Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
>>> Binance, the world's largest cryptocurrency exchange, gets banned by UK regulator
CNBC
by Ryan Browne
https://www.msn.com/en-us/news/other/binance-the-worlds-largest-cryptocurrency-exchange-gets-banned-by-uk-regulator/ar-AALwM8y?ocid=uxbndlbing
Britain's Financial Conduct Authority said that Binance Markets Limited "is not permitted to undertake any regulated activity in the U.K."
From June 30, Binance must notify U.K. users of the FCA's restrictions in a prominent place on its website and apps.
It's the latest sign of a growing crackdown on the cryptocurrency market from regulators around the world.
LONDON – Cryptocurrency exchange Binance has been banned from operating in the U.K. by the country's markets regulator, in the latest sign of a growing crackdown on the crypto market around the world.
Britain's Financial Conduct Authority said Saturday that Binance Markets Limited, the U.K. division of Binance, "is not permitted to undertake any regulated activity in the U.K."
From June 30, the company — which already offers Brits crypto trading through its website — must add a notice in a prominent place in its website and apps showing U.K. users the following text:
BINANCE MARKETS LIMITED IS NOT PERMITTED TO UNDERTAKE ANY REGULATED ACTIVITY IN THE U.K. Due to the imposition of requirements by the FCA, Binance Markets Limited is not currently permitted to undertake any regulated activities without the prior written consent of the FCA. (No other entity in the Binance Group holds any form of U.K. authorisation, registration or license to conduct regulated activity in the U.K.).
Binance, the world's largest crypto exchange by trading volumes, was set to launch its own digital asset marketplace in Britain. However, it was one of several crypto firms that withdrew applications to register with the FCA due to not meeting anti-money laundering requirements.
"Binance Markets Limited withdrew their 5MLD application on 17 May 2021 following intensive engagement from the FCA," a spokesperson for the FCA told CNBC. "The action taken today on Binance Markets Limited has been in train for some time."
The FCA spokesperson clarified that the scope of the ban was limited. Though Binance Markets Limited is banned from offering regulated services in Britain, non-registered firms can still interact with U.K. consumers. That means Binance could still offer Brits crypto trading through its website.
A Binance spokesperson told CNBC: "The FCA U.K. notice has no direct impact on the services provided on Binance.com ... Our relationship with our users has not changed."
"We take a collaborative approach in working with regulators and we take our compliance obligations very seriously," the spokesperson added. "We are actively keeping abreast of changing policies, rules and laws in this new space."
"The FCA has stated that Binance is not permitted to conduct regulated activities in the U.K.," Laith Khalaf, financial analyst at AJ Bell, said via email. "Providing access to cryptocurrencies itself is not a regulated activity, but offering derivatives is, which is presumably the activity the FCA is clamping down on."
The FCA isn't the only regulator clamping down on the crypto industry.
Japan's Financial Services Agency warned last week that Binance was operating in the country without its permission.
Meanwhile, China has stepped up efforts to stamp out crypto speculation, ordering digital currency miners to cease operations in a number of regions and urging banks and payment firms not to offer crypto-related services.
Increased regulatory scrutiny has weighed on the nascent crypto market. Bitcoin had a solid start to the year, rallying to an all-time high of almost $65,000 in April. But it's since almost halved in value, trading at $34,783 as of Monday morning.
"This isn't a step change in regulation which is going to knock the crypto craze on the head, but it is part of a growing trend of regulatory intervention in crypto markets," Khalaf said, referring to the FCA's restrictions on Binance.
"The idea that policy makers are simply going to allow a decentralised shadow payments system to emerge without any regulatory oversight is fantastical, and if the use of cryptoassets becomes more widespread, we can expect beefed-up regulation to follow suit."
<<<
>>> Bitcoin’s Volatility Spawns New Crypto Balance Sheet Alternative
Bloomberg
By Olga Kharif
May 29, 2021
https://www.bloomberg.com/news/articles/2021-05-29/bitcoin-s-volatility-spawns-new-crypto-balance-sheet-alternative
Circle to offer USDC stablecoin accounts paying interest
Firm is betting treasurers will next look at stablecoins
Corporate treasurers fed up with rock-bottom returns on their cash are about to get another pitch from the world of crypto.
Circle Internet Financial Ltd., one of the digital-asset firms behind the so-called stablecoin dubbed USDC that is pegged 1-to-1 to the dollar, has cooked up an alternative for the legions too conservative to follow the likes of Elon Musk and Jack Dorsey into Bitcoin. Park your extra cash in USDC and earn as much as 7% annually through high-yield accounts, the marketing says -- more than 10 times the return on an ultra-safe 1-year Treasury bill.
The idea may be appealing to some treasurers who were initially seduced by the big gains in crypto, especially following Bitcoin’s roughly 40% decline since mid-April. Stablecoins such as USDC are gaining increased attention because of their ability to maintain their pegs during the wild crypto price swings, suggesting they could actually serve as a store of value. Even so, not all long-term digital market observers are convinced.
“If companies wish to put their corporate reserves into a stablecoin and that is fully audited, it is like putting their money in a bank account which is what they normally do,” John Griffin, professor of finance at the University of Texas at Austin, said in an email. “However, if the account is paying out a higher yield than bank account yields, then it is not merely invested in some risk-free asset.”
Here’s how Circle’s program will work: Treasurers would open a “digital-dollar account” where the company’s fiat money is converted into USDC and interest is paid out in USDC. The yield is generated by Circle lending the digital dollars to a network of institutional investors that are willing to pay an interest rate for access to additional capital.
The companies would lock in their return when the account is opened, similar to a bank certificate of deposit. Circle plans to offer accounts with maturities ranging from one month to a year, with no early withdrawals allowed. Rates available will be updated on a weekly basis, depending on demand for USDC loans.
That’s a bit tamer than the strategy first highlighted last year by MicroStrategy Inc. Chief Executive Officer Michael Saylor, who advocated pouring company reserves into Bitcoin because he said the dollar is being debased by surging inflation. Musk’s February announcement that Tesla Inc. had added Bitcoin to its balance sheet helped fuel the rally that took the largest cryptocurrency to a record in April before it lost more than one-third of its value.
“Corporate reserves are not for investing in stocks, going to Vegas, or something more volatile and more rigged against you like Bitcoin,” Griffin said.
With few companies outside the crypto realm following MicroStrategy, Tesla and Dorsey’s Square Inc. into Bitcoin, Circle hopes that stablecoins may be the next logical step. The company is working with Genesis Global Capital, one of the largest crypto lenders.
The service will be first made available in the U.S. and Switzerland, and will launch “imminently,” Jeremy Allaire, Circle’s CEO, said in an interview. Thousands of businesses are already on the waiting list, according to Circle.
“We are seeing the opportunity for the treasury use-case grow a lot,” Allaire said.
Other providers of stablecoins are rolling out similar offerings. On May 26, Gemini exchange -- the brainchild of the Winklevoss brothers -- said investors can earn up to 7.4% annually on Gemini dollars through a program called Gemini Earn. The Gemini token is also pegged to the dollar and its reserves are held with State Street Bank and Trust, the largest financial custodian in the world. Each month, the dollar deposit balance is examined by BPM LLP, an independent registered public accounting firm.
USDC reserves are attested to monthly by accounting firm Grant Thornton LLP and published online.
Various small crypto lenders already offer yield accounts for different coins, including less regulated stablecoins like Tether.
For these products, “appropriate users would be people who invest in junk bonds or similar risky lending,” said Aaron Brown, a crypto investor and writer for Bloomberg Opinion. “It might offer a better risk-adjusted return than alternatives. . . or not. But whatever it is, it’s not a savings account in the way most people understand that term.”
<<<
>>> 'Britcoin': Central bank digital currencies explained
Yahoo Finance
Lucy Harley-McKeown
April 22, 2021
https://uk.finance.yahoo.com/news/britcoin-central-bank-digital-currency-explainer-pound-bitcoin-cryptocurrency
The buzz surrounding a potential central bank-backed digital currency grew louder this week, as the Bank of England and Treasury announced they would launch a taskforce to look into a potential digital pound.
