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>>> EXPOSED: The Bitcoin Fraud
BY JAMES RICKARDS
MARCH 1, 2021
https://dailyreckoning.com/exposed-the-bitcoin-fraud/
EXPOSED: The Bitcoin Fraud
Bitcoin crashed from $20,000 in 2017 all the way to $3,300 by December 2018 — an 83.5% collapse in one year and the greatest recorded asset price collapse in history.
That crash marked the collapse of the greatest asset price bubble in history, larger even than the Tulipmania of 1637.
Well, now Bitcoin is trading around $50,000 (the price currently is $48,595.50), 2.5 times its 2017 peak.
It’s a safe bet that it’s going to crash again. Today I’ll show you the fraud behind Bitcoin’s crazy run-up.
You don’t need a Ph.D. in finance to see that Bitcoin is a bubble. Just take a look at any price chart. The time series of prices over the past six months has been hyperbolic and almost vertical.
If you look at a chart of the Japanese Nikkei Index up to late 1989 or the NASDAQ Composite up until March 2000, you’ll see exactly the same pattern.
The Nikkei crashed over 80% beginning in 1999, and now, 32 years later, it still has not recovered its old highs. The NASDAQ crashed over 75% and did not recover its old high until April 2015, a 15-year recovery.
Bitcoin is positioned for the same kind of fall.
Based on the Nikkei and NASDAQ crashes, Bitcoin could fall from $50,000 to $10,000 or lower before establishing a new base. Still, there is one important difference between the Nikkei and NASDAQ bubbles and the new Bitcoin bubble.
The Nikkei and NASDAQ bubbles were based on a combination of investor mania, leverage and hyped-up earnings releases from companies in the index. But, there was relatively little outright fraud.
In contrast, the Bitcoin bubble is based almost entirely on fraud. Therefore, when this bubble bursts, the damage may be even greater, and the value of Bitcoin may disappear entirely.
Here’s an example of how the fraud works, as described in a legal notice from the New York State Attorney General…
A company called Bitfinex sponsors a cryptocurrency called Tether. This crypto is a so-called “stablecoin.” This means that the value of one Tether is fixed at $1.00.
When you buy a Tether for $1.00, the money is supposedly held in safe liquid assets. When you cash in your Tether, you should receive $1.00 in return (less small transaction costs).
The problem is that no one has been able to locate the liquid assets that supposedly back Tether. There has been no full audit, and there is no transparency about the whereabouts or composition of the liquid assets backing the coin.
Tether claims that its dollar reserves are held in a Bahamian bank named Deltec Bank & Trust. But independent research revealed that the assets claimed by Tether exceed the total U.S. dollar assets of the entire Bahamian banking system.
Other research shows that those who buy Tether use them overwhelmingly to buy Bitcoin from unregulated crypto-exchanges based in Africa and Asia. These exchanges offer leverage and often award “free” Tether coins for those who bring in new customers.
These Tethers have been used to bid up the price of Bitcoin and create the bubble.
Meanwhile, the dollars supposedly backing Tether are unaccounted for. If this process were to go in reverse, which it inevitably will, the Bitcoin values would collapse quickly (because of leverage) and Tether would be unable to redeem retreating Bitcoin investors (because of the unaccounted-for liquid assets).
The Tether crooks would walk away with dollars. The prices of Bitcoin and Tether would collapse catastrophically. And the Bitcoin “investors” would walk away empty-handed. This is not just a spectator sport for prudent investors.
The types of losses arising from a Bitcoin collapse would easily spill over into the brokerages and banks handling the accounts of investors who would be eager to sell everything because they’d be desperate to raise cash and avoid further losses.
Because the shady Bitcoin and Tether exchanges are unregulated, there is perhaps little that can be done to avoid this coming fiasco.
I would advise you to stay far away from Bitcoin. Don’t get sucked in by the hype. Sadly, some people never learn. And many will probably get burned all over again.
Investors should at least be alert to the potential collapse by increasing their cash allocations to help weather the storm.
Below, I show you why, when it comes to Bitcoin, “there’s no there there.” Read on.
Regards,
Jim Rickards
for The Daily Reckoning
<<<
>>> Blockchain ETFs Looking Overbought
Yahoo Finance
by Jamie Gordon
February 25, 2021
https://finance.yahoo.com/news/blockchain-etfs-looking-overbought-203000741.html
London – Blockchain equities have exploded in recent months, driven by the bitcoin rally which has seen many companies post three-figure returns since the start of 2021.
One product capturing much of this upside has been Europe’s only ETF offering direct exposure to blockchain, the $1.1bn Invesco Elwood Global Blockchain UCITS ETF (BCHN), which has increased in size by more than 35% year-to-date, courtesy of $382.7m inflows, according to data from ETFLogic.
BCHN’s popularity was most pronounced in the week to 19 February, in which the ETF saw inflows of $163.1m, pushing its AUM up by almost 15%.
Demand for the product has also been reflected in its performance with returns of 49.6% year-to-date, adding to the 95% rise in 2020.
Europe vs US: Time of the bitcoin ETP has come
Underlining this was the performance of the ETF's top holdings - Canaan, Silvergate Capital, and MicroStrategy - which, at their respective peaks in February, were worth around five times what they were just three months earlier.
Analysts highlighted the main cause of this bullishness as being the feverish surge in crypto valuations, with bitcoin jumping from $9,688 to $54,123 during the twelve months to 22 February. Likewise, the currency has surged 85.1% during the year-to-date.
The latest bitcoin resurgence was fuelled by reports that institutional investors had begun buying into the currency, with initial excitement compounded by the likes of PwC which pointed to professional buying as the driving force behind crypto hitting “record levels”.
As this excitement began to wear off, Tesla revived the bitcoin buzz by declaring that it had invested $1.5bn in the alternative currency – which in turn gave its rally enough steam to add an additional $20,000 to its valuation since the start of February.
Tesla, ESG and bitcoin: An unholy trinity
With investors of all levels of sophistication pouring in to chase an opportunity seemingly too good to miss, blockchains – in their capacity as the digital ledger for crypto mining and transactions – have been operating across more than 12,000 nodes to facilitate the safe and traceable trading of bitcoin on a global scale.
However, despite a number of positive developments in recent months, there is a growing feeling among analysts that the higher bitcoin climbs, the more it will take for the hype train to keep rolling.
And, should new, sensational headlines fail to materialise to sustain cryptos’ currently inflated valuations, one gets the sense that the ominous dot com bubble comparisons become increasingly apt.
As Barnaby Barker, investment analyst at SCM Direct, said: “Blockchain technology is undeniably a useful form of encryption, however the recent valuation of both blockchain companies and cryptocurrencies appears to have been driven by speculative excess rather than fundamentals, with FOMO appearing to be a core driving factor.
“History may not repeat itself but it has a rhythm, and there are many similarities between the current blockchain/crypto boom and the tech boom of the early 2000s.
“The latest “Fad” ETFs appear to rely on greater fool theory, whereby they can only be justified on the basis that an even greater fool will come along to pay an even higher price.”
Aside from its high valuation and illiquidity, investors should also be worried about bitcoin’s historical volatility, with the asset having dropped from $18,640 to $6,332 in less than two months between 2017 and 2018.
Commenting on the crypto’s recent surge, Ben Seager-Scott, head of multi-asset funds at Tilney, said: “The result has been a very volatile ride, and there are vanishingly few assets I know of that have rocketed without a fundamental investment case (including valuation considerations) and have stayed at such elevated levels.”
With alternative currency trading at unprecedented volumes and crypto ETPs making their debut in North America, investors should also be wary that such activity will attract the gaze of regulators. Should this lead to further, new restrictions – following the FCA’s ban of crypto ETNs being sold to retail investors – this would incur downside risk to the current valuations of crypto assets.
Industry bemoans FCA’s decision to ban crypto ETN sales to retail consumers
Even avoiding a repeat of the events of 2017, bitcoin’s current price is hard to justify. It would not be unreasonable to predict a correction, and this, in turn, would see blockchain equities reverse a good portion of their recent gains.
It is certainly true that blockchain has applications outside of cryptocurrency and will likely claim an increasing share of financial services’ back-office functions in coming years, as highlighted by Chris Mellor, head of EMEA ETF equity and commodity product management at Invesco.
“BCHN invests in a wide range of stocks exposed to different forms of blockchain technology, from token investment and cryptocurrency mining plays at one end of the spectrum through to enterprise blockchain in financial services and technology at the other,” Mellor added.
One challenge for BCHN, as highlighted by Laurent Kssis, managing director of 21Shares, is the majority of pure-play blockchain companies are yet to publicly list so are not available to be included in the basket.
“Instead, most companies with the potential to generate earnings from blockchain have well-established businesses in other areas, and blockchain merely presents an additional source of revenue,” Kssis said.
BCHN’s top five holdings have all more than doubled in the year-to-date illustrating just how directly the performance of blockchain equities are dictated by the crypto market.
Likewise, with bitcoin falling 5.4% on 22 February, BCHN’s three largest holdings fell by 15.9%, 5%, and 9.1% apiece during the same day.
Unfortunately, this means that for now, we should view the short-term prospects of blockchain the same way we look at assets like bitcoin. While the technology could well have a meaningful role within mainstream finance in the years ahead, its close correlation with crypto currently makes it a speculative investment – and one that is due a decline.
Offering some hope, Barker concluded: “I wouldn’t be surprised if there is a major correction, but feel that once we do, there will still be underlying demand for these companies (strongest will survive) until the next encryption technology arrives.”
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>>> 7 Ways to Play the Crypto Boom
Yahoo Finance
by Josh Enomoto
January 30, 2021
https://finance.yahoo.com/news/7-ways-play-crypto-boom-153213642.html
Although weakness has recently stymied what has otherwise been a remarkable run in bitcoin (CCC:BTC-USD), that alone won’t stop enthusiasm in the cryptocurrency sector. After breaking above the $20,000 level in December, bitcoin breached $40,000 in a matter of weeks before settling down to the low $30,000 territory. But is now a time to get into crypto assets?
Shedding about a quarter of its newfound lofty price gains, the correction invariably attracted critics, calling bitcoin and the virtual currency complex a dangerous asset class. To be fair, I understand the blowback. To the uninitiated, crypto sounds like magic fairy money, like something crafted out of thin air. And if it’s created that easily, it can be destroyed just as quickly.
While I don’t want to go into a university thesis as to why people can trust crypto assets, one of the most important factors to keep in mind is double-spending, or the ability to use a digital token in more than one transaction. Of course, such a concept would imply unlimited inflation, which would make bitcoin and other cryptocurrency coins worth as much as a billion-dollar Zimbabwean note during the underlying country’s hyperinflation struggles.
And accusations of such sent a shock wave through the crypto community recently, which contributed to the decline of bitcoin and other crypto tokens. However, as Coindesk.com points out, a double-spending incident did not occur. Instead, it was a misunderstanding of the nuances and intricacies of the bitcoin network.
However, that didn’t stop the entire cryptocurrency complex from correctly sharply. This has led people to consider diversifying how they are exposed to the blockchain markets. Fortunately, the burgeoning crypto arena offers multiple ways for all investors to participate.
Buy the crypto assets directly
Acquire shares of GPU manufacturers
Get broad exposure through exchange-traded funds
Purchase stock in mining companies or mining-equipment producers
Invest in companies which utilize the underlying blockchain technology
Consider solar energy firms
Regional investments where crypto or mining is popular
Each approach has their distinct pros and cons, which we’ll explore. But the important takeaway here is that you’re not limited to just one methodology. Indeed, the cryptocurrency market is much more diverse than many critics suggest.
Buying Crypto Directly
Many years ago, if you were to mention bitcoin, let alone alternative crypto coins (altcoins), you’d get a blank stare. At the dawn of blockchain technology and integration, it was difficult to understand how you get such assets in the first place.
Does bitcoin accept credit cards? Or do you have to mine the crazy things themselves? And how exactly do you cash out? What are the jurisdictional regulations regarding such transactions? So many questions.
Today, the process of acquiring crypto assets is much, much simpler. With ultra-popular exchanges and digital wallets like Coinbase, there’s never been a more conducive time to buy cryptocurrency coins directly. Better yet, once you’re satisfied with your profits, cashing out on these popular exchanges is remarkably quick and intuitive.
However, that doesn’t mean buying crypto coins themselves doesn’t have its drawbacks. For one thing, this asset class is incredibly volatile. Elation and despair are separated by mere hours, sometimes minutes. If you can’t handle stomach-churning chop, you better stay away.
As well, you generally have very little protection regarding your virtual currencies. Consider the case of a man who accidentally threw away a $275 million fortune in bitcoin. Things like this don’t happen with regular stocks because of the custodial safeguards in place.
Now, there are custodial crypto platforms available. However, if something happens to the platform, you could be up a creek without a paddle. Just something to think about before getting too heavily involved.
Limited Risk Exposure with GPUs
As you probably know, the process of cryptocurrency mining is extremely intensive. Essentially, various computers which are plugged into a target blockchain network (called a node) compete to solve an algorithmic problem first. The winner has the right to validate a block of transaction data into the blockchain, with crypto tokens as the reward for one’s troubles.
And those troubles are troubling indeed, especially if you walk away with nothing. Because your utility provider doesn’t give a ship what you used your energy for; the mere fact that you did is enough to slap you with a hefty bill. Nevertheless, this is a game of probabilities. With the right equipment, patience and commitment to the process, dedicated miners can make profits despite their astonishing overhead.
But to win consistently and with a measure of predictability, miners need the best equipment. That’s where graphics processing units or GPUs come into play. Companies such as Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) are always at each other’s throats, striving to develop the best GPU. Of course, this is great news for miners, which benefit from better products and lower costs.
Still, the main drawback for buying shares of NVDA or AMD is that these are diversified semiconductor businesses. Their fortunes are not tied to the crypto market; otherwise, they would be all over the map. But if you can’t handle all the pitfalls of virtual currencies, this may be the most risk-mitigated approach.
Diversify with ETFs
No matter what your investing style, exchange-traded funds offer valuable exposure. Rather than betting everything on one name, ETFs allow both investors and speculators to get broader coverage on a particular sector. Given the dramatic popularity of bitcoin in recent years, crypto-centric ETFs have popped up.
One of the most well-known crypto ETFs is the Grayscale family of offerings such as the Grayscale Bitcoin Trust (OTCMKTS:GBTC). Such a platform appeals to those who really believe in the cryptocurrency revolution but are nauseated with the risks of being directly exposed to the digital markets and would prefer the relative safety of the stock market.
In addition, there are ETFs that are levered to the underlying blockchain technology. An example is Siren Nasdaq NexGen Economy ETF (NASDAQ:BLCN), which feature crypto-friendly companies like Square (NYSE:SQ).
Certainly, the performance of many of these ETFs have been astounding. However, a key risk is that you’re purchasing quite a bit for the shares relative to how much crypto each equity unit represents. Also, ETFs trade under Wall Street rules whereas cryptos trade 24/7/365 across the world.
Therefore, if something happens in Asia, you can’t just dump out of your portfolio. You’ve got to wait for the falling knife to hit the ground and hope that you’re not in its trajectory.
Buying the Mining Operations Themselves
Although crypto proponents celebrate the remarkable rise in prices lately, the real “heroes” of this space are the miners. With few exceptions, virtual currencies are decentralized. And that means people have to participate in the mining process to validate transactions and to keep engagement within the target blockchain network.
Therefore, many astute investors have diversified their risk-on portfolios with companies that are connected to mining operations, such as Marathon Patent Group (NASDAQ:MARA) or the manufacturing of specialized mining equipment like Canaan (NASDAQ:CAN).
Fundamentally, it’s a compelling idea. You don’t have to worry about the administrative concerns of crypto investing. For instance, if you forget your password or throw away your hard drive, flash drive or even your computer, you don’t have to fret. Since stocks are basically custodial, you can just go to your broker and explain what happened.
As well, mining companies and manufacturers enjoy enormous upside when the underlying crypto assets are on fire. And let me tell you, they are on fire!
However, please be aware that in some cases, this approach could be riskier than buying blockchain tokens directly. Recently, a class-action lawsuit was filed against Bit Digital (NASDAQ:BTBT), alleging that it is “a fake cryptocurrency business” which is “designed to steal funds from investors.”
Bottom line: always perform your due diligence and be skeptical of outlandish claims (or even reasonable ones).
Stock Up on Companies Using Blockchain
Another potentially safe approach to gain exposure to crypto markets is buying shares of companies that utilize blockchain technologies in their business. At the end of the day, reward tokens will feature fierce debate – and if they don’t, that means we could be in a bubble! But there’s no debating the groundbreaking utility of the underlying blockchain.
What makes bitcoin so powerful is that it de-levered payment transactions away from the staid global financial infrastructure – which is tied to human intermediaries – and instead introduced the concept of decentralized payments without the need of such middlemen.
Later, the Ethereum (CCC:ETH-USD) blockchain came along and introduced the idea of smart contracts, which forges the path to potentially remove intermediaries in other industries, such as law and real estate.
Even better, publicly traded companies like Lemonade (NYSE:LMND) are rapidly integrating blockchain into their daily operations. One of the features that makes Lemonade so successful is its rapid-fire payments for claims. Well, that comes about through the company’s usage of smart contracts.
So long as you’re investing in fundamentally sound companies, this approach doesn’t have as much risk as many other methods. However, you’re limiting upside potential so it’s not great for growth-seeking speculators.
