Hollywood's Next Hit Could Be Based on an NFT -- And You'd Never Know It

Hollywood's Next Hit Could Be Based on an NFT -- And You'd Never Know It

In 1994, True Lies was a massive hit, raking in almost $400 million at the box office. That makes sense: It starred Arnold Schwarzenegger, one of the most bankable stars in Hollywood history, and was helmed by James Cameron, fresh off directing Terminator 2.

But how many people watched La Totale, the French movie it was based on?

That's the question on John Wick creator Derek Kolstad's mind. In between writing Netflix's upcoming Splinter Cell show, Kolstad is penning an eight-episode anime show, based on Forgotten Runes Wizard's Cult.

If you've never heard of Forgotten Runes, that's probably because you don't spend your nights surfing NFT marketplace OpenSea. It's an NFT collection that launched last July and consists of just under 10,000 fantasy characters. The question is simple: Is it possible for a show based on NFTs to cross over to a mainstream audience that may not even know what those three letters stand for?

"There's real life and there's what Web3 is doing, and there's a divide between the two," Kolstad said in a recent Zoom interview. "You [need] to bridge the divide by just making a good thing, a good thing that makes people say, 'What is this? It's based on something? What's that?'"

NFT collections, like the Bored Ape Yacht Club, typically feature thousands of different characters, as well as a loose story that ties them together. But NFTs are polarizing. They've been enthusiastically adopted by some, but are despised by many. Those working in the industry are aware that interest is too limited to market NFT adaptations, like a TV show, based on its crypto credentials alone.

But that doesn't mean NFT characters, stories and franchises can't be fodder for an adaptation that goes mainstream. Forgotten Runes is one of many NFT brands hoping to jump from the blockchain to the big screen.

"The number of [NFT owners] in a single collection is usually around 5,000," said Bryce Anderson, production executive at Clubhouse Pictures, which helped produce I, Tonya and Birds of Prey. "If that's your audience, it's not enough to make a global brand. We talk about our TV shows, and it's 500,000 people per week or you get canceled. That's what you need."

It won't be easy. Much of the hype around NFTs was generated by the speculative bubble that enveloped the crypto market in 2021. The crash of crypto prices in recent months has sedated that speculative mania, dampening enthusiasm for NFTs. Despite the cold winds of "crypto winter," many creators are trying to prove that NFTs are here to stay.

Similar to how some developers and engineers left the Silicon Valley giants to join the crypto industry, renowned creatives are exploring NFTs. Most notable are the celebrities. Seth Green is working on a show that will star his Bored Ape Yacht Club NFT. Reese Witherspoon's production house is working on a film and TV universe for the World of Women NFT collection. Equally important are the artists and scriptwriters, who've come from companies like Pixar and Marvel.

"You never know what something's going to become," said Bearsnake, one of Forgotten Runes' founders. Bearsnake declined to give his real name but verified to CNET that he ran creative at an entertainment startup acquired by Disney. "Hello Kitty started as a vinyl coin purse. Did they know it was going to turn into... one of the biggest media franchises in the world? No, but it found an organic way to where it is now."

28 of the NFTs in Forgotten Runes Wizard's Cult, a collection of 9,995 pixelated NFTs. 

Forgotten Runes/OpenSea

Fund a show, own a character

For some, the goal is for a universe created from an NFT collection to break through the cryptographic ceiling and go mainstream. Others see NFTs more practically: as a way to help fund productions.

"The biggest barrier for any young filmmaker has been finance," said Spike Lee during a talk at the NFT.NYC conference in June. "Where are you gonna get the money?"

Lee says technology has helped decentralize filmmaking, as amateurs can now shoot and edit video on their phones and laptops. Funding, however, continues to bedevil up-and-coming artists. Lee hopes NFTs can change that. He's piloting a program at New York University, where he teaches filmmaking, that will allow his students to fund projects by issuing NFTs.

"Films are still going to be made by the studios, and I think that NFTs will fit in the independent cinema," Lee said.

At the center of the premise is intellectual property. Punters can invest in up-and-coming filmmakers and the characters they create, just like they can invest in startup companies. The more popular those characters become, in theory, the bigger the returns.

IP bleeds into the second proposed benefit of media creation via the blockchain. Buying an NFT often means buying the IP for the depicted character -- and the right to build on top of that IP by creating a backstory. Many hope this can change the way films and TV are written and created.

Take Forgotten Runes. Wizard's Cult is a collection of 9,995, each depicting a different fantasy character: mages, warriors, alchemists, clairvoyants and more. Those who own an NFT get access to the Book of Lore, wherein they can write an official backstory for their character. Once it's written, it can't be changed -- even if the NFT is sold to another person.

It sounds like a recipe for chaos -- the internet is undefeated at loading unsuspecting platforms with offensive content -- but the idea is that self-interest will prevail. Worthwhile characters can be chosen to appear in Forgotten Runes' upcoming anime. If it becomes a hit, the characters within, and their attached NFT, become more valuable.

Writing fan fiction is technically illegal, points out Bearsnake, as it violates copyright law. The proposition, made by many NFT collections, is that franchises can be built quicker by embracing the passion of fans rather than merely tolerating it.

"Some of my favorite pieces of literature of the last 10 years, like actual literature, is stuff people wrote on the internet, and released on the internet, for free," said Clubhouse Picture's Anderson. "That was their creative impulse, and I think [NFTs help find] a way to let that live in a more public way."

Anderson is cocreator of Runner, an upcoming NFT collection. Runner takes place on a planet called Omega and focuses on The Omega Race, a contest that determines who rules the whole planet. It's being penned by Blaise Hemingway who, through the Disney Animation Story Trust, helped write Frozen and Big Hero 6.

Runner is an upcoming NFT collection. It's founded by Bryce Anderson and Bryan Unkeless, both of Clubhouse Pictures. Between them, they've worked on films like The Hunger Games and I, Tonya.

Runner

To Hemingway, the idea of NFT holders being able to create official backstories for their characters reminded him of being a kid and creating storylines for his Star Wars figurines.

"There could be a character that appears on screen for two seconds in a cantina scene, but what's that character's story?" he said. "We're following the story of about 12 central characters, but there's an entire world that has parallel stories going on that intersect with this."

Hemingway and Anderson have plans to adapt Runner to other mediums, though none are concrete yet. A film or TV expression seems inevitable given the team's credentials: Working with Hemingway and Anderson are Bryan Unkeless, producer of the Hunger Games, and Cedric Nicolas-Troyan, director of Snow White and the Huntsman.

NFTs going pop

The business models of NFT collections -- the ones that have business models in the first place -- often rely on the ability to break out into mainstream culture. But breaking out requires quality products, and quality products take a lot of time and effort to make.

Forgotten Runes is among the more ambitious NFT groups. Beyond the anime show, there's a comic book series that had its first issue in June, plans for a tabletop game and, curiously, even a cookbook. A Forgotten Runes massively multiplayer online role-playing game, or MMORPG, is in development and is due for release early next year.

The idea of creating a franchise and expanding it into different mediums is as old as Disney, said Bearsnake. What's new with NFTs is a set of tools that allows fans to play a more crucial role in that process. Those tools, however, create problems as well as solutions. Creators need to make products with mainstream appeal but also placate NFT investors who are mostly speculators, more interested in short-term hype than long-term vision.