Dubbed "Britcoin" by the press, the BoE said any UK digital currency would be a new form of digital money that could be used by both households and businesses. It would exist alongside cash and bank deposits, rather than replacing them. Both the BoE and Treasury stressed they were simply exploring the idea and are not committed to launching "Britcoin".
Interest in central bank digital currencies — often abbreviated to just CBDC – has evolved from the growth of decentralised digital currencies such as bitcoin (BTC-USD) and ethereum (ETH-USD), which have taken markets by storm.
Dutch bank ING said discussions of national digital currencies began with the emergence of bitcoin but were "mostly academic" until Facebook's decision to launch its own digital currency in 2019.
"All of a sudden, the prospect of a private stablecoin crowding out fiat currencies and pushing central banks into irrelevance turned into a real possibility, given Facebook’s vast global user base," Teunis Brosens, ING's head economist for digital finance and regulation, wrote in a research note.
What is Central Bank Digital Currency (CBDC) and how does it work?
Like other forms of cryptocurrency, CBDCs are a form of virtual money that uses an electronic record or digital token to represent cash. It is issued and regulated by a country’s monetary authority, which in the UK is the Bank of England. This is a key difference to cryptos like bitcoin, which are decentralised and unregulated.
Retail CBDC can be directly held by citizens and businesses. This is a step change from the current system where money is held at a bank. Instead of going to a cash machine to withdraw money from, say, Barclays, your money would instead be held directly on your mobile phone.
Interbank or wholesale CBDC is restricted to use by financial institutions like banks. It is used for big ticket bank-to-bank transfers and financial settlement processes.
CBDCs represent a new frontier for central bank stimulus, potentially acting as a conduit for policies such as stimulus checks, emergency loans, and UBI (universal basic income). Central banks could induce more powerful, directed "money drops" to stimulate the economy rather than tinkering with interest rates.
Which countries are looking at CBDCs and why?
According to PwC, retail CBDC projects appear to be more advanced in emerging economies.
China, Cambodia and The Bahamas are leading the pack, although the UK, Europe and the USA have all expressed an interest in developing their own CBDC.
Financial inclusion is often stated as a motivation, given that CBDC users do not need to be part of the banking ecosystem. With traditional money, people must have a bank account and a debit or credit card. With CBDCs, all they need is a phone.
READ MORE: Bank of England and UK Treasury explore 'digital pound'
PwC found that more than 60 central banks around the world have entered the central bank digital currency race since 2014, with 88% of the ongoing projects using blockchain as the underlying technology.
"As cryptocurrency investors ride a wave of speculation, the government will be keen to distance itself from what is still seen as the wild west of the payments world," said Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown.
"However, officials clearly believe they can’t ignore the surge of interest in digital currencies, as a means of faster and more efficient money transfers, particularly internationally."
Streeter said there was a do or die environment in the adoption of digital currency. Not developing a policy could mean more power falls into the hands of big tech companies as consumers drift further towards crypto.
Which country might be first to launch?
China is close to becoming the first major economy to launch a digital currency. Pilots began regionally last year and there are rumours of a national launch in 2022.
The Bahamas has also been tipped by PwC's CBDC global index as a frontrunner in the race, followed closely by Cambodia.
No wholesale CBDC projects have launched yet but nearly 70% are running pilots. Only 23% of retail projects have reached this stage.
Two projects are currently live and piloting: the Sand Dollar in the Bahamas and project Bakong in Cambodia.
The UK's taskforce has made clear that its project is in early stages. The European Central bank has said any possible "digital euro" will take several years.
Pros and cons
Many backers of digital currencies say banking this way is more efficient. Instead of relying on intermediaries such as commercial banks, money can be transferred directly to the recipient and payments can be made in real time.
There is also an argument that CBDC helps prevent illicit or fraudulent activity. CBDCs make it easier for central banks to keep track of the exact location of a unit of currency. Cash, meanwhile, can be laundered or 'lost' more easily.
Potential drawbacks include the invasion of privacy associated with this sort of surveillance. Governments could obtain access to private individual spending data, for example.
Another fear is that CBDCs could herald the onset of a fully cashless society, which could harm poor, rural, and elderly communities who largely rely on cash.
Central banks are also unsure of what the monetary policy implications would be of a fully cashless society. For example, if people can transfer money instantly and with zero friction, would bank runs be more common? Would commercial banks even still exist? And how powerful — or not — would interest rate adjustments become?
Questions like these are why governments around the world — particularly in major economies — are taking it slow when it comes to CBDCs.
<<<
>>> UK can lead the world on crypto regulation if it acts fast
by Oscar Williams-Grut
Yahoo Finance UK
May 24, 2021
https://finance.yahoo.com/news/thecityuk-cryptocurrency-regulation-stablecoins-cbdc-uk-britain-213034772.html
Britain can set the standard for cryptocurrency regulation if it acts fast, lawmakers have been told.
TheCityUK, the lobbying group for Britain's financial services sector, has published a white paper calling on Britain to put in place tailored regulation for the cryptocurrency sector. The paper said Britain could influence global policy by setting the standard for regulating crypto and take advantage of the booming sector by luring businesses with the certainty of rules.
"There is a fierce global race underway to see which applications of DLT [distributed ledger technology] and cryptoassets will win out, and who will grab the biggest slice of the value they promise," said Miles Celic, chief executive of TheCityUK. "The ultimate winner is for markets to decide, but government and regulators have an important part to play.
"They must set safe and robust rules for this burgeoning sector – while ensuring they don’t inadvertently squash good ideas before they can mature and flourish."
Read more: 'Britcoin': Central bank digital currencies explained
TheCityUK want regulators to draw up custom rules for the sector that take into account the different use cases and features of crypto technology. Some features — such as blockchain record keeping — don't need regulation at all, the group argues.
The call for regulation comes amid a renewed global boom for cryptocurrencies. The market has quadrupled in value to $1.5tn since last October as institutional investors like Tesla (TSLA) and Square (SQ) have ploughed money into bitcoin alongside amateur investors. Goldman Sachs (GS) said this week that cryptocurrencies should be treated as a new type of asset class.
"The UK has a great track record in supporting innovation with regulation," Celic said. "Its regulatory FinTech sandboxes, for example, have been copied around the world. Now we need to show similar vision and nimbleness in our regulatory approach to cryptoassets.”
TheCityUK said the UK should also capitalise on the "valuable opportunities" presented by central bank-backed digital currencies. Earlier this year UK chancellor Rishi Sunak said Britain was exploring a possible digital pound issued by the Bank of England — a project dubbed "Britcoin" in the press.
<<<
>>> Death by 1,000 Cuts
BY JAMES RICKARDS
MAY 24, 2021
https://dailyreckoning.com/death-by-1000-cuts/
Death by 1,000 Cuts
If you like roller coaster rides, then you should love Bitcoin. Bitcoin investors have been on a stomach-churning ride for the past few months.
Bitcoin traded at $33,537 on February 1 before really taking off. By mid-April, it topped out at around $64,829 before sliding down.
Last Wednesday, Bitcoin suffered a single-day collapse of 30%. Then, yesterday afternoon, Bitcoin plunged sharply to $31,227, over a 50% decline since its April high.
“Never fear!” say the Bitcoin cheerleaders. Bitcoin has had many drops of that magnitude or even greater in recent years and has bounced back to new highs every time.
That’s true. So, it’s too soon to talk about the demise of Bitcoin based on a few bad weeks of price action. And it did bounce back today to over $39,000.
Why? I can’t give you a good answer. It’s just part of the ongoing roller coaster ride that is Bitcoin.
The true believers (called HODLers), who hold onto their Bitcoin through thick and thin are still around. They have been rewarded for their tenacity every time, and they believe this time will be no different.
But, Bitcoin faces many challenges.
Bitcoin Mining Is Destroying the Planet!
First off, Bitcoin is a major generator of CO2 emissions because of the energy used in mining. Now, I don’t consider that some great environmental threat because CO2 is a harmless trace gas that plants need to survive. There’s no real science to support the alarmist claims that it’s a threat to the climate.
But climate alarmism is rampant in policy circles so you can expect a crackdown on Bitcoin mining. The largest amount of Bitcoin mining takes place in China, and news out today says China will likely ban all Bitcoin mining soon.