Go Solar
With the controversial election of President Joe Biden, the U.S. will enter a new phase in how it approaches climate change and the environment. This has been recently demonstrated by Biden’s executive order to return our nation to the Paris Agreement.
Naturally, Biden’s election and the Democrats securing control of Congress has been a boon for renewable energy stocks. But it can also be a catalyst for crypto assets. As I mentioned earlier, the process for mining cryptocurrency coins is extremely energy intensive. But with solar panels improving in efficiency and coming down in cost, mining becomes a more attractive proposition.
I explored this idea in December, which proposes that with solar panels running – particularly in the hot parts of the U.S. – crypto miners can possibly save 10% to 20% off their utility bills. Savings like that may not matter to the average household. But if your utility bill is in five-digit territory or more because of your mining operations, 10% to 20% adds up very quickly.
9 Stocks Selling at a Discount Right Now
Though creative, the risk here is that this is a limited-use application for solar energy. Therefore, I would primarily invest in solar energy companies which have upside in their core business, not because a few of their clients are mining cryptocurrency tokens.
Think Globally
While the U.S. is a world leader in multiple industries, when it comes to crypto markets, it lags many other countries. For example, the Securities and Exchange Commission’s lawsuit against Ripple Labs – the developer of the ripple (CCC:XRP-USD) payment protocol – for essentially sidestepping regulations of securities and initial public offerings may send a chill to crypto and blockchain-related enterprises.
On one hand, I can appreciate why the federal government is so severe with their stance on virtual currencies. You can’t just let companies sidestep laws that others have to abide by simply because the platform of choice is a crypto coin and not the U.S. dollar. As well, Uncle Sam needs his tax revenue.
But on the flipside, regulations can stifle growth. And that brings us back to the age-old debate of capitalism versus socialism. Fortunately, not every country has a stick up its hind end regarding the cryptocurrency complex. For example, Japan views XRP as a cryptocurrency, not a security. Thus, if you really believe that cryptocurrencies will change the world, you might look into Japanese stocks or ETFs.
Similarly, cold climates like Sweden may be more efficient in mining crypto tokens because the equipment won’t heat up as dramatically in hotter climates, possibly presenting cost-saving opportunities. Indeed, many are using the heat emitted from cryptocurrency mining in very creative ways.
Of course, this is a super-long approach to investing in virtual currencies. Thus, the risk again is limited upside potential. However, you will have the personal satisfaction of being a blockchain futurist.
On the date of publication, Josh Enomoto held a long position in BTC, ETH, and XRP.
<<<
>>> Sweden Explores Moving to a Digital Currency
Bloomberg
By Rafaela Lindeberg and Ott Ummelas
December 11, 2020
https://www.bloomberg.com/news/articles/2020-12-11/sweden-explores-the-feasibility-of-moving-to-a-digital-currency
Sweden’s government will start exploring the feasibility of having the country move to a digital currency, marking another step into the unknown for the world’s most cashless society.
Per Bolund, financial markets minister, said a review launched on Friday is expected to be completed by the end of November in 2022. Anna Kinberg Batra, a former chairwoman of the Riksbank’s finance committee, will lead the inquiry.
Sweden is among the first countries in the world to consider introducing a digital currency. Its central bank is already running a pilot project with Accenture Plc to introduce an electronic krona based on the same blockchain technology that underpins digital currencies like Bitcoin.
Governor Stefan Ingves said in October that any decision on whether to issue an e-krona needs to be taken at the political level.
From the point of view of the government, Bolund said that “it’s crucial that the digitalized payments market functions safely, and that it’s available to everybody.”
“Depending on how a digital currency is designed and which technologies are used, it can have large consequences for the entire financial system,” he said.
The Riksbank estimated in October that Sweden’s cash usage dropped to its lowest level ever, as the pandemic accelerates the shift away from bank notes and coins. Less than 10% of all payments are made with cash in Sweden, according to the bank’s research.
The Bank for International Settlements estimated back in 2018 that Sweden is the world’s most cashless society, measured as usage as a percentage of gross domestic product.
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Blockchain ETFs - >>> The 3 Best Ways to Invest in Cryptocurrency
MarketWatch
by Barbara Friedberg
October 9, 2020
https://finance.yahoo.com/news/3-best-ways-invest-cryptocurrency-203420576.html
Investing in cryptocurrency seems profitable and replete with fast profits. After all, during the past six months, bitcoin (BTC-USD) bottomed out in mid-March near $5,000, only to rebound to over $9,400 this week. That’s nearly a 100% profit in three months. Yet, in mid-March the crypto markets were scared due to the novel coronavirus pandemic and the closing of U.S. and global economies.
Bitcoin was priced so low because investors feared for the health of the economy and its people.
Identifying the market bottom is difficult, if not impossible. That recent March low followed a mid-February price peak of over $10,000. Not only is it difficult to pick an investing valley but doing so requires solid confidence during times of uncertainty.
Unlike investing in stocks and bonds, which are regulated by the U.S. government, investing in cryptocurrency is nebulous. There are thousands of distinct cryptocurrencies, while bitcoin and ethereum are the most recognizable.
What is Cryptocurrency?
It is a digital currency that is tracked on a ledger. It is decentralized and encrypted. Cryptocurrency is based on blockchain technology, which is a chain of digital information that isn’t controlled by a centralized institution. Blockchain and cryptocurrency are not a part of any centralized banking system.
Although investing is one use of cryptocurrency, there are other reasons to buy the asset:
You can own and use it anonymously.
You can use it to buy goods and services.
Crypto payments may avoids fees and transaction costs.
Crypto transactions are fast.
Cryptocurrency investing is speculative. Prices are extremely volatile, and the risks are distinct from investing in conventional assets. For example, the currency is typically stored in a digital wallet — and that means it may be stolen by savvy hackers.
If you’re interested in investing in cryptocurrency, here are three of the best ways to invest.
Ways to Invest in Cryptocurrency: Robinhood App
At present, Robinhood is the only broad investment app that offer users the opportunity to invest in cryptocurrency. Most states, although not all, allow commission-free investing in crypto with the Robinhood app. This lets users buy and sell:
Bitcoin (BTC)
Bitcoin Cash (BCH)
Bitcoin SV (BSV)
Dogecoin (DOGE)
Ethereum (ETH)
Ethereum Classic (ETC)
Litecoin (LTC)
Robinhood is appropriate for investing in specific crypto assets, but not for using the digital currency to buy goods and services.
Other crypto investing platforms do offer apps, including Binance, Coinbase, KuCoin and Changelly. But, unlike Robinhood, these apps trade crypto only, not other types of investments.
Coinbase
Arguably, the most popular bitcoin exchange is a full-service cryptocurrency firm. Before investing in crypto, there are a few preliminary steps to take.
First, since bitcoins aren’t physical assets, you need to secure a digital wallet. Coinbase offers a digital wallet, and the crypto secured on their servers is protected by their insurance policy. Their process is simple — create an account, link your bank account, and begin buying and selling.
Coinbase has a large base of available crypto assets for trading, as well as a library of education resources.
As with any investment, investigate the fees before selecting a crypto exchange. Coinbase has been charged with having higher fees than some competitors.
Other competing and popular digital investment platforms include Kraken, Coinbase, Cash App and Binance.
Blockchain ETFs
Exchange-traded funds have made investing in a variety of assets as easy as buying and selling a stock online. To answer the need for more seamless crypto ETFs are filing with the SEC. The Securities and Exchange Commission is moving slowly with this new asset class.
Unfortunately, at present only institutions and enormous investors can participate in the following cryptocurrency funds.
Launched in September the VanEck SolidX Bitcoin Trust is currently available only to institutional buyers like a bank or hedge fund.
Coinbase offers an index fund with exposure to four of the largest digital currency. The Coinbase Index Fund is also available only to large investors with a minimum of $250,000.
In the meantime, smaller investors can purchase blockchain ETFs. These funds invest in companies involved in developing and using blockchain technology. They also track the performance of Bitcoin or other cryptocurrencies through futures contracts or by owning the underlying currencies.
The three largest blockchain ETFs are:
Amplify Transformation Data Sharing ETF (NYSEARCA:BLOK)
Reality Shares Nasdaq NexGen Economy ETF (NASDAQ:BLCN)
First Trust Index Innovative Transaction & Process ETF (NASDAQ:LEGR)
The ETFs are volatile, like their underlying assets.
Like any other investments, do your homework before investing. Understand what you are investing in as well as the risks and returns. With speculative investing, it is wise to invest only a small portion of your net worth. That way, should the crypto investment disappoint, you’ll have other assets to offset the loss.
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>>> The Justice Department just seized a record $1 billion in bitcoin
MarketWatch
Nov. 5, 2020
By Shawn Langlois
https://www.marketwatch.com/story/somebody-may-have-just-gotten-away-with-stealing-1-billion-11604592280?siteid=yhoof2
Initially, speculation had it that $1 billion worth of bitcoin might have just been stolen by hackers. It turns out the U.S. government was behind it all along.
The Justice Department this week reportedly seized that unprecedented sum, which sat dormant for years in a wallet linked to Silk Road, the online black market that was shut down in 2013.
“Silk Road was the most notorious online criminal marketplace of its day,” U.S. Attorney David Anderson said in a civil complaint Thursday. “The successful prosecution of Silk Road’s founder in 2015 left open a billion-dollar question. Where did the money go?”
The seizure, as Bloomberg News reported, removed a big chunk of bitcoin from circulation, which likely gave another boost to the price of the digital currency. In the past, the government has auctioned off smaller seizures, but typically not until months later.
When word of the 69,369 bitcoins BTCUSD being removed from the fourth richest wallet in the world first broke, experts were left to scratch their head and offer up their best guesses.
“The movement of these bitcoins … may represent Ulbricht or a Silk Road vendor moving their funds,” Tom Robinson, co-founder of Elliptic, wrote in a post before the news broke. “However it seems unlikely that Ulbricht would be able to conduct a bitcoin transaction from prison.”
Meanwhile, bitcoin continues to charge higher, having already doubled so far this year. At last check, the virtual currency was hovering near $15,000, a level not seen since January 2018.
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>>> EU to introduce crypto-assets regime by 2024, EU documents say
Huw Jones
Reuters
September 18, 2020
By Huw Jones
https://finance.yahoo.com/news/eu-introduce-crypto-assets-regime-144112910.html
LONDON, Sept 18 (Reuters) - The European Union will introduce new rules within four years to make cross-border payments quicker and cheaper through the use of blockchain and crypto assets like stablecoins, two EU documents showed.
The European Commission is due to set out its strategy for encouraging greater use of digital finance at a time when 78% of payments in the euro zone are in cash. It also wants a rapid shift to "instant" payments generally as pandemic lockdowns showed the growing role of cashless payments.
The EU executive will present a draft law to clarify how existing rules apply to crypto assets and set out new rules where there are gaps, the documents said.
"By 2024, the EU should put in place a comprehensive framework enabling the uptake of distributed ledger technology (DLT) and crypto-assets in the financial sector," the documents said. "It should also address the risks associated with these technologies."
Stablecoins, a type of cryptocurrency often backed by traditional assets, leapt onto policymakers' agendas last year when Facebook revealed plans for its Libra token. Central banks are now studying whether to launch their own.
Brussels also wants to make it easier to share data within the financial sector to encourage competition and a wider range of services, while upholding the principle of "same risk, same rules, same regulation", the documents say.
The bloc should also have rules in place within four years to allow new customers to start using financial services quickly once anti-money laundering and identity checks have been completed, it said.
"By 2024, the principle of passporting and a one-stop shop licensing should apply in all areas which hold strong potential for digital finance," it said. Instant payment systems should become the "new normal" by the end of 2021.
Instant payments are suitable for many uses beyond traditional credit transfers, in particular for physical and online purchases, which are currently dominated by payment card schemes, the documents said.
Europe has long sought "home grown" alternatives to the likes of MasterCard and Visa, the U.S. payments firms heavily used in the region.
The Commission will assess the impact of charges levied on consumers for instant payments and to could require that they are no higher than those for regular credit transfers.
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reading, looks like 01-01-2021 will be digital currency day into the next decade !!!!!
Blockchain ETFs - >>> Blockchain's Back, But Not All Blockchain ETFs Are Created Equal
Investing.com
September 5, 2020
By Christiana Sciaudone
https://finance.yahoo.com/news/blockchains-back-not-blockchain-etfs-064222903.html
Investing.com -- With the U.S. dollar sinking and stock markets whipsawing, investors are hunting for ways to diversify.
And that's leading to a major jump in crypto interest, says Catherine Coley, chief executive officer of Binance.US, a digital asset marketplace, on Fortune.
How does one cautiously step into the world of digital currencies? If investors aren't ready to take the plunge and buy actual crypto quite yet, ETFs offer a way to play. But buyer beware: Unlike, gold, not all such ETFs are equal, and that can be seen in the performance of two of the best known, BLOK and BLCN.
Amplify Transformational Data Sharing (NYSE:BLOK) is actively managed by Toroso Investments.
"Some people believe it's the new gold," said Dan Weiskopf, a portfolio manager at Toroso who also goes by the Twitter handle @ETFProfessor. BLOK is a global equity portfolio of professionally-selected companies involved in the transformational data-sharing technology known as blockchain. Among the top holdings are GMO Internet, Square Inc (NYSE:SQ) and Z Holdings Corp (OTC:YAHOY).
"We're not able to directly own crypto, but what we can do is identify those companies, like Square and Galaxy Digital, and Nvidia (NASDAQ:NVDA) as a chip maker and the miners that are going to be benefiting by the trend in crypto," Weiskopf said in a phone interview last month.
BLOK was launched in 2018, and is up 35% this year, compared to GLD (NYSE:GLD), up 29%. The Dow Jones Industrial Average is down slightly for 2020, and the S&P 500 is up 8.8%.
"It's very clear from headlines that we're seeing more evidence that people are really excited about owning more crypto," Weiskopf said. "We may use dollars or banks to transfer money but there is no question that crypto is being used abroad."
Reality Shares Nasdaq NexGen Economy (NASDAQ:BLCN) tracks the Reality Shares Nasdaq Blockchain Economy Index, created through a partnership between Reality Shares and Nasdaq. The index constitutes the research, analysis and investigation of both groups on the emerging development of blockchain technology. The Index is designed to measure the returns of companies that are committing material resources to developing, researching, supporting, innovating or utilizing blockchain technology for their use or for use by others.
Among its top holdings are Overstock.com (NASDAQ:OSTK), Square and DocuSign (NASDAQ:DOCU).
Interestingly, not everyone is buying BLCN because of its blockchain theme.
"We rate these products not in relation to one another but prospects to the market," said Todd Rosenbluth, the senior director of ETF and mutual fund research at CFRA, in a phone interview last month. "We like BLCN but not necessarily as a call on blockchain as an entity," pointing as an example to the fact that Overstock's business isn't driven by blockchain.
This subcategory of ETFs is a great example of why an investor can't just look at a ticker, Rosenbluth said. While the overall theme is connected, it is like comparing apples and oranges.
Still, blockchain has the potential to affect so many different industries, Weiskopf said. It could be used as a ledger for everything from inventory management to home ownership validation.
"More firms are embracing the blockchain than there were in 2018. There's no question about that. Whether or not bitcoin should trade at $10,000 or $20,000 is anybody's guess, but just like gold, it seems like the trend is your friend right now," Weiskopf said.
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>>> Coro Global Inc. (CGLO) develops solutions for fintech industry. It develops a mobile application that will convert gold into a price-stable and scalable, as well as backed by the physical gold cryptocurrency asset using hashgraph digital ledger technology. The company was formerly known as Hash Labs Inc. and changed its name to Coro Global Inc. in January 2020. Coro Global Inc. was founded in 2005 and is based in Miami, Florida. <<<
>>> What Is the Difference Between Blockchain and DLT?
What exactly is the difference between a blockchain and distributed ledgers? Here is a full guide on what each technology does and how.
Cointelegraph
by Simon Chandler
8-2-19
https://cointelegraph.com/news/what-is-the-difference-between-blockchain-and-dlt
What Is the Difference Between Blockchain and DLT?
"Blockchain" and "distributed ledger technology." Many of us have been guilty of confusing these two terms and using them interchangeably. But even though their meanings overlap in a number of areas, and even though they've both reached similar levels of public notoriety since the 2017 cryptocurrency bull market, they aren't quite identical.
Yes, they both generally refer to a record of information that's distributed across a network, and yes, they both foster a greater degree of transparency and openness than had been enabled by earlier, centralized databases or digital records. But this is where the analogies end, since blockchains and distributed ledger technology (DLT) each come with their own important distinguishing features.
Openness, decentralization, cryptography
There are two big distinctions, and depending on where you sit on the Bitcoin vs. blockchain spectrum, some qualify Bitcoin-style blockchains as largely superior to and more innovative than their distributed ledger counterparts while others qualify DLT as more useful for everyday commercial purposes.
The illustration below outlines how the two technologies relate to each other, showing that one way to implement DLT is through a blockchain:
The relationship between blockchain and DLT
Firstly, blockchains are generally public, meaning that anyone can view their transaction histories and that anyone can participate in their operations by becoming a node. They are, as cryptocurrency parlance puts it, “permissionless.” This is the key feature pointed out to Cointelegraph by Marta Piekarska, the director of ecosystem at Hyperledger. According to Piekarska:
“First and foremost: one is permission less, the other is permissioned. This means that in the first case anyone can participate in the network, in the other: only chosen participants have access to it. This also determined the size of the network: Bitcoin wants to grow infinitely, while in a permissioned blockchain space, the number of parties is smaller.”
