The blockchain technology is certainly bringing a revolution to the financial world. What some people don’t know, however, is that several other industries are bound to be affected as well. Gartner, a giant of the information technology area, has recently affirmed that the blockchain will change most industries within 10 years.
These remarks were made on a press release that talked about its newest research: 2019 Hype Cycle. The report tries to explain how the blockchain is changing business all over the world.
According to David Furlonger, the vice president of research at Gartner, 60% of all CIOs in the survey expected to adopt the technology despite not knowing what impact it will have. However, the lack of governance is still one of the main issues that are still preventing them from achieving the potential of the technology.
18% of all the banking-related companies plan to adopt the blockchain within the 12 next months or already have done it. Other 15% plan to do it within the next two years.
Furlonger affirmed that the financial industry is already adopting the technology at quite a quick pace. However, other non-financial industries are still needing more efforts before they can be able to use the technology properly as well.
To Gartner, the key to the success of the blockchain is tokenization and decentralization. Several industries could decentralize by adopting this kind of technology and see real business value from these decisions. The authors of the study believe that only a few industries do not benefit from the technology and that the market will grow 42% annually until 2024.
Swiss financial markets watchdog (FINMA) says it is ready for international cooperation as well as oversight on modalities to regulate the expected Facebook’s crypto project, Libra.
Speaking in an interview with a local media outlet Neue Zürcher Zeitung (NZZ), FINMA director Mark Branson explained that it was difficult for a solitary country to regulate a project of Libra’s magnitude and there was a need for the international community to cooperate.
Branson explained that while majority of regulators have described Libra as controversial, it is not the role of FINMA to expedite the fulfilment of the project. He said that the role of the watchdog is to explain as well as apply the laws and rules as they exist.
The director also stated that if his country was to achieve its objective of becoming a crucial financial hub in the world, it will have to cope with the various risks that emanate from working with big projects like Libra that attract international attention.
Branson stated that major finance projects like Libra are linked with reputational risks and is the case in the entire world. He however said that Switzerland should not settle for second-class financial hub in order to avoid such risks. According to the FINMA director, the decisive factor should be if the country has the right legal and regulations regime as well as supervision to deal with such players in the industry.
Although Libra has come under immense attack and pressure from different quarters who view it as a financial risk, Branson stated that FINMA was not under any pressure to use stringent rules on Libra. He explained that Libra has huge ambitions and that FINMA did not require any international pressure to realize this, pointing to the successful and large corporations behind the project.
According to CoinDesk over the last couple of weeks, lawmakers and policy makers from the US have travelled to Switzerland to discuss the Libra project and the expected regulation of the project. One of them is Maxine Waters who is the chair of the House Financial Services Committee who stated that there were doubts about the Libra project after holding talks with the Swiss regulators.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) has recently talked about cryptocurrencies. According to the organization, cryptocurrencies are useless because they are too unstable.
SWIFT representatives claimed that the value of Bitcoin and other cryptos goes down like a yoyo, which makes it untrustworthy. They believe that even if some crypto companies can make a more stable investment, it is because they offer a basket of currencies.
Bitcoin’s network has roughly 100,000 nodes.
SWIFT’s network has roughly 11,000 nodes (banks).
Bitcoin’s network is almost 10x larger than SWIFT.
The members of the group also affirmed that they do not feel threatened by cryptos, but they are fairly aware of their issues. For instance, they recognize that SWIFT payments can take a lot of time.
However, despite being aware of all these issues with efficiency, the group does not feel threatened by SWIFT. Even solutions such as Ripple’s xRapid, which basically can do the same that SWIFT does now, is not recognized as a threat, at least publicly.
Curiously, the main rival that was actually recognized by SWIFT is Libra, the new stablecoin created by Facebook. The new crypto-like currency will be used on WhatsApp, Facebook Messenger and Instagram and it will reach the 2.7 billion user base of Facebook if the project is approved in the whole world.
Despite these concerns, however, SWIFT believes that the impact of the new Libra initiative can be limited. Facebook is facing a lot of scrutiny around its plans and the regulators do not seem very eager to approve its new token, so this might mean that the market may not be so affected if some countries decide not to accept the new token.
