Georgia’s Apex Bank Considers CBDC, Calls For Partnerships

Central bank digital currencies (CBDCs) have become the rave of the moment following the global outcry for a more efficient and inclusive financial system.

With the economic impact of the pandemic, the need for a digital form of value transmission has never been higher than now. National banks are rapidly rolling out CBDC programs to address this growing demand.

The latest in a long list of apex banks is the National Bank of Georgia.

Digital Gel On The Horizon

In a release posted on its website, the National Bank of Georgia (NBG) said it would be commencing a central bank digital currency (CBDC) program joining a list of national banks in the process.

According to the apex bank, this enhances the domestic payment system efficiencies and promotes financial inclusion for the underbanked in the country. To help it on this journey, the NBG said it would be accepting participants from the private sector.

In what is termed as a public-private partnership (PPP), it said private technology firms, fintech companies, and other interested financial institutions are welcome to aid in creating a “digital GEL,” named after the country’s official currency, the Georgian Lari.

However, the apex bank warns that despite its crypto efforts, its first mandate to maintain price and financial stability in Georgia remains. The official announcement says,

“CBDC holds the promise to unlock the tremendous value of innovative business models for the benefit of society. The introduction of CBDC could increase financial intermediation efficiency, help introduce new financial technologies, facilitate financial inclusion, and reach previously unbanked populations. It could also increase monetary policy efficiency by improving monetary policy’s monetary transmission mechanism and welfare effects for the society.”

The former Soviet region financial regulator said that it would be adopting the Bank for International Settlements’ (BIS) 2020 guiding principles in creating a Digital GEL wherein a set of rules for a successful CBDC program was listed.

Also, it noted that there were inherent risks attributed to CBDCs given the fact that it is a completely new and potentially disruptive technology. To ensure sound risk management, it would be creating a regulatory sandbox for potential partners to test the CBDC deployment in a controlled environment. This will see it use its Open Regulatory Framework tools to measure the economic impact of a possible CBDC use.

Meanwhile, no launch date has been chosen, and the project is still in the works.

Georgia’s Impressive Crypto Resume

Given its small population size of just 3.7 million people scattered across its Mountain Villages, Georgia is one of the smaller economies looking to join the CBDC frenzy.

But this does not make it negligible, given that the Georgian state has been active in the crypto space as far back as 2017.

In a move that saw it become the first national government to allow land authentication with blockchain, the Georgian state signed an agreement with BitFury to use the Bitcoin network to record land titles.

It also became the powerhouse of European crypto mining after hosting the world’s third-largest crypto mining operation. It also went further and concluded a deal with Cardano’s parent company IOHK in 2019 to aid in public sector administration, especially in education.

These decisive steps have since brought the Georgian state into the global blockchain community. They have since made former Prime Minister Mamuka Bakhtadze remarked that blockchain could do what the steam engine did for the first industrial revolution in an interview with Cointelegraph. According to Bakhtadze, blockchain could become the catalyst for the fourth industrial revolution.

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Author: Jimmy Aki

NFTs are the Next Frontier of Digital Currencies says Bitcoiner Chamath Palihapitiya

NFTs are the Next Frontier of Digital Currencies says Bitcoiner Chamath Palihapitiya

He’s currently “building a fairly sizable portfolio” of non-fungible tokens (NFTs). The Social Capital CEO says while Bitcoin will displace gold, it will be the stablecoins that will replace the US dollar.

“I don’t even know what that is,” was Chamath Palihapitiya’s reply to DeFi last summer. But now things have changed, so much so that the CEO of Social capital is “building a fairly sizable portfolio” of non-fungible tokens (NFTs).

An early executive at Facebook, Palihapitiya, shared in his interview with Bloomberg that he is buying digital arts, virtual trading cards, which “may sound crazy to some. But I do think that that’s the next frontier of digital currency and digital assets.”

Soon, they will be publishing their holdings. Although he’s not ready to share the details yet, Palihapitiya said he is “very excited.”

As for Bitcoin, he is still as bullish on the leading digital currency as ever, which he thinks is “very important because it just shows the fragility of the traditional financial infrastructure.”

According to him, while Bitcoin will replace gold and become a de-facto reserve currency, it won’t be BTC that would displace the US dollar rather, it will be a stablecoin. Palihapitiya explained,

“There are companies around the world that are replacing one fixed U.S. dollar with one digital token of a U.S. dollar. And by simply making that small abstraction they’re able to completely build financial rails that didn’t exist.”

“There is a revolution happening,” he said, which might not be felt in the United States because its financial services infrastructure is robust. But when you look at the developing world and any market where there is any form of currency manipulation or currency instability, stablecoins are “the future,” he explained.