Put simply, the public aspect of blockchains generally implies three interrelated things: 1) Anyone can use the blockchain, 2) anyone can serve as a validating node of the blockchain, and 3) anyone who becomes a node can, in turn, act as part of that blockchain's governance mechanism. In theory, this makes blockchains decentralized and democratic structures resistant to undue control or influence from any single party.
By contrast, a distributed ledger generally doesn't enable any or most of these public features. It restricts who can use and access it (hence the “permissioned” terminology), and it also restricts who can operate as a node. And in many cases, governance decisions are left to a single centralized company or body. Compared to the ideal of a public, decentralized blockchain, it exists solely to serve the interests of a concentrated group of commercial players and interests.
Below is an image detailing how centralized, decentralized and distributed networks are structured:
Different network types
And then there's the second main difference. As the name implies, blockchains consist in a series of time-stamped “blocks” that record the then-current state of the overall blockchain/cryptocurrency and that need to be cryptographically validated by a majority of the network in order to form the next entry in the chain. As Bitcoin Core developer Kalle Alm explained to Cointelegraph, this ensures a greater level of security for the blockchain, insofar as the need for cryptographic consensus makes it very difficult to fake transactions. Alm went on to say:
"Blockchains alleviate the trust requirement in a shared timestamped database. For a public cryptocurrency, this is obviously necessary or someone might just go and give themselves a million USD, but for a private database, especially when it is not a cryptocurrency but some more abstract form of smart contract platform, it starts to make less and less sense."
However, while some distributed ledgers aren’t cryptographically validated chains of blocks, it’s worth stressing that some are — or that they still feature cryptographic consensus. For instance, while R3’s Corda ledger doesn’t actually comprise a chain of blocks, it nonetheless relies on its notaries (i.e., nodes) reaching consensus over time-stamped transactions. Because of this, it should be emphasized that there’s really only one essential difference between blockchains and distributed ledgers, which is simply that one is permissionless and the other is permissioned. Michal Zajda, the blockchain architect at Aeternity blockchain, told Cointelegraph:
“The only difference between private and public blockchains is the range of availability. I can easily imagine deploying the Bitcoin protocol in a private cloud serving just a small group of users. The fundamental difference here is between permissionless blockchains — like Bitcoin, and permissioned ones. For permissionless ones, we do not need to trust any third party company to run it fairly and honestly.”
But assuming that a distributed ledger is private and isn't a time-stamped chain of blocks that results from cryptographic consensus, it often just amounts to a fairly conventional database that just happens to be shared among a select group of participants. This is the point made by Phil Chen, the decentralized chief officer at HTC Exodus. He told Cointelegraph that the difference between public and private blockchains is vast:
"In the enterprise space, people are talking about private blockchains, which technically are not blockchains but a better database management system. Nevertheless, it does have productivity gains; I call it a 9 to 10 innovation, whereas public blockchains like Bitcoin and Ethereum are 0 to 1 innovations that completely change the way we think and use money and computation. Bitcoin is a true public blockchain that is open, neutral, censorship resistant and borderless. And distributed ledgers are simply permissioned databases."
Privacy, scalability
But as Chen's explanation indicates, even though blockchains are arguably superior to distributed ledgers, DLT can still be a useful addition to the global economy's technological arsenal, particularly in cases in which it would be unwise to harness a truly public and decentralized blockchain. Alm added that:
"The strongest argument for a private blockchain seems to be when a bunch of banks get together to create a system for transferring money between each other. In this case, no bank would be content letting any of the other banks 'maintain' the database on their own, so a shared blockchain controlled by no one would make sense."
Added to this, the privacy of private ledgers is an obvious benefit for any company protective of its business or customer data. Still, the chief commercial officer at the Energy Web Foundation, Jesse Morris, contends that, even here, the privacy of public blockchains can actually be much stronger than some people realize. He told Cointelegraph that:
"A common criticism of public chains has to do with privacy (e.g., the details of every transaction are known to all). This criticism does not recognize two simple facts: 1) any dApp can shield certain transactional details by only transmitting the bare minimum of information necessary across any blockchain while keeping sensitive data off-chain and 2) even in private networks, privacy-preserving features are applied to protect sensitive information from participants on a private blockchain, and these same privacy preservation measures (e.g. EY Nightfall, other zero knowledge proofs) are beginning to be utilized on public blockchains as well."
In other words, there is a recognition that public blockchains potentially offer many of the privacy benefits promised by their more private rivals, and then some. Of course, private ledgers still generally have the advantage of being controlled by the companies that use them — and for big multinational banks that want to have control over their processes, this is obviously a big plus.
There's also the very salient benefit of improved scalability, since, as mentioned above, distributed ledgers are often shared yet largely centralized databases. As such, they can process hundreds — if not thousands — of transactions per second, while decentralized blockchains such as Bitcoin struggle to top seven transactions per second, all the while consuming vast quantities of electricity. This is perhaps the main benefit offered by distributed ledgers, and even if they don't offer much decentralization and transparency beyond previous database systems, it's one reason why they'll continue being used in the future.
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>>> SEC Quashes Dreams of Bitcoin ETF With Another Rejection
Bloomberg
By Vildana Hajric
February 26, 2020
https://www.bloomberg.com/news/articles/2020-02-26/sec-quashes-dreams-of-bitcoin-etf-with-another-rejection?srnd=premium
Commissioner Hester Peirce doubts a fund will ever be approved
Application by Wilshire Phoenix and NYSE Arca rejected
The U.S. Securities and Exchange Commission disapproved the last proposal for a Bitcoin exchange-traded fund, likely destroying any remnants of hope from digital currency fans that a fund would get the green light this year.
The SEC denied an application Wednesday by Wilshire Phoenix and NYSE Arca Inc. to list a fund that wanted to mix Bitcoin and short-term Treasuries, according to an order posted on the regulator’s website. Bitcoin dropped more than 6% to about $8,819 as of 4:13 p.m. in New York.
“The Commission concludes that NYSE Arca has not established that the relevant Bitcoin market possesses a resistance to manipulation that is unique beyond that of traditional security or commodity markets such that it is inherently resistant to manipulation,” the regulator said. A Wilshire representative didn’t immediately reply to a request for comment.
Bitcoin dropped for the third day, losing 6% Wednesday
The SEC has long urged issuers to address a wide array of risks and concerns associated with a potential crypto fund, including manipulation, liquidity and custody issues.
Read more: Crypto ETF Advocates Face SEC Resistance Despite Strategic Shift
In a dissenting statement, Commissioner Hester Peirce, who is a proponent of cryptocurrency products, said the disapproval leads her “to conclude that this Commission is unwilling to approve the listing of any product that would provide access to the market for Bitcoin and that no filing will meet the ever-shifting standards that this Commission insists on applying to Bitcoin-related products—and only to Bitcoin-related products.”
Wilshire’s proposal to mix Bitcoin with T-bills was meant, in part, to cushion against crypto volatility. The firm’s proposal was the last seeking approval from the U.S. regulator after a number of others were rejected or withdrawn. It’s a far cry from two years ago, when a mass of would-be issuers were duking it out to be the first to market.
“I didn’t see any viable reason why this would be accepted when others were denied,” said James Seyffart, an analyst with Bloomberg Intelligence.
Here’s what other market-watchers are saying:
“Bitcoin ETFs make sense based on the efficiency of the ETF investment wrapper, but we understand the regulators stance on surveillance and market manipulation concerns,” said Frank Koudelka, global ETF product specialist at State Street. “We are excited about the prospects for ETFs leveraging the blockchain, regardless of if they are digital currency or traditional asset classes. This ultimately provides the ability to broaden distribution and enhance efficiency.”
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$ALYI ALYI - Alternet Systems Q3 Financials Demonstrate Steady Progress
https://www.barchart.com/story/stocks/quotes/ALYI/overview/4011029/alyi-alternet-systems-q3-financials-demonstrate-steady-progress
>>> Say Goodbye to Banking as We Know It
China is poised to launch the first national digital currency. There will be no counting the disruption.
Bloomberg
By Andy Mukherjee
December 29, 2019
https://www.bloomberg.com/opinion/articles/2019-12-29/china-has-edge-over-silicon-valley-to-end-banking-as-we-know-it
So is China readying its own Bitcoin? Banish the thought.
It’s far bigger than that. Yes, just like any other cryptocurrency — or for that matter, cigarettes in prisoners-of-war camps — the upcoming digital yuan will be “tokenized” money. But the similarity ends there. The crypto yuan, which may be on offer as soon as 2020, will be fully backed by the central bank of the world’s second-largest economy, drawing its value from the Chinese state’s ability to impose taxes in perpetuity. Other national authorities are bound to embrace this powerful idea.
Little is known about the digital yuan except that it’s been in the works for five years and Beijing is nearly ready to roll. The consensus is that the token will be a private blockchain, a peer-to-peer network for sharing information and validating transactions, with the People’s Bank of China in control of who gets to participate. To begin with, the currency will be supplied via the banking system and replace some part of physical cash. That won’t be hard, given the ubiquitous presence of Chinese QR code-based digital wallets such as Alipay and WeChat Pay.
It may start small, but the digital yuan can disrupt both traditional banking and the post-Bretton Woods system of floating exchange rates that the world has lived with since 1973. No wonder that for China, “blockchain and the yuan digital currency are a national strategic priority — almost at the level of the internet,” says Sanford C. Bernstein & Co. fintech analyst Gautam Chhugani.
Ever since the advent of the 17th-century goldsmith-banker in London, the most crucial thing in banking has been the ledger, a repository of irrefutable records to establish trust in situations where it doesn’t exist. When Peter in Vancouver agrees to send money to Paul in Singapore, they’re forced to use a chain of interlinked intermediaries because there’s no ledger in the world with both of them on it. Blockchain’s distributed ledgers make trust irrelevant. Paul devises a secret code, and shares its encrypted version with Peter, who uses it to create a digital contract to pay Paul. A cumbersome and expensive network of correspondent banks becomes redundant, especially when it comes to the $124 trillion businesses move across borders annually. Imagine the productivity boost; picture the threat to lenders.
China isn’t the only one experimenting. Fast, cheap cross-border payment settlement is one application of JPMorgan Chase & Co.’s Quorum, an Ethereum-based platform on which the Monetary Authority of Singapore is running Project Ubin, an exploration into central bank digital money. These are early days, but if blockchain technology shows promise in handling a large number of transactions simultaneously, then digital currencies could become substitutes not just for physical cash but also for bank reserves.
That’s when the game changes. Reserves at a central bank are maintained by deposit-taking lenders. A digital yuan — or Singapore dollar or Indian rupee — could bypass this system and allow any holder of the currency to have a deposit at the central bank, potentially making the state the monopoly supplier of money to retail customers. As Agustin Carstens, the general manager at the Bank for International Settlement, noted recently, “If the central bank becomes everybody’s deposit-taker, it may find itself becoming everybody’s lender too.”
But why would central banks want to demote their own banking systems? One answer, looking at Europe and Japan, is that negative interest rates are doing that anyway. Lenders are starved of profit because while the central bank charges them for keeping money on deposit, they can’t as easily pass on those negative interest rates to their own depositors. If the global economy gets mired in long-term stagnation, official digital currencies will at least be an efficient way of monetary easing without involving banks.
The other, more concrete, reason may be that technological progress is making the status quo untenable. It’s no coincidence that China hastened its national cryptocurrency after Facebook Inc. announced the Libra project, which was touted as an alternative dollar. Perhaps that was fanciful, and the Libra has hit a wall of regulatory concerns. But if they’re offered like Spotify gift cards at the local 7-Eleven, there will be demand for tokens that are acceptable across borders, stable in value against baskets of national currencies, and can be used in global trade and investing. Someone in Silicon Valley will eventually succeed, blowing away the fig leaf of monetary sovereignty in emerging markets in the process.
The changes won’t end with banking and monetary arrangements. Token transactions will be pseudonymous: If the central bank wants to see who’s spending where, it can. Anonymity disappears when cash does. While that will make life difficult for money launderers and terrorists, it could also become a tool to punish political activism. Meanwhile, currency as a foreign policy weapon loses some sting. Pariah states will covet a crypto they can access by circumventing banks that are terrified of flouting Western sanctions. As Harvard University economist Kenneth Rogoff notes, technology “is on the verge of disrupting America’s ability to leverage faith in its currency to pursue its broader national interests.”
A roller-coaster decade — not just for for banking and money but also for privacy and politics — may just be beginning.
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Still whining? Learn to trade.
>>> BIS Wants Central Banks at Center of Digital Cash Revolution
Bloomberg
By Catherine Bosley
December 5, 2019
https://www.bloomberg.com/news/articles/2019-12-05/bis-wants-central-banks-at-center-of-digital-cash-revolution?srnd=premium
Central banks must embrace the revolution under way in digital money to ensure they remain at the heart of the global payments system, according to the head of the Bank of International Settlements.
Agustin Carstens’s argument is that while the private sector “excels at customer-facing activity,” central banks provide the basis for trust, ensure liquidity and set standards. He’s unenthusiastic about Bitcoin and is worried that big tech companies like Facebook offering payment services means they could become unfairly dominant because of their existing data resources.
“We have a responsibility to be at the cutting edge of the debate,” BIS General Manager Agustin Carstens said in a speech on Thursday. “There is really no choice but to do so, as otherwise events will overtake us.”
Carstens, who kicked off his BIS term urging authorities to rein in digital currencies, has since overseen the implementation of a hub to foster collaboration in financial technology. But his caution is clear, and he warns that people shouldn’t be blinded by shiny new things at the expense of stability in the financial system.
“A gleaming skyscraper is an awesome sight. But when we admire one, we often overlook its foundations. These are out of sight, below ground level. But just because they are not visible, it does not mean that they don’t matter. On the contrary, they matter a lot.”
In his speech at Princeton University, Carstens addressed central bank issued digital currencies. While institutions are looking into the idea, caution still rules. Speaking in the European Parliament this week, ECB President Christine Lagarde said it’s “an area where we have to rush slowly,” noting risks for customer security and financial stability.
Carstens gave a green light to wholesale CBDCs, as they’re known, because they’d be restricted to institutions that already have access to central bank deposits, but said issuing them to the general public is perilous.
“Imagine if anybody could open an account at the central bank” he said. “In extreme cases, the central bank could become the one-stop banker for almost everybody in the economy,” which would constitute a “daunting” risk.
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$ALYI New Crypto news.
Riot Blockchain inc. $RIOT The 1 analysts offering 12-month price forecasts for Riot Blockchain Inc have a median target of 3.50, with a high estimate of 3.50 and a low estimate of 3.50. The median estimate represents a +122.93% increase from the last price of 1.57. https://money.cnn.com/quote/forecast/forecast.html?symb=RIOT
>>> Distributed ledger -
https://en.wikipedia.org/wiki/Distributed_ledger
A distributed ledger (also called a shared ledger or distributed ledger technology or DLT) is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions.[1] There is no central administrator or centralized data storage.[2]
A peer-to-peer network is required as well as consensus algorithms to ensure replication across nodes is undertaken.[2] One form of distributed ledger design is the blockchain system, which can be either public or private...
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>>> Facebook Could Do to Banks What It Did to Newspapers
Libra isn't just another cryptocurrency. It's a bid for power.
Bloomberg
By Elaine Ou
October 24, 2019
https://www.bloomberg.com/opinion/articles/2019-10-24/facebook-s-libra-currency-is-zuckerberg-s-attempt-to-copy-wechat?srnd=premium
On Wednesday, Mark Zuckerberg, Facebook’s chief executive, testified about his company’s cryptocurrency project at a hearing held by the House Financial Services Committee. In his testimony, Zuckerberg tried to reassure Congress that Facebook’s Libra cryptocurrency would square the circle between financial inclusion and regulatory adherence, consumer privacy and proactive fraud detection. The one thing he didn’t manage to address is whether the world really wants a crypto offering from the social media giant.
Cryptocurrency has acquired an unseemly status where any use is automatically assumed to have nefarious ends. It doesn’t help that the most prominent example, Bitcoin, has been implicated in some horrific criminal conduct. At the same time, a lack of mainstream adoption gives cryptocurrency few redeeming advocates. No surprise, then, that regulators regard Facebook’s proposal with suspicion.
It’s not that legitimate businesses don’t want crypto; it’s that their customers don’t want to use it for payment. When buying stuff on the internet, consumers will choose the payment method that imposes the lowest transaction cost on themselves — that’s generally the credit card option, which allows deferred payment as well as the accrual of miles or points. An online business that refuses to accept credit cards will always lose out to a competitor that does.
But what if you don’t have any competitors? Facebook enjoys quasi-monopoly status when it comes to consumer attention, controlling the reach and distribution of content across its network of users. 1
As the driver of over one-fourth of web traffic, Facebook has a lot of influence over who sees what on the internet. And with over 2.3 billion monthly active users around the world, it’s not a stretch to imagine that the company could have similar influence over who pays whom, and how.