China has also recently banned Bitcoin payments (I’m sure China is far more concerned about Bitcoin’s challenge to the digital yuan it’s preparing to launch than it is about the environment).
Incidentally, Turkey has also banned Bitcoin payments. However, Bitcoin’s supposed environmental challenge is not the only obstacle it faces. Here are some more:
Bitcoin is not a good store of value because of volatility. How could it be a good store of value when it gains or loses 15-20% in a single day?
Also, Bitcoin is not a good medium of exchange because it’s slow, clunky and expensive to transact. It has little real-world use, aside from setting illegal transactions on the black market and supporting terrorism.
But none of this means anything to the Bitcoin groupies. Any swoon is just another opportunity to “buy the dip.” It’s been a successful strategy, to be sure. But it works until it doesn’t.
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, even surpassing the Tulipmania of 1637.
Yes, Bitcoin came back. But it took a long time, and many people got crushed. If you bought at the bottom in December 2018, congratulations. But that’s some dip.
It’s a safe bet that Bitcoin is going to crash again.
Based Almost Entirely on Fraud
As I‘ve explained before, the Bitcoin bubble is based almost entirely on fraud. Therefore, when this bubble bursts, the damage may be so great that the value of Bitcoin could fall to $10,000 or lower. It could even disappear entirely.
Here’s a reminder of how the fraud works, as described in a recent 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 reliably locate the liquid assets that supposedly back Tether. There has been no genuine audit, and there is no transparency about the whereabouts or composition of the liquid assets backing the coin.
Bitfinex and Tether paid an $18.5 million fine and pledged to provide quarterly breakdowns of its reserves.
Shady Auditing
Less than two weeks ago, Tether released the composition of its reserves for the first time in order to comply with the settlement.
Tether claims that its reserves are in cash, cash equivalents or other short-term deposits. The rest are in secured loans, corporate bonds and other investments.
But as Coindesk notes, “the first category is mostly made up of commercial paper, a form of corporate debt that can be easily converted to cash – or not, depending on the issuer and market conditions.”
The information Tether provided failed to mention any independent review by an accounting firm. So, the information Tether provided about its reserves really doesn’t resolve much.
Tether has claimed 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 has shown 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.
Contagion
These Tethers have been used to bid up the price of Bitcoin and create a bubble.
If this process were to 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).
Tether 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.
If that’s not enough, now there’s a new threat on the Bitcoin horizon.
The IRS Closes In
The Biden administration is working on major new tax legislation to go along with its multi-trillion deficit spending plans.
Part of this new legislation is an appropriation of $80 billion for IRS tax enforcement, including the hiring of thousands of new IRS agents to conduct audits and spot tax evasion.
Buried in the specifics of that proposal is a new regulation that would require reporting to the IRS of all transactions in Bitcoin over $10,000.
Such regulations already exist if you withdraw or deposit cash from a bank. But now they’ll apply to Bitcoin.
One by one, central banks and tax authorities around the world are zeroing in on Bitcoin in an effort to tax it, regulate it or ban it outright.
This effort will take time. But the efforts of countries around the world may do more to limit the appeal of Bitcoin than all the memes and narratives supporting it, combined.
I would advise you to stay far away from Bitcoin. 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.
And of course, they should buy gold, which has a proven track record going back thousands of years.
The fanboys can’t say the same for Bitcoin.
Regards,
Jim Rickards
for The Daily Reckoning
<<<
>>> Bitcoin is officially a new asset class: Goldman Sachs
Yahoo Finance
Brian Sozzi
Mon, May 24, 2021
https://finance.yahoo.com/news/bitcoin-is-officially-a-new-asset-class-goldman-sachs-103540636.html
It's time to take bitcoin way more seriously as an investable asset, says Goldman Sachs.
"Bitcoin is now considered an investable asset. It has its own idiosyncratic risk, partly because it’s still relatively new and going through an adoption phase," said Mathew McDermott, Goldman Sachs' global head of digital assets, in a new piece of research. "And it doesn’t behave as one would intuitively expect relative to other assets given the analogy to digital gold; to date, it’s tended to be more aligned with risk-on assets. But clients and beyond are largely treating it as a new asset class, which is notable—it’s not often that we get to witness the emergence of a new asset class."
Despite Goldman's rubber stamp of approval on bitcoin (BTC-USD) and other cryptocurrencies have traded anything like a typical stock of a credible company or bond in May. In truth, if bitcoin is to be considered a new asset class it has a lot in common with one area in the stock market: often very volatile penny stocks that see wild gyrations on the tiniest bit of news.
Bitcoin prices continued to be under massive pressure on Sunday, plunging more than 15% by afternoon trading. At $32,652, bitcoin prices have crashed about 50% from their mid-April peak of $64,829. Ether nosedived another 18% on Sunday, bringing it's drop from an all-time high this month to roughly 60%. Early Monday morning, crypto recovered slightly.
'A key concern is inconsistent regulatory actions'
The serious price correction in cryptos come amid a groundswell of negative news mostly from government officials worldwide.
Authorities in China said last Friday that it would be necessary to crack down on bitcoin mining and trading behavior to limit investment risks.
Meanwhile, Federal Reserve Chairman Jerome Powell said in a presentation last week the governing body would continue its work on a digital dollar. Any digital dollar would likely weigh on the bullish sentiment for bitcoin and other cryptos.
“The effective functioning of our economy requires that people have faith and confidence not only in the dollar, but also in the payment networks, banks, and other payment service providers that allow money to flow on a daily basis,” Powell said. “Our focus is on ensuring a safe and efficient payment system that provides broad benefits to American households and businesses while also embracing innovation.”
Goldman's McDermott acknowledges regulation of the crypto space looms large as a significant risk to further price appreciation.
"A key concern is inconsistent regulatory actions around the globe that impede the further development of the crypto space, or the ability of more regulated entities to engage within it. It feels like the regulatory tone has turned more constructive, but I certainly wouldn’t want to be complacent," McDermott said.
Even in the face of such risk, McDermott said institutional clients remain keen on adding some form of crypto exposure to portfolios.
"As a whole, discussions with institutional clients revolve around how they can learn more on the topic and get access to the space—as opposed to questions around what bitcoin or cryptocurrencies are—which was really the main topic just a few years ago. But beyond that, asset managers and macro funds are interested in whether or not crypto fits into their portfolios, and if it does, how to get access to either the physical—by trading the spot instrument on a blockchain— or exposure through other types of products, typically futures," McDermott explained. "Hedge funds, perhaps unsurprisingly, are more active in this space, and are particularly interested in profiting from the structural liquidity play inherent in the market—earning the basis between going long either the physical or an instrument that provides access on a spot basis to the underlying asset and shorting the future."
<<<
>>> U.S. regulators signal stronger risk, tax oversight for cryptocurrencies
Reuters
by Howard Schneider and David Lawder
May 20, 2021
https://finance.yahoo.com/news/fed-citing-crypto-risk-open-180231257.html
WASHINGTON (Reuters) - U.S. Federal Reserve chief Jerome Powell turned up the heat on cryptocurrencies on Thursday, saying they pose risks to financial stability, and indicating that greater regulation of the increasingly popular electronic currency may be warranted.
The Treasury Department, meanwhile, flagged its concerns that wealthy individuals could use the largely unregulated sector to avoid tax and said it wanted big crypto asset transfers reported to authorities.
The back-to-back announcements came in a week when Bitcoin, the most popular cryptocurrency, took a wild ride, falling as much as 30% on Wednesday after China announced new curbs on the sector, underscoring the volatility of the sector.
Powell underlined cryptocurrency risks in an unusual video message that also laid out a clearer timetable as the Fed explores the possibility of adopting a digital currency of its own.
https://www.federalreserve.gov/newsevents/pressreleases/other20210520b.htm
While highlighting the potential benefits of advances in financial technology, Powell said cryptocurrencies, stablecoins and other innovations "may also carry potential risks to those users and to the broader financial system."
As the technology advanced, "so must our attention to the appropriate regulatory and oversight framework. This includes paying attention to private-sector payments innovators who are currently not within the traditional regulatory arrangements applied to banks, investment firms, and other financial intermediaries."
