The Big Merge, between crypto and what the industry calls traditional finance, is underway, Crystal writes.

Why it matters: The awkward marriage between crypto and traditional financial firms is built around what each can provide the other — with one side seeking fresh capital and legitimacy and the other, new business and better tech.

Details: The slate of spot bitcoin ETF applications blurs the line between crypto exchanges and money managers.

• There are the banks' enterprise blockchain projects and the folks that have put U.S. treasuries and money market funds on-chain.
• Larry Fink, chief of BlackRock — the world's largest asset manager — said almost a year ago that tokenization could speed settlement times and cut fees — a vision of the future of wealth management.
• Today, for those who park at BlackRock, Coinbase and Kraken are already involved on the backend, set to provide custodial, prime broker and indexing services for its crypto offerings.

The other side: SEC chair Gary Gensler has insisted on the separation of custody and exchange functions, which some people think could hamper the chances of spot bitcoin ETF approval.

Yes, but: The Financial Stability Board, an international body that monitors the global financial system, put out a report this week that supports the crypto industry's main argument:

• Regardless of where in the world crypto firms perform a function equivalent to one in traditional finance, they should be subject to the same rules.
• "Same activity, same risk, same regulation."

Meanwhile, FSB said that vulnerabilities for MCIs (or "multifunction crypto-asset intermediaries") are "not very different from those of traditional finance," while acknowledging that certain combinations of functions could exacerbate them.

• It issued new recommendations aimed at shoring up regulation and supervision of MCIs, disclosure requirements, and improving cross-border cooperation.
• Today, "available evidence suggests that the threat to financial stability and to the real economy from the failure of an MCI is limited at present," FSB wrote.

What we're watching: Two crypto exchanges are in battle with the SEC.

• Coinbase is listed on pretty much every spot bitcoin ETF application as custody provider, but we're also interested in what it does with the asset manager it bought in March.
• Kraken's CF Benchmarks, an indexing provider the crypto exchange acquired in 2019, is also named on many applications; the subsidiary also recently launched an index for staking, a different tact to its parent exchange's staking services that the SEC took issue with earlier this year.

The big picture: The institutional buy-in has arrived with asset managers clamoring to launch spot crypto ETFs, but that initial capital will have to bring in more money to make the Big Merge stick.

Here's another way to look at the price of bitcoin, Crystal writes.

Zoom in: Folks at the CFA Institute's research and policy center took a stab at what the price of bitcoin would be if it had total addressable markets like that of U.S. cash and checking deposits, gold or global remittances.

• Here it is in full: Valuation of Cryptoassets: A Guide for Investment Professionals

Be smart: Bitcoin can be different things to different people depending on what they want — sometimes used to transfer value, sometimes as a store of value, or for payments or an investment.

• So it can be compared with assets like gold or remittances on the assumption that they share similar qualities.

Details: For example, if bitcoin could be a medium of exchange and lots of people used it to send funds, its total addressable market would be that of global remittances, or about $790 billion at the end of 2022.

• So at a 1% penetration of the global remittances market, bitcoin would be $378, and at 30%, $11,000.

By the numbers: Bitcoin was trading at under $38,000 this morning.

Of note: The M2 money supply market, which is the U.S. Federal Reserve's estimate of all the cash people have on hand — in their checking and savings accounts and short-term saving vehicles — makes bitcoin's number go up the most of the three.

Yes, but: The chart is more of an exercise, the caveat being that bitcoin has not yet proven that it can take a piece of one or more of these markets, according to the authors.

The other side: Bitcoin maxis would disagree.

Moving on could be the unofficial topic du jour in Washington this week, but it may take a second, Crystal writes.

Of note: Deputy Secretary of the Treasury Wally Adeyemo in a speech last night said he intends to crack down on illicit finance, nodding to its historic settlement last week with Binance and its former CEO Changpeng "CZ" Zhao.

• "Yesterday, Treasury provided Congress a set of common-sense recommendations to expand our authorities and broaden our tools and resources to go after illicit actors in the digital asset space."
• He also homed in on stablecoins coinciding with Binance's announcement yesterday that it is ending support for its BUSD stablecoin on Dec. 15.

What he's saying: "We cannot allow dollar-backed stablecoin providers outside the United States to have the privilege of using our currency without the responsibility of putting in place procedures to prevent terrorists from abusing their platform."

What's happening: That was the highlight of the Blockchain Association's mostly members-only policy summit that started yesterday — there's not much else to report, because the first day was closed to media (womp, womp).

What we're watching: Views from the movers and shakers are expected today — the BA's members include some of the biggest crypto firms (though not Binance) and they'll be largely in the audience and moderating panels of the real VIPs.

• Expected to speak: Sen. Cynthia Lummis (R-Wyo.) and Sen. Kirsten Gillibrand (D-NY), Majority Whip Tom Emmer (R-Minn.), Rep. Ritchie Torres (D-NY) and regulators SEC Commissioner Hester Peirce, CFTC Commissioner Kristin Johnson as well as NYDFS superintendent Adrienne Harris.

💰 Wormhole raised $225 million at $2.5 billion valuation. (CoinDesk)

😖 Losses from cyber exploits surged this month, making it the worst of the year. (Unchained)

🏁 Swiss digital asset manager Pando wants in on spot bitcoin ETF. (Decrypt)

🏧 SoFi cut a deal with Blockchain.com to offload all its crypto customers. (Fortune)

Here's an appropriately D.C.-themed meme to go with today's visit to our nation's capitol, Brady writes.

Catch up fast: The WSJ had a report on SBF's Metropolitan Detention Center experience, which included the detail that mackerel packets have become the currency of choice inside jails.

Speaking of Sam: The philosophical movement he adheres to, effective altruism, has had a rough year, between the FTX founder's conviction and the OpenAI/Sam Altman debacle.

• One of its chief proponents, blogger Scott Alexander, published a defense of the movement this week, one that focused on measurable accomplishments by its believers.
• Let us know if you find the account compelling.

The bottom line: Gary gonna Gensler.