(Bloomberg) — In the new frontier of cryptocurrency markets, it’s not uncommon to get lost in a theoretical debate about the value of money. But is money just a meme in itself?
That’s what Brian Mosoff, chief executive officer of crypto-investment firm Ether Capital Corp., had to say on this week’s latest episode of the “What Goes Up” podcast in a wide-ranging interview.
Below is a lightly edited transcript of highlights touching on regulatory developments, crypto’s staying power, use cases of digital coins, and the explosion of NFTs. (The conversation took place before news broke that China has intensified its anti-crypto push to say all cryptocurrency-related transactions were illegal.) Click here to listen to the full podcast, and subscribe on Apple Podcasts, Spotify or wherever you listen.
Q: Every day we wake up to some new news headline about regulators finally catching up with this whole industry and …
A: Incorrect, there is no catching up. It moves way too fast.
Q: That’s a fair point. But how are you thinking about the regulatory risks in the entire space and how do you determine who the winners and losers are going to be as the regulation scrutiny gets a little bit greater?
A: I don’t think it matters that much what regulators do. I think what it does do is it’ll change how people interact with these assets and how they interact from specific jurisdictions. But I don’t think the assets themselves are going to just disappear overnight. You can’t regulate at the protocol level, meaning you can’t change the code of Bitcoin, you can’t force IP addresses into transactions. Now you can do other things to try and extract IP addresses from transactions to look for nefarious activity. You saw this happen with, you know, the Silk Road case in 2014. But what’s going to get regulated here are the access points and the marketplaces, and that’s fine and it’ll play out. However, I’m not against those being regulated. NFTs are probably fairly regulator-proof, but it depends on the distribution mechanism of the NFT.
Q: You keep a list of some of the most frequently asked questions you get from people, especially retail investors, and one of them was: What are the real-world problems crypto is trying to solve? What sort of answer do you give them?
A: It’s a two-pronged question because I think most people are looking for an everyday use case that they can latch onto and say, “Ah, now I understand what this thing is going to be.” And it’s kind of hard to look at that right now because it’s still very much in this experimental phase. So we know that one thing that crypto assets do is they create an investment opportunity or a network that is uncorrelated to traditional assets — or over time hopefully becomes uncorrelated to traditional assets. It’s outside of the monetary policy of any political agenda, a specific jurisdiction. The protocols themselves are something that’s neutral to what’s happening in the world. So that alone, I think, is a big value proposition…
And we’re starting to see use cases emerge. You’re starting to see decentralized-finance come around. You’re starting to see NFTs, digital art, right? That exists on a blockchain. That’s becoming a recent trend. Visa, about six months ago, said that they’re going to test tokenizing U.S. dollars and moving them across the Ethereum network for settlement between their data centers. So there’s all sorts of use cases that may seem legit — like what Visa does, that has a kind of nexus to the real world. But then there’s this digitally native set of uses that we are not used to and are brand new…
What are the new businesses? What are the new use cases that no one even can imagine yet? And so we’re starting to see some emerge, but it’s really exciting. And there’s going to be more of them. There’s going to be lots of experimentation and lots of things that blow up, but there’s going to be a lot of good that comes from this new technology.
Q: I’m glad you brought up that notion of crypto being an uncorrelated asset. This is kind of a perennial debate in crypto markets. Is that promise of crypto being uncorrelated dying a slow death, or am I looking at it wrong?
A: These assets over time will become more and more uncorrelated. Certainly, I think one of the things that you’ve seen in the last year or year and a half — since Covid — is we’ve realized the world is more interconnected and all these markets are more interconnected than everyone even imagined. And it didn’t matter if it was the OPEC crisis, it didn’t matter if it was what just happened in the last week. People are looking for safe havens in these extreme moments of volatility. And the question is where is the safe haven going to be? What is the safe haven these days? Is it the U.S. dollar? Is it crypto? Where is that money going to go? And markets don’t like uncertainty. So this notion that crypto is this uncorrelated asset, I think, is something that will be more and more true as time goes on, as it continues to prove itself to be robust.
Q: What’s your bull case here for NFTs?
A: Look at something like Twitter — Twitter is not valuable because of the number of servers that they’re running and the number of data centers that they have in the backups. No, it’s valuable because you can’t just replicate that same number of servers and data center somewhere. It’s valuable because there’s social consensus and a network effect that has taken place around that set of standards that people go, “We’re all going to rally around this thing.” And that’s where the value comes. It’s the network effect, and that applies to Bitcoin and that also applies to CryptoPunks.
Q: What are some of the other reasons that somebody might be into NFTs besides just the collectible aspect?
A: Most of the purchasing of NFTs right now is on speculation. People are trying to catch the next Pudgy Penguin or Bored Ape Yacht Club that will have this huge explosion in price and value. And there’s something fun about it. It doesn’t take itself too seriously. In fact, the weirder and the more fun these NFTs can be by design, the more people seem to be interested in playing with them. But there’s something else happening under the surface, which is that utility…
I’ll just say it: money is just a meme, right? All money in a way is just a meme. The U.S. dollar, what is the meme of the U.S. dollar? Well, it’s most-powerful nation in the world, most successful economy in the world, biggest army, most stability — it represents certain things. And so if you think about this as an equation where you have money on one side, an equal sign, and then a meme word on the other side, what we’re starting to see is that the equation goes in two directions and that memes can also become money. And that’s something that I don’t think people had considered before — something can meme its way into being money.