Powell's comments signaled how seriously the Fed has been forced to reckon with the surge in popularity and market values of non-traditional currency options such as Bitcoin, especially as it looks at developing a digital version of the U.S. dollar, the world's reserve currency.
SPECULATIVE ASSETS
The Fed and Treasury consider cryptocurrencies, which now have a market capitalization of about $2 trillion, to be more like art, gold or other highly speculative assets.
A central bank digital currency, though, offers whoever holds it - a person, a business, even another government - a direct claim on that central bank, which is exactly what holding a paper dollar bill does now.
Powell said the Fed would release a discussion paper this summer on digital payments, with a focus on the benefits and risks of establishing a central bank digital currency, and will also seek public comment.
He noted that "to date, cryptocurrencies have not served as a convenient way to make payments, given, among other factors, their swings in value."
The Treasury also flagged cryptocurrency risks, including opportunities for wealthy individuals to move taxable assets into the largely unregulated crypto sector.
"Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion," the Treasury said.
Its proposal, disclosed as part of a policy report detailing the Biden administration's $80 billion IRS enforcement proposal to boost revenue collection, would provide additional resources for the IRS to address crypto assets,
https://home.treasury.gov/system/files/136/The-American-Families-Plan-Tax-Compliance-Agenda.pdf
In addition to the reports of $10,000-plus cryptocurrency transfers that would parallel bank reports of similarly sized cash transfers, the Treasury also proposed that crypto asset exchanges and custodians also report transactions to the IRS related to bank interest, dividend and brokerage transactions.
The reporting requirements, depending on how they are structured, could also allow the government to gain insight about U.S. companies that are extorted to pay hackers ransoms, almost invariably in cryptocurrency, to regain control of their IT systems.
Law enforcement and private sector cybersecurity experts alike have complained that a lack of transparency around these ransomware incidents contributes to their continued occurrence.
The Treasury disclosure took the wind out of a rally in the dollar value of Bitcoin on Thursday that followed steep plunges for Bitcoin and etherium on Wednesday. Bitcoin was up 8.7% in afternoon trade after an earlier gain of 10%.
CAUTIOUS APPROACH
While the Fed and some other developed economies are still conducting research on what a central bank digital currency would look like, China is moving ahead at a fast clip and is currently piloting a digital version of the yuan, with plans to ramp up usage before the 2022 Winter Olympics in Beijing.
Powell said last month that the Fed would not rush its efforts in response to China’s more aggressive pace, noting that the approach taken there would not work in the United States.
"It is far more important to get it right than it is to do it fast," Powell said after the April policy setting meeting.
The Boston Fed is currently working with the Massachusetts Institute of Technology to research the technology that could be used for a central bank digital currency and will be releasing those findings in the third quarter.
Congressional action would be required before a digital currency could be developed.
Also on Thursday, U.S. Securities and Exchange Commission Chair Gary Gensler said he would like to see more regulation around cryptocurrency exchanges, including those that solely trade bitcoin and do not currently have to register with his agency.
"This is a quite volatile, one might say highly volatile, asset class, and the investing public would benefit from more investor protection on the crypto exchanges," he said at the Financial Industry Regulatory Authority's annual conference.
<<<
>>> U.S. Treasury calls for stricter cryptocurrency compliance with IRS, says they pose tax evasion risk
CNBC
MAY 20 2021
Thomas Franck
https://www.cnbc.com/2021/05/20/us-treasury-calls-for-stricter-cryptocurrency-compliance-with-irs.html
Investors have seen the value of bitcoin slide about 25% over the past month and talk of capitulation creep into online forums.
Treasury announces new crypto tax reporting requirements
The Treasury Department on Thursday announced that it is taking steps to crack down on cryptocurrency markets and transactions, and said it will require any transfer worth $10,000 or more to be reported to the Internal Revenue Service.
“Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion,” the Treasury said in a release.
“This is why the President’s proposal includes additional resources for the IRS to address the growth of cryptoassets,” the department added. “Within the context of the new financial account reporting regime, cryptocurrencies and cryptoasset exchange accounts and payment service accounts that accept cryptocurrencies would be covered. Further, as with cash transactions, businesses that receive cryptoassets with a fair market value of more than $10,000 would also be reported on.”
Bitcoin reversed course shortly after the Treasury’s announcement and was last seen trading up 0.6%, according to Coin Metrics. Previously in the session, it was up more than 9%.
A growing number of Wall Street analysts have over the past month sounded the alarm that regulators at the Treasury and the Securities and Exchange Commission could soon take a more active role in cryptocurrency regulation.
The Treasury Department’s release came as part of a broader announcement on the Biden administration’s efforts to crack down on tax evasion and promote better compliance. Among proposals officials are considering are bolstered IRS funding and technology, and more severe penalties for those who evade their obligations.
According to the Treasury’s estimates, the difference between taxes owed to the U.S. government and those actually paid totaled nearly $600 billion in 2019.
Increased regulation will likely upset some cryptocurrency investors, who have seen the value of bitcoin slide about 25% over the past month and talk of capitulation creep into online forums.
With longtime cryptocurrency expert Gary Gensler at the head of the SEC, Raymond James expects it’s only a matter of time until Congress grants the regulator broader jurisdiction.
He told lawmakers earlier this month that allowing the SEC to regulate cryptocurrency exchanges will help ensure investors are protected and prevent market manipulation.
“Chairman Gensler is viewed as a potential ally for cryptocurrencies as a former professor on the topic; however, these statements are likely to revisit debates regarding the regulatory risk to cryptocurrencies and exchanges,” Raymond James analyst Ed Mills wrote earlier in May.
“In the short-term, this could cause headline risk,” he added. “However, in the medium-to-long term, regulation would add further legitimacy to the asset class and could provide a regulatory moat around existing cryptocurrency exchanges.”
While involvement by the Treasury Department and the SEC may ultimately prove a boon for cryptocurrency investors, any near-term regulatory hurdles will likely come as another bother for investors in bitcoin, dogecoin and the like.
Those sentiments were echoed by Miller Tabak last month, when the firm told clients that “cryptocurrency markets are not properly considering legal risk.”
“Confirmation of Gary Gensler as SEC Chairman, and cryptocurrency volatility over the weekend following rumors of tighter regulation, highlight the regulatory risks facing this industry,” strategic economist Paul Shea wrote in April.
“The difference in regulatory risk and progress as a means of payment raises an important question: are other coins’ recent success due to good news about them or are they piggybacking on positive sentiment related to bitcoin?” he added.
Democrats and Republicans alike have made cryptocurrency regulation a top priority in 2021 as run-ups in the price of bitcoin and other digital assets last year sparked concerns of market manipulation and uninformed retail investments.
<<<
>>> Bitcoin: National Security Threat?
BY JAMES RICKARDS
MAY 5, 2021
https://dailyreckoning.com/bitcoin-national-security-threat/
Bitcoin: National Security Threat?
After Bitcoin crashed from $20,000 to $3,400 in 2018, many observers decided the craze was over, and Bitcoin would slowly decline in price and fade into obscurity. But reports of the death of Bitcoin were premature.
In 2021, a new mania took hold, and the price surged to $60,000 before backing off a bit. Today it’s trading at about $56,871 (Bitcoin is so volatile, it could change by the time you read this).
But the price of bitcoin has not simply gone up. Now, millions of first-time users, mostly millennials and Generation Z, have joined the bandwagon.
Very few observers really understand the technology behind Bitcoin (including millions of the new buyers), but this seems irrelevant to most. They are true believers, akin to a cult or tribe.
The buyers believe one thing only — that the price of Bitcoin will continue to go up.
Buying it at any price is like buying a ticket for free money because, despite the occasional dip, the price has nowhere to go but up. If you think this sounds like the definition of a mania-induced bubble, you’re right. It is a bubble.
The Bitcoin price pattern displays the greatest bubble behavior in history, greater even than the Tulipomania in the Netherlands in the early seventeenth century.
The Higher They Rise…
You don’t need a Ph.D. in finance to see that Bitcoin is a bubble. Price increases over the past six months have been hyperbolic, almost vertical. The Japanese Nikkei Index in late 1989 and the NASDAQ Composite until March 2000 displayed exactly the same pattern.