"The majority of people in the space are really in it for financial gain, and that's OK," said Bearsnake. "I think there's a lot of unrealistic expectations from a lot of the community to the founders, because not everybody understands what goes into just even making a comic book. Like, that was hard."

It's a difficult time to be branching out. The past few months have been tough on all things crypto. Ether, the currency behind most NFTs, is down over 50% since the year began. That's tanked not only NFT valuations -- Bored Ape Yacht Club NFTs are at about a third of their all-time-high -- but also mainstream interest in the arcane technology.

The circumstances for a blockchain blockbuster aren't the most auspicious, but NFT creators don't need to make the next True Lies. They just need to make the next La Totale.

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What Is 3D Printing?

What Is 3D Printing?

Spend any time at an online craft market like Etsy, and you'll notice a lot of the products there are 3D printed or include 3D-printed parts. But what do we actually mean by that, and how easy is it to start 3D printing your own items? 

The answer isn't as simple as you might hope, but also not as complicated as you might fear.

How does a 3D printer work? 

3D printing is a type of additive manufacturing that uses material to build layers into 3D objects. Essentially it prints by adding material (usually a form of plastic) one drop at a time. The 3D printer draws a shape on a flat surface and then draws another on top of it until the model is complete.

There are a lot of different types of materials used to create these layers, but the ones you're most likely to use as a hobbyist are melted plastic and UV resin. Which type you use will depend on the result you want to achieve. The best 3D printers automate a lot of the process, but there is still a lot of trial and error to get it right. 

This picture shows one of the positives of owning a 3D printer. My colleague Dan Ackerman needed a mount for his iPhone to attach to his MacBook. A few hours and about $0.15 of material later, he had one up and running. It's satisfying to solve this kind of problem almost immediately.

Making 3D printed parts save you time and money

Dan Ackerman/CNET

What are the types of 3D printer?

Printers come in all different shapes and sizes and can be configured in various ways depending on your end goals, but most of the ones a hobbyist or small business will use can be broken down into two distinct types: FDM and resin.

Fused deposition modeling

This is the most common type of printer and the type most widely used by businesses and hobbyists. An FDM 3D printer is simply a plotting device. It pushes a plastic filament through a hot nozzle to squish layers into the print surface in a pattern.

There are a lot of different materials that you can use with an FDM printer. I won't go into detail here -- if you want more information, check out our list of the best 3D printer filaments -- but the simplest one to use is PLA. It's a type of non-toxic plant-based plastic that prints at fairly low temperatures.

You should buy an FDM 3D printer if you are looking to 3D print practical pieces, medium-sized decorative models and cosplay armor.

SLA (stereolithography) or resin 3D printing

SLA printing, more commonly known as resin printing, is almost the opposite of FDM printing. Instead of melting plastic into liquid, it uses a UV reactive liquid that's hardened under light. Each layer is "cured" using an LED array, which emits light in a set pattern.

Resin printing produces far more detailed models as an end result but it's a lot harder to work with. There are plenty of great resins out there for you to try but you need a wash-and-cure station to make sure they're safe to handle after you have printed them.

You should buy an SLA resin 3D printer if you want to print highly detailed models such as Dungeons and Dragons miniatures jewelry or even dentistry (assuming you're a dentist).

There is another process for 3D printing: Sintering uses a laser to fuse powder into shape. It's expensive and produces amazing results, but it requires large machines and plenty of space. It's certainly not great for use in your garage.

Even though it costs very little, this printer delivers excellent quality every time.

James Bricknell/CNET

How much is a 3D printer? 

Prices for 3D printers vary wildly depending on what you want to do with them, how big the printer is and how detailed you want the models from the printer to be. We have a list of the best budget 3D printers on the site if you're looking for something under $500. Or we can recommend the best 3D printers overall if you have a little more money to spend. There are even semi-professional rigs that can cost a few thousand dollars.

The Neptune 2 is a good starting point for beginners. It's easy to set up and use and it's usually priced at under $200. While it isn't going to print the most detailed models, it will give you a good understanding of everything that 3D printing entails. The most important thing is that it's cheap, making it accessible.

If money's no object and you want an amazing in-home 3D printing experience, then the Prusa Mk3S Plus is the best choice. It comes in both kit and preassembled forms, but if you want to learn more about 3D printing you should buy the kit. It's an excellent introduction to how the whole process works, and it'll save you money. 

At $799 plus shipping, it isn't the cheapest 3D printer, but it is the best out-of-the-box 3D printing experience money can buy. It's an investment when you're first starting out, but it can save you money in the long run: Some cheaper 3D printers require aftermarket upgrades and replacement parts to really shine. 

In the four years that I've owned it, it's been my most consistent 3D printer in terms of reliability and output quality.

Resin 3D printers are similarly priced as their FDM counterparts, though the differences between the price point are more about speed and size than quality. A budget resin printer like the Anycubic M3 can be as low as $270 but the level of detail it can capture is as good as printers five times the cost. What keeps the price cheap is the size of the build area. Simply put; the more space you want the more you will expect to pay. 

Is now a good time to buy a 3D printer?

3D printing is currently in a golden age. Unlike days past, when you needed an engineering degree to use a 3D printer, nowadays you can get set up and started with most printers in under 15 minutes. 

Advanced safety features such as filament runout sensors and power loss protection are now standard even on budget-friendly options, so you're less likely to experience failures and more likely to succeed. That's not to say you'll never get failures -- you will, I promise. But failures are a good learning experience, and they won't be the majority of your results, like they used to be.

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NFTs explained: Why people spend millions of dollars on JPEGs

NFTs explained: Why people spend millions of dollars on JPEGs

Take a quick look at the image to the right. What, if anything, could convince you that image is worth $9 million?

Richerd/OpenSea

What you're looking at is an NFT, one of the first ever created. It's part of the CryptoPunks collection, a set of 10,000 NFTs released in 2017, a time when much of the world was still finding out what bitcoin is.

Most likely you've already rolled your eyes, either at the $9 million figure or at the very idea of NFTs themselves. The response to nonfungible tokens hasn't changed much since March when they first started exploding. The public at large has reflexively dismissed them as environmentally harmful scams. The bigger the sale, the more brazen the injustice. 

Which brings us back to the above pixelated chap. Its owner is Richerd, an affable Canadian software developer. He started building cryptocurrency software around 2013, but eventually tired of it. After discovering NFTs earlier this year, Richerd bought CryptoPunk #6046 on March 31 for $86,000 in what he said was the biggest purchase he'd ever made in his life.

Richerd, who has over 80,000 followers on Twitter, last month claimed that his CryptoPunk was priceless to him and wasn't for sale no matter the price. The very next day his determination was tested when an offer came through for 2,500 ether, or $9.5 million. It was made not because Richerd's CryptoPunk is worth that amount -- similar NFTs now go for about $400,000 -- but rather because his bluff was very publicly being called. It was a challenge, but it was still a legitimate offer. If Richerd clicked "accept", 2,500 ether would have flowed into his wallet.

Richerd rejected the offer. 