Mark Zuckerberg’s Congressional testimony makes it clear that he takes inspiration from China, where WeChat serves as a one-stop portal to the greater internet. There, users conduct their banking, shopping, and bill payments without ever leaving the app. The ability to control users’ economic interactions comes with the privilege of deciding the medium of exchange. If it follows suit, Facebook may end up looking like another familiar monopolist — our own government, which creates the national currency we use to pay our taxes.
It’s no wonder regulators and central banks view the Libra project as a threat to the international monetary system. In a recent report, the G7 Working Group warns that global cryptocurrencies could undermine cross-jurisdictional efforts to combat illicit finance. All international transactions using U.S. dollars currently clear through the New York Federal Reserve, where they can be monitored and stopped if deemed unsavory. Previously, members of the Senate Banking Committee have expressed concern over Facebook’s ability to handle economic sanctions on foreign regimes.
Zuckerberg has promised that Calibra, Facebook’s payment app, will include robust compliance systems to fulfill regulatory obligations. However, the greater risk is that Calibra will go above and beyond its regulatory duty. Facebook already employs a more restrictive speech code than legally required — the platform blocks various forms of hate speech, harassment, misinformation and inauthentic behavior. Publishers must accept Facebook’s opaque Terms of Service or risk not being seen at all. It’s one thing to deny politically incorrect figures the ability to share inflammatory content; it’s another thing to leave them economically isolated.
In a competitive market, those who disagree with Facebook’s terms could simply take their business elsewhere. The Libra Association currently includes twenty-one member companies, after some early members dropped out. If Facebook mimics WeChat in establishing itself as a go-to payment portal, those former members may have no choice but to return to the cartel.
Global regulators are so worried about preserving their own monopoly status that they’ve forgotten that monopolies have victims. Just look at what Facebook did to publishers. When Facebook emerged as the arbiter of eyeballs, publishers lost control of their audiences and ad revenue, and consumers ended up with a barrage of clickbait. If Facebook disintermediates the banking system, it could take control of the economic relationship between businesses and their customers, with greater restrictions on financial transactions than ever before. It’s almost enough to make you wish for a decentralized currency.
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ConsenSys - >>> Blockchain Solutions
ConsenSys is a global blockchain company. We develop enterprise applications, invest in startups, build developer tools, and offer blockchain education <<<
https://consensys.net/
>>> The World’s Most-Used Cryptocurrency Isn’t Bitcoin
Bloomberg
By Olga Kharif
September 30, 2019
https://www.bloomberg.com/news/articles/2019-10-01/tether-not-bitcoin-likely-the-world-s-most-used-cryptocurrency
Controversial stablecoin tops Bitcoin in dollar trading volume
Opaque nature favored by traders raises regulator concerns
What’s the world’s most widely used cryptocurrency? If you think it’s Bitcoin, which accounts for about 70% of all the digital-asset world’s market value, you’re probably wrong.
While concrete figures on trading volumes are hard to come by in this often murky corner of finance, data from CoinMarketCap.com show that the token with the highest daily and monthly trading volume is Tether, whose market capitalization is more than 30 times smaller. Tether’s volume surpassed that of Bitcoin’s for the first time in April and has consistently exceeded it since early August at about $21 billion per day, the data provider says.
With Tether’s monthly trading volume about 18% higher than that of Bitcoin, it’s arguably the most important coin in the crypto ecosystem. Tether’s also one of the main reasons why regulators regard cryptocurrencies with a wary eye, and have put the breaks on crypto exchange-traded funds amid concern of market manipulation.
“If there is no Tether, we lose a massive amount of daily volume -- around $1 billion or more depending on the data source,” said Lex Sokolin, global financial technology co-head at ConsenSys, which offers blockchain technology. “Some of the concerning potential patters of trading in the market may start to fall away.”
Tether is the world’s most used stablecoin, a category of tokens that seek to avoid price fluctuations, often through pegs or reserves. It’s also a pathway for most of the world’s active traders into the crypto market. In countries like China, where crypto exchanges are banned, people can pay cash over the counter to get Tethers with few questions asked, according to Sokolin. From there, they can trade Tethers for Bitcoin and other cryptocurrencies, he said.
“For many people in Asia, they like the idea that it’s this offshore, opaque thing out of reach of the U.S. government,” said Jeremy Allaire, chief executive officer of Circle, which supports a rival stablecoin called USD Coin. “It’s a feature, not a problem.”
Tether, which is being sued by New York for allegedly commingling funds including reserves, says using a know-your-customer form and approval process is required to issue and redeem the coin.
Asian traders account for about 70% of all crypto trading volume, according to Allaire, and Tether was used in 40% and 80% of all transactions on two of the world’s top exchanges, Binance and Huobi, respectively, Coin Metrics said earlier this year.
Many people don’t even know they use Tether, said Thaddeus Dryja, a research scientist at the Massachusetts Institute of Technology. Because traditional financial institutions worry that they don’t sniff out criminals and money launderers well enough, most crypto exchanges still don’t have bank accounts and can’t hold dollars on behalf of customers. So they use Tether as a substitute, Dryja said.
“I don’t think people actually trust Tether -- I think people use Tether without realizing that they are using it, and instead think they have actual dollars in a bank account somewhere,” Dryja said. Some exchanges mislabel their pages, to convey the impression that customers are holding dollars instead of Tethers, he said.
The way Tether is managed and governed makes it a black box. While Bitcoin belongs to no one, Tether is issued by a Hong Kong-based private company whose proprietors also own the Bitfinex crypto exchange. The exact mechanism by which Tether’s supply is increased and decreased is unclear. Exactly how much of the supply is covered by fiat reserves is in question, too, as Tether is not independently audited. In April, Tether disclosed that 74% of the Tethers are covered by cash and short-term securities, while it previously said it had a 100% reserve.
The disclosure was a part of an ongoing investigation into Tether by the New York Attorney General, which accused the companies behind the coin of a coverup to hide the loss of $850 million of comingled client and corporate funds.
John Griffin, a finance professor at the University of Texas at Austin, said that half of Bitcoin’s runup in 2017 was the result of market manipulation using Tether. Last year Bloomberg reported that the U.S. Justice Department is investigating Tether’s role in this market manipulation.
Convenience Versus Risk
“Being controlled by centralized parties defeats the entire original purpose of blockchain and decentralized cryptocurrencies,” Griffin said. “By avoiding government powers, stablecoins place trust instead in the hands of big tech companies, who have mixed accountability. So while the idea is great in theory, in practice it is risky, open to abuse, and plagued by similar problems to traditional fiat currencies.”
On the other hand, because Tether is key to their growth, many crypto exchanges would likely be willing to bail it out if needed, said Dan Raykhman, who is developing a platform for issuing digital assets and used to be head of trading technologies for Galaxy Digital.
“There’s this implicit support from all these exchanges to help Tether stay afloat,” he said.
While dozens of stablecoins have come out in the past year, many of them independently audited and regulated, Tether remains the favorite, by far.
“Tether has been around since 2014 -- ancient antecedents in crypto --and has retained its value,” said Aaron Brown, an investor and a writer for Bloomberg Opinion. “I don’t say it’s perfect, but its convenience outweighs its risk for many people.”
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>>> UK Central Bank Chief Sees Digital Currency Displacing US Dollar as Global Reserve
Yahoo Finance
Coindesk
Nikhilesh De
August 23, 2019
https://finance.yahoo.com/news/uk-central-bank-chief-sees-201715816.html
UK Central Bank Chief Sees Digital Currency Displacing US Dollar as Global Reserve
A central bank-supported digital currency could replace the dollar as the global hedge currency, said Bank of England governor Mark Carney.
Speaking at the Economic Policy Symposium in Jackson Hole, Wyoming, on Friday Carney discussed the need for a new international monetary and financial system (IMFS), noting that while the U.S. dollar has played a dominant role in the world order over much the past century, recent developments such as increased globalization and trade disputes may have stronger impacts on national economies at the present moment than they would have in the past.
Carney highlighted the dollar’s use in international securities issuance, its use as the primary settlement currency for international trades and the fact that companies use dollars as examples of its dominance. However, “developments in the U.S. economy, by affecting the dollar exchange rate, can have large spillover effects to the rest of the world.”
Related: China’s Digital Fiat Wants to Compete With Bitcoin – But It’s Not a Crypto
“While the world economy is being reordered, the U.S. dollar remains as important as when Bretton Woods collapsed,” Carney continued.
Carney suggested a number of possible replacements to the dollar, including the Chinese renminbi, and most notably, a digital currency supported by an international coalition of central banks. He said:
“It is an open question whether such a new Synthetic Hegemonic Currency (SHC) would be best provided by the public sector, perhaps through a network of central bank digital currencies.”
“An SHC could dampen the domineering influence of the U.S. dollar on global trade,” Carney said.
Related: Bank of England Governor Says Facebook’s Libra Crypto Will Be Scrutinized
Technology can disrupt the current network effects that protect the dollar, he explained, noting that an increasing number of transactions occur online and use electronic payments rather than cash.
While he did not explicitly reference cryptocurrencies, he did note that “the relatively high costs of domestic and cross border electronic payments are encouraging innovation, with new entrants applying new technologies to offer lower cost, more convenient retail payment services.”
Libra example
One example is Facebook’s proposed Libra crypto project, he noted. The social media giant has proposed Libra as a payments infrastructure and stablecoin backed by a basket of national currencies.
To succeed, Libra needs to address regulatory issues, Carney said.
“The Bank of England and other regulators have been clear that unlike in social media, for which standards and regulations are only now being developed after the technologies have been adopted by billions of users, the terms of engagement for any new systemic private payments system must be in force well in advance of any launch.”
While a digital currency might not yet be ready to replace the dollar as a global currency, “the concept is intriguing,” Carney said.
“It is worth considering how an SHC in the IMFS could support better global outcomes, given the scale of the challenges of the current IMFS and the risks in transition to a new hegemonic reserve currency like the Renminbi,” he said.
If this new SHC were to take on a greater share of global trade, “shocks in the U.S. would have less potent spillovers,” he suggested, adding:
“By the same token, global trade would become more sensitive to changes in conditions in the countries of the other currencies in the basket backing the SHC.”
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>>> Another Hacked Florida City Pays a Ransom, This Time for $460,000
New York Times
By Patricia Mazzei
June 27, 2019
https://www.nytimes.com/2019/06/27/us/lake-city-florida-ransom-cyberattack.html
MIAMI — Even the phones went down in the government of Lake City, Fla., after hackers launched a cyberattack that disabled the city’s computer systems.
For several days after computer systems were paralyzed by a ransomware attack, the staff of the small North Florida town worked with the F.B.I. and an outside security consultant to restore phone lines, email and online utility payments. But in the end, city leaders called an emergency meeting this week and reluctantly approved paying the hackers the ransom they demanded: 42 Bitcoin, or about $460,000.
It was the second city to agree to a large ransom in two weeks. Riviera Beach, in Florida’s Palm Beach County, signed off on an extraordinary $600,000 payment last week, also in Bitcoin, a cybercurrency that is difficult to trace.
As in Riviera Beach, the brunt of Lake City’s ransom will be paid by insurance. Only $10,000 will come out of the city’s coffers.
“With your heart, you really don’t want to pay these guys,” Mayor Stephen Witt said. “But, dollars and cents, representing the citizens, that was the right thing to do.”
The F.B.I., as it typically does, recommended against agreeing to the hackers’ demands. But Mr. Witt said a prolonged recovery would have cost taxpayers more. Though there was no guarantee that the attackers would release the city’s data, Mr. Witt said information technology staff had already been making strides since the ransom had been paid.
On Thursday, a third Florida city, Key Biscayne, said it too had been the victim of a cyberattack that began on Sunday. It was not clear if the attackers demanded a ransom, but the city said it had brought most networks back up by Wednesday night.
Ransomware has become a digital epidemic for the public sector, which often manages large, tangled webs of computer networks, running older software, with limited budgets to defend them. Police departments in Illinois, Maine, Massachusetts and Tennessee have all opted to pay the ransom demands to get back their data. The difference in Florida is that the attackers are now emboldened, raising their ransom demands by a factor of 10 or more.
City officials in Baltimore, a much larger city that has been fighting a massive ransomware attack for the past two months, have spent $18 million on recovery. Hackers there had demanded a ransom of $80,000. A slew of other governments, including the city of Atlanta, have faced similarly crippling breaches.
The Lake City attack began on June 10 when an employee clicked on a malicious email and infected the city’s computers with ransomware, according to the mayor. The program, which the city identified as malware known as “Triple Threat,” affected everything but Lake City’s police and fire departments, which are on a separate server.
“As a result, all Emergency services remain intact,” the city said when it disclosed the attack.
Several days went by before the hackers demanded a ransom. At first, the city, which is about 65 miles west of Jacksonville, at the point where Interstate 10 and Interstate 75 meet, had some luck restoring its systems on its own. But then it ran into trouble, so city leaders decided instead to negotiate with its insurance carrier, the Florida League of Cities, to make the ransom payment.
“Any I.T. professional will tell you they’re fending off attacks all the time,” said Eric Hartwell, deputy general counsel and insurance counsel for the Florida league, which began offering cyberattack liability coverage to its hundreds of members a few years ago. “It’s not necessarily a new thing — I just think for whatever reason, the news cycle is now showing municipalities are no different from private corporations.”
There is a chance Lake City could have decrypted the ransomware on its own. A spokesman for the city said the ransomware was a variant of a malware strain called “Ryuk.” Security experts have successfully unscrambled Ryuk ransomware in 3 to 5 percent of cases, according to Emsisoft, a security firm. Part of the problem, said Brett Callow, a spokesman at Emsisoft, is that security experts need better communication channels with victims. His firm created ID Ransomware, a free website that allows victims to upload strains of ransomware so that security experts can help them to decrypt it.
In Europe, similar projects have proved successful. Security experts, law enforcement and local officials are partnering on the No More Ransom Project to share information about attacks in real time, share decryption techniques, and point law enforcement toward attackers’ command and control servers. In Poland last year, the Polish police, Belgian Federal Police and Europol arrested a Polish national suspected of having infected several thousand computers with ransomware. Security experts said they have had similar success working with the Dutch National Police, but have had a harder time connecting with the F.B.I. because the agency has stricter communication protocols.
Mr. Witt said Lake City fired an employee who it deemed had not done enough to protect the computer systems from an intrusion. That employee was not the same person who clicked on the malicious email, he said.
“We’re developing a system with a backup that hopefully won’t be vulnerable,” Mr. Witt said, imploring other small-town mayors to do the same. “Every other town needs to look at their system — today.”
“I have been in office 14 years,” he added. “We’ve had tornadoes. We’ve had hurricanes. We’ve had fires that they told me were going to maybe reach the city limits. But this was unusual. This was different.”
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>>> Facebook Wants Its Cryptocurrency to One Day Rival the Greenback
Social-media giant says Libra will be better than Bitcoin. But the company is late to the party and other payment initiatives have stumbled.
Bloomberg
By Kurt Wagner , Olga Kharif , and Julie Verhage
June 18, 2019
https://www.bloomberg.com/news/articles/2019-06-18/better-than-bitcoin-facebook-unveils-libra-cryptocurrency?srnd=premium
Facebook Announces Plans for Libra: Is it Really a Currency?
Facebook Says Its New Cryptocurrency Will Be Better Than Bitcoin
Facebook Inc. unveiled plans for a new cryptocurrency that the social-media giant hopes will one day trade on a global scale much like the U.S. dollar.
Called Libra, the new currency will launch as soon as next year and be what's known as a stablecoin -- a digital currency that's supported by established government-backed currencies and securities. The goal is to avoid massive fluctuations in value so Libra can be used for everyday transactions in a way that more volatile crypotcurrencies, like Bitcoin, haven’t been.
Read More: Facebook’s Cryptocurrency Project: Who’s In and Who’s Out
Libra is the culmination of a year-long effort to devise an easy way for Facebook users to send and receive money through its messaging services. Private messaging is one of the company’s fastest growing products, and Chief Executive Officer Mark Zuckerberg is embracing this by integrating all Facebook’s messaging products to let users communicate between its different apps.
This focus comes at a time when user growth of the main social network has plateaued in some major markets, and regulators are scrutinizing the company’s frequent privacy failures. Payments are a potential way to turn messaging into a business that complements Facebook’s advertising operation, which generates almost all its revenue.
To come anywhere close to matching the U.S. dollar for utility and acceptance, Libra will need to be widely trusted. So Facebook and its partners are mimicking how other currencies have been introduced in the past.
“To help instill trust in a new currency and gain widespread adoption during its infancy, it was guaranteed that a country’s notes could be traded in for real assets, such as gold,” the companies wrote in a white paper. “Instead of backing Libra with gold, though, it will be backed by a collection of low-volatility assets, such as bank deposits and short-term government securities in currencies from stable and reputable central banks."
Facebook Wants Its Cryptocurrency to One Day Rival the Greenback
The total number of Libra can change, and new digital coins can be issued whenever someone wants to exchange their Libra for an existing fiat currency, so the price shouldn’t fluctuate any more than other stable currencies, according to David Marcus, head of the Facebook blockchain team that’s spearheading the project.
“It would make a scenario where there’s a run on the bank completely impossible, because we are backed one-for-one,” he said. Libra will also be audited, he added, an important step in an industry with limited transparency.
Facebook has closely guarded its crypto plans for more than a year, though many of the details have already been reported by Bloomberg News and other outlets.
Read about how Marcus tapped PayPal talent to build Facebook’s blockchain team.