Many regulators and heads of financial institutions have expressed concern over cryptocurrencies and their use. Crypto assets come with many challenges that place financial institutions in an awkward position as far as dealing with digital assets goes.
Thomas Jordan, the president of the Swiss National Bank, said that stablecoins pegged to fiat foreign currencies could place Switzerland’s monetary policy in jeopardy. The bank’s president made this statement at the University of Basel on the 5th of September.
The Volatility of Crypto Assets
Jordan said that cryptocurrencies have limited use as a payment method, units of account,or stores of value. Cryptocurrencies are volatile and prone to fluctuations, and this affects their ability to perform those functions according to Jordan.
In his description of cryptocurrencies, Jordan said that they are speculative investment instruments and they cannot be equated to good money. People who use financial systems describe a unit of value as good if it maintains a stable value over time, if it enables easy and efficient payments, and if it is accepted by many people across the world. If these lines of definition are applied to cryptocurrencies, one can see that it is unlikely that they will be used as money in Switzerland said Jordan.
Foreign Currency Pegged Stablecoins
Some stablecoins are pegged to fiat currencies such as the USD, and these may come into use in Switzerland. Jordan said that if these kinds of stablecoins made their way into Switzerland’s system, they could impair the country’s entire monetary policy.
A stablecoin backed by the Swiss franc would have no immediate effect on the country’s monetary policy but problems come from ones pegged on foreign currency. Swiss National Bank’s president said that giving the public access to a digital currency issued by the central bank could eventually cause a bank run, and this would then threaten the country’s financial systems.
A Hub for Crypto Development
Favorable regulations and an enabling environment have made Switzerland a welcoming environment for crypto-related businesses. Many crypto companies have set base in the country, and they are running a variety of blockchain and crypto projects.
Facebook placed the headquarters for its project Libra in Switzerland and authorities in the country have put the project under scrutiny. The country’s central bank is working closely with relevant authorities to ensure that Libra is compliant with the country’s regulations. The central bank’s chairman, Fritz Zurbruegg, said that it is difficult to provide a complete analysis of Libra because the documents about the project are vague.
The Financial Industry Regulatory Authority (FINRA) has recently decided to approve IOI Capital and Market’s application for membership. The new company is set to offer digital securities based on the Hyperledger Fabric technology.
Now that the company has the approval of the entity, it can issue its securities to clients. According to the co-founders Hamid Gayibov and Rashad Kurbanov, the plans are to launch the platform in September.
The company had to wait around 18 months in order to be approved. FINRA has a huge backlog and it is common to take over a year to approve companies, which can get in the way of their plans sometimes.
Fortunately, this gave the company time to prepare. Kurbanov affirmed that the company wanted to make sure that all investors would end up receiving all necessary protections from them, which is why the company has already implemented all the systems that will ensure its security.
Iownit, the technology that was developed by the group based on Hyperledger, will be used to manage the technological part of the securities and create a more efficient market, according to the company’s founders.
The name of the new platform, which sounds like “I own it”, was inspired by how the blockchain can be used to secure records. All named that had blockchain in it were rejected. According to Kurbanov, many people wanted names such as Block Security or something similar. He decided to hold on because he was against following trends that were so obvious.
Black Manta CapitalPartners, a financial company based in Luxembourg, has recently received the license from the German regulator BaFin (Federal Financial Supervisory Authority). With the license, the company will now be able to start offering Security Token Offering (STO).
The company first filed the order for the license nine months ago. Now, it is legally able to offer regulated blockchain-based brokerage services to its clients, which was the plan since the start.
According to the reports, the company is set to manage the tokens of the clients using the blockchain. The idea is to offer more access to smaller and medium companies via the STOs. This way, they will get an innovative new way to raise capital from investors.
Part of the reason why the company wanted to get the license from the regulator was in order to reach a more global audience. The Black Manta Capital Partners project is very ambitious and the company wants to set many international bases. Berlin will be one of these places, as well as Vienna and Malta.
There are also some plans to open up shop in Singapore, which would expose the company to Asian markets. Because of this, the company has already applied for a license in Singapore a well. At the moment, they are awaiting their approval.