"Well, obviously, the day before I said 'I'm not selling it for any price,' so if I sell it for that price, I'd be going against my integrity," Richerd told me over a Zoom call. "On top of that, I've used this CryptoPunk as my profile pic, as my brand. Everyone knows that's me."

Not too long ago, Richerd's explanation would have sounded insane to me. How divorced from reality would someone need to be to offer eight figures on a picture that looks like a Fiverr job? How scandalously misguided would a person need to be to rebuff that offer? After I spent a few months researching and following NFTs, however, it doesn't surprise me in the slightest. In fact, it makes a whole lot of sense.

There are 10,000 NFTs in the Bored Ape Yacht Club collection. Here are three examples. The middle one is owned by Jimmy Fallon.

Yuga Labs

Bitcoin millionaires

Here is one quick fact that explains why NFTs are bought for the equivalent of a CEO's salary: Bitcoin is estimated to have made over 100,000 millionaires. It's no surprise that NFTs became a phenomenon in March. That's when bitcoin hit $60,000, up over 500% from just six months prior. 

When you see a headline or a tweet about some preposterous sum being spent on an NFT, it's easy to become bewildered over how absurd that purchase would be for you. What's easy to forget is that very expensive things are almost exclusively bought by very rich people -- and very rich people spend a lot on status symbols. 

Take Bored Ape Yacht Club, for example. It's a collection of 10,000 ape NFTs, all with different traits that make some rarer than others. Rare ones have sold over for over a million bucks, but common variants go for around $200,000. (At the time of launch back in April, BAYC developers sold the NFTs for $190 each.) BAYC, owned by the likes of Steph Curry and Jimmy Fallon, is what you'd call a "profile pic collection." The main purpose of the images is to be used as your display photo on Discord, where most NFT business goes down, or on Twitter, Instagram or wherever else. 

To recap: $200,000 minimum for a profile picture. 

In isolation, that's insane. But place it on a spectrum of how wealthy people spend money, and it becomes less staggering. You can right click and save a JPEG, so why spend money on it? Well, you can buy a nice house in a safe neighborhood almost anywhere in the world for $1 million, yet celebrities regularly snap up $20 million mansions. You can find a fashionable dress for under $500, yet brands like Chanel build their business on selling ones for 20 times that amount.

Up to 100,000 people became millionaires when that green line shot skyward. 

coinmarketcap.com

We accept that rich folks buy extravagant items offline. Is it so inconceivable they would buy extravagant things online, too?

"In the real world, how do people flex their wealth?" said Alex Gedevani, an analyst at cryptocurrency research firm Delphi Digital. "It can be buying cars or watches. How scalable is that versus if I buy a CryptoPunk and use it as my profile picture?"

Obviously, status symbols aren't specific to the rich. All of us indulge in some way or another, be it buying a $20,000 new car when a $7,000 used vehicle will do, or buying a $30 T-shirt when Walmart sells basics for under $5. What most status symbols have in common is that they have a specific audience in mind. The banker sporting his Rolex and the chief executive stepping into her Bentley don't care that I think either of those purchases is excessive. They have a small but powerful group of people they're trying to influence. So, too, with NFTs. 

In the case of Richerd, he runs his own business, Manifold, where he helps show digital artists like Beeple how they can use blockchain technology to make art that could only exist as NFTs. Being a part of the most sought-after NFT collection helps in those circles. And when he says his brand is built on his Punk, he's not exaggerating -- a group of investors even named their organization after him.

"Anybody who owns a CryptoPunk believes certain things," Richerd explained. "Either you've been in the community for a long time so you believe in what these are, or you've paid a lot of money to get in, which shows conviction.

"I want to show my conviction. This is one of those projects that makes you put your money where your mouth is." 

A bit of trouble

NFTs are polarizing. There's a small group of people who believe in the underlying technology (tokens that prove ownership of a digital good), but there are many more who regard it as a hoax. Just as the second group struggles to see any value in NFTs, the first group can sometimes be defensive about the technology's imperfections.

And make no doubt about it, there are a lot of issues with NFTs. 

First is the confounding inaccessibility. There's a reason software developers tend to do well in crypto and NFT trading: Setting up blockchain wallets and other required digital apparatus is difficult. Even just buying and selling can be perilous. Send money to the wrong wallet address by accident, and it's gone forever.

Then there are the fees. Imagine you're interested in dipping your toes into nonfungible waters and you have $1,000 you're willing to lose. If you're minting a new NFT during a public sale you'll usually spend between $120 and $400. Not too bad -- until you factor in the transaction fees. Most NFTs are built on the ethereum blockchain, which is notoriously inefficient. The more people using ethereum, be it through trading altcoins or buying NFTs, the higher the fees. At a good time you'll spend about $100 per transaction, though double or triple that amount is common. Suddenly that $1,000 doesn't go very far. 

This is especially troublesome for NFTs, which are infamous for causing "gas wars." It's possible for 100,000 people to buy shiba inu coins at once, since there are a quadrillion in circulation. But when 10,000 people try to buy an NFT, it results in a massive spike in transaction costs as some users outbid each other to speed up their purchase. It may only last a minute or two, but a lot of damage can be done in that time. People spending over $10,000 on a transaction fee isn't rare. People losing $1,000 on a failed transaction isn't, either.

This is what it looks like when someone spends $4,000 on a failed transaction. It's rare, but not rare enough. 

Etherscan screenshot by Daniel Van Boom

Ethereum's inefficiency also contributes to the other major criticism of NFTs, the massive amount of energy they consume. Note that this is something of a semantic issue: NFTs aren't bad for the environment as much as ethereum is. Other networks, like Solana, use a fraction of the power. Ethereum developers are expected to implement an upgrade next year that will make mining it consume 1% the energy it currently does. At this moment though, while no one can say precisely how much energy ethereum consumes, we know it's a lot. (Bitcoin, despite getting all the headlines, is even less efficient than ethereum, which is why almost nothing is built on its blockchain.)

And finally, there's the fact that most people trading NFTs are doing so to make a profit. Scams are everywhere, and prices are volatile. Most of the people who create, buy and sell NFTs are ignorant or uninterested in the technology. If there is a technological leap taking place, it's likely to be obscured by the dizzying price movements.

"I'd call it a bubble," Gedvani said, "because the amount of speculators that are entering the market is outpacing genuine creators." 

But a bubble can pop and leave something better in its wake. Think of Pets.com. It had a peak valuation of $290 million in February 2000 but by November of that year, as the infamous dot-com bubble began to burst, it had already closed shop. It's used as a cautionary tale for speculative trading in bubbles. But the impulse to invest in Pets.com evidently ended up being justifiable. That particular venture was misguided, but the e-commerce trend it was flicking at was legitimate. Seven-figure pixel art may not be forever, but proof of digital ownership, which is what NFTs are really about, may be. 

A big 2022

Where NFTs will end up is anyone's guess -- and anyone who claims to know is probably trying to sell you something. What we do know is that the amount of people buying NFTs is almost definitely about to grow.

It's estimated that around 250,000 people trade NFTs each month on OpenSea, the biggest NFT marketplace. In the short term, CoinBase will soon open its own NFT marketplace, for which 2 million users are on the waiting list. Robinhood has similar plans.