Here, “Bitcoin is a canary in the coal mine for a completely virtual largely anonymous financial reality,” said Palihapitiya.

You can see the full interview here:

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Author: AnTy

Standard Chartered Bank CEO: Digital Currencies Will ‘Inevitably’ Become Mainstream

Standard Chartered CEO, Bill Winters, has said that digital currencies will soon become mainstream as more people adopt this new tech. Winters shared his sentiments during the Singapore FinTech Festival, where he signaled that the bank would soon be announcing some exciting developments in this field.

Speaking at the virtual conference, the Standard Chartered Bank CEO touched on matters CBDC and private stablecoins. Winters’s approach on both digital asset classes as relaxed as opposed to recent takes by monetary authorities to phase out private stablecoins like Tether (USDt).

According to the initial reporting by CNBC, Winters particularly highlighted that,

“I think there is absolutely a role for central bank digital currencies as well as non-central bank-sponsored digital currencies.”

Giving an example of the voluntary carbon market, Winters noted that the concept of having crypto assets to represent an underlying is more intriguing to him,

“The exciting development for me is to have currencies that don’t match a currency in and of itself but are intended to capture either a superset of a subset.”

Despite being bullish on the fundamentals, the CEO was also keen to highlight the existing gap in merging the world of traditional finance and crypto. Per Winter’s view, the two industries can only merge if organizations embrace critical fundamental cultural shifts. He also hinted at they may be developing their own digital currency, stating, “I think there is a whole new world that’s opening up for us.”

Standard Chartered & UnionBank $187 Million Tokenized Bond

Meanwhile, the bank is still making strides through blockchain tech itself; an update yesterday by both Standard Chartered and UnionBank revealed that the two completed a PoC bond issuance worth 9 billion Philippines pesos ($187 million). This bond targeted retail investors and was issued within a blockchain ecosystem to make it more accessible.

Standard Chartered head of capital markets ASEAN, Aaron Gwak, said that this innovation changes the bonds market dynamics, where institutional investors dominate the game.

“The bond infrastructure around the world has been designed primarily for institutional investors and involves several intermediaries to buy and subsequently trade bonds, making it less accessible to retail investors.”

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Author: Edwin Munyui

PayPal CEO: Entire World is Going to be ‘Digital First’ with ‘Consumers Abandoning Cash’

PayPal CEO Dan Schulman said digital currencies are set to go mainstream as more merchants take a “digital first” approach to payments, which means cash is on the way out.

“The entire world is going to come into digital first,” Schulman said at the Web Summit conference on Wednesday. Merchants are moving to accept payments via smartphones and QR codes, and more customers have started to use digital wallets, which “are natural complements to digital currencies.” He added,

“So, over the long run, I’m very bullish on digital currencies of all kinds.”

These remarks came after the popular payment company announced support for cryptos just last month. PayPal is also planning to use digital currencies to shop at 26 million merchants on its network next year.

According to a recent survey by Mizuho, one-fifth of PayPal users have already traded Bitcoin on the app.

Bitcoin’s ongoing exuberance boosts user engagement, with BTC traders reporting over three times higher usage frequency than non-BTC traders. However, converting these non-BTC traders into crypto users is a challenge because only 8% say they plan to trade Bitcoin in the future on the PayPal app.

Schulman also sees China’s largest mobile-payment company Ant Financial as its biggest competitor who had “tremendous success” in the country with a digital wallet with “all elements of financial services, all elements of shopping,” Shulman said.

Drop the Cash

During the conference, Schuman said PayPal’s most significant opportunity is to move toward digital payments and away from cash. The trend that has already been happening is “accelerating” in the pandemic, and “you’re seeing an explosion in digital payments,” he said.

The USD Index has been on a decline ever since March, currently at a level not seen since April 2018 as “Treasury Secretary Steven Mnuchin, and Federal Reserve Chair Jerome Powell are once again on Capitol Hill begging Congress for some money.”

Meanwhile, Bitcoin has made a new all-time high, currently trading above $19,000.

According to analyst Mati Greenspan, currently, we are having a very similar setup playing out that we saw just before BTC broke through $14,000. He noted,

“The pattern resulted in an extremely rare upward breakout of an upward facing channel, despite a coinciding psychological barrier.”

While the natural thing for the market to do is have a pullback and test the lows before going for ATH, we are not in a “normal market right now,” and “the question isn’t really when we break $20,000 so much as how it will break,” said Greenspan.