Of course, The Nikkei crashed over 80% beginning in 1989 and has still not recovered its old high after 32 years. The NASDAQ crashed over 75% beginning in 2000 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 described above, Bitcoin could fall from $60,000 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. There is substantial evidence that the price of Bitcoin is based on a Ponzi.
Charles Ponzi Would Be Jealous
Over 50% of Bitcoin purchases are made with another crypto-currency called Tether, a so-called stablecoin. Tether has never accounted for the billions of dollars that buyers have used to acquire Tether.
Hard currencies such as dollars go into Tether, which is used to pump Bitcoin, while the dollars are possibly skimmed away. That process does not work in reverse.
There has been no full audit or 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 domiciled in Africa and Asia. Of course, these exchanges exist in cyberspace only and are accessed through the internet.
These exchanges offer leverage and 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.
Aside from fraud, the list of objections to Bitcoin is long.
What’s the Case for Bitcoin?
Mining bitcoin requires the use of an enormous amount of electricity. This adds to CO2 emissions since most of the mining is done in China (which uses mostly coal-fired generators).
Now, there’s no real scientific evidence that carbon dioxide is an environmental threat, but many policymakers believe it is. So, if they want to crack down on emissions, Bitcoin mining is one way to do that.
Bitcoin payments are also slow and expensive. Less expensive payment layers are available, but these destroy the anonymity that was the original selling point for Bitcoin.
It has no real use case except for money laundering and evading taxes or capital controls.
Theft is rampant as billions of dollars of Bitcoins have been stolen or simply disappeared as exchanges have collapsed. Billions more have been lost when Bitcoin holders lose their encryption keys and cannot access their accounts.
Bitcoin has no utility because it is deflationary by design and therefore unsuitable for use in bond markets, which is the key to reserve currency status. And so on.
Bitcoin has no return other than higher prices based on the greater fool theory. You can make money in Bitcoin at any purchase price as long as there’s a greater fool willing to pay an even higher price.
That system works until it doesn’t.
Bitcoin is a wealth transfer device but not a wealth creation device. Bill Gates is worth $100 billion because he created trillions of dollars in value through his Microsoft programs and operating systems. Bitcoin is a zero-sum game where one player takes money from another, but no new wealth is created.
None of this has slowed the widespread adoption of Bitcoin as a store of value, despite enormous volatility that cuts against that very function. Now, Bitcoin may face a more formidable challenge that will actually curtail its growth and possibly pop the bubble…
Is Bitcoin a National Security Threat?
Increasingly, Bitcoin is considered a threat to U.S. national security. The reasons for this include Chinese dominance of Bitcoin mining, financial instability that could result when the bubble bursts, and damage to the U.S. dollar’s role as the principal reserve currency if billions of users around the world simply abandon dollars for Bitcoin.
Along with national security threats comes a long list of draconian statutory powers that the president can use to curtail the threat, including a ban on Bitcoin usage and a prohibition on clearance of transactions by payments processors who also handle U.S. dollar payments.
This is not an abstract threat.
A reaction to Bitcoin on national security grounds may be coming sooner than many expect. But that doesn’t mean it’s going to collapse tomorrow. Still, when it does come, it could happen rapidly.
What goes up fast often comes down fast.
Investors can prepare by increasing their allocations to cash so they can weather the financial fallout when the death of Bitcoin actually does arrive.
And, of course, gold. Gold has endured for thousands of years. Will Bitcoin be able to make the same claim?
Regards,
Jim Rickards
for The Daily Reckoning
<<<
>>> Digital Yuan Gives China a New Tool to Strike Back at Critics
Bloomberg News
April 20, 2021
https://www.bloomberg.com/news/articles/2021-04-20/digital-yuan-gives-china-a-new-tool-to-strike-back-at-critics?srnd=premium
Beijing could have clear picture of financial transactions
‘That currency can be turned off like a light switch’
Even as China grows in economic and military power, perhaps nothing reveals Beijing’s weaknesses more than the U.S.’s control of the global financial system.
China has recently sought ways to counteract U.S. sanctions after the Trump administration targeted Chinese officials and companies over policies from the South China Sea to Xinjiang. Hong Kong’s leader can’t access a bank account and a top executive at Huawei Technologies Co. is detained in Canada. Even China’s state-run banks are complying with U.S. sanctions.
That’s one reason the Biden administration is starting to study whether China’s development of a digital currency will make it harder for the U.S. to enforce sanctions, Bloomberg reported earlier this month. The digital yuan, which could see a wider roll out at the 2022 Winter Olympics in Beijing, is also spurring the U.S. to consider creating a digital dollar.
China New Silk Road
But instead of challenging U.S. dollar dominance and neutralizing sanctions, the digital yuan appears potentially more geopolitically significant as leverage over multinational companies and governments that want access to China’s 1.4 billion consumers. Since China has the ability to monitor transactions involving the digital currency, it may be easier to retaliate against anyone who rebuffs Beijing on sensitive issues like Taiwan, Xinjiang and Hong Kong.
“If you think that the United States has a lot of power through our Treasury sanctions authorities, you ain’t seen nothing yet,” Matt Pottinger, former U.S. deputy national security adviser in the Trump administration, said last week at a hearing of the government-backed U.S.-China Economic and Security Review Commission. “That currency can be turned off like a light switch.”
So far China has mostly resisted hitting foreign firms in response to U.S. actions on companies like Huawei, holding off on releasing an “unreliable entity list” designed to punish anyone who damages national security. Any move to cut off access to the digital yuan would carry similarly high stakes, potentially prompting foreign investors to pack up and leave.
But Beijing has gone after companies like Hennes & Mauritz AB for statements on human-rights issues, even while government officials have been careful to avoid directly endorsing a boycott. In a Weibo post last month, the Communist Party Youth League declared: “Want to make money in China while spreading false rumors and boycotting Xinjiang cotton? Wishful thinking!”
READ MORE ABOUT CHINA’S DIGITAL YUAN:
How China Is Closing In on Its Own Digital Currency: QuickTake
Biden Team Eyes Potential Threat From China’s Digital Yuan
China Digital Yuan Will Co-Exist With Alipay, WeChat, PBOC Says
China Says It Has No Desire to Replace Dollar With Digital Yuan
A Digital Currency to Fight Data Overlords: Andy Mukherjee
Controlling access to China’s massive market remains the best way for Beijing to hit back at the U.S.: As long as Chinese companies still want access to the broader financial world dominated by the U.S. and its allies, Washington can effectively wield sanctions against nearly anyone who doesn’t operate exclusively in China’s orbit. And Beijing has little incentive to shun the dollar.
While President Xi Jinping has called for greater self-sufficiency in key technologies like advanced computer chips, a financial decoupling from the U.S. would only hurt China’s economy and potentially leave the Communist Party more exposed to destabilizing attacks. After Xi effectively ended Hong Kong’s autonomy last year with a sweeping national security law, the U.S. refrained from cutting off the territory’s ability to access U.S. dollars due to the potential devastation to the global financial system.
‘Great Commercial Risk’
Widespread use of the digital yuan -- also known as the e-CNY -- could potentially give China’s central bank more data on financial transactions than the big tech giants, allowing the Communist Party to both strengthen its grip on power and fine-tune policies to bolster the economy. While that level of control may boost growth in the world’s second-biggest economy, it also risks spooking companies and governments already wary of China’s track record on intellectual property rights, economic coercion and rule of law.
China’s state-endorsed boycott of H&M shows “great commercial risk” for companies that use the digital yuan, Yaya Fanusie, adjunct senior fellow at the Center for a New American Security in Washington, told the U.S.-China Economic and Security Review Commission hearing. If foreign merchants had to use the e-CNY, he said in a separate email, the government could prohibit transactions with H&M wallets and the store could disappear from digital yuan apps.
“This is the other side of the coin -- Beijing not as a sanctions evader, but more empowered to enforce its own financial muscle,” said Fanusie, who has written extensively on how central bank digital assets may impact U.S. financial sanctions. “China’s digital currency is as much about data as it is about money,” he added. Foreign firms that use the digital yuan “might end up handing over to the Chinese government lots of real-time data that it could not access efficiently through conventional banking technology.”