Marcus, who used to run Facebook Messenger, said Facebook plans to build a new digital wallet that will exist inside Messenger and its other standalone messaging service, WhatsApp. Once Libra is up and running, the currency and the digital wallet should make it easier for people to send money to friends, family and businesses through the apps. Libra will run on the so-called blockchain, a database that can use millions of computers to verify transactions, eliminating risks that come with information being held centrally by a single entity. Facebook created a new subsidiary, called Calibra, to build the new wallet and focus on the company’s blockchain efforts.
Facebook's track record in payments and commerce has been spotty. A few years ago, it began letting people buy flowers or hail an Uber through its Messenger service. Those features have not been huge hits. In 2010, it began offering Facebook Credits, a way to buy virtual goods inside Facebook games. But in 2012 it scrapped Credits, and in 2013 it started working with third-party services like PayPal process some payments. Facebook's revenue from "payments and other service" was less than 2% of total sales in 2018.
The Decline of Facebook Payments
Facebook's payments revenue as a portion of overall revenue has been declining.
If successful, Libra could make Facebook a much bigger player in financial services. That’s a big “if,” though. Cryptocurrency companies have been trying to build cross-border, digital currencies on the blockchain to disrupt traditional banking and payments for a decade. Nothing has caught on at the scale of traditional money yet.
When it finally arrives, Libra will be late to a party that’s been going on so long, many of the party-goers have either left or collapsed. Some past attempts to make coins usable for commerce, such as Bitcoin, haven’t widely caught on yet because price volatility mainly attracted traders and speculators. Predecessor stablecoins, like Tether, have been used by some traders to park funds in during times of high volatility, but have not been broadly adopted for commerce.
Read more about Facebook CEO Mark Zuckerberg’s early plans for cryptocurrency.
U.S. regulations may represent another hurdle for Facebook. Creating a digital currency doesn’t just require buy-in from financial institutions who need to accept it, and consumers who need to trust it, but it requires approval from regulators, too. The Securities and Exchange Commission has shut down about a dozen businesses issuing their own tokens for violations of securities law. Marcus said Facebook has been in contact with regulators and central banks, but added that the company hasn’t received a “no-action” letter from the SEC yet. That would have safeguarded the project from regulatory action by the agency.
One way Facebook hopes to appease regulators is through the Libra Association, a governing body tasked with making decisions about Libra. At least 27 other firms, including Visa Inc., Uber Technologies Inc. and PayPal Holdings Inc., are part of the group. Marcus described these members as “co-founders,” and said they will have an equal say in how the cryptocurrency is managed.
“Facebook will not have any special privilege or special voting rights at the association level,” said Marcus, the former president of PayPal. “We will have competitors and other players on top of this platform that will build competing wallets and services.”
All Libra Association members are putting a minimum of $10 million into a reserve to help support the cryptocurrency’s value. This buy-in comes with voting privileges. However, the association’s governance structure is still in flux, and most of the group’s crucial decisions, including the creation of its charter, have not yet been decided, according to several members of the group. They asked not to be identified discussing private details.
“Facebook will not have any special privilege”
Libra’s timing could also pose challenges. Facebook is being investigated by the Federal Trade Commission over the company’s privacy practices. Some have called for the company to be broken up, including Senator Elizabeth Warren and Facebook co-founder Chris Hughes. Asking consumers to put more trust in the social media giant, and giving Facebook a strong entry into the world of digital payments and banking, will likely draw further criticism.
Opinion: Crypto-evangelists hoped digital currencies would challenge Big Tech’s data control. Zuckerberg has other plans.
The company plans to keep financial data gathered from Libra users separate from Facebook user data. That’s why Facebook’s digital wallet will exist under the Calibra subsidiary, which will house user transaction data on separate servers, Marcus said. If a WhatsApp user uses her Calibra wallet to send money to a friend or pay a retailer, those interactions won’t be stored alongside her social-media profile.
“There’s a clear distinction between Calibra and what Calibra has access to, and what Facebook Inc. has access to,” Marcus said. “It’s very clear that people don’t want their financial data from an account to be comingled with social data or to be used for other purposes.”
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>>> Fidelity Is Really In Love With Bitcoin: Texas Office Filled With Crypto ASICs
5-25-19
Avatar
Nick Chong
https://www.newsbtc.com/2019/05/25/fidelity-is-really-in-love-with-bitcoin-texas-office-filled-with-crypto-asics/
Many cynics say that institutions and other big names in the corporate world aren’t in Bitcoin (BTC) or crypto assets yet. But, this is quickly being proven not to be the case. In a recent tweet, a Bitcoin developer and industry insider revealed that one of the biggest names on Wall Street has and continues to mine BTC.
Fidelity Continues To Mine Bitcoin
According to Justin Moon, Fidelity Investments, one of the world’s largest asset managers and financial institutions, has a “room full of Bitcoin miners (ASICs) at their [Texas] office.” This likely marks the first time that a Wall Street institution, let alone one of the big names, has actually mined BTC and actively participated in public, renowned blockchains. As Moon puts it, “[this is] cypherpunk AF!”
This isn’t the first time that Fidelity was revealed to have actually truly involved itself in cryptocurrency.
In an episode of “Unconfirmed” with Laura Shin, Tom Jessop, an institutional executive-turned-Fidelity’s crypto chief, claimed that as early as 2015 or so, CEO Abigail Johnson was mining Bitcoin in her very own office. What’s more, Jessop stated that an R&D division of the company even once tested an internal Bitcoin payments network.
Ari Paul, the founder & chief investment officer of BlockTower Capital, earlier this year claimed that Fidelity has a cryptocurrency culture that is “bonkers.” The investor remarks that there are “hundreds of passionate advocates” of the innovation from the C-Suite to the lower rungs of the executive ladder, accentuating that Wall Street sees value in this budding ecosystem.
--- @AriDavidPaul
Fidelity’s cryptocurrency culture is bonkers. Literally hundreds of passionate advocates at every level of seniority at the firm. They have more people working on crypto than the 5 biggest crypto funds combined. ----
And, the company is obviously known to be working on a custody and trade execution solution for its 20 thousand-odd institutional clients, a purported majority of which believe that digital assets have a future and a place in their portfolios.
Strong Mainstream Support
This valuable tidbit of information confirms that mainstream players in finance and the corporate world are delving into cryptocurrency. As reported by NewsBTC previously, TD Ameritrade and E*Trade, two of the largest American retail brokerages, are soon expected to launch spot cryptocurrency trading support for their clientele. No dates or deadlines were mentioned, but these plans have been confirmed by sources to be solid.
On the corporate side of things, cryptocurrency has started to see monumental levels of adoption. Announced Thursday, AT&T, a Texas-based American technology giant valued at $234 billion, will be accepting Bitcoin payments for its services through the Atlanta-headquartered BitPay. Per a press release, AT&T is now the first “major U.S. mobile carrier” to provide its millions of customers with the ability to purchase services for cryptocurrency.
Researcher Willy Woo noted that whenever common Joes and Jills use Bitpay to pay their AT&T bill or purchase an item or service through other retailers, which is technically a negative selling pressure on BTC spot, “thousands more will see it and consider buying a few thousands of BTC as an investment.”
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>>> The Biggest Fraud in History
BY JAMES RICKARDS
MAY 20, 2019
https://dailyreckoning.com/the-biggest-fraud-in-history-2/
The Biggest Fraud in History
My readers know that I’m a longtime critic of bitcoin. Bitcoin rose from about $2,000 in May 2017 to $20,000 by December 2017 in one of the greatest asset price bubbles in history.
I argued repeatedly that it was nothing but a massive bubble and that the bubble would probably burst when it hit $20,000.
In late 2017 it did.
Bitcoin crashed from $20,000 all the way to $3,300 by December 2018 — an 83.5% collapse in one year and the greatest recorded asset price collapse in history.
The crash of bitcoin was even more dramatic than the infamous collapse of tulip prices in the tulipomania in Netherlands in the early 17th century.
But suddenly, bitcoin is back in the news.
You’ve probably seen the headlines about bitcoin’s return. Bitcoin rose from $3,900 on March 26, 2019, to $8,100 on May 15, 2019, a gain of 52% in less than seven weeks.
Happy days are here again! Bitcoin mania is back!
60 Minutes even ran a feature on bitcoin last night.
Is this the start of a new rally back to the heights of $20,000? That seems highly unlikely.
Early Friday bitcoin plunged well over $1,000 in a massive flash crash, about 10% in one day. Easy come, easy go.
What caused the crash?
It seems that a bitcoin “whale” unloaded a massive holding.
A “whale” is a term for a cryptocurrency investor with a large amount of units, or “coins.” That gives them significant influence on the market control.
It’s been estimated that less than 450 people or entities own 20% of the entire bitcoin market.
And when someone buys or sells a massive amount, prices can swing dramatically, as we saw on Friday.
It is still not clear if the large sell order was deliberate or an accidental “fat finger” error.
Prices have recovered to some extent, and bitcoin’s trading around $7,800 today. But either way, Friday’s flash crash highlights a major weakness of bitcoin. It can all come crashing down like a house of cards, as bitcoin’s 2017–18 hair-raising plunge proves.
As an asset, bitcoin has very little to offer outside of speculation.
Bitcoin still has no use case except for gambling by speculators or the conduct of transactions by terrorists, tax evaders, scam artists and other denizens of the dark web. Bitcoin is still unsustainable due to extreme demands for electricity in the computer “mining” process.
It is still nonscalable due to the slow and clunky validation process for new blocks of transactions on the bitcoin blockchain. Bitcoin has no future as “money” because the supply of bitcoin cannot grow beyond a preset amount.
That feature makes bitcoin inherently deflationary and therefore not suitable for credit creation, which is the real source of any system of money. Bitcoin has been subject to continual price manipulation by miners through wash sales, front-running, ramping and other tried-and-true techniques for price manipulation.
The bitcoin infrastructure has been plagued with hacking, fraud, bankruptcy and coin theft measured in the billions of dollars. Bitcoin may go higher from here; it’s entirely possible. But it will then come crashing down again.
What is bitcoin’s intrinsic worth?
JPMorgan Chase has tried to break it down. They examined bitcoin as a commodity.
To arrive at its worth, JPMorgan Chase estimated the cost of producing each individual bitcoin by looking at factors such as electrical costs, computational power and energy efficiency. I mentioned these factors above.
When they crunched the numbers, what number did they come up with?
JPMorgan Chase estimated the intrinsic value of bitcoin at around $2,400. Let’s assume for now that’s accurate, or a reasonable approximation. Then even at $8,000, we can conclude that bitcoin is severely overvalued.
JPMorgan Chase compared bitcoin’s recent run-up to the bubble it experienced two years ago. Even though it is still far from $20,000, if we see another speculative frenzy it could undergo a similar run. But it would end the same way.
The bottom line is I would advise you to stay far away from bitcoin. Do not get sucked in by the hype.
Sadly, some people never learn. And my guess is that many will get burned all over again.
Read on for more.
Regards,
Jim Rickards
for The Daily Reckoning
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>>> Fidelity Will Offer Cryptocurrency Trading Within a Few Weeks
By Matthew Leising
May 6, 2019
https://www.bloomberg.com/news/articles/2019-05-06/fidelity-said-to-offer-cryptocurrency-trading-within-a-few-weeks?srnd=premium
Asset manager will target institutional customers, not retail
Crypto markets continue to be plauged by fraud and theft
Fidelity Investments, which began a custody service to store Bitcoin earlier this year, will buy and sell the world’s most popular digital asset for institutional customers within a few weeks, according to a person familiar with the matter.
The Boston-based firm, one of the largest asset managers in the world, created Fidelity Digital Assets in October in a bet that Wall Street’s nascent appetite for trading and safeguarding digital currencies will grow. It also puts Fidelity a step ahead of its top competitors that have mostly stayed on the sidelines so far. The firm said in October that it would offer over-the-counter trade execution and order routing for Bitcoin early this year.
Fidelity would join brokerages E*Trade Financial Corp. and Robinhood in offering cryptocurrency trading to clients, though Fidelity is only targeting institutional customers and not retail investors like E*trade and Robinhood, said the person, who asked not to be named discussing private matters. A study released by Fidelity on May 2 found that 47 percent of institutional investors think digital assets are worth investing in.
“We currently have a select set of clients we’re supporting on our platform,” Fidelity spokeswoman Arlene Roberts said in en email. “We will continue to roll out our services over the coming weeks and months based on our clients’ needs, jurisdictions, and other factors. Currently, our service offering is focused on Bitcoin.”
Fidelity closer to offering crypto trading
According to the survey, which questioned 441 institutional investors from November to February, 72 percent prefer to buy investment products that hold digital assets, while 57 percent choose to buy them directly.
The hurdle to make crypto appeal to more mainstream investors is that it continues to be plagued with fraud, theft and regulatory infractions. The latest case involves the New York attorney general accusing Bitfinex, one of the largest Bitcoin exchanges, of hiding the loss of about $850 million in client and corporate cash. Vancouver-based Quadriga Fintech Solutions Corp., which is going through bankruptcy in Canada, owes 115,000 clients about $193 million in cryptocurrencies and cash after the death of founder Gerry Cotten last year.
Bitcoin has jumped more than 50 percent this year, extending the wild price swings that have attracted many individual investors to the mostly unregulated coin. The original digital currency gained widespread notoriety when it surged 1,400 percent in 2017, before tumbling 74 percent last year.
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>>> Crypto’s Long Road to Acceptance May Have Started Here
In the wake of the 2018 crash, two dozen traders gathered to plan its emergence as a new asset class. Step one: a clearinghouse.
By Alastair Marsh
April 24, 2019
https://www.bloomberg.com/news/articles/2019-04-25/crypto-s-long-road-to-acceptance-may-have-started-here?srnd=premium
He sent the invitations when the party was over.
Only after the cryptocurrency craze’s collapse hit bottom in December did Standard Chartered Plc veteran Hoe Lon Leng issue his call to the market’s biggest traders: join him to brainstorm making digital tokens part of the world’s financial architecture.
It may seem quixotic, but the goal of the two dozen men gathered Jan. 20 at a resort on Singapore’s Sentosa Island was to create the framework for an orderly market in crypto derivatives—part of every primitive asset class’s journey to acceptance. If they succeed, those hours spent in Sofitel meeting rooms hemmed in between an 18-hole golf course and one of the city-state’s sandy beaches could prove to be a turning point, these true believers say.
“We see this as getting the crypto market into shape in order to absorb the entry of traditional finance firms,” said Simon Nursey, Leng’s former colleague who attended the meeting. (Leng’s crypto initiative is a personal project, and his employer is not involved). “We are witnessing the emergence of a new asset class.”
Such visions underscore the schizophrenic world of cryptocurrencies—digital money that its advocates cheer as the future free from meddlesome officaldom. But alongside finance professionals prospecting for a big score and institutional investors testing it out, a rogue’s gallery of anarchists, criminals and fraudsters has left a stink on virtual currencies that is proving hard to wash away.
“Crypto is now practically a pejorative,” said Eoin O’Shea, a former compliance chief at Credit Suisse Group AG who now runs Temple Grange Partners, a risk and compliance consultancy. “It will need to shake off this taint if it is to go mainstream.”
Yet in the wake of crypto’s 2018 crash, traders flew into Singapore from Hong Kong, Tokyo and New York to join Leng’s caucus.
The gathering brought together traders from firms including Mike Novogratz’s Galaxy Digital Holdings Ltd. and Circle Internet Financial Ltd., which counts Goldman Sachs Group Inc. among its investors, as well as exchanges Binance and Coinbase. Together, the group embodied the first Crypto OTC Roundtable Asia.
They focused on private bilateral derivatives known as over-the-counter contracts, instead of exchange-traded products like Bitcoin futures. Unlike the futures contracts that trade on public markets managed by regulated companies such as CME Group Inc., OTC contracts, including options, are not standardized. They also expose traders to the credit risk of their counterparts.
When Wall Street bankers from firms including Deutsche Bank AG and Goldman Sachs Group Inc. in 2005 created a standardized contract for credit default swaps on mortgage-backed securities, the market boomed, until it melted down just a few years later.
While no official statistics exist for bilateral crypto derivatives trading, Nursey estimates volumes total around $750 million per month across swaps and options contracts. That’s a fraction of the trillions that change hands weekly in the interest-rate derivatives market.
The Singapore meeting gave birth to what will be the first clearinghouse for crypto derivatives to increase trading volume and dramatically reduce trading costs. The venture, known as Liquidity Offset Network, should be operational and regulated by the Singapore Monetary Authority as soon as July, said Nursey, 46, who until November was head of foreign-exchange options trading for Asia at Standard Chartered. The network will be the central counterparty, while the services it offers, including margin calculations and confirmation, are known as OTSafe, according to Nursey, who says he’s financing the network along with a silent partner.
The point would be to eliminate the need for traders to post collateral with each of their counterparties, an arrangement that can quickly exhaust all the resources of a small fund. Were the same fund to face a single central counterparty—in this case the clearinghouse—it would need to hold less collateral, he said.
“It’s very hard to grow a market on a bilateral basis,” said Darius Sit, a Singapore-based managing partner at crypto trading firm QCP Capital who helped Leng organize the meeting. “It is almost impossible to arrive at a system both parties see as fair and equal.”
An accepted guide of trading conventions would also help, laying the ground for institutional investors and Wall Street banks to join, said Nursey. A handful of mainstream finance firms are looking at crypto investments or businesses, but most have steered clear.