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Author: AnTy

CBDC’s Offer Better Privacy Propositions Than Big Tech Digital Currencies: New York Fed

  • Fed research concludes that government-issued digital currencies offer better user data privacy than private companies’ digital assets.
  • However, CBDCs are not the answer to all problems relating to the privacy of payment data.

The research paper titled, “Monetizing Privacy,” by Rodney Garratt Professor of Economics at the University of California, Santa Barbara (UCSB) and Michael Lee, an economist at Federal Reserve Banks – Federal Reserve Bank of New York, states that central bank digital currency (CBDCs) will outperform the private company-based stablecoins such as Libra in protecting the privacy of user payment transaction data.

According to the research, the big tech firms are susceptible to selling users’ payment data to firms searching for an extra buck to boost their profits. It further states that a digital currency offered by these big tech firms such as Libra, led by Facebook and VISA’s digital currency, could lead to troubling cases of data privacy.

A follow-up post on the NY Fed blog by Lee and Garratt states some of these companies could become monopolies as more users join their platform and give them their data. Transactions using digital currencies will enable big tech firms with a competitive advantage to stack up on transaction data, further killing competition across the market. The post reads,

“This gap in product quality enables the [monopoly] firm to set discriminatory prices between payment types, taking into account the profit-maximizing quantity of data it would like to extract from consumers.”

“As a consequence, consumers obtain only a small share of the surplus generated from their data.”

The paper further states that public digital cash such as Bitcoin (BTC) could mitigate data monopoly by big tech firms. However, volatility in prices, fluctuating blockchain fees, and the rising costs of energy by BTC mining raise adoption issues.

A case for central bank digital currencies

The financial payment system is turning digital as the world battles with social distancing due to the global Corona Virus pandemic. With private big tech–owned digital currencies failing in offering users privacy on their transaction data, the research paper focused on government-issued CBDCs as the solution to privacy concerns.

The paper further states that a CBDC could also function as a measure against big tech data monopolies. CBDCs, however, not only offer increased privacy to users but also reduces the overall cost of fees and are environmentally friendly. The post reads,

“Nevertheless, the possibility that a privacy-preserving digital payment method may improve consumer welfare represents a relevant consideration for central banks to take into account.”

Regulators and authorities are urged to create policies around the privacy-enabled digital cash to ensure users are protected. Moreover, Garratt and Lee further claim that the privacy digital currency’s design should ensure that “the ability for consumers to purchase products without revealing their private data to vendors” is factored during development.

‘CBDCs not the answer to all privacy problems’

Despite the benefits CBDCs offer over big tech-built digital currencies, the paper notes that they also pose their own challenges in transactions. A “reliable and robust system” must be built to ensure that the privacy-preserving platform is secure at all times.

Notwithstanding, looking at “the commitment to privacy, regulators and lawmakers would have to rethink how to adapt current anti-money laundering practices.” Finally, a privacy-enabled CBDC could also affect the banking industry and financial systems, the report noted.

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Author: Lujan Odera

Alibaba Founder Jack Ma: Digital Currencies are the Future of Financial System

Alibaba Group founder Jack Ma talked about digital currencies, potentially playing an important role in building the financial system of the future. Ma at the Bund Summit in Shanghai said,

“Digital currency could create value, and we should think about how to establish a new type of financial system through digital currency.”

He said the future vision of a financial system in the next 30 years might have digital currencies at its “very important core.”

“Digital currency may redefine currency.”

Ma criticized global financial regulation during the event. According to him, they stifle innovation and, as such, urged for a system that focuses on development.

“After the Asian financial crisis, the risk control highlighted in the Basel Accords has been” regulators’ priority, he said adding that now the world “only focuses on risk control, not on development, and rarely do they consider opportunities for young people and developing countries.”

Comparing the Basel Accords to a club for the elderly, Ma said they are used to solving financial systems operating for decades. But China is still a “youth” and needs more innovation, he said.

Ma’s speech came just hours after Ant Group set the price of its Shanghai listing. The IPO, which is also planned to be in Hong Kong, is one of the most anticipated and on course to become the “biggest in history,” surpassing Saudi Aramco’s record $29 billion share sale last year by raising $34.1 Billion at aa valuation of $310 Billion.

Ant Group Biggest IPO Record - CNN
Source: CNN

Retired from all his corporate roles, Ma, who is still the face of Alibaba and Ant, said the IPO’s share price had been decided on Friday but didn’t disclose the figure.

At the event, which hundreds of bankers and regulators attended, Ma said the Ant Group offering was a “miracle” because, for the first time, a big tech company set prices outside New York.

“We didn’t dare to think about it five years ago, or even three years ago. But the miracle just happened.”