More importantly, giant companies that already make money outside of the crypto space want in. Niantic, the company behind Pokemon Go, has just announced a game in which players can earn bitcoin. Twitter and the company formerly known as Facebook plan to integrate NFTs into their platforms, and Epic Games says it's open to doing so too. Envision a world where instead of buying skins in Fortnite, you buy an NFT for those skins that you own -- meaning you can trade it for outfits and weapons in other games, or sell it once you're done with it. (Epic said it won't integrate such a mechanic into Fortnite, but that may not stop competitors.) 

Richerd reckons the flood of people soon to enter the NFT marketplace will create a broader diversity of digital products sold for different audiences. Your neighbor might not want to spend $200 -- much less $200,000 -- on a profile picture, but maybe they'll be willing to spend $10 on a one-of-a-kind skin, or on a product in Facebook's Metaverse. But though the space may change, he remains confident that CryptoPunk #6046 is safe for a while yet. 

"Even if every NFT falls," he said, "CryptoPunks will be the last one."

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Is the US Developing a Digital Dollar? This Week's Top Bitcoin & Crypto News

Is the US Developing a Digital Dollar? This Week's Top Bitcoin & Crypto News

Welcome to Nonfungible Tidbits, a weekly roundup of news in crypto, NFTs and their related realms.

Our lead story this week is the possibility of a US Central Bank Digital Currency or 'digital dollar.' We'll also cover the million-dollar NFT of a cartoon rock that accidentally sold for less than a penny and declining Google searches for NFTs.

Stay tuned for more next week.

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US considering centralized cryptocurrency

Lance Nelson/The Image Bank/Getty Images

Biden signed an executive order last week directing various federal agencies to come up with policy recommendations on cryptocurrency. The order included a call to explore a US Central Bank Digital Currency, a type of cryptocurrency controlled by the government. Part of Biden's strategy includes ensuring any US CBDC is inline with the country's priorities and democratic values, according to the order's fact sheet. 

The Federal Reserve has been researching CBDCs for a while now. In January, the Fed released a report that delves into what a CBDC could look like in the US. Countries across the globe, including Australia, China and Brazil, are also working on CBDCs of their own.

Read CNET's full story on a potential US Central Bank Digital Currency.

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Owner of $1 million rock NFT accidentally sells it for less than a penny

Sarah Tew/CNET

There's an NFT collection called EtherRock that contains NFTs of clipart rocks, each one a slightly different color. Last year, an EtherRock NFT sold for 400 ether, or about $1.3 million at the time. Earlier this month the owner of an EtherRock NFT accidentally listed the NFT for sale for 444 wei instead of 444 ether. Wei is the smallest denomination of ether, like pennies are to dollars, with one ether containing 1,000,000,000,000,000,000 wei. This means the owner of the EtherRock NFT sold an NFT potentially worth over a million dollars for less than a penny. People are now using bots to give them an edge when buying NFTs, and a bot snapped it up immediately after it was listed. 

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Google searches for NFTs are falling fast

Searches for NFTs on Google plunged over the first few months of 2022, according to a recent report from Statista based on Google Trends data. Google searches for NFTs rose in December 2021 and reached a high point in January 2022. Since then, there's been a sharp drop-off. Currently, Google Trends shows only one-third of the search volume for NFTs as January's. 

Despite what appears to be declining interest in NFTs from Google Search users, Meta (Facebook) Founder Mark Zuckerberg said NFTs are coming to Instagram during a talk he gave at South by Southwest in Austin, Texas. 

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Thanks for reading. We'll be back with plenty more next week. In the meantime, I encourage you to read this feature on how cryptocurrency and NFTs are funding Ukraine's resistance against Russia by Roger Cheng. Roger also recorded an interview series with Alex Bornyakov, deputy minister of digital transformation for Ukraine, which you can find embedded in the story.

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5 predictions for bitcoin, NFTs and the future of money

5 predictions for bitcoin, NFTs and the future of money

This story is part of The Year Ahead, CNET's look at how the world will continue to evolve starting in 2022 and beyond.

Cryptocurrency made many of the strangest headlines of 2021. Boosters touted digital currencies as a world-changing technology with the potential to create new economies and empower people who don't have access to bank accounts. Critics pointed to crypto's massive environmental footprint, as well as its popularity in online crime. The chasm between these views will be hard to bridge.

Much of the cryptocurrency industry functions as a hype-monster, powered by oddball memes of cute dogs and outer-space emoji. The same industry boasts a staggering amount of funding from venture capitalists and private enthusiasts, along with real technical innovations that could radically alter the way we interact with money. And, as it often goes with innovation, what we get may not be what we expect. CNET asked experts to help us navigate crypto's journey to new lands in 2022. Here's what they told us.

1. Crypto moves further into the mainstream

Big companies are trying to figure out how cryptocurrency fits into their business. Everyone from hedge fund managers to Starbucks executives are making moves that could impact how we use digital money this year. 

When we hear about cryptocurrency in the headlines, it's often about Tesla CEO Elon Musk's tweets, overnight millionaires, expensive digital art and hacks. Yet the larger, fundamental changes are often less flashy and attention-grabbing than whatever crypto-hype machine dominates Twitter at any given moment. 

"I hope we're going to see a lot more focus on utility," said Denelle Dixon, CEO of Stellar Development Foundation. "Instead of focusing just on a few use cases that create a lot of hype, we'll see more focus on the use cases that drive real value. And more discussion around financial inclusion."

2. NFTs create new ownership opportunities, and remix old ones

NFT, or nonfungible token, is a buzzy term that many of us heard for the first time in 2021. A new way to determine ownership of digital property using a blockchain ledger, NFTs are increasingly popular in the art and collectibles scenes. One of the most notable NFT collections of 2021 was called the Bored Ape Yacht Club. Go figure.

But the potential of NFTs goes far beyond eccentric digital artworks. NFTs are also used for digital land purchases in virtual worlds and for next-generation music ownership, licensing and publishing. Some observers see a future in which NFTs offer access to special sales or limited-edition products. How about using a NFT as a concert ticket? Or when you log into your favorite video game online? Expect to see all of that in 2022. 

"The possibilities of NFTs are endless, since they can be used to log ownership of any unique asset," Alex Atallah, co-founder of OpenSea, said in an email. "We're already seeing early use-cases of NFTs being used as event tickets, software licenses, fan club memberships, or otherwise tied to interactive experiences."

Some of America's biggest brands, including Nike, are already working on expanding the application of NFTs. But NFTs used in consumer products may only be the tip of the iceberg. How about using an NFT to prove you are you? 

"We've seen some movement from the artist-driven NFTs to NFTs that are focused on access or authorization," said Stellar's Dixon. "There was a party in New York recently where folks got access to the party by purchasing an NFT. So I wonder if we'll see some focus on leveraging NFTs for digital identity."

The $85 billion video game industry may be one of the most fertile areas of potential for NFTs. Some of the larger studios are already experimenting with them. And with all the talk surrounding the metaverse, an immersive 3D digital environment that's been proposed by Meta (formerly Facebook) CEO Mark Zuckerberg and other movers and shakers in the tech industry, NFTs could serve as building blocks for a next-generation digital world. 