China’s ability to see every transaction may make it difficult for foreign banks to use the digital yuan and still comply with confidentiality rules in their home countries, according to Emily Jin, a research assistant at the Center for a New American Security. But, she added, the currency might appeal to some regimes that prioritize control over privacy protection.
Limited Role
Yuan's share of foreign exchange reserves tiny compared to size of economy
“They might find it easier to convince governments more authoritarian in their leaning that it helps monitor elicit activities or stop them quickly or stop them before they happen,” Jin said. “They aren’t going to market it to everyone.”
The digital yuan would serve as a back-up to Ant Group Co.’s Alipay and Tencent Holdings Ltd.’s WeChat Pay, which together make up 98% of the mobile-payments market, according to Mu Changchun, director of the central bank’s Digital Currency Research Institute. Last month he said the electronic yuan has the “highest level of privacy protection” and the central bank wouldn’t directly know the identity of users, but the government could get that information from financial institutions in cases of suspected illegal activity.
Dollar Challenge
Chinese policy makers have also repeatedly emphasized that the digital yuan isn’t meant to challenge the dollar, with People’s Bank of China Deputy Governor Li Bo saying last weekend the motivation for the e-CNY is primarily for domestic use. The Chinese currency now makes up about 2% of global foreign exchange reserves compared with nearly 60% for the U.S. dollar, and most of Beijing’s trade and loans in Xi’s Belt-and-Road Initiative are disbursed in dollars.
Any serious challenge to the dollar’s position as the world’s reserve currency would also require significant policy changes from China, including lifting capital controls that help the Communist Party keep a lid on sudden outflows that could trigger a financial crisis. Even if the digital yuan could be transacted more cheaply outside of U.S.-controlled global payment systems, it’s unclear if anyone would use it.
“The dollar is not the dominant reserve currency because the Americans say it must be,” said Michael Pettis, finance professor at Peking University and senior fellow at the Carnegie-Tsinghua Center in Beijing. “The dollar is the dominant reserve currency because the Chinese, the Europeans, the Japanese, the South Koreans etc. say it must be. It’s the rest of the world that imposes that because they think its the safest place to park money.”
Digital Ambitions
Central banks are at varying stages of developing digital currencies
The U.S. still has an incentive to set standards for digital currencies. In a survey last year of 65 central banks representing 91% of global economic output, the Bank of International Settlements found more than half were experimenting with digital currencies and 14% were moving forward to pilots. The U.S. itself is taking a cautious approach: Federal Reserve Chair Jerome Powell said last month policy makers must understand the costs and benefits of a digital dollar, and wouldn’t rush the “very, very large, complex project.”
‘Wake Up Call’
China began research on the digital yuan back in 2014, right after the price of Bitcoin surged from $13.40 to more than $1,000, raising the risk that digital currencies could impact Beijing’s control of monetary policy. It has begun technical testing with Hong Kong for cross-border payments, and is working with Thailand and the United Arab Emirates on real-time foreign exchange settlements. Authorities are also studying how the digital yuan can be combined with 5G networks and the internet of things.
This kind of research allows China a greater say in how other countries across the globe design digital currencies, particularly when it comes to questions of surveillance, privacy and anonymity, according to Josh Lipsky, director of the Atlantic Council’s GeoEconomics Center.
“China is really leading in this area and it should be a wake up call to the U.S. and to Europe,” Lipsky said. “There is a serious first mover advantage not because of what China will do, but what other countries are doing.”
<<<
>>> Coinbase Hangover Rattles Crypto Assets With Bitcoin Falling
Bloomberg
By Shamim Adam and Emily Barrett
April 18, 2021
https://www.bloomberg.com/news/articles/2021-04-18/bitcoin-falls-as-much-as-15-biggest-intraday-drop-since-feb?srnd=premium
Bitcoin pared some losses after sinking as much as 15%
Other cryptos also plunged; Dogecoin resumed its advance
Bitcoin Plunges Days After Reaching Record High
The mania that drove crypto assets to records as Coinbase Global Inc. went public last week turned on itself on the weekend, sending Bitcoin tumbling the most since February.
The world’s biggest cryptocurrency plunged as much as 15% on Sunday, just days after reaching a record of $64,869. It subsequently pared some of the losses and was trading at about $56,440 at around 8:25 a.m. in Tokyo Monday.
Ether, the second-biggest token, dropped as much as 18% to below $2,000 before also paring losses. The volatility buffeted Binance Coin, XRP and Cardano too. Dogecoin -- the token started as a joke -- bucked the trend and is up 7% over 24 hours, according to CoinGecko.
The weekend carnage came after a heady period for the industry that saw the value of all coins surge past $2.25 trillion amid a frenzy of demand for all things crypto in the runup to Coinbase’s direct listing on Wednesday. The largest U.S. crypto exchange ended the week valued at $68 billion, more than the owner of the New York Stock Exchange.
Bitcoin took a dive after a heady ascent to a record
“With hindsight it was inevitable,” Galaxy Digital founder Michael Novogratz said in a tweet Sunday. “Markets got too excited around $Coin direct listing. Basis blowing out, coins like $BSV, $XRP and $DOGE pumping. All were signs that the market got too one way.”
Dogecoin, which has limited use and no fundamentals, rallied last week to be worth about $50 billion at one point before stumbling Saturday. Demand was so brisk for the token that investors trying to trade it on Robinhood crashed the site a few times Friday, the online exchange said in a blog post.
There was also speculation Sunday in several online reports that the crypto plunge was related to concerns the U.S. Treasury may crack down on money laundering carried out through digital assets. The Treasury declined to comment, and its Financial Crimes Enforcement Network (FinCEN) said in an emailed response on Sunday that it “does not comment on potential investigations, including on whether or not one exists.”
‘Price to Pay’
“The crypto world is waking up with a bit of a sore head today,” said Antoni Trenchev, co-founder of crypto lender Nexo. “Dogecoin’s 100% Friday rally was ‘peak party,’ after the Bitcoin record and Coinbase listing earlier in the week. Euphoria was in the air. And usually in the crypto world, there’s a price to pay when that happens.”
Besides the “unsubstantiated” report of a U.S. Treasury crackdown, Trenchev said factors for the declines may have included “excess leverage, Coinbase insiders dumping equity after the direct listing and a mass outage in China’s Xinjiang province hitting Bitcoin miners.”
Growing mainstream acceptance of cryptocurrencies has spurred Bitcoin’s rally, as well as lifting other tokens to record highs. Bitcoin’s most ardent proponents see it as a modern-day store of value and inflation hedge, while others fear a speculative bubble is building.
Interest in crypto went on the rise again after companies from PayPal to Square started enabling transactions in Bitcoin on their systems, and Wall Street firms like Morgan Stanley moved toward providing access to the tokens to some of the wealthiest clients.
Volatility
That’s despite lingering concerns over their volatility and usefulness as a method of payment. Moreover, governments are inspecting risks around the sector more closely as the investor base widens.
Federal Reserve Chairman Jerome Powell last week said Bitcoin “is a little bit like gold” in that it’s more a vehicle for speculation than making payments. European Central Bank President Christine Lagarde in January took aim at Bitcoin’s role in facilitating criminal activity, saying the cryptocurrency has been enabling “funny business.”
Turkey’s central bank banned the use of cryptocurrencies as a form of payment from April 30, saying the level of anonymity behind the digital tokens brings the risk of “non-recoverable” losses.
<<<
>>> Bitcoin price drops after Turkey bans cryptocurrency payments
Yahoo Finance
by Suban Abdulla
April 16, 2021
https://finance.yahoo.com/news/bitcoin-price-turkey-cryptocurrency-ban-coinbase-ethereum-075916004.html
The value of Bitcoin (BTC) has exceeded the threshold of 64,000 dollars for the first time in history. The Cryptocurrency overtakes the British Pound to become the 6th largest currency in the world. The total bitcoin market now represents $ 1.2 trillion, while that of all cryptocurrencies stands at $ 2251 billion.
Demand for cryptocurrencies in the country has been driven up recently by inflation pressures and a weaker Turkish Lira. The country's annual inflation rose above 16% in March.
The price of bitcoin (BTC-USD) descended from record highs on Friday following a decision by Turkey's central bank to ban cryptocurrencies for payments.