According to the spokesman of the company, Black Manta wants to hold only great STOs, but they want to be the link between Europe and Asia, so having investments in both companies is a great start.
At an Anti-Money Laundering Conference in Las Vegas, the director of the Financial Crimes Enforcement Network (FinCEN) asked the casinos to comply with the agency’s guidelines in regards to suspicious convertible virtual currency (CVC) activity.
Convertible virtual currency is an unregulated digital currency that can be used as a substitute for real and legally recognized currency. It usually has measurable value in real money, but what makes it convertible lies in its ability to be interchangeable.
In his speech, he mentioned that the two areas where CVC and Casins intersect are mostly online casinos. Even physical casinos and card clubs are increasingly becoming more vulnerable. He reminded about the gap in reporting about the suspicious activities in these areas, saying:
“I encourage casinos to closely review both documents on FinCEN’s website to see how we are addressing this industry and its interactions with others in the financial sector. Casinos should be filing SARs when they encounter suspicious CVC activity and any cyber events that affect, facilitate, or conduct transactions. We know that casinos are targets for cyber and cyber-enabled criminal activity such as ransomware attacks and business e-mail compromise schemes.”
FinCEN was founded in 1990 with the goal of fighting money-related crime. The agency analyzes financial transaction information with the goal of combating terrorism financing, money laundering, and other financial crimes. Blanco has held the position since November 2017. In May 2019, the firm issued new guidance that contains its financial regulation policies concerning Decentralized Applications.
Last year BitcoinExchangeGuide had reported about Blanco explaining the agency’s stance on crypto. He was overall positive about cryptocurrencies and blockchain technology. He began his speech discussing how crypto can be used to optimize businesses and conduct more efficient international transactions. Although, even then, Blanco had claimed crypto can be used for criminal activities and that his agency’s goal was to facilitate a healthy, crime-free cryptocurrency ecosystem.
One of the main regulatory agencies of South Korea under the command of the Financial Services Commission (FSC), the Financial Intelligence Unit (FIU), has recently decided that the cryptocurrency exchanges of the country would start to be under its guidance. Before now, the exchanges were guided by the banks of the country.
This is part of an ongoing process. Last year, for instance, the entity required the banks to enforce a harsher regulation on these exchanges and to monitor them more.
According to the recent reports, Lee Tae-hoon, known as the director of the entity, affirmed that the local government is ready to start a new system in order to monitor these exchanges by using more international standards. This happens partly because of a new standard issued by the Financial Action Task Force, which is currently working in order to enforce more security in the crypto world.
Lee also affirmed that by being closer to the exchanges, the entity will be able to stop money laundering and shift the indirect regulation to a more directed regulation, which was always the goal of the agency. This way, the oversight over the market continues to grow.
It was also affirmed that, in order to follow the FATF’s guidance, the regulator would also force the exchanges to adhere to the same standards of Know Your Customer and Anti-Money Laundering regulation as more traditional financial companies do.
[Author Alert] The author’s opinions above are solely based on their own self-conducted research. Assume any and all authors are using, holding, trading and/or buying cryptoassets mentioned as a portion of his or her financial portfolio. Use information at your own risk, do you own research, never invest more than you are willing to lose.
The Islamic financial world has some pretty big differences from its Western counterpart. For instance, in the Islamic regions of the world, the markets have to follow the Shariah, known as the Islamic law. There is not a complete separation between Church and State and this affects the economy as well.
As you may have expected, this obviously affects the crypto market, too. It is because of this that an Islamic expert called Suhaida Mahpot recently talked about the upcoming emergence of the “halal coin”. A halal coin would be a cryptocurrency that is “halal”, meaning that it is accepted by the Shariah standards.
One of the principles that a halal coin would need is to not be used in speculation, for instance. This is partly what makes the situation harder to define, as cryptos are often involved in speculation.
Mahpot, who is the CEO of Amanie Advisors, a Shariah advisory company, affirmed that it is only a matter of time and awareness before the first halal coin appears in the Islamic market. According to him, some investors are very skeptic of the Islamic market because of its own complex rules. This causes uncertainty and some investors simply decide that it will be profitable to invest elsewhere.