Ma said China’s financial system is dominated by big state banks and needs an inclusive, sustainable, and green system that uses new technologies like big data, cloud computing, and blockchain.

“Innovation always comes with a risk, there will be no risk-free innovation … the biggest risk is that you try to minimize the risk to zero.”

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Author: AnTy

Canada’s Central Bank Seeks an Economist to Monitor Digital Currencies and FinTech

The Bank of Canada is hiring an economist for “Digital Currencies and Financial Technologies.”

As per the official page, Canada’s central bank is currently engaged in a “large-scale research program to analyze the risks and opportunities” of the new developments in the fintech sector.

The idea is to ride the wave of innovation in fintech that is transforming the landscape of currency, payments systems, and financial intermediation. “This is a program of major social significance and will require us to break new ground,” says the bank.

The key part of this program is the monitoring framework for money and payments and the “contingency planning” for a Central Bank Digital Currency (CBDC).

Earlier this week, Deputy Governor Tim Lane said the COVID-19 pandemic is accelerating public use of online services, which means the central bank must move quickly to research how a CBDC works.

CBDC “looking a lot more urgent”

Under this position, the economist will be monitoring and analyzing developments in electronic money and payments, including CBDCs, cryptocurrencies, stablecoins, crypto exchanges, and others, develop tools for analysis, develop a policy to help maintain Canadian monetary sovereignty, and work on the “the potential development of a CBDC.”

The job position is for a 3 year time period with the possibility of extension and permanence that requires the knowledge of Bitcoin, Ethereum, and other networks and have experience in handling and analyzing public blockchain data besides the usual master’s degree in the relevant field.

With the closing date of October 25, the security level required for the position of “FSS Analyst, CBDC” is “Secret.” Currently, there is no specific time frame for the launch of a CBDC, Lane said,

“The main point, I think, is this is all looking a lot more urgent because of the speed with which technology is evolving.”

On Wednesday, during the panel discussion on the future of money, Lane also said that they are talking to several companies, including tech companies, banks, and financial institutions that are developing products or advising on the related things, on issuing a CBDC.

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Author: AnTy

CBDCs Are A Threat to The US Dollar’s Reign As The World’s Reserve Currency: Deutsche Bank

A new report by Deutsche Bank has acknowledged the potential of Central Bank Digital Currencies (CBDCs) to disrupt the US dollar’s dominance as the most held reserve currency. This is not the first research that highlights such a possibility; previous reports by Bloomberg and German think tank, DGEN, have speculated similar situations as more Central Banks evaluate the feasibility of a CBDC.

The report, which is dubbed ‘Central Bank Digital Currencies; Money reinvented,’ was released in September and particularly highlighted that CBDCs could ‘erode the dollar’s primacy in the global financial market.’ Currently, the U.S dollar is involved in over 90% of global transactions and has been the world’s reserve currency since abolishing the gold standard.

This dominance is, however, at a threat given a sudden spike in CBDC interest and their value proposition to individual jurisdictions when it comes to oversight and bilateral trade. China, which appears to have taken the lead, is already piloting its digital yuan (e-RMB) in several cities, including Hong Kong and Beijing; the initiative began back in 2014 but was accelerated previously following Facebook’s intentions to launch Libra.

Though still at its early stages, the ongoing global tech wars seem to be in line with the digital yuans’ purpose as China looks to challenge the U.S economic supremacy. Deutsche Bank’s Chief Investment strategist, Gerit Heinz, told Coindesk that,

“The e-RMB and the Belt and Road Initiative would give China a chance to increase the importance of that currency overall … That could also imply some changes in the global reserve system.”

The report goes on to mention that around 80% of the world’s central banks have already begun active research into potential CBDCs. However, progress has been different for some countries already in the development and implementation phases. That said, Europe is also considering a digital Euro, although its progress is far behind compared to China. Heinz was keen to point out that societal underpinnings such as a democratic approach should have placed the continent ahead,

“In Europe, I would expect a lot of discussions about this. The euro, introduced as a currency decades ago, has triggered a lot of discussions.

So CBDC in a euro system of different countries would, of course, imply much more discussion than in a bigger, more centralized country like China.”

Being a relatively new concept, this report by Deutsche bank also highlighted that the current verifiable evidence is not sufficient enough to make conclusive speculations. Nonetheless, the bank noted it would follow CBDC developments more actively to provide informed updates on the impact of this upcoming class of legal tenders.

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Author: Edwin Munyui

Bitcoin’s Key Psychological Level Showing ‘Strength’ But Price Could Still Drop Another 30%

The weekend didn’t bring any reprieve for digital currencies, rather resulted in bitcoin falling to $9,850 briefly before going back above the $10,000 level.

