Axios Crypto

A multicolored cube.

October 03, 2023

Sam Bankman-Fried's criminal trial has kicked off with jury selection. We'll have the latest from the courtroom each day, right here. If you missed us yesterday, here's our trial preview.

  • Until then, a little about Sam and the world after FTX. And the Matrix.
  • 📭 Questions, comments? [email protected]

Today's newsletter is 1,028 words, a 4-minute read.

⚠️ 1 big thing: The Crypto Risk Assessment Matrix

Illustration of a pair of eyes with cubes for pupils, looking around.

Illustration: Brendan Lynch/Axios

The International Monetary Fund has a working paper out on a "Crypto Risk Assessment Matrix," Brady writes.

Why it matters: The paper notes that the use of cryptocurrency is growing around the world, but unevenly so, with increasing links to the real economy.

  • Because of that, they recommend a country-by-country assessment of how much it should be monitored.

Zoom out: The matrix, which the IMF calls the C-RAM, is the beginning of a method to assess how important cryptocurrency is in any given nation.

  • The authors note that it's nascent still, in particular, because there's not enough data gathering going on to be systematic.
  • In fact, they acknowledge that one key point of assessment, whether or not digital assets are macro-critical in a given nation, should be done qualitatively.

How it works: The first decision to make is whether or not to engage in official crypto monitoring.

  • If any cryptocurrency is legal tender (such as in El Salvador) then the answer is "yes." The only question is whether or not to monitor financial institutions (answer: not so much if their exposure is capped).
  • If it's not legal tender, then the question becomes whether or not it's macro-critical to the country, which is a question of how big it is there and how interwoven it is with society.

After that, what officials should do gets fuzzier.

  • The paper seems to be aimed simply at getting policymakers to begin refining their thinking. They ask that folks consider issues like credit risk for different assets, liquidity for assets like stablecoins, if there's concentration in an important cryptocurrency or service provider, et cetera.
  • By multiple levels of analysis, the authors argue that officials can do a better job of writing policy that mitigates the salient risks in a particular country.

Case in point: In a case study on Vietnam, the authors note that it's a nation with one of the highest market penetrations of cryptocurrency in the world, and yet the assets are not acknowledged in the law.

  • By going through the C-RAM process, the authors note, "There is no strong evidence that [the country's] financial sector is exposed to crypto," in part because digital assets are not permitted as a means of payment (for example).
  • Yes, but: Because cryptocurrencies are self-custodied and permissionless, the authors note that people are using them with each other, and there are no rules around doing so to protect civilians in the space.
  • The authors project Vietnam will see $150 billion in gross transactions in cryptocurrency by 2025.

The bottom line: "Over the last few years, the private crypto asset industry has experienced rapid growth and is becoming increasingly more integrated into the global economy," the authors write in the conclusion.

📉 2. Charted: When FTX left

Data: The Block Pro; Chart: Thomas Oide/Axios

Not every exchange has significant volume in trading pairs that feature actual U.S. dollars, Brady writes.

  • When you look at volumes on the exchanges that do, its clear that Bankman-Fried's FTX was a big player in that world.

Be smart: Every exchange does have trading pairs with stablecoins that represent dollars, such as tether (USDT).

  • But this chart dramatizes — quite nicely — the impact of FTX's sudden disappearance from the actual dollar world.

👨‍👨‍👦‍👦 3. Charted: The Samglomerate tokens

Data: CoinGecko; Chart: Axios Visuals
Data: CoinGecko; Chart: Axios Visuals

Remember that the first thing that drove concern about FTX was the "balance sheet" of Alameda Research, the hedge fund that spawned the exchange, Brady writes.

Catch up fast: What rattled investors was the fact that so much of Alameda's assets were extremely low quality, really just a bunch of tokens that Sam and his business partners had spun out of thin air.

  • These tokens were known collectively as "Sam Coins."

Context: This chart leaves out a couple of Sam coins, but it gets the big ones. To review:

  • Solana (SOL). It's somewhat unfair to call Solana a "Sam coin" — it's a coin for a blockchain that came into the world without any involvement from SBF or FTX. But his endorsement of the chain gave it its momentum in the crypto boom (and they embraced that endorsement).
  • Oxygen (OXY). This was a DeFi project that SBF's entities invested in. Its website is still up, but its social media has been silent since FTX collapsed. All the liquidity left it in Summer 2022.
  • Maps.me. MAPS was for Maps.me, a popular travel app that Alameda invested in in 2021. SBF himself once touted the potential of this product to me in one of our phone calls. Its updates are in much the same state as Oxygen.

And then there was FTT. FTT was the loyalty card for FTX. The estate has said it plans to give holders of FTT nothing, so it's surprising there's any volume on the token.

  • But in crypto, there's always someone willing to take very long odds of a recovery.

The intrigue: If someone can make the MAPS/OXY bull case, please hit us up.

🚴 4. Catch up quick

Illustration of a hand holding a glowing green cube-shaped stopwatch

Illustration: Annelise Capossela/Axios

⚖️ Sam Bankman-Fried was never offered a plea deal from prosecutors. (Reuters)

🙅‍♂️ SBF's prosecutors moved to block certain FTX investors and former insiders as witnesses. (CoinDesk)

ğŸ“ž Meta issued a summons for Australian mining magnate Andrew Forrest in a battle over an alleged crypto scam. (The Guardian)

🙀 5. The intrigue: Shade on the judge

A screenshot from a legal filing

Screenshot: Letter from Mark S. Cohen (The United States v. Samuel Bankman-Fried)

It's hard not to read this last bit from a recent letter by SBF's defense team as throwing a bit of shade, Brady writes.

Catch up fast: The defense got one charge related to campaign finance thrown out because prosecutors hadn't brought it up with The Bahamas before extradition.

  • Then Judge Lewis Kaplan ruled that the political donations could be used as evidence of fraud.
  • But the judge had previously ruled — the defense points out — that their proposed expert witness, a former federal election commissioner, would not be germane to the case (the judge ruled against a lot of expert witnesses).

What they're saying: "In light of these apparently inconsistent rulings, we therefore respectfully request clarification as to the extent to which the Government is permitted to argue and present evidence that the campaign contributions were illegal, as opposed to the fact that contributions were made," Cohen writes.

Quick take: This is my first time covering a trial (what do I know?), but that reads like a brassy bit of analysis from the defense.

This newsletter was edited by Pete Gannon and copy edited by Carolyn DiPaolo.

CK is at SBF's trial this morning in New York. Stay tuned! —B & C.