"Gamers are already accustomed to caring about digital goods, so the potential for NFTs is enormous: a few million NFT users compared to almost 3 billion gamers," said Atallah. "We're seeing some exciting developments when it comes to the intersection of NFTs, gaming and the metaverse."

3. Bigger hacks and bigger ransoms

Cryptocurrencies were used to facilitate millions of dollars of ransomware payments in 2021. That's because digital currencies include features that make them attractive to criminals. They're difficult to track, they're borderless, and once the payment goes through, it's nearly impossible to unwind. 

"We should expect to see more criminals turning to cryptocurrency and services that promise to obfuscate illicit funds due to the misconception of total anonymity," Gurvais Grigg, a senior tech officer at Chainalysis, said in an email. "Bitcoin is appealing to criminals for the same reasons it appeals to those using them for legitimate purposes: It's cross-border, instantaneous and liquid."

Grigg and others expect decentralized finance, a nascent but blossoming industry on the cryptocurrency frontier, to be a popular target for cybercriminals in 2022. Decentralized finance, or DeFi, involves finance that works independently of a central authority or institution. Instead of relying on a bank or credit card network, people can connect directly with DeFi products on a distributed network. 

Though the industry is still in its early days, DeFi is a fast-evolving, highly technical space with tremendous potential. As such, it's attracted a great deal of attention and investment, making it ripe for criminal activity.

"Criminals are likely to explore DeFi as both a target for hacking and as a means to attempt laundering funds through," said Grigg. "Because of how new DeFi is, and the explosion in adoption in developed markets, these platforms are easy targets for experienced criminals who have conducted similar hacks before."

4. You'll hear more about stablecoins

Bitcoin and other cryptocurrencies have grabbed headlines because of their volatility. You can become a millionaire or lose it all at the hyper speed of the internet. But try buying a latte with bitcoin, and that volatility can make things confusing fast. 

Enter stablecoins. This subcategory of cryptocurrency, which is tied to an underlying asset, mitigates much of that volatility. Stablecoins could play a vital role in turning cryptocurrency into something we can easily use to conduct the ordinary transactions of everyday life. 

"People should start paying attention to trends in stablecoins both as a medium of payments and as a dollar digital currency. The use cases for cross-border payments, aid relief, instant settlement payments are starting to flourish in 2021 and we will see more of that in 2022," Rachel Mayer, a vice president of product at fintech firm Circle, said in an email.

Transferring assets more efficiently is one of the central values of a stablecoin. This value is powerful for companies that need to move digital assets and cash quickly and efficiently. 

"On the payments side, more industries will start adopting stablecoins as a more efficient way to make payments," Omid Malekan, author of The Story of the Blockchain and a professor at Columbia Business School, said in an email. "Stablecoin volumes will continue to grow, but the share of that volume that is only involved in crypto trading will go down."

5. New crypto rules appear on the horizon

Washington lawmakers sense that cryptocurrency is a big and important thing. But they are struggling, perceptibly, to understand it. It may only be a matter of time before crypto gets its "series of tubes" moment from a hapless representative out of their element.  

In December, executives from six cryptocurrency companies were called to testify before the House Financial Services Committee, where they discussed potential paths for future legislation. Lawmakers in the US have expressed interest in a range of topics -- whether stablecoin issuers should be considered banks, when to tax cryptocurrency and how to craft functional rules in a highly technical and complex industry. This is tricky stuff. Creating the right standards will take time. 

"I think there's going to be a lot more conversations around crypto and blockchain," said Dixon, one of the executives who testified before the House committee. Dixon previously testified on the issue of net neutrality before a House committee during her tenure at Mozilla in 2019 and harbors no illusions when it comes to regulating new technology. Some discourse will be positive and some will be negative, "but I just think that [by] having these conversations, we're going to see policymakers and regulators be more focused, and hopefully, more traditional businesses will be more focused on that." 

There could be more milestones to reach before Americans see a comprehensive framework for crypto-focused legislation. But if industry leaders and elected officials can work together, regular cryptocurrency users and investors may benefit while environmental and security concerns are addressed. 

"It's important to understand that the cryptocurrency industry wants to be regulated, but wants to ensure that proposed regulatory frameworks are feasible," said Grigg. "Governments globally are working with industry players to create legislation that protects consumers and fosters innovation."

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This Week's Most Exciting Crypto News: UK Announces NFT and More

This Week's Most Exciting Crypto News: UK Announces NFT and More

This week brought some exciting developments in the world of cryptocurrency and NFTs. Our lead story is the UK's push to become a center for crypto asset investment and technology. We'll also dive into a south Florida case where US authorities confiscated $34 million in cryptocurrency and Robinhood's new cryptocurrency wallet. Lastly, we'll discuss Tom Brady's NFT sales, a collection of NFT stick figures going for wild sums of money and what happened to the first mainstream video game to integrate NFTs as in-game items. 

Welcome Nonfungible Tidbits, CNET's weekly roundup of news in crypto, bitcoin, NFTs and their related realms. Read on to find out about the six stories you may have missed this week, and stay tuned for more next week.

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UK announces NFT to promote national crypto initiative 

The U.K. wants to be "a global hub for cryptoasset technology and investment."

HM Treasury

The British government announced plans on Monday to make the UK a global hub for investment and tech in crypto assets. The UK is looking to make stablecoins a valid form of payment, and the Royal Mint will issue an NFT to promote Britain's crypto push. "The measures we've outlined today will help to ensure firms can invest, innovate and scale up in this country," UK finance minister Rishi Sunak said in the announcement. This comes just weeks after the country's financial regulator declared all bitcoin ATMs in the UK illegal and ordered them to shut down. The country's advertising authority has also been cracking down on crypto ads in the country for failing to highlight risks associated with cryptocurrency investing. 

Read CNET's full story on the UK's NFT and crypto plans here.

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US Authorities Seize $34M in Crypto in South Florida Case

Angela Lang/CNET

US authorities confiscated 34 million worth of cryptocurrency that was allegedly made from selling illicit items and stolen accounts from online services, including HBO, Netflix and Uber, on the dark web, the Justice Department said Monday. The DOJ says this is one of the largest cryptocurrency forfeiture actions the US has ever filed. The announcement didn't specify the identity of the south Florida resident the cryptocurrency was confiscated from or if the DOJ was pursuing further legal action.

Read CNET's full story on the cryptocurrency confiscation here.

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Robinhood rolls out cryptocurrency wallet for people on waiting list

Getty

Robinhood's cryptocurrency wallet is now available for eligible users who previously signed up for the waiting list. The wallet's release was announced by Robinhood CPO Aparna Chennapragada on Thursday at the Bitcoin conference in Miami. The Robinhood crypto wallet allows transferring cryptocurrency into external wallets with daily withdrawals capped at $2,999 total and 10 transactions. However, residents in Hawaii, New York and Nevada are not eligible to sign up, due to state regulations. Robinhood has been a subject of controversy since the company's role in the GameStop stock saga.

Read CNET's full story on Robinhood releasing the cryptocurrency wallets here.

