Crypto Investor Newsletter: Financial Contagion from FTX Is Spreading

Inside this week's issue:

• Coin Chatter: Line's crypto exchange shuts down, the Bahamas defends its crypto regulations in the wake of the FTX collapse
• Featured: Visa's NFT play at the 2022 FIFA World Cup

Welcome to this week's Crypto Investor!

Financial contagion from the FTX collapse is spreading, as BlockFi announced on Monday that it was filing for bankruptcy and cutting its workforce. FTX had offered the embattled crypto firm a $250 million lifeline this summer, but BlockFi was forced to suspend withdrawals on the same day that FTX filed for bankruptcy earlier this month. Now it says "recoveries from FTX will be delayed."

Further afield, the 2022 FIFA World Cup in Qatar is abuzz with energy around NFTs and crypto. It's the first World Cup with a major crypto exchange, Crypto.com, serving as a headline sponsor, and fans can even mint their own NFTs at the World Cup thanks to payments giant Visa. In today's newsletter, we've got an interview with Visa about its plan to give World Cup fans their own user-generated NFTs.

As always, if you have any questions, drop a line at [email protected].

Crypto Lender Genesis Under Regulatory Probe in Multiple States

One of the world’s largest crypto lenders is being scrutinized by regulators in the state of Alabama (and several other unnamed U.S. states) for a range of issues, including the interconnected nature of crypto firms. Adding to its problems is the fact that the company is the latest experiencing financial contagion from the FTX collapse. Genesis lost $175 million on FTX, and although it received a cash bailout of $140 million from parent company Digital Currency Group, the company is struggling to stay afloat amid a liquidity crunch. For now, Genesis denies it is planning to file for bankruptcy, but customers are growing jittery. 

Mark Cuban: FTX's Sam Bankman-Fried Should 'Be Afraid of Jail'

Over the weekend, the pro-Ethereum billionaire owner of the Dallas Mavericks waded into the FTX collapse: “I don’t know all the details, but if I were him, I’d be afraid of going to jail for a long time,” Mark Cuban told media about the disgraced former CEO of FTX, Sam Bankman-Fried. "I talked to the guy and thought he was smart.. I had no idea he was going to take other people's money and put it to his personal use." 

Bahamas: Stop Saying We Lack Crypto Regulations After FTX

The Bahamas is apparently launching an offensive to rescue its image as a crypto-friendly country that obeys laws after the collapse of FTX, which was headquartered in the Caribbean state. A government official on Sunday declared that the Bahamas was a "place of laws," unlike most jurisdictions that have no cryptocurrency regulation. 

"We have been shocked at the ignorance of those who assert that FTX came to the Bahamas because they did not want to submit to regulatory scrutiny," said Ryan Pinder, the country's attorney general and Minister of Legal Affairs. 

Line's U.S. Crypto Exchange Shuts Down

U.S. crypto exchange Bitfront, owned by Japan's messaging platform Line, suspended all new registrations and credit card payments on Monday, after saying its closure was not tied to “certain exchanges that have been accused of misconduct" (referring to FTX). The company had been operating in the U.S. since 2020, but was excluded from operation in many key states like California, New Jersey, and Pennsylvania.

‘The World Is Watching’: How Visa Brought NFTs to the 2022 FIFA World Cup

The 2022 FIFA World Cup in Qatar is the first World Cup featuring non-fungible tokens (NFTs), with payments giant Visa partnering with Crypto.com to bring user-generated digital collectibles to the popular sporting event. From now until December 18, global soccer fans visiting the FIFA Fan Festival will be able to see Visa’s “Masters of Movement” experience, where they can jump on top of an LED soccer pitch and draw their own NFT designs with their feet. The resulting NFT will be emailed to fans as a digital souvenir.

On the LED floor, fans don a tracking vest and kick an Adidas tracking ball relying on motion-sensor technology to generate artwork via algorithm. The technology logs the gestures and movements of fans dynamically moving on the field (the original NFT artwork was designed by the U.K. experimental art firm XK Studio). Fans can even have their NFTs minted by Crypto.com if they simply scan a QR code in Qatar.

“We wanted to create these lasting experiences for fans that are on site [in Qatar],” Andrea Fairchild, Senior Vice President of Global Sponsorship Strategy at Visa, told TheStreet Crypto. “We wanted to uplift the local communities and then really spark an impact in the global sport community.”

Fairchild said Visa and Crypto.com’s collaboration was a “a mutual partnership” born out of Crypto.com’s pre-existing relationship with FIFA. The crypto exchange is a major sponsor of the 2022 FIFA World Cup in Qatar.

“It really gives us an opportunity during the World Cup to celebrate the love of the game, the technology and the art of movement,” Fairchild added. ”It’s the first time we’ve been able to bring together all these elements in one place.”

Fairchild said that the company spent more than a year developing the proposal for the fan experience. “The concept of the idea grew based on where we are in culture,” she said, pointing out that NFTs had exploded in popularity over the past year, and Visa knew it wanted to showcase the strengths of NFTs while also celebrating artists embracing the technology. In particular, Visa wanted to help users mint NFTs in a safe environment, converting iconic moves on the field into “dynamic works of art.”

“As a sponsor of the FIFA World Cup, Visa enables the movement of money across the world fluidly and seamlessly, which we then mapped back to the love of the game of global football and how the players move on the pitch,” she said. “NFTs gave us the ability to articulate that in a unique way.”

But it's also true that Visa had experimented with the NFT craze long before the World Cup. Last summer, Visa spent $150,000 on a CryptoPunk NFT, calling the digital memorabilia a “cultural icon.”

“We think NFTs will play an important role in the future of retail, social media, entertainment, and commerce,” Cuy Sheffield, head of crypto at Visa, said at the time. Earlier this year, the company also unveiled a year-long NFT creator program to support a global group of artists, musicians, fashion designers and filmmakers.

“We’ve seen rapid growth in the NFT ecosystem over the past year,” Sheffield said, calling it a new form of e-commerce. “The thing that’s so exciting to us about NFTs is we think it lowers the barrier to entry for people to build a business and sell online.”

In October, Visa also filed two metaverse trademarks with the U.S. Patent and Trademark office, and said that the company was looking to manage crypto wallets, NFTs and digital currency transactions. In particular, Visa plans to provide software for auditing crypto and managing virtual transactions.

Last year, Visa also announced a much sought-after plan for a "universal adapter" for central bank digital currencies around the world. The project will allow merchants, blockchain systems and customers to carry out transactions seamlessly across multiple networks and different digital wallets.

The 2022 FIFA World Cup is noteworthy for prominent crypto sponsorships, but also a return to in-person sporting events and fan experiences. “The world is watching,” Fairchild told TheStreet Crypto. “They're all coming together for the World Cup in Qatar – it's one of the greatest sporting events in the world. So it gives us the ability to tell the story that we want to tell and immerse consumers in an experience that is timely, culturally relevant, and hopefully helping them become more educated in areas [like crypto and NFTs] that we feel are important.”

“We're always trying to anticipate the next move, and we are at the forefront of developing new digital payment solutions for people across the economy and making it feel like a safe environment,” she said. “We’re testing some of these emerging technologies that are only going to enhance the fan experience.”