This is obviously bad for the countries, as they lose the change of getting investors that could help. Mahpot, which works in the industry for over 11 years, affirmed that Malaysia has a big potential for growth in the future.
Situation With Crypto Is Similar To Other Investments
According to Mahpot, the situation of the crypto market is very similar to two kinds of investments that were introduced in Malaysia before: Amanah Saham Bumiputera (ASB) and Amanah Saham Nasional (ASN).
He explained that the perception of these investments changed over time. They were created during the 90s and they are now considered “harus”, which means that they neither encouraged nor prohibited by the Shariah. Before there was consensus, there were plenty of doubts in the industry whether the investments were harus or “haram” (against the Shariah).
Now, the financial institutions of Muslim countries need more education about how cryptos work. Only this way they will be able to at least declare that they are harus. Without this, the uncertainty will be too big to convince investors to give the investment a shot.
Currency, Saudi Arabia and the United Arab Emirates are starting to work on the creation of a new cryptocurrency. Also, there are several companies which claim that they have created a fully halal token such as ADAB Solutions, which created the so-called First Islamic Crypto Exchange. So far, nobody actually accepted these tokens as halal.
Day 2 of Libra hearing – House Financial Serices Committee unanimously against Libra launch
Research explores potential catalyst for unprecedented Bitcoin demand
No, India has NOT banned Bitcoin just yet. Supreme court further delays hearing
Will BitMEX get rekt? CFTC probes whether exchange is illegally servicing American traders
“Unstoppable Force” Bitcoin Shines Through Like a Beacon of Hope At Grim Libra Hearing
We covered day 1 of the two-day Libra hearing at the Senate Banking Committee in last week’s digest and besides lack of trust in Facebook, the refrain for the day, ad nauseam, was money laundering and financing of terrorist activities. It was pretty prosaic scare-mongering without too much substance. Calibra’s CEO David Marcus being largely unforthcoming certainly didn’t help matters.
On day 2 of the hearing in front of the House Financial Services Committee (FSC), it wasn’t just Marcus who testified but also a panel of blockchain experts, presumably to better inform the committee to pose more pertinent questions.
* FSC Chairwoman Maxine Waters set the tone for the day’s proceedings by highlighting the systemic risk posed by government currencies backed Libra tokens and recommending that Facebook walk back on Libra plans, “Facebook’s plan to back Libra with government currencies and securities by holding them in the so-called Libra reserve to be governed by Facebook and its partners would shift government assets on such a massive scale without proper oversight, threatening to concentrate government influence in the hands of few elites.”
* North Carolina Congressman and FSC ranking member Patrick McHenry eloquently stressed the importance of embracing innovation, while stopping short of endorsing Facebook’s inclination and competency to lead innovation, “Whether Facebook is involved or not, digital currencies are here and blockchain is real. The world that the author of Bitcoin’s whitepaper Satoshi Nakamoto envisioned and others are building is an unstoppable force. Governments cannot stop this innovation.”
* McHenry also asked a very fundamental question which could have important implications on how Libra is regulated, “What is a Libra? Is it a security, a commodity..?” To which Marcus responded by characterizing Libra as a payment tool similar to Venmo and PayPal, “Libra would be a reserve-backed digital currency. We don’t believe it is a security but based on current US laws, it could be a commodity but we see it as a payment tool.”
* Asked whether the decision to domicile the project in Switzerland was to evade US regulations, Marcus said,
“The decision to locate in Switzerland was not an attempt to evade regulation or responsibility in the US. We thought a global, digitally native currency used by people around the world would benefit from being headquartered in an international place that is the home to many international organizations.”
* Georgia Congressman David Scott perceptively highlighted the contradiction of Facebook’s express mission statement to bank the unbanked and unequivocal regulatory compliance, pointing out that the reason most people are unbanked is because they do not have government identification that is required to open a bank account and registering for Facebook’s Calibra wallet would require fulfilling the same criteria.
* On the subject of censorship, Wisconsin Congressman Sean Duffy asked Marcus who could use Calibra and Libra, to which Marcus responded, “Anyone that can open an account, goes through KYC, in countries where we can operate.” Duffy then held up a $20 bill to illustrate his point, “This $20 bill doesn’t discriminate on anything you can be a murderer say horrible things, you can say great things. This $20 bill can be used by every single person that possesses it. With regard to your network, can Milos Yianopolous and Louis Farrakhan use Libra?”
