Bitcoin's been rising back to the top.

But if mafia movies have taught us anything, it’s that as soon as you’re feeling good, everything comes crashing down around your ears in the third act.

Police helicopters. A botched bank job. Betrayal by your feeble-minded younger brother.

Who is Bitcoin’s Fredo? And will they cost Bitcoin all of its riches?

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Espresso Shots

☕️ ARK Amends ETF Filing 📝✉️

ARK Invest has amended its application for a spot Bitcoin ETF.

ARK Invest retroactively added a section regarding a surveillance-sharing agreement.

Though they’re a little behind the ball, as BlackRock’s spot Bitcoin ETF already contained a surveillance-sharing section in its initial application.

Though ARK applied for a spot Bitcoin ETF before BlackRock, the industry has paid much more attention to the larger asset manager.

The inclusion of a surveillance-sharing section, intended to assure the SEC that ARK will do everything in its power to prevent market manipulation, may be the extra touch ARK needs to pull ahead of BlackRock in the application process.

While ARK frantically copied BlackRock’s application in homeroom, BlackRock urged ARK to add some wrong answers so it “doesn’t seem obvious.”

☕️ SEC Critical of ETF Applications 🤔🖋️

Despite the security-sharing sections and additions above, the SEC has indicated that they’re not impressed with the recent flood of Bitcoin ETF applications.

As reported by The Wall Street Journal, The SEC told NASDAQ and the CBOE that the Bitcoin ETF filings from ARK Invest, Fidelity, BlackRock, and other assets managers are not “sufficiently clear and comprehensive.”

The SEC has been denying spot Bitcoin ETF applications since 2017. However, the first leveraged futures Bitcoin ETF was approved this year.

And America may once again be falling behind, as several spot Bitcoin ETFs are already available in Canada.

For better application results, the SEC unofficially recommends that asset managers engage in more extracurriculars, earn an athletic scholarship, or have a rich or famous relative.

☕️ Slovakia Cuts Crypto Taxes 🤑💰

The nation of Slovakia has just passed a tax bill that would significantly cut taxes on the sale of digital currency.

The bill intends “to reduce the tax burden in connection with the sale of virtual currencies, thereby simplifying their use in everyday life,” according to a press release from the Slovak National Council.

This legislature will make Slovakia more appealing as a crypto hub, and could lead to crypto expansion throughout Eastern Europe.

But the action also comes with a degree of governmental altruism, as the Slovakian government stands to lose an estimated €30 million (nearly $33 million) as a result of this tax cut.

Unfortunately, no matter how welcoming Slovakia becomes to crypto, we’ll never be able to point to it on a map.

Spilling the Beans

Could This Send Bitcoin Crashing? 😳 📉

Bitcoin is having a great run.

But of course, widespread, institutional involvement from some of the biggest names in traditional finance has had a hand in it.

Like BlackRock. And Charles Schwab, and Fidelity. Also Citadel, ARK, and Grayscale. Just to name a few.

All of these entities are entering (or attempting to re-enter) crypto. And they’re doing it through Bitcoin ETF applications, or involvement with EDX Markets, TradFi’s very own crypto exchange.

And it’s bigger than corporate America. Nations — even whole continents — are swinging crypto’s way through the EU’s MiCA legislation, which passed with a unanimous vote for all 27 member nations of the EU.

But no change this massive, no matter how good in the short term, can be purely beneficial.

Remember that mafia narrative we mentioned at the top? When we hinted that Bitcoin could have a rat in its outfit?

Well, that rat isn’t some Italian second cousin with six last names. Its name is CBDC, or a Central Bank Digital Currency.

CBDCs have been a big discussion not only in American politics, but also globally.

A CBDC, in short, would be a cryptocurrency backed by a country’s economy.

Fundamentally, widespread CBDC adoption can go one of two ways:

The first potential outcome will simply kill the dream of decentralization.

In that case, crypto becomes about as sexy and exciting as a federal tax break.

Then the power that crypto tried to wrest from centralized finance returns to the fat cats in Washington, London, Dubai, and in whichever city big government chooses to rest its head.

This outcome appeals most to world governments because it means more control.

Not only is that appealing, but it’s also frighteningly possible. Consider this statement from Agustin Carstens, general manager of the Bank of International Settlements.

“We don’t know who’s using a $100 bill today and we don’t know who’s using a 1,000 peso bill today. The key difference with the CBDC is the central bank will have absolute control on the rules and regulations that will determine the use of that expression of central bank liability, and also we will have the technology to enforce that.”

If crypto becomes hyper-regulated, CBDCs could quickly become the only options as Bitcoin and altcoins become heavily taxed or scrutinously surveyed, effectively rendering them pointless.

And England and Switzerland have both made meaningful, visible steps toward this (dystopian) future.

The second path is more interesting.

And this is one in which the rise of CBDCs gives way to a second decoupling.

Government CBDCs could also create a secondary black market, where the denizens of DeFi traffic in arbitrarily designated current-thing altcoins.

This would be a return to the volatile, lawless, early days of crypto. Get in your DeLorean, because just like in “Back to the Future III,” we’re headed back to the Wild West.

And this possibility is actually more likely.

It’s not that crypto and CBDCs will coexist in a good-natured rivalry like Dunkin’ Donuts and Starbucks.

It’s that these governments… can’t really do much about DeFi.

The framework for decentralization is already there. Its very nature makes it intangible and indestructible.

We’re never ones to doubt the reach and power of world governments, but it’s simply too late to put the toothpaste back in the tube.

The American government has spent billions of dollars and countless years trying to control the marijuana and gun markets.

But despite all that effort, you can still buy an assault rifle in somebody’s backyard or cop some home-grown from that kid who got held back, fully unregulated.

The world’s financial powers may one day come for crypto. But we think it’s very unlikely they’ll ever be able to stamp out crypto’s existing infrastructure.

Because even if governments want to make CBDCs the word of law to one day “have the technology to enforce that,” they’re still going to need their nephews to explain how the cloud works.

Meme of the Day

Crypto 101

CBDC vs Fiat Currency

You may be wondering what’s the difference between these two. The answer? Not much.

A fiat currency is any money backed by a government instead of a physical commodity like gold.

A CBDC, or central bank digital currency, is essentially the digital form of a country’s fiat currency, just no cash.

The only difference between Britain's pound and Britain’s digital pound is that one is purely digital and one can give you COVID.

The Last Sip

The Last Sip: If you’ve enjoyed our crypto-mafia allegory, here are some of the crypto gangsters who would be introduced by the narrator in a long nightclub tracking shot at the beginning of the movie.

3. Benny “Block-Chain” Spatore: There wasn’t a block of data or a pair of legs he couldn’t break.

2. Eddie “the ETH” Vizette: The only thing colder than his wallet is the pile of bodies he leaves behind.

1. Bit-Corleone. Sorry, this one isn’t a guy. It’s the mafia-backed digital currency they all use. Saves the families a lot of time and effort in money laundering.

Stay Caffeinated,

Coffee & Crypto Team

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