Hello and welcome to this week’s edition of the FT Cryptofinance newsletter, where we’ll be focusing on developments surrounding the search for Terra chief Do Kwon.
When the collapse of Terra’s stablecoin started making headlines in May, I think it’s fair to say not many people outside the niche sphere of crypto knew who Do Kwon was. Well, one $40bn collapse later, and the mind behind the unstable terra stablecoin has garnered worldwide infamy.
Earlier this month, South Korea requested that Interpol issue a red notice against Do Kwon, which acts as a plea to worldwide law enforcement to arrest the Terra chief. The red notice has upped the pressure on Kwon, who has now graduated from your everyday troubled crypto executive to a notorious figure who has captured the attention of one of Europe’s most powerful figures.
“The evolution [of crypto] has been stormy. It went from this sort of cultural hype pushed by libertarians, promoted by Satoshi Nakamoto in his wisdom and total anonymity, to being this tool that is now accepted by the PayPals, Visas and Mastercards of this world, and which has been abused by — whether it was Terra or Luna — but certainly Mr Do Kwon who is on the run,” said European Central Bank president Christine Lagarde this week.
It wasn’t always like this for Kwon. He co-founded Terraform Labs, the company behind the terraUSD stablecoin that was meant to push the boundaries of crypto and financial innovation. With just the right mix of algorithmic coding, stablecoins could be pegged to a currency like the dollar without needing to be backed by hard assets.
This, of course, proved to be music to the ears of crypto’s long-established ideological core of libertarians, folks who cherished the idea of a truly decentralised alternative to the corrupted world of fiat currencies. As such, many — including Luna-tic-in-chief Mike Novogratz — embraced Kwon as one of their own. The Galaxy Digital chief executive even flexed a luna tattoo in a tweet posted in January, months before the terraUSD sister project came crashing down.
Kwon has been flippant about his newfound police attention. He insists he’s not on the run, and has nothing to hide. In a recent tweet offering the Terra chief to “grab some food”, Kwon responded simply with: “U buying?”
In fairness to Kwon, however, he showed his location as Singapore on Twitter at the start of the week. Police in the city-state say he is not in the jurisdiction.
“Locating and arresting someone is tricky. The situation changes every time. We’re doing our best to get him,” the Seoul Southern District Prosecutors’ Office said this week.
What’s next on the hunt for Do Kwon? Email me your thoughts at scott.chipolina@ft.com.
Weekly highlights
If you read last week’s newsletter, you’ll know I asked whether the streak of C-suite crypto resignations would continue after Jesse Powell stepped down as Kraken’s chief executive. Turns out it did. Just this week, beleaguered Celsius chief executive Alex Mashinsky stepped down. FTX.US president Brett Harrison also announced he would be stepping down and moving to an advisory role. This follows Sam Trabucco’s announcement last month that he was stepping down as co-chief executive of Alameda Research.
Chipotle is excited about the Ethereum Merge. No, seriously, it is really excited. The popular fast-food chain is offering 99.95 per cent off its steak bowl when you pay with ether because Ethereum’s shift to a proof-of-stake blockchain could mean a 99.95 per cent reduction in energy consumption. If you visit, send me your proof of Garlic Guajillo steaks.
Stablecoin issuer Circle has announced a partnership with exchange platform Robinhood that enables customers on Robinhood Crypto and the Robinhood Wallet to buy and sell the USDC stablecoin. Circle’s chief executive Jeremy Allaire said he looked forward to “jointly introducing web3 to a new generation of tech-savvy and digitally connected individuals”.
Soundbite of the week: Bitcoin is . . . comforting?
Bitcoin’s favourite senator Cynthia Lummis of Wyoming appeared on Natalie Brunell’s Hard Money podcast to chat bitcoin. Here’s what the Republican senator said:
“I love that it can’t be stopped, especially because I’m concerned our national debt, I’m concerned about inflation . . . that’s why to me it’s actually comforting to know that bitcoin is there.”
For helpful, comforting context: bitcoin has lost more than 50 per cent of its value this year.
Data mining
One of the central claims made by cryptocurrency advocates is the industry’s ability to reach — and provide financial freedom to — those who the traditional banking system has failed to support. With that said, recent data published by blockchain analytics firm Chainalysis provide valuable insight into the total share of cryptocurrency transaction value received by region.
Notably, eastern Asia has seen a significant drop in transaction value since the start of 2020. Elsewhere, sub-Saharan Africa has seen virtually no incoming crypto value for more than three years.
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