The Central Bank of the Republic of Turkey (CBRT) said the use of cryptocurrencies and other crypto assets based on distributed ledger technology would be prohibited as a payment, whether directly or indirectly.
The ban will come into force from 30 April this year.
"Payment service providers will not be able to develop business models in a way that crypto assets are used directly or indirectly in the provision of payment services and electronic money issuance, and will not be able to provide any services related to such business models," CBRT said in a statement.
The CBRT said the ban was motivated by a lack of "central authority regulation" and "supervision mechanisms" for cryptocurrencies and other similar digital assets.
It said that, among other risks, cryptocurrencies "may cause non-recoverable losses for the parties to the transactions" due to the lack of regulation.
A statement from the bank added that payments could "include elements that may undermine the confidence in methods and instruments used currently in payments."
Bitcoin was down over 3% to $61,379 (£44,670) in morning trade in London.
Demand for cryptocurrencies in Turkey has been driven up recently by inflation pressures and a weaker Turkish Lira. The country's annual inflation rose above 16% in March.
Prior to the announcement, Turkish authorities had last week demanded user information from trading platforms.
Cryptocurrency prices have hit record highs in recent weeks thanks to a rise in demand.
Bitcoin, which has been up and down over the last few weeks, crossed another record high on Wednesday, touching $64,717.01.
On Thursday, Ethereum (ETH-USD) — the world's second biggest cryptocurrency — continued its multi-month rally, hitting a record high of $2,488.07. It was down nearly 2% on Friday morning.
On Wednesday, cryptocurrency exchange Coinbase became the first crypto firm to list on the Nasdaq (^IXIC).
Coinbase, the largest cryptocurrency exchange in the US, was briefly worth over $100bn when it debuted on the Nasdaq on Wednesday. Shares ended their first day of trading at $328.28, below the opening price of $381.
<<<
>>> Coinbase shares close 14% below opening price after trading debut
Yahoo Finance
Emily McCormick
April 14, 2021
https://finance.yahoo.com/news/coinbase-direct-listing-stock-cryptocurrency-bitcoin-172655492.html
Coinbase Global (COIN) shares ended their first day of trading at $328.28 apiece, falling below their opening price of $381.
Coinbase's closing level gave the stock a fully diluted valuation of nearly $86 billion. Earlier, in the day, the stock's valuation easily exceeded $100 billion, with shares rising to as much as $429.54 in the minutes immediately following its opening trade.
The stock was given a reference price of $250 per share on the Nasdaq on Tuesday, though no shares traded hands at that price. Coinbase's direct listing differed from a traditional initial public offering in that no new shares were issued in the process, with existing shareholders instead directly selling the stock to the public.
Coinbase, the largest cryptocurrency exchange in the U.S., hit the public markets amid a record-setting rally in cryptocurrency prices and broadening adoption of digital assets. The public debut was one of the most highly anticipated in the U.S. this year, with public and institutional interest in cryptocurrencies swelling in recent months. Companies including Tesla (TSLA), Square (SQ), BNY Mellon (BNY) and PayPal (PYPL) have either added significant holdings of bitcoin to their balance sheets or begun facilitating transactions in cryptocurrencies, and legacy banks Morgan Stanley (MS) and Goldman Sachs (GS) recently announced they would begin offering bitcoin exposure to their wealth management clients.
"Coinbase is a foundational piece of the crypto ecosystem and is a barometer for the growing mainstream adoption of bitcoin and crypto for the coming years in our opinion," Wedbush analyst Dan Ives wrote in a note. "Given the still nascent and volatile nature around Bitcoin we believe less than 5% of public companies will head down the Bitcoin investment path in some capacity over the next 12 to 18 months, but could move markedly higher as more regulation and acceptance of this currency takes hold further down the road."
Bitcoin prices reached a record high of more than $64,000 on Wednesday, and comprise most of the total cryptocurrency market capitalization of over $2 trillion. The boom in demand for digitally native, non-interchangeable assets has been further underscored by the rise in non fungible tokens (NFTs) in the digital art and collectibles world, most of which have been built on the ethereum blockchain.
"Crypto has the potential to be as revolutionary and widely adopted as the internet. The unique properties of crypto assets naturally position them as digital alternatives to store of value analogs such as gold, enable the creation of an internet-based financial system, and provide a development platform for applications that are unimaginable today," Coinbase said in its prospectus. "These markets and asset classes collectively represent hundreds of trillions of dollars of value today."
Coinbase, for its part, makes the vast majority of its money via transaction fees from trades on its platform by retail and institutional users. Revenue for the year ended Dec. 31 more than doubled to $1.3 billion. On the bottom line, Coinbase swung to a profit of $322.3 million for the full year 2020, versus a net loss of $30.4 million in 2019. More than 43 million retail users and 7,000 institutions use the Coinbase platform, the company added.
For the first quarter of fiscal 2021, Coinbase estimated it would post net income of between $730 million and $800 million, compared to net income of just $32.26 million in the first three months of 2020.
Coinbase, America's leading cryptocurrency exchange, arrives on Wall Street on Wednesday April 14 as part of a 'direct introduction'. An IPO, eagerly awaited by crypto enthusiasts, which could value the Californian company at more than 100 billion dollars. Taking advantage of exploding demand for digital currencies, Coinbase said last week that it expects to make a profit of $730 million to $800 million in the first quarter of 2021, more than double the total profit in 2020. Revenues for the first three months of 2021 have likely exceeded last year's, to nearly $1.8 billion.
'Will be worth more than Goldman Sachs'
Even staunch cryptocurrency proponents, however, have noted that Coinbase's recent, rapidly growing results could be subject to volatility due to competition and price changes in digital assets.
"The biggest risk here is that 90% of Coinbase’s revenue is still tied to retail trading volume. And it’s very expensive — 250 basis points in transaction fees on average on those retail users, that’s expensive. So I think there’s going to be margin compression and challenges to Coinbase’s business model," Meltem Demirors, chief strategy officer at digital asset investment firm CoinShares, told Yahoo Finance. "Their margin is someone else’s opportunity, and already we see competitors in the space that are offering the same service, albeit with smaller brands, at much better prices."
Coinbase's results would also be subject to fluctuations in notoriously volatile cryptocurrency prices, which tend to dictate retail investor interest in cryptocurrencies overall, Demirors added.
"Historically, bitcoin in particular has gone through these two to three year cycles where we see a period of tremendous expansion and growth and then we see a 30% to 40% correction, sometimes even greater," she said. "So the risk here is Coinbase could have some of that same volatility that bitcoin and other digital assets have historically had."
Still, the opportunity for growth remains significant for cryptocurrencies and for Coinbase, Demirors maintained.
"I firmly believe within the week it will be worth more than Goldman Sachs," Demirors said. "Goldman today employs 40,000 people. It was founded in 1869, $120 billion market cap. Coinbase, founded in 2013, employs less than 4,000 people, and it's going to have a bigger market cap. So again, what I think we're watching here is a new guard coming in. And frankly, if financial institutions don't start to pay attention to this and take notice and build things that their clients want, their clients are going to leave."
At the same time, however, Coinbase's elevated valuation has given some investors pause. The stock already easily surpassed the $100 billion mark during intraday trading on Wednesday.
"Really to be comfortable buying at this price, you really have to have a strong belief, firm conviction, that cryptocurrency is the way of the future and that it’s going to be a long-term, sustainable trend," Bankrate.com's Jim Royal told Yahoo Finance. "But of course, you’re also betting on, at least to some extent, the continued rise in price of major cryptos such as bitcoin [and] ethereum raising increased trading volume ... And so those are really key drivers to the success of Coinbase.”
However, a number of investors are still on the sidelines when it comes to investing in bitcoin and other cryptocurrencies. In Bank of America's latest April global fund manager's survey, the firm found that 74% of respondents answered "yes" when asked whether they believed bitcoin was in a bubble, compared to just 7% of respondents who gave the same answer about equities.
<<<
that's a dramatic move. so what happens if someone doesn't have a mobile device, or if they lose it? i guess the bare minimum requirement would be a debit card, swiped at each point of sale.
