obtain a banking charter and obtain FDIC insurance among other things. 
  • Law professor Hilary Allen questions whether stablecoins should even exist and suggests ways to ban them.
  • Gary Gorton and Jeffrey Zhang explain that privately produced monies such as stablecoins are an ineffective medium of exchange that are subject to runs. 
  • Ryan Clements analyzes the inherent fragility of algorithmic stablecoins such as Terra. 
  • Matt Levine breaks down the failure of algorithmic stablecoin Terra (UST) for Bloomberg. 
  • David Gerard explains how stablecoins are just as risky as the money market funds that contributed to the 2008 financial crash.

Fraudulent Nature

  • Cryptocurrency-related scams have cost consumers at least $80 million
  • NFTs, Web3 and cryptocurrencies are just another generation of multi level marketing schemes. In the long run, individual small-time investors will not be those profiting from their rise.
  • Insider trading is a common practice in the unregulated industry – anonymous wallets buy up tokens right before they are listed and sell shortly afterward.
  • Billions of dollars are pilfered annually through a variety of cryptocurrency scams. 
  • Crypto scams identified as the top threat to investors in the latest annual survey of North American Securities Administrators Association.
  • Crypto exchanges use wash trading (fake trades designed to boost volume) to falsely prop up their liquidity. This study by Le Pennec et al estimates that up to 90 percent of trading on most exchanges is wash trading.

On Crypto’s Influence Game

  • Coinbase Global (COIN) established the Coinbase Institute, which will publish research on crypto and Web 3 and be led by Hermine Wong.
  • The crypto industry has invested over $30 million into campaigns since the start of the 2020 election cycle.  
  • Detailed report by the Tech Transparency Project highlighting nearly 240 examples of officials with key positions in the White House, Congress, federal regulatory agencies, and national political campaigns moving to and from the industry.
  • The Revolving Door Project’s ongoing tracker of revolving door traffic between crypto and the federal government.
  • Hilary Allen separates crypto’s facts from lobbyists’ fiction. 
  • A look into FTX CEO Sam Bankman-Fried’s plans to influence crypto regulations.
  • Paul Kiernan and Dave Michaels report that the crypto sector is hiring scores of former government officials and regulators to increase its influence on Capitol Hill and in federal agencies.
  • Steven Stradbrooke explains how crypto exchange FTX is increasing its lobbying efforts on Capitol Hill to eliminate SEC oversight over digital asset regulation. 
  • Kiran Stacey examines the establishment of the “​​crypto caucus,” which consists of a bipartisan group of lawmakers seeking to bypass SEC regulation of digital assets. 

Energy Use and Environmental Impact

  • In Nature, Mora, et. al., explain how Bitcoin alone could push warming above 2 °C within the next 30 years.
  • Bitcoin’s growth has led to increased e-waste and global semiconductor supply chain disruptions. 
  • Advocacy organizations warn Congress of crypto’s role in e-waste production, global warming, and electric grid risks.
  • Bitcoin miners’ growing presence in Texas raises pressure to upgrade electric grids which may increase consumer costs and blackout risks
  • Jessica McKenzie analyzes how off-grid Bitcoin mining operations are burning fossil fuels at gas wells with little monitoring or regulation. 
  • Avi Asher-Shapiro warns of the climate consequences of reopening closed gas and coal facilities in Kentucky to power the cryptocurrency industry.
  • Bitcoin’s purported environmental benefits including, tokenizing carbon offsets, sound appealing but do not meaningfully mitigate Bitcoin’s climate impact. 
  • Crypto mining negatively impacts standards of living in local communities. Mining raises electricity costs and generates constant high-frequency noise while providing few local jobs. 
  • Bitcoin and ethereum consume more energy than the likes of Italy, Saudi Arabia, and Mexico.

Decentralized Finance

  • Law professor Hillary Allen notes that Decentralized Finance aka DeFi could be the second coming of shadow banking
  • The Bank for International Settlements outlines the risks tied to DeFi and unpack the industry’s illusory story of decentralization. 
  • In-depth overview of DeFi by the board of the International Organization of Securities Commissions. 
  • Law professor Angela Walch explores the industry’s overstated claim of decentralization.
  • David Gerard explains how every process in bitcoin tends to centralization and relies on an infrastructure of trusted entities. 

Inequality

Cybersecurity

  • Hackers obtained assets worth about $625 million after targeting the Ronin blockchain service in March 2022.
  • DeFi site Wormhole’s security flaws were exploited by hackers who made off with $325 million
  • 483 customer accounts were compromised in a hack of crypto exchange Crypto.com in January 2022. The hacker made off with $30 million worth of cryptocurrency.  
  • Hackers stole around $610 million in August 2021 from peer-to-peer platform, Poly Network. Hackers later returned most of the funds. 
  • In 2018, hackers made off with nearly $500 million in digital tokens after breaking into Japanese crypto exchange, Coincheck.
  • Mt. Gox, a pioneer exchange, was hacked to the tune of $460 million.
  • News site Rekt catalogs stories of hacks in the crypto space.
  • A timeline of the biggest ransomware attacks.
  • The ransomware problem is a bitcoin problem. 

Tax

  • Sion Bell and Timi Iwayemi outline steps that would stop wealthy individuals from using crypto to evade taxes.
  • A factsheet from Open Markets Institute detailing ways policymakers can stop cryptocurrency tax evasion.

General

Additional Resources

  • David Gerard’s blog offers news and critical analysis of the space.
  • The satirical Web3 is going just great
  • Software engineer Stphen Diehl’s blog.
  • Amy Castor’s blog provides independent reporting on cryptocurrencies and NFTs.
  • The crypto critics’ corner podcast.
  • Famed computer scientist David Rosenthal’s blog.

This list will be updated regularly. Come back for new additions and follow RDP’s contributions to the space here.

IMAGE: “Set of cryptocurrencies on dollar bills by marcoverch is marked with CC BY 2.0.

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