Good morning. Here’s what’s happening:
Prices: Meme coins soar as crypto giants stumble amid mixed market signals in Asia
Insights: North Carolina and Florida have both voted to ban CBDCs. Welcome to the wedge issue of the 2024 election.
As the East begins its trading day, crypto is confused.
Nobody can make much sense of this market. CryptoQuant data says that there’s both high selling pressure because of an uptick in exchange reserves. But at the same time, there’s both a high Coinbase premium and a high Korean premium indicating a lot of buying pressure.
Meanwhile, over in the world of macroeconomic signals, China’s economy looks like it’s slowing down.
Thursday’s (Asia time) release of the Caixin China General Manufacturing PMI, which measures the performance of the manufacturing sector, showed things dropping – but not looking grim.
Caixin’s PMI metric fell to 49.5 in April 2022, marking the first contraction in factory activity since January due to a property downturn and global slowdown fears. Input prices decreased for the first time in seven months, causing the steepest drop in selling prices since December 2015 as firms sought to attract new business, according to a release.
Singapore’s QCP said in a recent note that the market is “confused and rangy” because it’s caught between two minds.
“This lack of direction has led to an absolute crushing of implied volatility across asset classes,” QCP wrote on Telegram.
Conflicting narratives of a hawkish Fed and strong employment with sticky inflation are holding back breaking to new highs, while positioning in the USD is heavily skewed to the short side, the trading firm wrote.
Friday’s job numbers will likely be a good test as to what side of the narrative equation wins.
CBDCs Stir Strong Opinions in Florida
U.S politics has a handful of hot-button issues: guns, health care, illegal immigration, and LGBT rights.
Fireband Florida Governor, and possible Republican presidential candidate, Ron DeSantis has taken a stand on all of these in the state legislature. Whether you agree with him or not, his tenure as governor is helping to define the next federal election narrative.
But what issue has gotten his office the most phone calls? Central bank digital currencies (CBDC), Samuel Armes, president of the Florida Blockchain Business Association, told CoinDesk.
“If CBDCs are the encroachment on our civil liberties that the majority of people believe they are, we don’t have time to wait,” Armes said. “At the end of the day, if the feds want something, they’re going to try to get it. So it’s our job to try and stop it.”
As of now, the U.S. has no concrete plans to issue a CBDC. China continues its nationwide rollout of its CBDC, the eCNY, which as of January is 0.13% of the total circulation of the Chinese renminbi yuan. While many nations are researching CBDCs, aside from China, only the Bahamas sand dollar and the Bank of Jamaica’s JAM-DEX are deployed.
Republicans argue that a CBDC would give the government too much control. Armes notes that many who have immigrated to Florida from authoritarian states such as Cuba and Venezuela are horrified by the idea, as it reminds them of what they fled.
Florida’s bill declares that CBDCs will not be recognized by the state as money. Other anti-CBDC bills that are still on the drawing board, or have passed, have taken different approaches, which Armes says is great because there will be “no perfect policy.”
Florida not recognizing CBDCs as money will likely put the state on a warpath with the feds. If a state were to refuse to recognize a specific type of money that has been authorized by the federal government, it could potentially face a lawsuit for interfering with the federal government’s constitutional power to regulate this — which it has a monopoly on.
Amers says if the federal government sues Florida, the resulting legal battle would delay the implementation of CBDCs and buy time for states to figure out different strategies to counter them. North Carolina’s House of Representatives also voted this week to ban CBDCs.
“Suing complicates matters, bogging them down in the administrative state to the point that by the time they’re implemented, numerous disputes have caused significant delays,” he told CoinDesk. “It’s going to be a federalism issue, like every other issue.”
CBDCs potentially undermine the autonomy of state-chartered banks and allow the federal government to encroach on state-level rights and regulations, Armes argues, pointing to Caitlin Long and Custodia’s long battle with the federal government, as an example of federal encroachment into the rights of states to charter financial institutions.
“We’ve had this dual banking system between the states and the [Federal Reserve] that is really turning into just a federal banking system. And a CBDC is going to solidify that further,” Armes said.
Regardless of what happens in Washington, D.C. with CBDCs, DeSantis seems to have touched a sensitive, even if his stance seems counterintuitive. Some might argue that Republicans should support CBDCs as a tool against de-platforming. A CBDC could theoretically allow for a constitutional defense that couldn’t be used against a private company.
All this is a particularly curious issue as, unlike other national debates that have pitted states against Washington, D.C, such as guns and abortion, this one hasn’t materialized yet; it’s currently not on the agenda. But there are well-paid lobbyists at the ready on Capitol Hill for when it gets on the agenda.
In the meantime, the issue continues to poll well for DeSantis.
As part of our “CoinDesk Turns 10” series looking back at seminal stories from crypto history, “All About Bitcoin” closely examined the rise and fall of defunct crypto exchange Mt. Gox with author, journalist and CoinDesk contributor Jeff Wilser. Plus, digital asset strategist Joe Orsini discussed his outlook for bitcoin (BTC) as its dominance rate has risen sharply since the onset of the ongoing U.S. banking sector instability almost two months ago.