>>> Galaxy Digital becomes latest firm to file for a bitcoin ETF
Block
by Aislinn Keely
April 12, 2021
https://www.theblockcrypto.com/linked/101357/galaxy-digital-bitcoin-etf?utm_source=coinbase&utm_medium=rss
Galaxy Digital filed for a bitcoin exchange-traded fund (ETF) on Monday, according to a new S-1 with the Securities and Exchange Commission (SEC).
The Galaxy Bitcoin ETF filing names NYSE Arca as the intended exchange venue. Per the filing, Galaxy has yet to name a custodian, administrator or transfer agent and will likely submit amended filings as these roles take shape and become public.
Galaxy trades publicly in Canada, and already acts as sub-advisor to a Canadian bitcoin ETF offering sponsored by CI Financial, the CI Galaxy Bitcoin ETF. That particular product began trading on the Toronto Stock Exchange last month.
That product utilizes the Galaxy Bitcoin Index, which is owned and calculated by Bloomberg services. The Galaxy Bitcoin ETF, if approved, would also utilize the index as its pricing mechanism.
"The Index is designed to measure the performance of a single bitcoin traded in U.S. dollars," said the filing.
The end-of-day price of the net asset value of the ETF, or the pricing of the underlying holdings each day, is determined using the Bloomberg Crypto Price Fixings' mid-price for bitcoin. It's a "simple average" of the price of bitcoin using inputs from real-time pricing sources, according to the S-1.
The submission comes after a strong Q4 report from the firm. CEO Mike Novogratz said the crypto bank is seeing growth across asset management, trading and its newest addition, mining. The Q4 report also revealed plans to conduct a secondary listing on a U.S.-based venue.
The Galaxy filing joins a number of other submissions, including NYDIG, Fidelity and First Trust/SkyBridge. The U.S. has seen an increase in submissions since a wave of Canadian approvals, including the CI Galaxy Bitcoin ETF.
<<<
>>> TIME Joins Tesla in Keeping Bitcoin on Its Balance Sheet
Grayscale Investments and TIME magazine are partnering on cryptocurrency content. And TIME is keeping the BTC.
Decrypt
By Jeff Benson
Apr 12, 2021
https://decrypt.co/66263/time-joins-tesla-keeping-bitcoin-balance-sheet?&utm_medium=referral&utm_campaign=feed&utm_source=coinbase
It was only a matter of TIME.
One of the most recognizable publications in the world, TIME Magazine will now be receiving some payments in Bitcoin, according to Grayscale CEO Michael Sonnenshein. What’s more, unlike some people, it won’t be immediately converting that crypto to fiat.
“Thrilled @Grayscale is partnering w/ @TIME on a new video series coming this summer explaining the #crypto space,” Sonnenshein tweeted today.
“Equally as important, @KeithGrossman & @TIME has agreed to be paid in #Bitcoin - and will hold the $BTC on their balance sheet. A first for our media partnerships!”
TIME President Grossman retweeted the news, blessing the partnership over Twitter.
Grayscale is a cryptocurrency asset manager that holds over 3% of the Bitcoin in circulation via its Grayscale Bitcoin Trust. No further details were available regarding its TIME partnership.
TIME won’t be the first non-crypto company to keep Bitcoin on its balance sheet. Cloud software company MicroStrategy and payment processing firm Square pioneered that approach. When electric automaker Tesla bought $1.5 billion in Bitcoin earlier this year, it announced in SEC filings that it may keep any Bitcoin it receives for car purchases. It has since confirmed that strategy.
<<<
>>> A Key Bitcoin Investment Faces Activist Pressure
Barron's
By Avi Salzman
April 6, 2021
https://www.barrons.com/articles/a-key-bitcoin-investment-faces-activist-pressure-51617734136?siteid=yhoof2
The U.S. has yet to approve any Bitcoin ETFs.
The most popular fund for investing in Bitcoin without buying the cryptocurrency itself is under heat from a top investor.
The Grayscale Bitcoin Trust (ticker: GBTC), an ETF-like security that has drawn more than $34 billion in assets, now trades at a discount to the underlying Bitcoin it holds. Marlton LLC, a family office that owns a substantial amount of GBTC, sent an open letter to Grayscale’s board of directors calling for the company to conduct a tender offer that would allow current shareholders to sell at a premium to current market prices.
Marlton didn’t say how many shares it holds, but a spokesperson said that it would be on the list of the top 23 holders on Bloomberg if its filings were public.
The Grayscale trust, created in 2013, took off as the most direct way for investors to get Bitcoin exposure into their traditional portfolios. It remains popular, but because it is structured like a closed-end fund, the net asset value of its underlying Bitcoin can differ from the price of the security.
Grayscale has historically traded at a significant premium to the net asset value. That switched several weeks ago, and it has been trading at a significant discount—as large as 14%—since then. That is likely because competitors have begun to launch rival products, and there are now Bitcoin ETFs, including two in Canada.
The U.S. may also get a Bitcoin ETF later this year, some market participants are predicting, though regulators have yet to approve any.
Grayscale is looking to convert GBTC into an ETF, a move that would presumably eliminate the discount. But Marlton wants faster action, calling the ETF move a “wait and see” option that may fail. That is why the firm wants a tender offer.
“A tender offer is a superior value creating initiative, offering stockholders the ability to sell their shares for a specified price and within a particular window of time for an offered price at a premium to the market price and contingent upon a minimum or a maximum number of shares sold,” the letter says.
Grayscale responded to the letter by reiterating its plans for an ETF.
“We are 100% committed to converting GBTC into an ETF, on which more details can be found in a blog we shared yesterday,” the company said in a statement.
<<<
>>> 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.”
<<<
>>> 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.
<<<
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.
<<<
>>> 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.
<<<
>>> 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.
<<<
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.
<<<
>>> 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.
<<<
>>> 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.”
<<<
$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.
<<<
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.
<<<
No thanks, Goldman Small Cap Research are scammers. Can see that with SURG.
$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...
<<<
>>> 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.
<<<
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.”
<<<
>>> 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.”
<<<
>>> 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.”
<<<
>>> 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.”
<<<
>>> 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.”
<<<
>>> 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
<<<
>>> 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.
<<<
>>> 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.”
<<<
>>> 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
<<<
Name | Symbol | % Assets |
---|---|---|
GMO internet Inc | 9449 | 5.13% |
Square Inc A | SQ | 4.61% |
Z Holdings Corp | 4689 | 4.18% |
Galaxy Digital Holdings Ltd | GLXY | 3.92% |
Intercontinental Exchange Inc | ICE | 3.44% |
Digital Garage Inc | 4819 | 3.39% |
Kakao Corp | 035720.KS | 3.38% |
DocuSign Inc | DOCU | 3.34% |
LINE Corp ADR | LN | 3.26% |
SBI Holdings Inc | 8473 | 3.23% |
Name | Symbol | % Assets |
---|---|---|
Overstock.com Inc | OSTK | 5.47% |
Square Inc A | SQ | 3.07% |
SBI Holdings Inc | 8473 | 2.20% |
DocuSign Inc | DOCU | 2.15% |
GMO internet Inc | 9449 | 2.14% |
PayPal Holdings Inc | PYPL | 1.91% |
SAP SE ADR | SAP.DE | 1.88% |
JD.com Inc ADR | JD | 1.86% |
NVIDIA Corp | NVDA | 1.84% |
OneConnect Financial Technology Co Ltd ADR | OCFT | 1.81% |
Name | Symbol | % Assets |
---|---|---|
Xilinx Inc | XLNX | 1.77% |
Alibaba Group Holding Ltd ADR | BABA | 1.68% |
Infosys Ltd ADR | INFY.BO | 1.67% |
Tata Consultancy Services Ltd | TCS.BO | 1.67% |
Micron Technology Inc | MU | 1.65% |
Baidu Inc ADR | BIDU | 1.64% |
JD.com Inc ADR | JD | 1.61% |
Cognizant Technology Solutions Corp A | CTSH | 1.60% |
Taiwan Semiconductor Manufacturing Co Ltd ADR | TSM.TW | 1.57% |
Texas Instruments Inc | TXN | 1.55% |
Volume | |
Day Range: | |
Bid Price | |
Ask Price | |
Last Trade Time: |