How do you solve a problem like crypto?
In the Financial Times this week, business columnist Helen Thomas argued that governments shouldn’t treat crypto like gambling – “even if it is largely pointless.”
Having faced several major challenges and crises over the past 12 months, the world of crypto has battled against those who would seek to bring it down.
Not least among them are governments, with US agencies launching “a slew of enforcement actions in the sector,” and politicians in Westminster recommending cryptocurrencies be regulated as gambling.
For Thomas, that meant “an influential parliamentary committee suggested that crypto was, not disruptive or renegade, but worse: borderline irrelevant.”
Indeed, parliamentarians in the Treasury select committee judged currencies like Bitcoin to have “no intrinsic value” and serve “no useful purpose,” instead suggesting that trading cryptocurrencies was hardly different at all from backing the favourite in the 5:50 at Sandown or lumping it all on 17 in roulette.
This “dismissive” approach was wrong, in Thomas’ view, as she argued that even though cryptocurrencies themselves may have failed to clearly elucidate the use cases of distributed ledger technology, that doesn’t mean it is totally without utility.
“The industry still does a very bad job of explaining things,” said Oliver Linch, chief executive of Bittrex Global. “It’s been wink wink … if you know, you know, to the moon nonsense.”
Lawyer Marc Jones went on to suggest that “to say [cryptocurrency] is gambling makes no sense legally,” with Thomas adding that it also wouldn’t contribute to effective regulation of the sector.
And all this at a time when “UK gambling regulation is still trying to catch up with the invention of the smartphone.”
Still, there remains a challenge in working out who exactly should be looking after the crypto sector – should it be the gambling world or the finance world?
Thomas suggests that “dividing responsibility between regulators would be a mistake. The crypto universe doesn’t neatly split into conceivably useful and definitely pointless.”
For the time being, she suggests that financial regulators still seem the most likely contenders for the position of Bitcoin watchmen in the future, with the latest report “unlikely to prompt a change of direction from the government.”
Unlikely, perhaps. But stranger things have happened.
UAE casino still a gamble
Wynn Resorts’ much discussed project to bring the first casino resort to the United Arab Emirates was the subject of another story in Forbes this week.
The article suggested that the cost of developing the resort is likely to push the local government of Ras Al-Khaimah – one of the seven emirates that make up the UAE, and the first to develop plans for a casino – into a fiscal deficit.The integrated resort is expected to open its doors in 2027 after ground was first broken on the project earlier this year.
For a small economy like Ras Al-Khaimah, however, Forbes said “the project represents a giant gamble.”
The development is set to cost close to $4bn, equivalent to some 32% of the emirate’s total GDP last year.
RAK Hospitality and Al-Majran Island, two state-owned companies, are developing the project together with Wynn and are assumed to hold a majority stake in the venture once it’s up and running.
According to a report from Fitch Ratings, however, the resort is expected to “weigh on public finances initially” before boosting growth prospects and national revenues in the longer term.
The development will likely push the government’s budget into a 0.1% deficit this year and 0.2% in 2024, according to Fitch, as a result of the cash injections needed to build the resort.
On the upside, however, the ongoing construction work should boost the emirate’s GDP by one percentage point this year and three points in 2024, with real GDP in those years set to grow 4.4% and 5.1% respectively.
And, with the resort set to be the only destination of its kind in the surrounding region, there’s no telling how much it could generate once it arrives.
A fine mess at Meta
Dominating discussions earlier this week was Meta’s record-breaking €1.2bn fine in the EU, as reported by Bloomberg, which was levied on the social media giant just a couple of days before the fifth anniversary of the introduction of the General Data Protection Regulation (GDPR).
The Facebook owner was ordered to cough up, and to stop transferring user data to the US within the next five months, after regulators said it had failed to protect personal information from American security services.
The Irish Data Protection Commission said continued data transfers to the US didn’t address “the risks to the fundamental rights and freedoms” of the people the data belonged to, and were promptly deemed unlawful.
The decision had been widely expected, according to Bloomberg, as there was already some precedent here. The last time Meta’s transfer of data between the EU and US came to under inspection by regulators in 2022, the company threatened to pull its Facebook and Instagram services out of the region entirely.
This time, Meta said it would appeal the latest decision, which it described as “flawed” and “unjustified”. It will also immediately seek a suspension of the banning orders on its transfers of data, which it said would cause harm to the “millions of people who use Facebook every day.”
According to Meta’s chief legal officer Jennifer Newstead and former UK Deputy Prime Minister Nick Clegg (who for some reason is now Meta’s president of global affairs), the rules risk chopping up the internet “into national and regional silos, restricting the global economy and leaving citizens in different countries unable to access many of the shared services we have come to rely on.”
Any appeals from Meta will have to be filed in Ireland, and will take months at best to be resolved.
It seems that while the internet might make it seem like we live in a world without borders, that doesn’t mean companies like Meta can simply ignore them.