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ESPN, Tom Brady sell NFTs to promote documentary series

Jordon Kelly/Icon Sportswire via Getty Images

An NFT collection from ESPN and Tom Brady was released Wednesday in concert with the Tom Brady documentary series 'Man in the Arena: Tom Brady' arriving on Hulu and Disney Plus. The NFTs feature ESPN magazine covers of Brady, range from $100 to $500 and have already sold out. Brady, along with his wife, Gisele Bündchen, previously took an equity stake in the cryptocurrency exchange FTX and released a commercial for the crypto company.

Read CNET's full story on the NFTs from ESPN and Tom Brady here.

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NFT stick figures are selling for thousands of dollars

OpenSea

Over $100 million in cryptocurrency has been spent on 'mfers,' an NFT collection featuring drawings of stick figures in front of color backgrounds. Recently, the least expensive NFT in the collection was 3.97 ether, or around $14,000, and the collection's simple art is very much on purpose. "Underlying mfers' meme art is, hilariously, an argument about intellectual property," says CNET Senior Writer Daniel Van Boom.

Read CNET's full story on why mfers are selling and what's driving the prices here.

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First mainstream video game to use in-game NFTs will end new content

Ubisoft

Ubisoft became the first big video game developer to integrate NFTs into mainstream video games when the company introduced 'digits' in Ghost Recon Breakpoint earlier this year, a move that didn't go over well with much of the game's fanbase. On April 5, only a few months post-integration, Ubisoft announced it is ending new content for the game. However, Ubisoft is looking to hire more blockchain-related roles at the company and reportedly wants to put NFTs in future games, so gamers can probably expect to see NFTs in upcoming Ubisoft titles. 

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Thanks for reading. We'll be back with plenty more next week. In the meantime, check out this cautionary tale from Farnoosh Torabi on how bitcoin blackmailers tried to steal from her dad's E-Trade account. 

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https://catetf.kian.my.id/

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Crypto Security: Protect Your Coins and NFTs From Being Stolen

Crypto Security: Protect Your Coins and NFTs From Being Stolen

With crypto prices in free fall, crypto firms laying off thousands of workers and coins that are considered "stable" losing all their value, it's more important than ever to secure your remaining portfolio. 

The current crypto crash isn't the only way people are losing their money. There have been an increasing number of scams that give thieves access to your accounts and crypto assets. Just recently in May, Seth Green had several NFTs worth over $300,000 stolen, after the actor connected his crypto wallet to a scam website pretending to be a credible NFT project.

Protecting your crypto means taking some of the same steps you'd use to safeguard your other digital accounts, such as creating and using strong passwords. However, crypto accounts have unique characteristics like seed phrases that require additional security. Also, the crypto industry still lacks the regulatory framework necessary for the retrieval of your crypto assets if they're stolen.

In this story, we'll cover several ways you can protect your cryptocurrency and NFTs from being purloined and explain why it's worth taking the time to properly secure your digital assets from being stolen. For more on crypto, learn five questions every investor should ask about cryptocurrency and the latest details on bitcoin's wild price swings.

Always follow these two basic password security rules

One of the easiest ways to protect your digital assets is with strong passwords. Ideally, you want your passwords to be at least eight characters long and include random capital letters, numbers and other special characters. If you can make your password longer, however, you should, because the longer the password, the harder it is to crack, in theory.

If you're worried about remembering all of your long, complicated and unique passwords, consider using a password manager, which makes it simple and secure to store and use your passwords from one place. We recommended choosing a password manager with encrypted storage and two-factor authentication for extra security.

Also, when creating an account, never repeat your passwords. If one of your accounts is compromised, your others will also be at risk.

A strong password is vital to keeping your digital assets secure.

James Martin/CNET

Use a hardware crypto wallet for your most treasured assets

Your crypto wallet serves as the gateway to your crypto assets. "Hot" wallets such as software or mobile apps operate online, while "cold" wallets are hardware devices that work offline. Crypto wallets don't hold the actual coins or tokens -- they store the private keys that prove you own your crypto assets and let you buy, sell or trade on blockchains.

Anytime you purchase cryptocurrency or NFTs, they must be stored somewhere. Most people keep their assets in a digital wallet or marketplace, such as Coinbase or MetaMask, because they're free and easy to use, but for your most valuable holdings, you may want to consider a physical wallet.

A hardware, or cold, wallet allows you to store cryptocurrency and NFTs on a physical drive, which you can connect to a computer to access. Hardware wallets are generally more difficult to hack into, so they're a preferred option when storing digital assets that are especially high in value.

The Trezor One hardware wallet ($48.49) works with bitcoin, ethereum, litecoin and a variety of other cryptocurrencies.

Trezor

Here's more on the different types of crypto wallets.

Keep the seed phrase for your crypto wallet secure and offline

In addition to a password, most crypto wallets use a seed phrase for additional security. This seed phrase acts like a master password and is created whenever you set up a new wallet. A seed phrase is made up of 12 or 24 words that you can use to sign in to your account on other devices, or recover your account if you forget your password.

While this seed phrase provides additional security, it also comes with risk -- anyone who learns your seed phrase could potentially steal all the crypto assets recorded in your wallet. While you might be tempted to store your seed phrase somewhere online, it's crucial to write it down -- offline -- to prevent anyone from accessing it. 

Once you write down your seed phrase, store it in a safe or lockbox, so that it's not easy for anyone else to access. Specialized seed phrase hardware tools, like Cryptosteel and Crypt Keeper, can securely store your 12 or 24 words in a portable system that's protected from fire and flooding.

If your seed phrase is either lost or stolen, but you still know your password, immediately log in to your wallet and generate a brand new seed phrase.

This is an example of a randomly created 24-word seed phrase.

Nelson Aguilar/CNET

Be wary of frauds in direct messages on Discord

Discord is one of the unofficial homes of crypto and NFT communities. It's where many crypto enthusiasts go to discuss upcoming NFT projects, cryptocurrency prices, real-life events and even personal lives. Fans of NFT projects use Discord to form communities -- but it's also where hackers and thieves go to compromise accounts.

Here's how it works: A hacker may directly message you, pretending to be part of a project that you're following and interested in. The DM looks official and usually claims that you can mint an NFT that's difficult to get, at a relatively cheap price, and includes a link to follow. But when you click the link, connect your wallet and attempt to purchase the NFT, your wallet is drained of all your NFTs and crypto. And there's really no way to get it all back.

The most important research you can do to avoid falling for a fake NFT website is to use verified channels to find the correct website when attempting to mint or purchase a newly created NFT. Even if you receive a link from what seems like a credible source, use multiple online sources like Google, Twitter and Opensea to verify that you have the correct URL for the project.

An even simpler method to avoid falling into a scam is to disable DMs on Discord. On your mobile device, launch the Discord app, tap your profile picture on the bottom right, go into Privacy & Safety, and toggle off Allow Direct Messages From Server Members. You'll no longer receive direct messages on Discord.

Discord is where people go to discuss cryptocurrency and NFTs, as well as prey on potential victims.

Discord

Don't fall for support scams on Twitter

Like Discord, Twitter is a hunting ground for hackers looking to swindle unsuspecting victims into giving away their assets.

On Twitter, anytime someone mentions "stolen account," "lost password" or even "MetaMask," an army of hackers may respond, offering to help recover stolen assets or restore access into accounts. Hackers may then ask for your seed phrase via DM and use it to steal your crypto or NFTs. 

