One of the most fascinating recent development is not the drip drip of institutional investors or the ever expanding uses of smart contract blockchains, but the geopolitical implications of tokenized bond money which tend to be backed by assets.
Such tokenized bonds have led to the very first Executive Order which mentions cryptocurrencies when Trump banned US citizens from transacting in Petro.
That means even Trump now knows what bitcoin is, although we’re not sure if the same applies for eth. Putin, on the other hand, might be an expert on both when compared to Trump.
The Associated Press says one of the few ways to buy Petro was through a Russian bank, Evrofinance Mosnarbank, which is 49% owned by Venezuela, with the rest held by state-controlled VTB and Gazprombank.
They further say Venezuela’s president “dispatched his economy minister to Moscow to brief his Russian finance counterpart.”
They then paraphrase Yuri Pripachkin, president of the Russian blockchain group that honored Venezuela for “challenging the de-facto powers of the international financial system.” According to AP, Pripachkin said:
“While the Kremlin is keeping a close eye on the petro it hasn’t been involved in its development.” He further said “as long as sanctions are used as a foreign policy tool to punish governments that challenge U.S. policies, the incentives to seek out alternative means of financing will remain.”
A bank’s involvement is obviously no evidence of Kremlin involvement, but suggestions Iran may also issue tokenized bonds does start to paint a picture of a Russian plan of sorts.
What such plan is we obviously have no idea and can only speculate, but one reason for a decisive victory during America’s Civil War was due to innovation in the bond market.
Tokenized bonds likewise have potential to create a new financial system that may unlock value or funding means in a previously inaccessible manner.
At the same time they undermine the power banks have over money – for digital money is the payment system and the payment system is banks – and thus the power banks have over governments.
That’s especially the case when the banks in question are foreign or hostile banks, so contributing to Russia blockchenizing their Swift.
America however could potentially easily deal with such tokenization by simple declaring a specific token to be illegal, so limiting access to markets.
So we do not think Russia is playing a very clever game, if indeed they are playing one at all, nor is America at a government level. That goes to the Swiss who keep attracting blockchain talent in their Crypto Valley cluster.
Without attracting such blockchain talent any tokenization of bonds would be limited because there wouldn’t be that organic quality that gets businesses to accept it, gets individuals to use it, or indeed incorporates it within services.
To attract such blockchain talent one needs to begin with removing barriers to this space. For America that would mean an exception of what is considered a security where ICOs are capped at $20 million, similar to the exception that applies for crowdfunding. It would also mean removing IRS’ double taxation.
For Russia, the task would be a bit more difficult. Suffices to say that for many eth and blockchain are pretty much the same thing and as bitcoin retains the highest market cap, how that’s treated continues to be a litmus test.
Europe has already begun to offer some sweeteners, including funding for blockchain projects, but really the frontier has now moved to regulations that concern ICOs.
That’s where a lot of innovation is happening, including these tokenized bonds, and that’s where a lot of talent is looking for reasonable regulations that do not stand in the way of good men, while obviously locking up scammers and the rest.
It’s who attracts most of that talent that in the end wins the game for if they want to go there they must be doing something right. And who will win that game remains a heavily contested race.