For Leng, 44, crypto trading is similar to many of the other nascent markets he has seen in a 20-year career at firms including Tudor Investment Corp., Goldman Sachs and now Standard Chartered. He’s even written an introductory guide to crypto.
The violent price swings and makeshift infrastructure for digital assets are reminiscent of the Asian currency derivatives market in late 1990s, which began with a few in-the-know dealers and grew quickly as the contracts became widely adopted, said Leng. OTC derivatives on Bitcoin, Ethereum and the like could also grow rapidly.
CORA will hold a second meeting in Chicago in May to draw more U.S. traders into its initiative. Such a move could be crucial because of the U.S.’s outsize influence, said Rich Rosenblum, co-founder of GSR, a Hong Kong-based algorithmic trading firm focused on digital assets who did not attend the Singapore meeting.
“Due to weak regulatory oversight in Asia, it will be challenging for initiatives of this kind to have an industrywide impact,” said Rosenblum. “Similar efforts in the U.S. have the opportunity to work with more progressive regulators, which may be the deciding factor in what sets the global standards and legal framework of the future.”
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>>> Dollar Dominance Under Multiple, Converging Threats
BY JAMES RICKARDS
APRIL 16, 2019
https://dailyreckoning.com/dollar-dominance-under-multiple-converging-threats/
Dollar Dominance Under Multiple, Converging Threats
For years, currency analysts have looked for signs of an international monetary “reset” that would diminish the dollar’s role as the leading reserve currency and replace it with a substitute agreed upon at some Bretton Woods-style monetary conference.
That push has been accelerated by Washington’s use of the dollar as a weapon of financial warfare, including the application of sanctions. The U.S. uses the dollar strategically to reward friends and punish enemies.
The use of the dollar as a weapon is not limited to trade wars and currency wars, although the dollar is used tactically in those disputes. The dollar is much more powerful than that.
The dollar can be used for regime change by creating hyperinflation, bank runs and domestic dissent in countries targeted by the U.S. The U.S. can depose the governments of its adversaries, or at least blunt their policies without firing a shot.
But for every action, there is an equal and opposite reaction.
As the U.S. wields the dollar weapon more frequently, the rest of the world works harder to shun the dollar completely.
I’ve been warning for years about efforts of nations like Russia and China to escape what they call “dollar hegemony” and create a new financial system that does not depend on the dollar and helps them get out from under dollar-based economic sanctions.
These efforts are only increasing.
Russia has sold off almost all of its dollar-denominated U.S. Treasury securities and has reduced its dollar asset position to almost zero. It has been amassing massive quantities of gold, and has increased the gold portion of its official reserves to over 20%. Russia has almost 2,000 tonnes of gold, having more than tripled its gold reserves in the past 10 years. It has actually acquired enough gold to surpass China on the list of major holders of gold as official reserves.
This combination of fewer Treasuries and more gold puts Russia on a path to full insulation from U.S. financial sanctions. Russia can settle its balance of payments obligations with gold shipments or gold sales and avoid U.S. asset freezes by not holding assets the U.S. can reach.
And Russia is providing other nations a model to achieve similar distance from U.S. efforts to use the dollar to enforce its foreign policy priorities.
Certainly any talk of a monetary reset must involve China. Despite its present weakness, China is still the second-largest economy in the world and the fastest-growing major emerging market. Like Russia, China is amassing gold, and likely has far more gold than it officially lists. It has also been helping to suppress gold prices so that it can buy gold cheaply without driving up the price.
Europe has also shown signs that it wants to escape dollar hegemony. For example, German Foreign Minister Heiko Maas has called for a new EU-based payments system independent of the U.S. and SWIFT (Society for Worldwide Interbank Financial Telecommunication) that would not involve dollar payments.
SWIFT in the nerve center of the global financial network. All major banks transfer all major currencies using the SWIFT message system. Cutting a nation off from SWIFT is like taking away its oxygen.
In the longer run, these are just more developments pushing the world at large away from dollars and toward alternatives of all kinds, including new payment systems and cryptocurrencies. The signs of a reset are everywhere, but at least for now the dollar is still king of the hill.
The dollar represents about 60% of global reserve assets, 80% of global payments and almost 100% of global oil sales. With such a dominant position, the dollar will not be easy to replace. Still, the trends are not good for the dollar. The international reserve position may be 60%, but as recently as 2000 it was over 70% and just a few years ago it was still at 63%. That trend is not your friend.
Another challenger to the dollar is the IMF’s special drawing rights or SDRs. The SDR is a form of world money printed by the IMF. It was created in 1969 as the realization of an earlier idea for world money called the “bancor,” proposed by John Maynard Keynes at the Bretton Woods conference in 1944.
The bancor was never adopted, but the SDR has been going strong for 50 years. This article describes how the IMF could function more like a central bank through more frequent issuance of SDRs and by encouraging the use of “private SDRs” by banks and borrowers.
At the current rate of progress, it may take decades for the SDR to pose a serious challenge to the dollar. But that process could be rapidly accelerated in a financial crisis where the world needed liquidity and the central banks were unable to provide it because they still have not normalized their balance sheets from the last crisis.
In that case, the replacement of the dollar could happen almost overnight. Individuals will not be allowed to own SDRs, but you can still protect you wealth by buying gold. That’s what Russia and China are doing. Both countries have more than tripled their gold reserves since 2009.
But attacks on the dollar are not limited to gold or SDRs themselves. The most imminent threat to the dollar actually comes from a combination of gold and digital currency.
The fact that Russia and China have been acquiring gold is old news. Still, there are practical problems with using gold as a form of currency, including storage and transportation costs. But Russia is solving these transactional hurdles by combining its gold position with distributed ledger, or blockchain technology.
Russia and China could develop a new cryptocurrency that would be transferred on a proprietary encrypted ledger with message traffic moving through an internet-type system not connected to the existing internet. Other countries could be allowed into this new system with permission from Russia or China.
The new cryptocurrency would be a so-called “stable coin,” where the value was fixed with reference either to a weight of gold or another standard unit such as the SDR. Goods and services would be priced in this new unit of account. Periodically, surpluses and deficits would be settled up in physical gold.
Such net settlements would require far less gold than gross settlements (where every transaction had to be paid for in real-time). This type of system (also called a “permissioned blockchain”) is not pie-in-the-sky, but is already under development and will be deployed soon. But you can count on the U.S. government being the last to know.
The development of a gold-backed digital currency is just one more sign that dollar dominance in global finance may end sooner than most expect. And we may be getting dangerously close to that point right now.
Regards,
Jim Rickards
for The Daily Reckoning
<<<
>>> Quadriga’s Late Founder Revealed Crypto Storage in Old Podcast
By Doug Alexander
February 15, 2019
https://www.bloomberg.com/news/articles/2019-02-15/quadriga-s-late-founder-revealed-crypto-storage-in-old-podcast?srnd=premium
Gerry Cotten said access keys were kept on paper back in 2014
Customer accounts remain frozen as company searches for codes
Quadriga CX founder Gerry Cotten died in December possibly holding the only keys to C$190 million ($143 million) in cryptocurrencies -- but five years ago, he revealed exactly how his digital exchange stored Bitcoin for its clients.
Cotten was interviewed on the “True Bromance Podcast” in February 2014 when he was living in Vancouver, in which the show’s hosts -- actors Sage Brocklebank and Michael Karl Richards, and producer Brett Michael -- were given a primer on cryptocurrencies and an explanation of his new venture. About an hour in to the rambling discussion, Cotten warned of the dangers of losing passwords needed to access Bitcoin.
“It’s like burning cash in a way," Cotten told his hosts. “Even the U.S. government, with the biggest computers in the world, could not retrieve those coins if you’ve lost the private key. It’s impossible to retrieve those."
The warning resonates now with more than 100,000 customers in light of Quadriga’s current woes. Cotten, who ran Quadriga off his laptop, died while traveling in India, and no one knows how to recover the cryptocurrencies the exchange was holding for clients. Quadriga’s operations have been shuttered and the Vancouver-based firm is reorganizing under court-approved creditor protection with the help of Ernst & Young Inc.
Canadian exchange was early avenue for crypto
While Cotten, who last resided in Halifax, may have changed his procedures over the years, back in 2014 he was a big fan of protecting cryptocurrencies with a very low-tech solution: paper.
“The paper wallet is a great way to store your Bitcoins. Basically, all you need to send Bitcoins is your private key, which is a string of, a ton of numbers and letters," he said. “The best way to do it is take your private key, print it off, store it offline in your safety deposit box, vault, whatever, and then take the public key, which is your address, and use that to send money to it. So that way you can never have your Bitcoin stolen, unless someone, like, breaks into the bank, steals your safety deposit box and gets into your private key and so forth.”
And that’s exactly what he did for his firm in those days.
“At Quadriga CX, we’re obviously holding a bunch of Bitcoins that belong to other people who have put them onto our exchange," Cotten said. “So what we do is we actually store them offline in paper wallets, in our bank’s vault in a safety deposit box because that’s the best way to keep the coins secure.
“Essentially we put a bunch of paper wallets into the safety deposit box, remember the addresses of them," he said. “So we just send money to them, we don’t need to go back to the bank every time we want to put money into it. We just send money from our Bitcoin app directly to those paper wallets, and keep it safe that way."
Winklevoss Twins
Cotten’s measures aren’t unique. Bitcoin advocates Tyler and Cameron Winklevoss, the brothers who run the Gemini Trust Co. exchange, came up with a similar method to store and secure their own private keys using paper, according to December 2017 New York Times story. The brothers cut up printouts of their private keys into pieces and then distributed them in envelopes to safe deposit boxes around the country, so if one envelope were stolen the thief would not have the entire key.
Gemini has since created a high-tech version of the process to hold client money, and accessing the firm’s so-called digital wallets requires multiple signatures from cryptographically sealed devices never linked to the internet.
Read More: Crypto Exchange Founder Dies, Leaves Behind $200 Million Problem
Cotten explained in the podcast that his early measures left the crypto cache safe even if hackers got into his site.
“It’ll be a little annoying because we’ll have to clean up whatever mess the hackers make, however they won’t actually be able to steal any of the funds," Cotten said, adding that while they could “see the address of where the coins went" hackers couldn’t actually access it.
Now it’s up to the court appointed monitor to attempt to unravel the current mess, whether the keys are stored on paper as Cotten mentioned years ago or in more elaborate forms.
<<<
>>> J.P. Morgan Chase Becomes First U.S. Bank With a Cryptocurrency
MSN Money
by Erik Sherman
2-14-19
https://www.msn.com/en-us/money/savingandinvesting/jp-morgan-chase-becomes-first-us-bank-with-a-cryptocurrency/ar-BBTAbxW?OCID=ansmsnnews11#page=2
How the mighty have taken a u-turn.
J.P. Morgan Chase CEO Jamie Dimon called bitcoin a fraud in September 2017 and said, “You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart,” By January 2018 he had walked the remarks back but said he still was “not interested that much in the subject at all.” In February 2018, J.P. Morgan called cryptocurrencies “risk factors” to its business, something it never previously said.
And now J.P. Morgan jpm has become the first bank to offer its own cryptocurrency, CNBC reported. But don’t expect it to become an investment vehicle—at least for now. The cryptocurrency, called “JPM Coin,” is intended for the bank’s wholesale payments business that moves $6 trillion around the world daily.
As long-time former banker and now cryptocurrency industry figure Alan Silbert said of Dimon in a January 2018 tweet, “Backpedaling is the first step in the program towards walking the path.”
There are two reasons J.P. Morgan is on that road. One is strategic. If cryptocurrencies are risk factors, it’s better to be inside than out, potentially watching someone walk away with your business.
The second is competitive. Wholesale cross-border payments involve the movement of large sums between banks as part of the complex dance of international transactions. Those movements have traditionally used wire transfers that can take a day to complete.
But global banking is moving toward blockchain, the database technology that drives cryptocurrencies and leaves a clear audit trail that supports a high level of regulatory compliance. A cryptocurrency can work at the same speed for real-time transactions instead of a wire transfer’s lag, giving the processor a competitive advantage.
Small trials of JPM Coin are expected to start within a few months.
<<<
>>> Forget Bitcoin. Have You Heard of IMFcoin?
IMF would like its special drawing rights to have a digital future, and has spent the past year thinking of a broader role for it
By James Mackintosh
Oct. 5, 2017
https://www.wsj.com/articles/forget-bitcoin-have-you-heard-of-imfcoin-1507228382
Forget Bitcoin, think IMFcoin. The head of the International Monetary Fund has been musing about the future of money, and thinks there is a decent chance it will come from the guardian of the world’s monetary system.
Christine Lagarde, IMF managing director, held up the organization’s special drawing rights (SDRs) as having a possible digital future at a Bank of England forum last week, and put what she said was a “question mark” over whether SDRs could replace existing international currencies. “It’s not a far-fetched hypothetical,” she said, and the IMF needs to be ready.
The SDR is a long way from the digital disruption that cypherpunks hope cryptocurrency can deliver. Dreamed up in the 1960s, SDRs are a kind of artificial currency whose value depends on other currencies. Dollars are a part of it, but so are euros, sterling, renminbi and yen. An SDR is a bit like a currency mutual fund for central banks.
Pounded
Sterling fell as it lost reserve currency status to the dollar from 1914 onwards
For decades it has been an afterthought in the global financial system, but the IMF has spent the past year thinking about how to give SDRs a broader international role. So could some sort of crypto-SDR eventually replace the dollar as the world’s money?
The idea has heavyweight support from those who want to diminish the dollar’s status, notably in China. People’s Bank of China Governor Zhou Xiaochuan called in 2009 for wider use of the IMF’s money to “gradually replace existing reserve currencies with the SDR,” one reason for the latest review.
The reasons are well-rehearsed, and not digital. China—and other emerging markets—would like to diversity their risk away from dollars. They also worry about the inherent problem of using national money for global reserves. When the U.S. faces a conflict between domestic and international needs, it is likely to favor its voters over the world economy.
Buck's the System
The dollar's reserve-currency status means it often strengthens in a recession
So what would digital SDRs add? When monetary economists are drawing up dream scenarios, they often come up with something similar to the “bancor” presented by John Maynard Keynes at the 1944 Bretton Woods conference. International trade would be conducted in bancors with rules about the size of overdrafts allowed, preventing imbalances getting too big.
SDR or IMFcoins would allow a much wider group to use the currency, supplanting the dollar in international trade and reducing both the big currency swings that can destabilize countries and the dangers of large current account deficits. Instead of representing a basket of currencies, the digital SDR would be a currency of its own, albeit one only used for international transactions.
A more limited alternative would try to speed global growth. At the moment, countries hold big piles of dollars as a form of insurance against a balance of payments crisis, damping growth and distorting the world economy. If the IMF was empowered to act more like a global central bank, whisking up new SDRs on its own blockchain in a crisis, it would reduce the need for countries to hold reserves.
José Antonio Ocampo, a Colombian central bank board member also on the IMF’s expert group considering the future of the SDR, thinks annual SDR issuance could be worth $200 billion to $300 billion a year.
“Countries would not have to accumulate reserves, [which] generate a general contractionary effect on the global economy,” he says.
The prospect of giving the IMF the ability to execute global helicopter drops of money worries believers in strong currencies.
No Cross of Gold
Since President Richard Nixon broke the dollar's link to gold, the price has risen.
Jim Rickards, an author and former general counsel for failed hedge fund Long-Term Capital Management, thinks SDRs will be issued to reflate the system in the next crisis, hurting the dollar’s reserve status. “It’s all converging on a world where the dollar will just be a local currency like the Mexican peso,” he says. He is a longstanding advocate of using gold to back money to limit the supply.
The real opposition to an IMFcoin is likely to come not from fans of gold, but from defenders of the dollar’s central role in the global system. Sterling once held the role of global reserve currency, and spent decades in decline once it was abandoned in favor of the dollar, reducing demand for pounds.
The benefit of having the reserve currency is obvious, and much-envied: Americans can offer to buy real things from the rest of the world with money the Federal Reserve creates out of nothing, and other countries have little choice but to accept. The U.S. gets lower interest rates than it otherwise would and can run a permanent current-account deficit with impunity—just so long as it remains the reserve currency.
There is a downside to having the reserve currency, though. The purchase of dollars by the rest of the world makes it harder for the U.S. to devalue to support its own economy. When the banking crisis hit in 2008 investors piled into the reserve currency, and the dollar soared 21% against its trading partners before the panic abated in March 2009. Instead of the weaker currency central banks usually aim for in a recession, the U.S. got a stronger currency.
There is little chance U.S. politicians will want to give up what a French finance minister once called the “exorbitant privilege” of the dollar, no matter what Ms Lagarde, another former French finance minister, might suggest. As she noted, the IMF would need a “geopolitical situation that would be propitious” for the changes she is speculating about to happen.
China wants it, and has been encouraging the issuance of SDR-denominated bonds to try to create a true alternative to the deep and liquid markets of the U.S. (China’s had little success so far, with only two SDR bonds outstanding, according to Thomson Reuters). Ms. Lagarde’s paean to the future suggests she likes the idea. Luckily for those holding dollars, the geopolitical situation is still tilted in favor of the U.S., and there is little prospect we all be trading in IMFcoins any time soon.
<<<
$DIGAF awaiting that reversal for huge news. Bitcoin just popped on yearly pivot support. Crypto stocks looking to boom.