If you need support, go straight to the official customer service site on Twitter. Never give anyone your seed phrase, ever, even if an account is verified -- sometimes hackers have access to verified accounts. And never share your screen.

Not even Elon Musk can stop these Twitter scammers.

James Martin/CNET

For more about cryptocurrency security, learn whether it's possible to insure bitcoin and how the Securities and Exchange Commission is taking on crypto fraud.

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The UK Will Issue Its Own NFT This Summer

The UK Will Issue Its Own NFT This Summer

The UK government is the latest to join the NFT craze. The Treasury said Monday that Chancellor Rishi Sunak has asked the Royal Mint, the state-owned company responsible for minting coins for the UK, to create an official NFT, or nonfungible token, by this summer. 

"This is part of our plan to ensure the UK financial services industry is always at the forefront of technology and innovation," Sunak said.

The Treasury also laid out plans to regulate stablecoins and recognize them as a valid form of payment. Stablecoins are cryptocurrencies whose values are pegged to existing traditional currencies such as pounds, euros and dollars. These decisions are part of a wider plan to make the UK "a global hub" of crypto asset technology, according to a press release.

"We want to see the businesses of tomorrow -- and the jobs they create -- here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term," Sunak said. 

NFTs are digital products whose authenticity has been certified on a blockchain, and they are considered "nonfungible" due to NFTs being valued on a case-by-case basis instead of one set value. It is estimated that around 250,000 people trade NFTs each month on OpenSea, the biggest NFT marketplace. 

Despite their esoteric nature, NFTs have become a wildly popular cultural phenomena that can be sold for five to six figures each. Some of the more extreme cases include Jimmy Fallon buying a Bored Ape NFT for $200,000, Christie's auctioning a digital art NFT for $69 million in March 2021 and over $90 million worth of mfers -- an NFT collection -- being bought and sold by NFT traders. 

Twitter and Instagram both announced plans earlier this year to bring NFTs to their platforms. And while NFTs are usually associated with cartoonish imagery sold at inflated prices, they have been shown to have real-world value -- Ukraine is using crypto and NFTs to raise funds for its resistance against Russia. 

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Amid War in Ukraine, Should Ordinary Russians Be Banned From Trading Crypto?

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Amid War in Ukraine, Should Ordinary Russians Be Banned From Trading Crypto?

This story is part of War in Ukraine, CNET's coverage of events there and of the wider effects on the world.

As Russia's war on Ukraine intensifies, the US and its allies have continued to increase their economic pressure on the Russian government, to isolate the country further from the global financial system and debilitate its military capacity. Western allies have frozen Russian assets abroad, removed Russian banks from international banking networks and even banned all gas and oil imports, among other unprecedented penalties. But there's still growing concern that Russian President Vladimir Putin and his supporters might turn to cryptocurrencies to avoid economic sanctions.

With their ability to operate as alternatives to the traditional financial system, cryptocurrency exchanges -- digital marketplaces where you can buy and trade digital currencies -- have become an effective option both for Ukraine supporters to raise funds for relief efforts and for ordinary Russians to seek financial shelter from the economic sanctions imposed on their country.

That's why both the Ukrainian government and advocates for even further economic penalties against Russia have become increasingly vocal about the role crypto exchanges can play in the conflict. Hundreds of Western businesses, such as oil companies Shell and BP and tech players Netflix and Microsoft, have scaled back or halted their dealings in Russia since the beginning of the war. And some people argue that similarly stopping crypto operations in the country could significantly weaken Putin's hold on Russia's economy and its citizens.

"I'm asking all major crypto exchanges to block addresses of Russian users," Ukraine's vice prime minister and minister of digital transformation, Mykhailo Fedorov, tweeted Feb. 28. "It's crucial to freeze not only the addresses linked to Russian and Belarusian politicians but also to sabotage ordinary users." 

Fedorov also sent letters to eight cryptocurrency exchanges, including two of the largest by volume, Coinbase and Binance, asking them to stop offering service to Russian users out of concern digital currencies are being used to evade sanctions.

The response was swift. 

"We are not preemptively banning all Russians from using Coinbase," CEO Brian Armstrong tweeted March 3. "We believe everyone deserves access to basic financial services unless the law says otherwise." And hours after getting Fedorov's letter, a Binance spokesperson told CNBC, "We are not going to unilaterally freeze millions of innocent users' accounts. Crypto is meant to provide greater financial freedom for people across the globe. To unilaterally decide to ban people's access to their crypto would fly in the face of the reason why crypto exists."

But the CEOs of several exchanges, including some that got Fedorov's letter, said that though they'll continue to offer access to ordinary Russians, they're complying with US law in regard to sanctions. On March 7, Coinbase reportedly said that to facilitate sanctions enforcement, it had blocked more than 25,000 wallet addresses related to Russian individuals or entities thought to have engaged in illicit activity and had reported them to the US government.

"Some ordinary Russians are using crypto as a lifeline now that their currency has collapsed. Many of them likely oppose what their country is doing, and a ban would hurt them, too."

Coinbase CEO Brian Armstrong

Ukraine's request for an all-out ban on Russian users, and the unequivocal rejection from most regulated crypto exchanges, has sparked a debate about the responsibilities digital currency platforms have in an international conflict. As a growing number of Western companies decide to stop conducting business in Russia, should crypto exchanges follow suit and go beyond what they're required to do by law? And even if they did, would banning all Russian users from crypto exchanges make a difference in slowing down Russia's invasion of Ukraine?

Some crypto specialists interviewed by CNET, including executives from crypto companies and public officials working to prevent Russia from using digital assets to sidestep economic sanctions, said a full Russian ban from crypto platforms could do more harm than good in regard to ordinary Russians. And some said the volume of the whole crypto market is still too small to really help Putin's government counter the impact of Western economic penalties, even if it tried.

But other experts on the role the private sector can play in global conflicts said bringing the Russian economy to a standstill is the one nonmilitary way to thwart Putin's advance on Ukraine, and that crypto exchanges can contribute to that only if they stop operating in Russia altogether. 

Cryptocurrencies are digital assets that are recorded on a blockchain, a distributed digital ledger that can't be altered. They usually aren't backed by an underlying asset, such as fiat currency. That's why they could be an ideal safe haven amid a wave of economic sanctions. 

Why crypto exchanges won't budge on Russia

In refusing to kick ordinary Russians off their platforms, cryptocurrency exchanges argue that the move would further hurt Russian citizens who are suffering from the economic impact of the war and who might consider buying cryptocurrencies as a way to protect their financial standing.

"We all saw those photos of runs on ATMs from Russian citizens -- lines around the block in Moscow," said Todd Conklin, counselor to the deputy secretary of the US Treasury Department. "One would suspect ordinary citizens may have been looking for an alternative to the ruble." Conklin made the remarks during a March 4 webinar hosted by blockchain analytics company TRM Labs about the possibility Russia could use cryptocurrencies to avoid economic sanctions. 

