Despite everything, blockchain companies are still building and shipping. [92]

The American banking system is on fire, and the SEC has chosen to attempt to cripple crypto on and off-ramps. Meanwhile, the industry keeps building. Why do you think that is?

Hey! So that was a weird couple of weeks, right?

All those enforcement actions?

Oddly, other things have happened in crypto! Major companies continue to ship new products and make announcements (including Binance, who this week announced the launch of an NFT lending platform!). Any other week, that might be front page news, but this week it’s buried below a pound of enforcement action news.

There are two things I want to re-iterate in my coverage of all this: Yes, this is serious (the doom and gloom is warranted), but also: I’m not leaving this world of crypto, bitcoin and blockchain. Ultimately that’s the side of this fight that’s going to win.

I was on the train ride in to the studio this morning, and I was trying to answer the question in my head that always comes up when there’s epic bad news: “As a crypto OG, is this as bad as it’s ever been?”

This does feel bad. This feels like as much of an existential threat to crypto as when Bitfinex announced they’d been hacked in 2016. But even that’s not exactly right, because the alignment of powerful interests against blockchain are now an order of magnitude larger (as is the community and capital in the camp of the good guys).

This more feels like the tale of e-gold. Ah, e-gold. The godfather of online currencies that blazed a trail and got burned in the process, all while being gold-backed (or so it claimed). I’ve got a tale for you, crypto fans, and it’s one we should remember as we navigate the blockchain-infused waters of the present day.

Founded by Douglas Jackson and Barry Downey in 1996, e-gold was a digital currency service where your dollars were converted into, well, e-gold. This e-gold was represented by physical gold stored in a vault somewhere (often in London, Zurich, and Dubai), and thus, was subject to less fluctuation than the average fiat. A noble idea, you might say, and it had its heyday, with millions of accounts created, and the e-gold economy turning over billions of dollars.

But then, the Law happened. The Justice League of America (AKA the U.S. government) caught whiff of this operation, and they weren't too thrilled about it. By 2005, they'd pulled together a case that alleged e-gold was involved in all sorts of seedy underworld activities – money laundering, child exploitation, and credit card fraud.

You see, dear readers, e-gold fell prey to the grand ol' issue of regulatory capture. E-gold was a borderless currency, intended for the internet age. But the government and regulatory systems? Those still ran along the lines of borders and geopolitics. E-gold was doing things that traditional banks did, like money transfers, but without having to follow the same rules. It was a novel idea with an execution that lacked regulatory foresight, and the U.S. government, ever watchful of its financial sovereignty, swooped in.

In 2007, the charges landed. By 2008, e-gold pled guilty to the charges of money laundering and operating without a proper financial license. The golden dream was tarnished, and by 2009, e-gold ceased all operations.

E-gold was an ambitious idea, a bit ahead of its time perhaps. It showed the world that digital, borderless currency was not just a sci-fi concept, but a reality we could grasp. Yet, it also showed us that any financial revolution needs to be aware of the existing regulatory landscape.

Now, let's put e-gold's fall from grace in perspective. It wasn't the only digital currency of the time that met its Waterloo at the hands of regulators. There were others that found themselves in similar straits, and their stories paint a picture of a significant clampdown on this emerging tech sector.

Liberty Reserve, for example, thought they'd found the key to a global, unrestricted payment system. Yet, they faced an inglorious end in 2013 when Uncle Sam came knocking, accusing them of laundering a hefty $6 billion. Boom! That's not the kind of record any company wants to set.

Then there's WebMoney. Sure, they're still around, but not without getting a few regulatory punches to the gut. They dared to walk the line when it came to identity verification. Result? They got hit with the cold shoulder in some markets, including the U.S. It was a veritable Wild West back then (far more than it is believed to be today). An industry trying to find its footing while regulators tried to apply yesteryear's rules to tomorrow's tech. The fallout? An innovation ice age in the fintech world that lasted longer than anyone wanted.

But, as they say, life finds a way. The industry didn't fold; instead, it innovated around these constraints. It gave us decentralized payment systems – blockchain, crypto, you know the gang. It’s no longer about evading regulation; it’s about reinventing the game.

So, remember, folks, as we tinker away at the frontiers of fintech, we stand on the shoulders of digital giants – tarnished they might be, but giants nonetheless. They didn't just push the envelope; they set it on fire, and from the ashes, we're building a world they could only dream of.

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Blockchain Bulletin

• Crypto analysis outfit Elliptic taps AI to catch cybercriminals. Elliptic is putting OpenAI’s ChatGPT to use helping its employees with collecting and organizing its blockchain data intelligence per a recent announcement in order to assist with risk assessment, reported Decrypt.

  PayPal-backed Magic looks to become broadly available ‘wallet-as-a-service’. Magic, the provider of a software development kit that gives businesses access to a crypto “wallet-as-a-service” raised $52 million led by PayPal Ventures, is looking to onboard the next million users to Web3, reported Cointelegraph.

• Binance introduces NFT lending platform. NFT lending takes center stage this week as Binance, the world’s largest crypto exchange, launched a nonfungible token lending feature for digital asset holders to secure ETH loans, reported CoinDesk.

• Former Ethereum miner turned GPU-focused cloud provider CoreWeave goes big on AI. A deal with Microsoft may mean billions in revenue for specialized GPU-focused cloud provider CoreWeave, which started out as an Ethereum mining outfit, as AI workloads become the norm.

• Peer-to-peer NFT marketplace Blur takes 82% of NFT lending market share. NFT marketplace Blur recently released its Blend lending platform and quickly took almost 82% of the NFT lending market, reported CoinDesk.

Blockchain Behind the Scenes

• Solana Labs announces ChatGPT plugin giving AI access to blockchain data. The Solana Foundation announces a ChatGPT plugin that will allow users to pull, query and understand information on the Solana blockchain using AI, including NFTs, tokens and blockchain data.