* Rep. Alexandria Ocasio-Cortez brought up the important issue of antitrust,
“Facebook is a publishing platform, an advertising network, a surveillance corporation, a content distributor and now it wants to establish a currency and act through its wallet as at minimum a payment processor. Why should these activities be consolidated under one corporation?”
* Facebook’s recent $5 billion FTC fine for breach of privacy was brought up by Rep. Madelaine Dean,
“Could you be specific as to the wrong-doing that generated a $5 billion fine? It’s tough to trust when the collection, storage and misuse of the information of your customers generated a $5 billion fine.”
* The quote of the day came from Coinshares’ Meltem Demirors’ prepared testimony, which deftly delineated the fundamental differences between Bitcoin and Libra,
“Bitcoin is three things – it’s a technology, a network and a cryptocurrency. Bitcoin’s network is not regulated, is permissionless and decentralized. Like the Internet, Bitcoin could be considered a public good. However the companies providing services on top of the Bitcoin network are centralized and regulated. We’re now seeing countless imitators, which borrow some features of but are decidedly not cryptocurrencies. Libra is not a cryptocurrency. It cannot and should not be compared to Bitcoin.”
The hearing was severely hampered by Marcus’s taciturn disposition, obviously under instructions not to commit too strongly on any future plans on regulatory compliance or developmental roadmap. However, the hearing served to spotlight the brilliance of Bitcoin and it seems now that US lawmakers are getting their head around to the idea that Bitcoin is inevitable, whether they like it or not.
Congress doesn’t trust or believe in Libra. What about the public? Market intelligence platform CivicScience carried out a survey of 1799 US adults, which was published on Monday, and found that only 5% of responders had any interest in Libra.
In another curious development, Despite Facebook’s claims that their 27 partners had fully committed to the project, Visa CEO, Alfred Kelly played down their involvement on Wednesday, stating that the agreement with Facebook was non-binding, “So we have signed a nonbinding letter of intent to join Libra. We’re one of – I think it is 27 companies that have expressed that interest. So, no one has yet officially joined.”
Retail Demand For Bitcoin Sees Exponential Growth In Hyperinflationary Economies
Compared to late 2017 levels, retail interest in Bitcoin in leading economies has been rather modest despite a fourfold price appreciation this year. That is not to say there isn’t a great deal of retail interest, it’s just not coming from more stable economies.
Research findings of Digital Assets Data, a Fintech data provider, have revealed that although Bitcoin remains a speculative asset in relatively stable economies, retail demand for Bitcoin in hyperinflationary economies keeps soaring to new highs as the currency is being used as a legitimate store of value in these countries, a mantle traditionally held by gold.
This was happening in 2018 even as Bitcoin’s price kept tumbling, according to Mike Alfred, co-founder of Digital Assets Data,
“We found that in developing countries and places where monetary policy and banks are less stable, bitcoin trading volume continued to rise even as the bitcoin price was falling.”
Although leading economies like the US, UK and the EU manage their economies better, that’s not saying much. As evidenced a decade ago, continually stimulating economic ‘growth’ by cutting lending rates comes at the ultimate price of a recession.
In the US, the current federal funds rate – interest banks charge each other to lend money – is 2.25-2.5%. Under pressure from the US president, the Federal Reserve is expected to further lower this rate. This negatively impacts savings and leads to systemic overlending.
Another key factor which portends imminent recession is the yield curve inversion – which hasn’t occurred since 2007 and is considered a bad omen for the economy. Yield curve plots yields on government bonds from shortest maturity to highest. In a healthy market environment, long-term bonds have higher yields than short-term bonds.
When this inverts and short-term bonds have higher yield, it indicates that people are uncertain that growth is here to stay. Yield curve inversion is a major reason for pessimism from economists despite the Dow average scaling unprecedented highs this month.
It stands to reason that in the event of a recession, as widely expected, we may come to see Bitcoin’s ascendency to SoV status in larger economies.
