Worldcoin Foundation swims against the crypto tide

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You might recall that last month I attended the Financial Times’ annual “Next Web” conference in Amsterdam. For an event sitting at the intersection between technology and finance, it was surprising to see fintech enthusiasts renege on crypto.

As I reported at the time, most attendees told me digital assets have had their time in the sun, and after being stung by a never-ending series of scandals, heads would inevitably turn away and embrace Silicon Valley’s shiny new toy: artificial intelligence. 

OpenAI chief executive Sam Altman didn’t get the memo. 

His latest initiative, the Worldcoin Foundation, rolled out its services globally on Monday. Its goal is ambitious to say the least: it offers a cryptocurrency traceable on the blockchain that requires users to prove their identity by using an eye-scanning physical orb, increasing the number of available throughout the summer in more than 35 cities around the world.

This creates a global identification system that provides the infrastructure to distribute swaths of financial services and social aid, including the provision of universal basic income. 

As loyal FT subscribers, it’s likely you will have read my recent stories with venture capital correspondent George Hammond, where we covered everything from the project’s launch to how Altman’s efforts to reshape society could put him on a collision course with regulators. 

Unlike those in Amsterdam who thought crypto was making way for AI, the Worldcoin Foundation could finally mean crypto has found its mainstream ticket. Since bitcoin’s inception in 2009, the industry has tried and failed to achieve any real scale or make good on its promise to bank the unbanked. But fuelled by the seemingly unstoppable wave of AI, things could finally be different. 

Despite the change in mood in some quarters, there’s another group who could turn on Altman: crypto advocates themselves.

Lest we forget, the crypto industry was born in an era where confidence in the traditional banking system was at an all-time low: the ashes of the 2008 financial crisis had barely cooled, and the bitcoin white paper called for an electronic peer-to-peer cash system, an original plan for the cryptocurrency that would, if successful, all but remove the need for financial institutions. 

“While Worldcoin is a big-name project, it’s not accepted by the true crypto community as it goes completely against the ethos of what the industry is about: decentralisation, trustless networks and privacy,” Charles Storry, head of growth at a DeFi project and on-chain index fund provider, told me.

The beliefs that underpinned the nascent days of crypto — privacy, limited government and financial freedom — still define many of the industry’s projects today, notably in decentralised finance where industry professionals just last week discounted US government efforts to prise open transaction data in the name of anti-money laundering requirements. 

“The feeling is that Worldcoin wouldn’t get any traction or funding if it wasn’t for Sam Altman, who is a big name in Silicon Valley. It just isn’t what the industry is about,” added Storry.

When I spoke with Altman ahead of the Worldcoin launch, I asked him whether he was worried people would reject the idea of a private company performing services typically fulfilled by governments. 

“People ask me periodically, ‘don’t you think this should be done by the government? Isn’t it horrible that you are doing this as a private tech company?’,” he said. “Why don’t you ask the government why they aren’t doing these things, isn’t that the horrible part?”

He also conceded that eye-scanning technology had a “clear ick factor”, but if Worldcoin does take off, Altman may have to account for the long-established libertarian values still held dear by the very people whose eyes he’d like to scan. 

What’s your take on Worldcoin? As always, email me at [email protected].

Weekly highlights: 

• Cyber security firm SonicWall released its mid-year threat report this week, and found an overwhelming increase in cryptojacking, the practice of hijacking another person’s computer to illegally mine cryptocurrencies. According to the company, there has been a 399 per cent increase in global cryptojacking attacks in the last 12 months. What’s more, Europe and the UK have been the main hotbeds for cryptojacking activity, witnessing increases of 788 per cent and 479 per cent in attacks, respectively. 

• A win for the crypto industry in Congress: this week the House of Representatives financial services committee passed the Financial Innovation and Technology for the 21st Century Act, which seeks to “provide for a system of regulation of digital assets by the Commodity Futures Trading Commission and the Securities and Exchange Commission”. The proposal’s success has been hailed as a watershed moment for crypto, but the text has a long way to go before it becomes law. 

• Leading blockchain analytics company Chainalysis will work with Deloitte’s blockchain and digital assets practice, according to a blog post shared by the company this week. The co-operation will be in a host of areas, including anti-money laundering and know your customer standards. “Our new alliance with Chainalysis is another demonstration of Deloitte’s investment in its digital asset innovation ecosystem for the benefit of our clients,” said Tim Davis, Deloitte’s advisory blockchain and digital asset practice lead. 

Soundbite of the week: A rare win for Sam Bankman-Fried

Last month, a court document filed in New York by Sam Bankman-Fried’s legal team shone a spotlight on the delicate relationship between the US and The Bahamas since the collapse of crypto exchange FTX last November. 

After initially facing eight charges, including allegations of wire fraud, conspiracy to commit money laundering and conspiracy to violate campaign finance laws, the former FTX chief was hit with new charges after being extradited to the US in December. 

These included securities fraud, and conspiracy to violate anti-bribery laws by paying $40mn to allegedly influence Chinese officials. 

Because these charges did not serve as part of the basis for Bankman-Fried’s extradition from The Bahamas, the charges stood to be dropped if the Bahamian government did not consent to US prosecutors pursuing them. 

And that’s exactly what happened this week, when US attorney Damian Williams declared the government would no longer pursue the campaign contributions count against the former crypto kingpin. 

“The government has been informed that The Bahamas notified the United States earlier today that The Bahamas did not intend to extradite the defendant on the campaign contributions count. Accordingly, in keeping with its treaty obligations to The Bahamas, the government does not intend to proceed to trial on the campaign contributions count.” 

Data mining: Signs of recovery for Coinbase 

A key point of difference between industry bellwethers Coinbase and Binance this year is that Coinbase has managed to preserve its market share despite clashes with regulators. 

Since the start of the year, Binance — the world’s largest exchange led by Changpeng Zhao — has surrendered roughly a significant share of its hold on the crypto spot trading market, falling from 55 per cent to 40 per cent. In comparison, despite a much more modest grip on the market, Coinbase’s share has fallen less than one percentage point from 6.5 to 5.7 per cent.

Cryptofinance this week is edited by John Aglionby. Please send any thoughts and feedback to [email protected].