The ruble, Russia's national currency, has lost nearly 50% of its value against the US dollar since the start of the year, according to Reuters. Other parts of Russia's financial system have also been impacted by the West's pressure on the country to stop its aggression on Ukraine. Digital payment services such as Apple Pay, Google Pay and Samsung Pay aren't available in Russia any longer. Visa, Mastercard and PayPal also halted operations in the country. Ordinary Russian citizens, worried that economic sanctions will devastate the Russian economy even further, have flocked to ATMs and banks, seeking to withdraw as much cash as possible before it might be too late. 

"Some ordinary Russians are using crypto as a lifeline now that their currency has collapsed," Armstrong, the Coinbase CEO, tweeted. "Many of them likely oppose what their country is doing, and a ban would hurt them, too."

As long as US crypto businesses are complying with US laws in ensuring that sanctioned individuals or entities aren't using their platforms, "crypto could be a vital lifeline for ordinary Russians to preserve their savings [and] receive familial remittances," Michael Parker said in an email. Parker is a former federal prosecutor who's now head of anti-money laundering and sanctions practice at Ferrari & Associates, a Washington, DC-based law firm.

Jesse Powell, co-founder and CEO of Kraken Exchange, another crypto platform, tweeted that though he understood the rationale behind Ukraine's request to remove all Russians from crypto exchanges, Kraken "cannot freeze the accounts of our Russian clients without a legal requirement to do so." 

"I would guess that the vast majority of crypto holders on @krakenfx are anti-war," Powell tweeted. "#Bitcoin is the embodiment of libertarian values, which strongly favor individualism and human rights."

Given the anti-authority libertarian streak that fuels so much of the cryptocurrency sector, the refusal from crypto exchange executives to stop operations in Russia isn't surprising, said Yale University professor Jeffrey Sonnenfeld, who's the president of the Chief Executive Leadership Institute, a nonprofit focused on CEO leadership and corporate governance.

Crypto executives don't like "being told what to do," Sonnenfeld said. "And yet, there's a striking naivete [in] that they are working in support of [Putin], the greatest autocrat alive today, the most restricted world leader, [who] they are tacitly supporting by enabling a bypass, if it's even for the cognoscenti, for elites and for oligarchs, if it was as limited as some claim."

Sonnenfeld said that the reason more than 300 Western companies have pulled out of Russia so far isn't that the government told them to do so. "It's the maverick streak of these CEOs who pulled out and started this thundering herd," he said, "courageous CEOs who had the moral character to pull out."

What a full ban on Russia would and wouldn't do

Some specialists said that blocking all Russians from crypto would not only potentially inflict damage on millions of innocent citizens, but it would also do little to amplify the West's sanctions on Russia's economy. The reason? Russia doesn't have the digital infrastructure to tap into crypto assets at a level required to outmaneuver the economic penalties already imposed by the US and its allies.

"You can't flip a switch overnight and run a G20 economy on cryptocurrency," Conklin said during the webinar hosted by blockchain intelligence company TRM. He explained that in recent years, Russia has worked to bolster the ruble and build up its reserves, instead of laying the rails needed to support crypto. That's why US economic sanctions have been focused on preventing Russia from accessing the reserves it keeps overseas. "Big banks in an economy need real liquidity," Conklin said. "Conducting large-scale transactions in virtual currency is likely to be slow and expensive."

Anthony Citrano, founder of Los Angeles-based NFT platform Acquicent, pointed to crypto prices as a clue to what's going on. "If the Russian government really were using crypto as a major piece of their international finance strategy, you'd expect to see absolutely explosive growth in prices of major crypto [currencies]," he said, "which we have not seen. Time will tell, but for now there is zero evidence this is happening."

"If you can show [Putin] to be truly impotent over the economy, that he doesn't have control over civil society, then he and the oligarchs fall flat on their face, and that's what cryptocurrency mavericks can do."

Yale University professor Jeffrey Sonnenfeld

Former federal prosecutor Ari Redbord, who's now head of legal and government affairs at TRM, said the economic sanctions levied so far have been so "serious and so draconian in their measures" that Russia would need much more than crypto assets to counterbalance them. "We're talking about [the] potential loss of, or no access to, hundreds of billions of dollars in frozen [Russian] Central Bank assets. We're talking about $1.5 trillion in potential trade losses," he said. "The entire crypto market cap doesn't approach what ultimately Russia would need to prop up a G20 [economy] government and fight what is going to become a more and more costly war."

But that doesn't mean the Russian government or Putin's supporters won't try to use crypto to circumvent economic sanctions. "Russian actors are very adept at money laundering and have been for a long time," Redbord said. In the case of crypto, they'll be looking for "noncompliant exchanges in order to move those funds." 

Such exchanges include platforms like Suex, which was blacklisted by the Biden administration in September for allegedly helping launder ransomware payments. TRM has identified about 340 exchanges that are either in Russia or Russia-related and don't have compliance controls in place, "and that is where illicit actors will look to move on as on-ramps and off-ramps for crypto," Redbord said.

Those digital platforms are already operating outside the law, though. For any US business, including businesses in the crypto industry, "there is still a full compliance obligation to not deal with sanctioned parties or interests in blocked property," said Parker, from Ferrari & Associates. "US crypto businesses must, and largely do, institute robust compliance programs, including advanced analytics software, to ensure legal compliance with US sanctions."

Bringing Russia to a standstill

Yale's Sonnenfeld argues that it's beside the point whether Putin and his supporters can actually get their hands on enough digital assets to offset the impact of Western sanctions. He said that by halting all operations in Russia, crypto exchanges could contribute to putting even more pressure on Putin's government, until it reaches a tipping point.

"Government-ordered sanctions have limits," Sonnenfeld said, even if they're a coordinated effort between multiple international actors, including the US, the EU, the UK, Australia, Japan and the UN. "They work best when voluntary efforts of the private sector rally."

That's what happened in South Africa in the late 1980s, Sonnenfeld said, when international pressure contributed to putting an end to apartheid, a system of institutionalized racial segregation that had ruled the country for more than 40 years. Economic sanctions imposed by the US government had an effect only when dozens of major private companies joined in. "It brought civil society to a stop/standstill," he said.

Sonnenfeld and his research team at Yale compiled a list of companies that continued operating in Russia following its invasion of Ukraine. After the publication of a Washington Post story that mentioned that McDonald's and Starbucks were on the list, both chains announced plans to stop operating in Russia. Since the list was created and made public, it now shows "over 330 companies [that] have announced their withdrawal from Russia in protest" of the Ukraine war.

For Sonnenfeld, paralyzing Russia's economy is the only nonmilitary option the West has against Putin's advances on Ukraine.

"The humanitarian thing to do is to not go with bombs and bullets, and to strangle civil society" and dissolve Putin's image of being a totalitarian with full control over all sectors, he said. "If you can show him to be truly impotent over the economy, that he doesn't have control over civil society, then he and the oligarchs fall flat on their face, and that's what cryptocurrency mavericks can do" should they decide to halt operations in Russia. "They can be really helpful here." 

Allowing ordinary Russians to have access to digital assets through crypto exchanges is "not doing anything humanitarian," Sonnenfeld said. "People should be thrown out of work, they should be out on the street" due to an economic collapse brought on by government-ordered sanctions and to private companies denying Russian citizens access to services, goods and money. "Is that cruel?" Sonnenfeld said. "No, it is better than shooting them, than bombing them -- and that's the stage we're at right now."

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