The good thing for bitcoin is that the key psychological level of $10k, although broken a few times, has managed to hold the fort.

While bitcoin is keeping above $10,000 for the most part, for now, Ether, which has been leading this rally, lost nearly 35% of its value last week.

Ether’s loss resulted in the DeFi’s TVL declining by $2 billion, while a whopping $78 billion were wiped out from the overall crypto market. Su Zhu, CEO of Three Arrows Capital said,

“Eth 320 as a bottom made sense and played out; btc i am actually flabbergasted by the strength shown at 10k and prob means 100k is more likely than 5k at this stage.”

At the time of writing, BTC/USD has been trading around $10,150, with ‘real’ volume still low at just $1.2 billion. Meanwhile, Tether is currently recording over 3x of bitcoin’s volume.

In late July, the flagship cryptocurrency broke the $9,000 – $10,000 range in which bitcoin traded between May and July to form a new higher range of $11,000 to $12,000.

Bitcoin / US Dollar on Bitstamp
Source: TradingView — Bitcoin YTD performance (+38%)

The current situation, however, doesn’t bring any confidence to bulls, as per analyst DonAlt, who has been bearish on BTC for quite some time.

He is “full-blown beartard” on bitcoin until the digital asset has a significant daily close above $11,200. Such an upward move would invalidate his bearish stance, but if not, he is looking for $8,000 or even $6,000 – $7,000.

Already, the last week which saw the digital currency briefly going to $12,000, bitcoin has fallen 17.5%. But a move to about $7,000 would put the pullback into the 40% drop category, which will be in-line with the previous pullback of 30%-40% recorded during the last bull cycle to the top.

As such, on-chain analyst Willy Woo says while “Local on-chain switching bullish (looking at the next few weeks out),” he is “not calling this has bottomed,” although it may have.

However, he also says, “it’s not a bad time to buy back in.”

A lot of Bitcoin’s next move depends on the stock market. Last week, after hitting a new all-time high, they experienced a correction, and a sharp reversal in tech stocks saw bitcoin responding as well.

However, unlike the crypto market, the stock market will remain closed on the occasion of Labor Day on Monday. Although stocks reversed some of their losses on Friday, markets are expected to still be choppy after investors return from the long weekend, which means bitcoin still remains in danger.

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Author: AnTy

Russia Missing the ‘Unique’ Opportunity to Invest in BTC as it Focuses on Hoarding Gold

While on one side, Russia is regulating digital currencies, on the other hand, Roskomnadzor, a federal executive body responsible for overseeing the media, is banning the crypto, fiat, and e-currencies exchange monitoring website Bestchange.

While the site is blocked by RKN, Bestchange advises people to use the blocking bypass tools like VPN, mirror site, and extensions to access the site. Other crypto sites affected include ProstocCoin and CryptoRussia.

The step has been taken by RKN because these sites promote the use of other currencies besides the ruble in the country. This is because the money can only be issued by the Central Bank of the Russian Federation, and the introduction of other funds in the Russian Federation is not allowed, states the court document.

The court found these websites guilty of allowing the use of Bitcoin to purchase goods and services which violate Federal Laws. Besides the preventing financing of terrorist activities with Bitcoin, it also states the decentralized nature of bitcoin’s issuance eliminates the “possibility of its regulation.”

Amidst this anti-cryptocurrency move, economist Vladislav Ginko wrote that the country is missing the “unique” chance of stacking bitcoin as Russia focuses on gold hoarding with “the looming severe sanctions from the United States may provoke a cascade selling out of Russia’s debt.”

Ginkgo is a former vice-rector of Moscow-based Jewish University, currently an analyst and lecturer at Russia’s leading state think-tank, Presidential Academy.

He points out how some of Russia’s elite believe new sanctions are almost inevitable while the share of foreign investors plummeted from 34.9% in March this year to 29.8%. Russia’s central bank has also slashed the key rate to 4.25%.

In response, Russia’s state has become the biggest buyer of domestic produced gold. In August, Russia’s banking system accumulated 97.7 tons of gold, up 21% from one month earlier.

However, according to Ginko, the banks should invest in bitcoin instead, as some Russian elites also believe. Some of them reportedly bought BTC in January 2019 when BTC was around $3,500. He said,

“The current price of Bitcoin is not $500,000 yet, but $11,700, which means a 330% return for less than two years. Russia may miss an opportunity to catch a lucky ‘Bitcoin ticket’ to the future, and instead of it falls into the gold trap.”

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Author: AnTy