Indian Government Panel Recommends Ban On Bitcoin Because It’s A ‘private’ Cryptocurrency
It’s the year 2019 and the Bitcoin network has been around for ten years. The economic affairs secretary of the sixth largest economy, Subhash Chandra Garg, in the world has proposed a ban on Bitcoin because he thinks it’s a private cryptocurrency. Someone needs to go back to the ISI in Delhi to get up to speed on current economic affairs.
Garg leads the panel which was given a remit by the Indian government to recommend a regulatory framework for cryptocurrencies so it’s hardly surprising that the panel has recommended that the Indian government ban Bitcoin.
There have been reports all week that India had already banned or is on the brink of banning Bitcoin after Tim Draper criticized Indian government for banning Bitcoin.
People behaving badly! India’s government banned Bitcoin, a currency providing great hope for prosperity in a country that desperately needs it. Shame on India leadership. Pathetic and corrupt. #India#bitcoin
An official Bitcoin ban hasn’t happened just yet. It requires the proposed bill to be introduced by the Finance Ministry before both legislative assemblies, which may not happen until December’s parliamentary session, and pass by a two-third majority in both houses. Let’s hope that not all lawmakers in India are as ignorant as Garg.
While endorsing distributed ledger technologies as a necessary innovation in delivering financial services, the panel’s proposal demonizes private cryptocurrencies, including Bitcoin, and urges the RBI to work towards issuing a digital rupee. The panel’s recommendations can be read in full here.
Last year, Indian government introduced legislation prohibiting banking institutions from providing financial services to cryptocurrency exchanges. There are five petitions appealing this banking restriction and the proposed draft bill to ban cryptocurrencies, which are due for hearing in India’s Supreme Court. The case was supposed to be heard this week but has been tentatively postponed to August 2.
Wrath of Roubini – CFTC opens overdue investigation of margin trading platform BitMEX
BitMEX CEO Arthur Hayes thought it would be a cool plug to have a debate with Keynesian economist and Bitcoin critic, Nouriel Roubini, at the Asia Blockchain Summit earlier this month in Taiwan. It seems he got a lot more than he bargained for out of the encounter.
Incensed at BitMEX for releasing heavily edited footage of the debate, Roubini has since been on a crusade against the exchange. On July 16, Roubini published an essay titled “The Great Crypto Heist”, in which he criticized the compliance policies of BitMEX and called on authorities to intervene.
Three days later, on July 19th, it was reported that CFTC was opening an investigation against BitMEX to find whether it had breached US laws by allowing US customers to trade on its platform.
There have been frequent rumors about all manner of malpractices by BitMEX. BitMEX even openly trades against its own users with its so-called trading desk. Most traders have tended to normalize them as par for the course in unregulated markets.
Although HDR Global Trading Limited, the parent company which operates BitMEX is registered in Seychelles, there are fears among traders now that a CFTC probe could lead to further inquest against other allegations against the exchange.
Blockchain data analytics firm, TokenAnalyst revealed on Wednesday that traders have duly withdrawn $175 million worth of Bitcoin from BitMEX between Friday and Tuesday.
Despite sinking as low as 9049 during the week, Bitcoin closed last week strongly in green by rallying towards the end of the week to close at 10600, thought to have been spurred by Bakkt launching the platform’s testing phase on July 22.
There are a few things to look for in the daily chart. A falling wedge pattern is beginning to take shape, which would be confirmed by a strong daily close above 10378 with an attendant increase in volume.
Daily RSI is holding firm above the perceived bull cycle low of 40, but it’s something to keep an eye on. A breakdown below this level has historically indicated a shift in market sentiment. Looking at the stochastic oscillator on daily, %K is shaping up to converge and crossover bullishly at the lower band.
In the monthly chart, there are two things to note. First, it illustrates the importance of RSI holding above 40 as an indicator of the bull market. Bitcoin’s monthly RSI has never dipped below the level.
Secondly, July seems likely to be the first close in red in 6 months, after 5 green closes. The last time this occurred was September 2017, which propelled Bitcoin to its all-time high within 3 months.
Leading altcoins posted modest gains against Bitcoin this week, with Ethereum clawing back slightly to 0.022 and Ripple’s XRP up to 3200 sats. Bitcoin’s dominance is at 64.5%, down 4% from last week.