China. One of the proudest, greatest and most populated nations in the world. Despite China’s role as a global tech leader, the country has no love for crypto. 

For years China has been staunchly anti-crypto, banning crypto exchanges, and essentially prohibiting the trading of all crypto within the country. But now, things may be changing. 

So, is it only a matter of time until crypto emerges in the land of the Red Dragon? Or will crypto continue to be walled out? Read on to find out!

Espresso Shots

☕️ Eyes on the Blue Circle 🔵 👀

Coinbase employees have been cryptically posting the blue circle emoji and the mystery has finally been revealed.

Coinbase has announced that it will release “Base,” a new layer 2 scaling network built for Ethereum.

Yay! Another Blockchain! What’s more, Coinbase will also be giving away a free NFT collection, “Base, Introduced” to coincide with the launch of their new platform.

Anyone can claim a “Base, Introduced,” but there’s a limit of one free NFT per wallet. They’re currently trading for around $16 a pop, so trade accordingly.

Coinbase’s move towards a layer 2 network appears to be an attempt to add value to their ecosystem, a move that closely mirrors Binance’s Smart Chain network. 

This development has completely sunk our blue circle emoji theory that the Coinbase offices were trying to coordinate a blue moon belgian-style wheat beer happy hour.

☕️ New Charges Against SBF 🚔 ⚖️

Additional charges have been brought against Sam Bankman-Fried in regards to his political donations.

The new charges detail over 300 illegal political donations that SBF made during his time at FTX in an attempt to, “try to purchase influence over cryptocurrency regulation in Washington D.C.”

The indictment states that SBF orchestrated an immoral and illegal political campaign that resulted in, “flooding the political system with tens of millions of dollars in illegal contributions to both Democrats and Republicans.”

This brings the total criminal counts levied against SBF to 12. Currently, Bankman-Fried has pleaded not guilty to all charges. He now faces nearly 170 total years in prison.

As more crimes emerge, it’s only a matter of time before the Justice System holds Sam accountable for all those movies he torrented during undergrad at MIT.

☕️ Spotify's Token Playlists 🪙 🎧

Music-streaming titan, Spotify, has announced that it will partner with several NFT collections as it rolls out “Token-gated Playlists.”

You’ll need to be in possession of a certain NFT or token to access private playlists.

For example, one of the most popular token-guarded playlists is held by the NFT project, Overlord.

Users will need to possess one of Overlord’s Creepz NFTs in order to access a 100 song playlist featuring Elton John and Ol’ Dirty Bastard.

Or, you know, you could just listen to those songs anywhere else. But not in this order, this order is crazy.

This new feature may be crucial for high school students who are about to rediscover the lost art of making a mixtape. 

Only now, they build a playlist for their crush and then give them an NFT in order to hide their sappiness and vulnerability behind a paywall.

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Spilling the Beans

China’s Complicated Crypto History 🇨🇳

It seemed like the People’s Republic wanted nothing to do with Web3 or this new tech.

Which, culturally, shouldn’t come as a massive surprise.

The entire ethos behind decentralized finance is taking power away from institutions and giving it to the people.

And China, despite literally being “the People’s Republic,” seems to much prefer it when the government is in charge of the people, rather than the other way around.

The Chinese government began placing severe restrictions on crypto in 2018, until finally, in 2021, China banned crypto mining as well as all crypto transactions.

Like the quaking boots in American regulation, the Chinese government feared that crypto could bring illegal activity and economic instability to their glorious nation.

And despite the country’s crypto ban, it would seem that there are those in China who are anxious to dip their feet back into crypto’s alluring waters.

And those people are in Hong Kong.

Hong Kong appears to be gearing up to become a crypto hub. 

This week, the Hong Kong Securities and Futures Commission proposed a consultation paper that would allow investors to trade cryptocurrencies on licensed exchanges.

Hong Kong would be able to actively support crypto-related businesses and trading, while the crypto-ban stays in effect throughout the rest of the country due to a special feature of China’s constitution.

And that’s China’s “One Country, Two Systems,” policy, which allows the Hong Kong and Macau regions of China their own degrees of autonomy.

Hong Kong and Macau are permitted their own governmental, legal, financial, and economic systems, independent of Mainland China.

So, if Hong Kong wants to become a crypto mecca, as far as the Chinese constitution goes, that’s entirely kosher.

And Hong Kong seems thrilled to embrace what they’re calling the “golden opportunity” of Web3.

In addition to the publishing of the consultation papers, on Wednesday, Paul Chan, Hong Kong’s Financial Secretary, gave a speech announcing Hong Kong’s plans to spend $50 million to expedite the development of Web3.

Chan also went on to further outline the next steps in the Securities and Futures Commission’s plans to safely implement crypto.

“Over the past few months, a large number of innovative enterprises with potential have been considering setting up business in Hong Kong,” said Chan.

“For the next step, I will establish and lead a task force on virtual assets...to provide recommendations on the sustainable and responsible development of the sector."

This all seems mighty official. It seems that it’s no longer a question of “if” crypto will come to China, but “when.”

And as we’ve seen in America, that can be a mixed bag. 

This may sound unpatriotic, but the government of Hong Kong has an opportunity here to actually regulate crypto far better, safer, and more effectively than we do in the United States.

And will they still be just as susceptible to market volatility and the potential for major crashes as the rest of the world? Absolutely.

But personally, we think that crypto may be the best thing for China’s economy since 19th century opium.

Meme of the Day

Make sure you don't smoke too much crypto at once, that stuff can mess you up. 

Crypto 101

Layer 2: A layer 2 refers to a scaling solution built on top of another blockchain. That initial blockchain is the layer 1, what's built on top is the layer 2.

Layer 2 solutions are generally built to add additional scale and functionality to the underlying blockchain. Layer 2 solutions can be used to build applications, payment systems, games, smart contracts and more.  

The most popular layer 1 to build on top of is Ethereum, which now has several layer 2s for developers to choose from. Think of it like a delicious, decentralized cake.

The Last Sip

In the vein of the blue circle, here are some lesser-loved emojis that we’d like to see be part of a massive crypto reveal:

The Black Moon Emoji 🌚

He’s so cute and peaceful. It’s nice that he’s taking a break from being in the corner of a page of a children's picture book to be on your phone.

The Ogre Emoji 👹

Rather than Shrek or the mountain troll we associate with notions of “ogre,” this red-nosed monstrosity is a rendering of a traditional Japanese kabuki theater mask.

The Squid Emoji 🦑 

Why is this one so insanely detailed? It’s like we can literally feel its suckers latched on to our submarine.

Stay Caffeinated,

Coffee & Crypto Team

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.