China and Russia are building their own crypto currencies and an encrypted digital ledger to exchange them. This system will be denominated in SDRs (Special Drawing Rights, the global currency of the IMF), and will be free of US interference and sanctions. Net trade balances can be periodically settled in physical gold.
James Rickards explains (starts at 42:50) -
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>>> There Is No Such Thing as Cryptocurrency
By James Rickards
May 16, 2018
https://dailyreckoning.com/no-thing-cryptocurrency/
There Is No Such Thing as Cryptocurrency
The next time someone talks to you about blockchain or cryptocurrency, you should politely say to them, “There is no blockchain and there is no such thing as cryptocurrency.”
They’ll look at you funny, as if you’ve been living under a rock or just don’t get the latest thing in technology. Now you’ve got them where you want them.
You then go on to explain, “There is no blockchain. There are thousands of blockchains. There is no single cryptocurrency. There are thousands of cryptocurrencies. And they’re all different!”
That last point is the critical one — “They’re all different.”
It’s the same way you would think about stocks. It may be interesting if the stock market went up or down today, but what you really care about is your particular portfolio of stocks.
If you own IBM (IBM), Walmart (WMT) and Amazon (AMZN), then you care about those stocks. If Boeing (BA) went down, that’s too bad for Boeing holders, but it has no impact on you if you don’t own it.
And no one believes that Walmart and Boeing are interchangeable. They’re completely different companies with diverse business models and revenue prospects.
That’s important to bear in mind because too much of the cryptocurrency discussion these days focuses on generalities and broad-brush statements without drilling down on the particulars.
My readers know that I consider bitcoin (BTC) a dead-end cryptocurrency and would not hold it in a portfolio.
Yet I’m convinced that blockchain technology, or what we call distributed ledger technology (DLT), has a bright future. And cryptocurrencies that perform useful functions in an efficient manner on DLT platforms have a bright future as well.
The key to reaping gains from those potentially successful cryptos involves diligence and research as well as finding the right entry point for an investment.
Generally speaking, the new early-stage cryptos have better prospects than some of the well-known names because developers of the new cryptos have learned from the mistakes of the pioneers.
If you’re a golfer with a foursome on the green, you know it’s advantageous to putt last because you can “go to school” on the missed putts of your partners. You’ll watch their putts, read the quirks on the green and improve your own putting.
It’s the same with cryptos.
The early coins had problems of scalability, sustainability and processing time. That’s why they are dead ends. The newer coins solve many of those problems with improved governance models for validating the ledger and layering solutions for improved processing time.
The new cryptos “went to school” on the mistakes of the old ones.
A second wave or new generation of cryptocurrencies is now emerging with better governance models, more security and vastly improved ease of use.
These new-wave coins represent the future of the cryptocurrency technology. These cryptos have much greater potential to disrupt and disintermediate established payments systems and financial intermediaries such as banks, brokers and exchanges.
It is critical that investors have a robust and reliable method for distinguishing between the dead-end cryptos such as bitcoin and the new-wave cryptos with a chance to disrupt banks the way Uber disrupted taxis or Airbnb disrupted the hotel industry.
Regards,
Jim Rickards
for The Daily Reckoning
<<<
>>> The Empire State Moves Against Bitcoin
By James Rickards
April 18, 2018
https://dailyreckoning.com/empire-state-moves-bitcoin/
The Empire State Moves Against Bitcoin
Bitcoin got hammered yesterday after New York Attorney General Eric Schneiderman announced an investigation into some of the major cryptocurrency exchanges.
I’ve been warning about a coming government crackdown on bitcoin for several months, and now we’re seeing it happening around the world.
From China to Japan to South Korea and here in the U.S., the regulators are closing in on bitcoin. And all those who thought their bitcoin was invisible to the IRS are getting a rude awakening these days.
Bitcoin was the classic bubble. Market bubbles are nothing new. In the 17th and 18th centuries we had the Dutch tulip bubble, the French Mississippi bubble and the U.K.’s South Sea bubble.
The 19th century saw bubbles in canal building (1830s), gold (1869) and railroads (1890s). In the 20th and 21st centuries we have seen bubbles in Florida real estate (mid-1920s), stocks (late 1920s), dot-coms (2000) and mortgages (2007).
All of these episodes of investment mania crashed, causing enormous losses for investors. As always, some investors got in early and got out before the crash and walked away with their winnings. But most did not.
Analysts should remind themselves that those bubble winnings of the lucky few represent not wealth creation or rewards for hard work, but a simple wealth transfer from a mass of latecomer losers to a lucky few winners.
That’s hardly a desirable model for finance in particular or society as a whole, not least because the end result destroys confidence in markets and retards normal financial functions for a full generation.
The latest bubble, of course, is bitcoin. Last December as bitcoin was making its way higher from $8,000, I said that bitcoin might go to $20,000 (it did), but that it would surely come crashing down sooner rather than later.
I based this forecast on a Nasdaq chart showing the dot-com bubble of 1996–2000. The hyperbolic rise in the price of bitcoin and dot-com stocks was a close fit, which made the subsequent crash easy to see coming.
Now that bitcoin has crashed more about 70% based on recent lows, the resemblance to the Nasdaq dot-com episode is even more dramatic.
The biggest difference is that the bitcoin rise and fall happened 15 times faster than the Nasdaq collapse. A projection of bitcoin at $2,000 is easily justified.
My own projection is much lower, but either way economic historians will look back on the bitcoin episode as the greatest bubble since the Dutch tulip bubble, maybe greater.
At least with the tulip bubble, the last investors got to keep the tulips. With bitcoin, investors will end up with nothing.
Goldman briefly flirted with cryptocurrencies but eventually came around to the view that cryptos like bitcoin suffer from too many problems.
All of the cryptocurrencies that rely on clunky “proof of work” to validate their blockchains, such as bitcoin, are heading for the scrap heap. They are too slow, too cumbersome and too expensive to compete with Visa, Mastercard and PayPal in the payments space.
The only use case for bitcoin is to support criminal transactions, and even criminals have moved to some other cryptos because they have better security and privacy features. Bitcoin also suffers from slow processing times and other inefficiencies.
Goldman’s assessment is mostly right. However, some coins will survive. And as I’ve argued before, blockchain technology has a bright future.
Goldman also admits that blockchain technology has a future, but caution is indicated because processing speeds are still not as fast as existing systems. The bottom line is don’t invest in cryptocoins but invest in blockchain technology instead.
Regards,
Jim Rickards
Managing editor, The Daily Reckoning
<<<
>>> The SEC Lowers the Boom on Bitcoin
By James Rickards
March 8, 2018
https://dailyreckoning.com/103492-2/
The SEC Lowers the Boom on Bitcoin
I’ve warned repeatedly that government regulators would be putting the squeeze on bitcoin and other cryptocurrencies.
Well, the noose just got tighter.
The Securities and Exchange Commission (SEC) announced yesterday that bitcoin and many other cryptocurrencies meet the government’s definition of a security and are therefore subject to regulation. Importantly, crypto exchanges must register with the SEC.
Here’s what the SEC said:
If a platform offers trading of digital assets that are securities and operates as an “exchange,” as defined by the federal securities laws, then the platform must register with the SEC…
The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not.
Bitcoin fell about 10% on the news, back under $10,000. That’s less than half its December 2017 highs around $20,000.
Yesterday’s announcement follows action the SEC took late last month, when it issued a number of subpoenas and information requests to companies dealing in the crypto markets.
Christian Catalini, a professor at MIT, estimates that $270–317 million of the money raised by coin offerings has “likely gone to fraud or scams.”
“We’re seeing the tip of the iceberg,” said Dan Gallagher, a former SEC commissioner, adding, “there is going to be a ton of enforcement activity.”
I agree, and I’ve been saying that for months. But it’s not just U.S. regulators that have made the news.
Shortly after the SEC announcement, Japan’s Financial Services Agency ordered two exchanges to suspend activities for a month. It also penalized four other exchanges.
Japan’s crackdown comes a month after the Tokyo-based exchange Coincheck lost about $500 million in a massive cybertheft.
The bottom line is the bitcoin fans who mock the government and play “catch me if you can” are finding out the hard way that the government has the resources to track them to the ends of the Earth.
Besides the SEC, I explained last week how the IRS is also cracking down on bitcoin. It’s already demanding all records of cryptocurrency transactions from cryptocurrency exchanges including names, addresses, Social Security numbers and bank account information about their clients.
One man got a very nasty surprise when he received an IRS Form 1099 from Coinbase, a major U.S.-based cryptocurrency exchange (not to be confused with Coincheck).
It informed him that he owed $2.4 million in taxes, despite his estimate that he only put $8,000 into cryptos. He decided to sit tight in the belief that he does not owe the taxes.
Big mistake.
The IRS will take its copy of the 1099 (the IRS also receives a copy) from the exchange and assert that this man does owe the taxes. The IRS puts the burden of proof on the taxpayer to show they don’t.
Courts have backed up the IRS on this burden-of-proof approach. Just ask Al Capone, the notorious gangster who went to Alcatraz not for extortion and murder but for not paying his taxes! This guy will find this out the hard way how the IRS plays hardball, as will millions of other crypto customers.
The IRS is warming up for a bonanza of tax claims. Cryptocurrency traders who thought they could hide their gains from the IRS should get ready for the mother of all tax nightmares.
Coupled with the latest SEC crackdown, the noose is tightening on bitcoin.
Regards,
Jim Rickards
for The Daily Reckoning
<<<
>>> Big Brother Is Coming for Bitcoin
By James Rickards
March 8, 2018
https://dailyreckoning.com/big-brother-coming-bitcoin-2/
Big Brother Is Coming for Bitcoin
Many advocates of bitcoin and other cryptocurrencies have a naïve belief that their digital assets are “beyond the reach of governments,” “cannot be traced” and “cannot be frozen or seized.”
They’re beginning to learn otherwise.
When it comes to bitcoin, I take a laissez-faire approach. Do your own thing. If you want some bitcoin in your portfolio as part of a diversified bundle of assets, that’s up to you. If you want to speculate in some of the other lesser-known cryptocurrencies, that’s fine, too. You might make a lot of money (I actually recommend one small crypto myself).
My only advice is buyer beware. You need to take the time to understand how it works and what the risks are.
The technology behind cryptocurrencies is usually called the “blockchain,” but a more descriptive term now in wide use is “distributed ledger technology,” or DLT.
There’s no denying that fortunes have been made and still will be made in various DLT applications. While I’m not necessarily a fan of individual cryptocurrencies, I am a believer in this technology.
And here’s the thing:
Governments don’t want to kill the blockchain; they want to control it.
Governments enjoy a monopoly on money creation and they’re not about to surrender that monopoly to cryptocurrencies like bitcoin.
But governments know they cannot stop the technology platforms on which the cryptocurrencies are based. Blockchain technology has come too far to turn back.
They seek to do so using powers of regulation, taxation, investigation and ultimately more coercive powers, including arrest and imprisonment of individuals who refuse to obey government mandates with regard to blockchain.
Governments, regulators, tax authorities, and the global elite are moving in for the crypto-kill. The future of bitcoin may be a dystopia in which Big Brother controls what’s called “the blockchain” and decides when and how you can buy or sell anything and everything.
Furthermore, cryptocurrency technology could be the very mechanism used by global elites to replace the dollar based financial system.
In 1958, Mao Zedong, the leader of the Communist Party of China and China’s dictatorial leader was confronted with demoralized intellectuals and artists who were alienated by Communist rule. As a policy response, he declared a new policy of intellectual freedom.
Mao declared, “The policy of letting a hundred flowers bloom and a hundred schools of thought contend is designed to promote the flourishing of the arts and the progress of science.”
This declaration is referred to as the “Hundred Flowers Campaign” (often misquoted as the “thousand flowers campaign”).
The response to Mao’s invitation was an enthusiastic outpouring of creative thought and artistic expression.
What came next was no surprise to those familiar with the operation of state power. Once the intellectuals and artists emerged, it was easy for Mao’s secret police to round them up, kill and torture some, and send others to “reeducation camps” where they learned ideological conformity.
The Hundred Flowers Movement was a trap for those who placed their trust in the state. It was also a taste of things to come in the form of the much more violent and comprehensive Cultural Revolution of 1964–1974 in which all traces of Chinese bourgeoisie culture and much of China’s historical legacy were eradicated.
Something similar is going on with bitcoin and the Distributed ledger technology (DLT) today. Governments have been patiently watching blockchain technology develop and grow outside their control for the past eight years.
Libertarian supporters of blockchain celebrate this lack of government control. Yet, their celebration is premature, and their belief in the sustainability of powerful systems outside government control is naïve.
Blockchain does not exist in the ether (despite the name of one cryptocurrency) and it does not reside on Mars. Blockchain depends on critical infrastructure including servers, telecommunications networks, the banking system, and the power grid, all of which are subject to government control.
Last year, a group of major companies, all regulated by government, announced a joint effort to develop an open-source blockchain as a uniform standard for all blockchain applications. The group includes JPMorgan, Wells Fargo, State Street, SWIFT, Cisco, Accenture, the London Stock Exchange and Mitsubishi UFJ Financial.
That’s not exactly five guys in hoodies working in a garage. That’s a sign of the corporate-state consortium taking over.
An elite U.S. legal institution called the Uniform Law Commission (ULC), that proposes model laws intended for adoption in all fifty states, also released a proposal called the “Uniform Regulation of Virtual Currency Businesses Act.”
The ULC released a final version of the Uniform Regulation of the law on October 9, 2017. No state has yet adopted the law yet, but several state legislatures are expected to take it up this year.
This new law will not only provide a regulatory scheme for state regulators, but will also be a platform for litigation by private plaintiffs and class action lawyers seeking recourse against real or imagined abuses by digital coin exchanges and facilities. Once litigation begins, anonymity is the first casualty.
Perhaps most portentously, the International Monetary Fund (IMF) has weighed in. In a special report dated June 2017, the IMF had this to say about blockchain:
“Distributed ledger technology (DLT), in particular, could spur change in the financial sector. …. DLT can be categorized as “permissionless” or “permissioned” depending on who can participate in the consensus-driven validation process. Permissionless DLTs allow anyone to read, transact on, and participate in the validation process. These open schemes (that underlie Bitcoin, for instance) could be very disruptive if successfully implemented. By contrast, in permissioned DLTs, the validation process is controlled by a pre-selected group of participants (“consortium”) or managed by one organization (“fully-private”), and thus serve more as a common communications platform.” (emphasis added).
IMF releases require expert translation because they are never written in plain English, and the real meaning is always hidden between the lines. But, the thrust of this report language is clear.
The IMF favors “permissioned” systems over “open schemes.” The IMF also favors control by a “pre-selected group of participants” or “one organization,” rather than allowing “anyone” to participate.
This paper should be viewed as the first step in the IMF’s plan to migrate its existing form of world money, the special drawing right or SDR, onto a DLT platform controlled by the IMF. In time, all other forms of money would be banned.
These and other developments all point toward an elite group including the IMF, JPMorgan, the Davos crowd, the IRS, SEC and other agencies converging to shut down the existing free-wheeling blockchain ecosphere, and replace it with a “permissioned” system under “consortium” control.
Big Brother is coming to the blockchain.
Regards,
Jim Rickards
for The Daily Reckoning
<<<
>>> Best Bet in Crypto Now Is “Pick and Shovel” Names
By James Rickards
February 28, 2018
https://dailyreckoning.com/best-bet-crypto-now-pick-shovel-names/
Best Bet in Crypto Now Is “Pick and Shovel” Names
My readers know I’m not a bitcoin proponent. I don’t deny that it’s made some people a lot of money. But even with the recent pullback, I believe bitcoin is a massive bubble.
But I’ve also stated my belief in blockchain technology, which is the technology behind bitcoin and other cryptocurrencies. There’s great promise here.
And despite what some critics may claim, I’m not some technophobe who doesn’t understand the technology underlying cryptos.
I know it very well. I’ve been studying cryptos since before many of their current owners even heard of bitcoin. I actually worked with the intelligence community years ago to counter ISIS’s use of cryptocurrencies to bypass the international money system.
And in my opinion, bitcoin’s hype has run far ahead of reality. But again, I also believe blockchain technology is for real and has great potential. So just because I’m not a bitcoin cheerleader doesn’t mean I’m opposed to all blockchain-based cryptos.
Let me explain my position a little more…
One of the most familiar metaphors on Wall Street is the distinction between gold miners and those who supply the gold miners with the picks and shovels needed to mine. The classic 19th-century version from the California Gold Rush of 1848–1855 is a prime example.
First comes an unexpected gold discovery. Next comes the “gold rush,” when prospectors pour in from all over the world, stake their claims and begin mining gold. Some make huge discoveries of “gold nuggets as big as your fist!” Those miners can get rich quick and retire early.
But that’s not the typical case. More often the ore is of poor quality, the sluice has little to show and the miner runs out of time and money and walks away broke. The abandoned claim sits idle waiting for the next gold rush or optimistic newcomer.
Meanwhile, all of the miners — both rich and poor — need equipment and supplies. It starts with picks and shovels but also includes clothing, lamps, oil, food, dynamite and more.
Entrepreneurs set up to supply those needs.
The most famous such entrepreneur was Levi Strauss, who headed to San Francisco during the California Gold Rush to establish a dry goods business selling clothes, boots and other items needed by the miners.
The point is that the suppliers of “picks and shovels” make money from the successful and unsuccessful miners. Every miner needs clothes and food whether he discovers gold or not.
Something similar is going on in the cryptocurrency space today.
There are over 1,000 cryptocurrencies in circulation. Some, such as bitcoin, have produced quick riches for a few and huge losses for many more who jumped in at prices above $12,000 all the way up to the all-time high of $20,000.
Bitcoin can be likened to a gold strike with a few big nuggets lying in a stream but not much below the surface to sustain it in the long run.
Most cryptocurrencies have little or nothing to offer. Investors in those “gold mines” will go home empty-handed.
But some cryptocurrencies, particularly those that meet my COINN criteria, described below, have excellent long-term prospects.
Those will be like the Homestake Mine in Lead, South Dakota, that produced gold for its owners for over 100 years.
Meanwhile, there’s a pick-and-shovel aspect to cryptocurrencies as there is to gold mining. To be successful, a cryptocurrency needs a practical use case, efficient processing and a robust validation scheme.
Success also requires adoption by major enterprises such as banks, NGOs, or industry consortia in energy, agriculture, transportation or other major economic sectors. Important developments come not from garage startups but from the major technology companies such as IBM, Intel, Oracle and Siemens.
The more radical crypto advocates may insist on so-called “trustless” systems that offer peer-to-peer transactions without intermediation. The reality is that there are no trustless systems. Even bitcoin requires holders to trust that 51% of the miners won’t validate a block that wipes out their bitcoin, or that bitcoin exchanges are not roach motels set up to steal investors’ money.
With transaction costs high, validation slow and environmental waste from electricity usage nonsustainable, bitcoin’s days are numbered.
Meanwhile, large enterprises with billions of dollars to spend on R&D and implementation are interested in distributed ledger solutions to concrete business problems.
A second wave or new generation of cryptocurrencies is now emerging with better governance models, more security and vastly improved ease of use. These new-wave coins represent the future of cryptocurrency technology. These cryptos have much greater potential to disrupt and disintermediate established payments systems and financial intermediaries such as banks, brokers and exchanges.
It is critical that investors have a robust and reliable method for distinguishing between the dead-end cryptos such as bitcoin and the new-wave cryptos with a chance to disrupt banks the way Uber disrupted taxis and Airbnb disrupted the hotel industry.
That’s exactly what my team and I developed over the past year. Our analytic method is called COINN. Those initials stand for:
Consensus
Open Source
Impenetrable
No-Nonsense Governance and
Nimble
Let’s take those one at a time to show how you can use the COINN method to distinguish between cryptocurrencies that will soon hit the wall and those with a bright future.
Consensus refers to the fact that participants in a cryptocurrency community are able to select the trusted parties who will perform the blockchain validation function.
This works organically in the same way that Google determines which pages are most sought after for a given search request or Wikipedia determines which content to display from among a community of editors and contributors. It avoids the “dictatorship of the miners” that bitcoin forces on users today.
Open Source refers to the fact that the source code for the relevant blockchain is freely available to all participants. This eliminates closed communities such as a central bank “FedCoin” or an IMF-sponsored “SDRCoin” and other permissioned systems.
Impenetrable refers to the security of the relevant blockchain. The bitcoin blockchain is vulnerable to attack by a cabal consisting of 51% of the total mining capacity for bitcoin. Such a group could create a block that steals all existing bitcoins and then validates that block. Your bitcoin would simply disappear with no recourse, and the malevolent miners would control any amount of bitcoin they desired.
Other types of threats include “Sybil” attacks (so-called after the story of a woman named Sybil who suffered multiple personality disorder). In a Sybil attack, a malevolent actor clones itself on a governance whitelist in order to obtain disproportionate voting power that can be used to steal coins. An efficient coin would be immune to such attacks.
No-Nonsense Governance refers to the technical method for validating a blockchain. Bitcoin today relies on clunky proof-of-work in the form of uninteresting math problems that require nonsustainable amounts of processing power and electricity consumption to solve. This is massively wasteful and inefficient.
Ether requires proof-of-stake, which is wasteful in different ways and excludes white hats who will support honest validations but who may lack the resources to establish proof-of-claim. An efficient coin would allow reliable validation without such wasteful effort.
Nimble refers to the ease of use of the coin. Existing cryptos are too slow, too cumbersome and too expensive to compete with Visa, MasterCard and PayPal in the payments space. The only use case for bitcoin is to support criminal transactions, and even criminals are moving to monero and spectrecoin because they have better security and privacy features.
The same criticism about slow processing times and other inefficiencies also applies to popular cryptocoins such as ether and ripple.
Unless a cryptocurrency can offer payments transactions that are easier, faster and cheaper than existing systems such as Visa and MasterCard, it has no future as a currency. The new-wave cryptos do offer this ease of use.
Older cryptos don’t even come close.
Companies that can create or support cryptocurrencies or smart-contract tokens that meet my COINN criteria are the future of the blockchain.
I myself have argued that blockchain technology has a bright future, even though I believe bitcoin does not.
The bottom line is, don’t invest in older cryptocoins that don’t meet my COINN criteria.
Regards,
Jim Rickards
for The Daily Reckoning
<<<
>>> The IRS Comes for Bitcoin
By James Rickards
February 28, 2018
https://dailyreckoning.com/irs-comes-bitcoin/
The IRS Comes for Bitcoin
A lot of bitcoin advocates sold the idea that it was invisible to the IRS. Well, not really, I said all along. And now that’s becoming evident, as you’re about to see.
I was reminded of a story from about 15 years ago…
A Swiss banker loaded all of the confidential information on Americans with Swiss bank accounts that he could find onto a CD-ROM. He then flew to the United States and handed the information over to the U.S. Treasury and the FBI.
The banker was in trouble for helping Americans evade taxes, and this was his play to avoid prosecution. He blew the whistle on his clients. What ensued was a 10-year manhunt by U.S. tax authorities to find the tax evaders and many more whose information was not included on the original CD.
The U.S. played rough not by chasing the individuals but by putting pressure on the Swiss banks themselves. The big Swiss banks like UBS and Credit Suisse have huge capital markets and wealth management operations in the U.S. The U.S. told those banks they could either hand over the information or we would shut down their U.S. operations.
They handed it over.
Some of the tax evaders got lawyers, turned themselves in and paid their taxes (plus interest and penalties) to avoid jail time. Others waited and ended up in jail. Today, if you go to Switzerland and try to open a bank account, they will turn you away; they have zero interest in taking on U.S. clients.
Now something similar is happening in cryptocurrencies.
The bitcoin fans who mock the government and play “catch me if you can” are finding out the hard way that the U.S. government has the resources to track them to the ends of the earth.
The IRS is already demanding all records of cryptocurrency transactions from cryptocurrency exchanges including name, address, Social Security number and bank account information about their clients.
Consider the latest developments…
IRS Form 1099 is the form used to report most income other than regular wages that go on the W-2. The person paying the income — it could be a bank, broker or any supplier — files a copy of the 1099 with the IRS and sends one to the income recipient.
It’s the recipient’s job to report the income on their tax return. IRS computers match 100% of the 1099s they receive with what taxpayers put on their tax returns. It’s a kind of computerized audit. Those who don’t report the income may not get a knock on the door, but they will definitely receive an official letter asking the income recipient to explain the discrepancy.
Coinbase, a major U.S.-based cryptocurrency exchange (not to be confused with Coincheck), just sent a Form 1099 to one of its customers identified only by the initial “K.”
K was initially freaked out even to be receiving a 1099 from a crypto exchange. What happened to the anonymity in the crypto world?
Apparently, it doesn’t exist, as I have been warning for years.
But when K read the 1099, it got even worse. It showed that he owed $2.4 million in taxes, despite his estimate that he only put $8,000 into cryptos. K has decided to sit tight in the belief that he does not owe the taxes.
Big mistake.
The IRS will take its copy of the 1099 from the exchange and assert that K does owe the taxes. The IRS puts the burden of proof on the taxpayer to show they don’t.
Courts have backed up the IRS on this burden-of-proof approach. Just ask Al Capone, the notorious gangster who went to Alcatraz not for extortion and murder but for not paying his taxes! K will find this out the hard way, as will millions of other crypto customers.
The IRS is warming up for a bonanza of tax claims. Cryptocurrency traders who thought they could hide their gains from the IRS should get ready for the mother of all tax nightmares.
But that doesn’t mean stay away from all crypto investments. Below, I show you why blockchain technology has a bright future — and I say that as a bitcoin skeptic.
Regards,
Jim Rickards
for The Daily Reckoning
<<<
>>> Cryptocurrencies and the Powers That Be
By James Rickards
February 14, 2018
https://dailyreckoning.com/cryptocurrencies-and-the-powers-that-be/
Cryptocurrencies and the Powers That Be
Remember the days (about six months ago) when bitcoin was going to revolutionize banking and disintermediate the mean nasty “banksters?”
Well, a funny thing happened on the way to the revolution. Bitcoin itself has hit an air pocket with a 50% price drop since December. Meanwhile, the banks that were supposed to be so dramatically disrupted by bitcoin are taking over the blockchain.
This is not surprising. Disruptive technology does come along from time to time, but established franchises have a way of either fighting back or co-opting the new technology just by buying it.
Uber is disruptive, but London taxi drivers (the best in the world, by the way) have organized to get Uber’s license there revoked. In the same spirit, it was naïve to expect that banks would just sit there and let blockchain technology eat their lunch. All of the major banks have blockchain research and development projects underway.
Japan is the first major economy to declare bitcoin “legal tender” in payment for goods and services. This does not fix a value for bitcoin, and it does not force anyone to use bitcoin, it just keeps bitcoin transactions safe from counterfeiting charges.
The Japanese banks are taking that opening and driving an armored car through it. Japan’s largest bank is creating its own crypto-currency. Valuation won’t be an issue because each coin will be worth exactly one yen. It’s really just an alternative payment system like PayPal.
What it does is allow bank customers to make and receive payments on the blockchain with a yen equivalent, but with much lower costs. Also, because this is a “permissioned” system (customers only may participate with bank approval) verification does not require the clunky proof-of-work of the original bitcoin blockchain.
Distributed ledgers and blockchain are here to stay, but bitcoin is not. The banks will see to that.
Another major argument bitcoin advocates made was that it was invisible to the IRS.
Well, not really. I’m reminded of a story from about 15 years ago…
A Swiss banker loaded all of the confidential information on Americans with Swiss bank accounts that he could find onto a CD-ROM. He then flew to the United States and handed the information over to the U.S. Treasury and the FBI.
The banker was in trouble for helping Americans evade taxes and this was his play to avoid prosecution. He blew the whistle on his clients. What ensued was a 10-year manhunt by U.S. tax authorities to find the tax evaders and many more whose information was not included on the original CD.
The U.S. played rough not by chasing the inpiduals, but by putting pressure on the Swiss banks themselves. The big Swiss banks like UBS, and Credit Suisse have huge capital markets and wealth management operations in the U.S. The U.S. told those banks they could either hand over the information or we would shut down their U.S. operations.
They handed it over.
Some of the tax evaders got lawyers, turned themselves in and paid their taxes (plus interest and penalties) to avoid jail time. Others waited and ended up in jail. Today, if you go to Switzerland and try to open a bank account they will turn you away; they have zero interest in taking on U.S. clients.
Now something similar is happening in cryptocurrencies. The U.S. Treasury is concerned that cryptos are the “new Switzerland” where Americans are hiding income and avoiding taxes. The Treasury is probably right about that. Treasury will use the same hardball tactics against the cryptocurrency exchanges they used against the Swiss banks.
The IRS is already demanding all records of crypto-currency transactions from these exchanges including name, address, social security number and bank account information about their clients. The bitcoin fans who mock the government and play “catch me if you can” will find out the hard way that the U.S. government has the resources to track them to the ends of the earth.
This is just another sign that reality is catching up to the bitcoin market.
I’ve said for years that bitcoin is a fraud, a Ponzi and a bubble all at the same time. I based this on analysis of price activity and certain other technical analyses and some anecdotal evidence.
Critics have always demanded “proof” that bitcoin was a fraud with smoking-gun-type evidence. That was difficult at first because of the secretive nature of bitcoin trading. Yet now the evidence is arriving almost every day.
New hacks are reported, millions of dollars of bitcoin routinely go missing and exchanges are closing with no recourse for investors. What may be one of the biggest frauds in history, this one involving bitcoin, is now coming to light.
One cryptocurrency exchange called Bitfinex owes customers hundreds of millions of dollars in bitcoin held in their accounts. Bitfinex is nontransparent about the funds it actually has on hand and whether its customer funds are really safe.
Bitfinex sponsored another cryptocurrency called tether, which is tied to the U.S. dollar at a one-to-one fixed exchange rate. Customers give tether $1 (or the equivalent in another crypto) and receive one tether in return. The amounts paid for the tether are supposed to be held in reserve to back up the one-for-one promise.
No one knows if tether has the funds or not. Tether recently parted ways with an auditor who was supposed to answer that question, so there is still no transparency. It also seems that every time the price of bitcoin plunged, millions of tethers were issued out of thin air to prop up bitcoin on the Bitfinex exchange.
All of this has raised suspicions that Bitfinex and tether are Ponzi schemes. A couple of weeks ago, the U.S. government sprang into action by hitting Bitfinex and tether with subpoenas demanding information about reserves and the safety of customer funds.
If it turns out the suspicions of fraud are correct, it could start a run on the bank in all cryptocurrency as holders and investors lose confidence in the crypto space generally. That would be bad enough.
But the greater fear is that panic in cryptocurrencies could spill over into regulated stock and bond markets and mark the beginning of another global financial panic.
If that happens, it’ll make the recent correction look like child’s play. And the only safe haven will be physical gold.
Regards,
Jim Rickards
for The Daily Reckoning
<<<
>>> Noose Tightens on Bitcoin
By James Rickards
February 14, 2018
https://dailyreckoning.com/noose-tightens-bitcoin/
Noose Tightens on Bitcoin
With everything that’s been happening with the stock market lately, people have forgotten about last year’s biggest investment story:
Bitcoin.
After briefly topping off around $20,000 in December, today it’s trading around $9,000.
A lot of bad news has come to the bitcoin ecosphere. China, for example, recently ordered its banks to stop providing financial services for any cryptocurrency-related transactions.
This is important because customers wishing to buy or sell cryptocurrencies have to start by funding their crypto accounts from conventional banking sources. Also, when customers are ready to cash out of cryptos, they need to move their account balances back to traditional banks.
Without the ability of crypto exchanges and banks to interact, the crypto exchanges are basically roach motels — you can put your money in, but you can’t get it out. Now you can’t even put it in to begin with.
Crypto exchanges also need banking services to pay vendors, employees, electricity companies and others who want to get paid in yuan rather than crypto.
Those transactions will no longer be possible.
This is all part of a broader crackdown on cryptos by China, which sees them as a threat to the People’s Bank of China’s control of the money supply and capital account.
Some crypto enthusiasts shrugged off the news and said, in effect, “No big deal, the business will just move to Taiwan.”
The problem is other jurisdictions are also taking a hard look. South Korea has been considering a ban on cryptos, although there’s a popular backlash to this because so many everyday South Korean citizens bought into the hype last December and bet their life’s savings on bitcoin at prices of $15,000 per coin or higher.
Many of them are now facing financial ruin and want the government to prop up bitcoin so they can recover their losses. Recently, Germany and the IMF have issued calls for global regulation of bitcoin.
This is likely to be a topic of the next G-20 meeting in Argentina. The bottom line is jurisdictions around the world see that bitcoin in particular and many cryptos more broadly are a threat to independent monetary policy and something that can damage their citizens and possibly their economies. The noose is tightening on bitcoin.
But it’s not just governments that have concerns about cryptocurrencies.
After briefly flirting with trading cryptocurrencies themselves, Goldman Sachs has now seen the light and is saying that many of today’s cryptocurrencies are heading to zero.
Goldman’s assessment is mostly right. All of the cryptocurrencies that rely on clunky “proof of work” to validate their blockchains, such as bitcoin, are heading for the scrap heap.
They are too slow, too cumbersome and too expensive to compete with Visa, MasterCard and PayPal in the payments space. The only use case for bitcoin is to support criminal transactions, and even criminals are moving to monero and spectrecoin because they have better security and privacy features.
The same criticism about slow processing times and other inefficiencies also applies to popular cryptocoins such as ether and ripple.
Having said all that, some coins will survive.
The survivors will have two characteristics. The first is an efficient governance scheme for blockchain validation. The second is a use case supported by real enterprises or governments such as payment remittances or international bank settlements.
And Goldman admits that blockchain technology itself has a future, but caution is indicated because blockchain processing speeds are still not as fast as those of existing systems.
I myself have argued that blockchain technology has a bright future, even though I believe bitcoin does not.
The bottom line is don’t invest in cryptocoins (with a few exceptions), but invest in blockchain technology instead.
Regards,
Jim Rickards
for The Daily Reckoning
<<<
$FUSZ: NEW UPDATED DD~01/27/2018``HOT TECHNOLOGY COMPANY WITH DYNAMIC INTERACTIVE ‘walk-out-style’ VIDEO CRM (customer relationship management) / ICO for Ebates style platform and believed that same people who setup Kodak’s ICO is creating the NFusz CRM ICO
Composed by Sheepwolf.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=138045471
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