BoE Economist; Speculation in Crypto Markets Reduces Bitcoin’s Transactional Value

A senior Economist at U.K’s central bank has published a working paper on how speculation affects the value of digital currencies. Peter Zimmerman, a BoE economist, highlighted that crypto coin users are mostly speculative making it hard to realize the transactional value of digital assets like Bitcoin.

According to the paper, a speculative approach to the crypto market has seen more people acquire digital currencies for hoarding purposes. This traffic has however become overwhelming for some blockchain platforms that host the cryptocurrencies. Zimmerman argues in his paper that the decentralized networks become less efficient in process execution owing to the high number of participants.

It therefore beats logic for users to opt for a slower network when they need it most; if the assumption is crypto utility is based on transactions. The paper further emphasized that congesting the blockchain networks creates a competition for space eventually wiping out the monetary value of cryptocurrencies;

“Limited settlement space creates competition between users of the currency, so speculative activity can crowd out monetary usage.”

The ‘Digital Gold’ PoV on Bitcoin

Zimmerman also observed that some Bitcoin and other token HODLers are now viewing the assets as ‘digital gold’. As mentioned earlier, the majority of BTC investors are looking to make a kill with this ‘investment product’. The paper explains this in basic household economics;

“When cryptocurrency is more valuable, households become reluctant to spend it on fees. Instead, they prefer to hoard it and endure slower settlement times. I call this a ‘digital gold’ effect: when cryptocurrency is more valuable, agents view it as an asset to store, rather than money to spend.”

A solution was also offered in the paper to help realize the value of cryptocurrencies in transactions. Notably was the diversification of speculative risk through derivatives that are settled on the crypto market. In addition, implementing the new lighting network could improve the operating capacities of platform’s like Bitcoin blockchain. The views in Zimmerman’s paper however do not represent those of the Bank of England (BoE).

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Author: Edwin Munyui

DTCC Urges Financial Institutions to Collaborate in Forming A DLT Regulatory Framework

U.S Depository Trust & Clearing Corporation (DTCC) published a white paper on Feb,12 calling for the establishment of a proper regulatory framework on blockchain technology. The leading American financial markets clearing and settlement company noted that this would help avoid the risks associated with Digital Ledger adoption in future.

This white paper dubbed ‘Security of DLT Networks’ highlights the opportunities and looming risks if financial industry stakeholders do not step up to oversee blockchain implementation. DTCC’s Chief Security Officer, Stephen Scharf, further emphasized on the importance of tech policy upgrades;

“DLT offers great potential, but as with any new technology, it also comes with certain risks. Traditional security measures may not be adequate, so it is critically important that this topic is top of mind for any DLT implementation.”

DTCC’s Proposed Strategy on Blockchain Implementation Oversight

According to the whitepaper, financial market players are better off collaborating to form standardized guidelines on DLT adoption. It continues to read that a coordinated approach would help address the security associated risks in detail. This will in turn assist firms operating and looking to enter the blockchain market to play by the book and grow within a regulated framework.

DLT will notably improve how data is protected, verified and processed. As a result, DTCC suggests that a more tech specific framework would be effective in integrating the DLT networks within IT legalities across the world. An industry consortium to form fundamental operational guidelines was also identified as a long-term solution to the existing legal gaps in the DTCC whitepaper.

There have been previous efforts to form a baseline regulatory framework around blockchain tech but only a few jurisdictions have achieved much. DTCC plans to capitalize on its muscle within the derivatives market to lobby as many financial players and develop a standard for DLT frameworks. Mr. Schaff noted on the importance of a global framework for all industry participants;

“As is common in IT security communities, frameworks must be widely available, generally agreed upon, and commonly adopted.” he added “As best practices mature, they can be adopted into a formal framework and used for financial industry participants and regulators alike.”

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Author: James W

New Research by Deutsche Bank Analyst Projects Bullish Future for Crypto Industry

  • The research paper is titled “Imagine 2030,” and it addresses the next decade of the cryptocurrency industry.
  • Many traditional financial institutions are welcoming the crypto industry, though others have banned employees from being involved.

Jim Reid, an analyst for Deutsche Bank, recently published a research paper titled “Imagine 2030,” examining the cryptocurrency industry for the next decade. The paper has a more bullish perspective for cryptocurrency’s future, as Reid expresses that the asset class could see major success in the 2020’s as fiat money becomes more inflated and less secure, according to Bloomberg.

The fiat system is held together by “fragile” pieces now, and the research paper suggests that government-based currencies could be dwindling soon. The paper states, “The forces that have held the current fiat system together now look fragile and they could unravel in the 2020s.” Gold and cryptocurrency, which have been considered more of a safe haven for some consumers, could see an explosion, in the event that government-backed currencies fail and leave consumers demanding these asset classes.

Max Keiser, a TV host, recently pointed out that there’s been some all-time highs established for Bitcoin in many fiat currencies globally, leaving him to project values in the millions in USD. However, Ray Dalio – a hedge fund manager worth billions – pointed to the damage within the financial system, predicting that it will soon face “a paradigm shift.” His statements were taken by the cryptocurrency community as an endorsement for the original crypto asset.

While cryptocurrency was once seen as a passing fad by the traditional finance supporters, this view has changed through the last few years. In fact, many central banks – like the Bank of France – are dipping their toes into the industry with their own digital bank-issued currencies.

Herbert Scheidt, the chairman of the Swiss Bankers Association, recently claimed in October that financial institutions need to keep up with the changes that cryptocurrency has brought about, or they risk being pushed out by the competitors.

Still, despite this progress, there are still big banks in the industry that are steadfast in their abhorrence of cryptocurrency. On December 3rd, the Nordea Bank in Scandinavia recently won a court case to prevent employees from holding, purchasing, or even selling cryptocurrencies.

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Author: Krystle M

China’s Internet Conglomerate Tencent Launches Third White Paper on Blockchain in Last 3 Years

On October 19, 2019 Chinese internet giant Tencent released a white paper on blockchain, its third in the last three years, making abundantly clear that China’s crackdown on cryptocurrency has not derailed its attempts at flirting with blockchain.

The 2019 Tencent Blockchain White Paper was released by Tencent Cloud and Tencent FIT at Tencent’s first digital transformation strategic meeting: “The road to break the industrial blockchain”. It was jointly held by Tencent Research Institute, Tencent FIT, Tencent Cloud, Tencent Legal Innovation Center and Tencent Finance and Economics.

The white paper explores the development status and trends of the blockchain industry in 2019, proposes the conception and thinking of the industrial blockchain, and announces the Tencent block. Along with highlighting Tencent’s practices and achievements in blockchain and industry integration, the white paper also dives into Tencent’s plans for the future.

The focus of this paper has been on how to help upgrade traditional industries with the use of blockchain. After nearly five years of industry exploration, Tencent is increasingly convinced that blockchain will go deeper into the industry and empower the real economy.

Tencent first showed interest in the blockchain in 2016 when its bank subsidiary joined one of the first business alliances in China to explore applications of the technology. In 2017, it published its first white paper detailing its plans to build a suite of blockchain services on top of an open platform called “TrustSQL”.

Cai Weige, head of the Tencent Virtual Bank blockchain, said at Saturday’s press conference that since the release of the first edition of the Tencent Blockchain White Paper in April 2017, Tencent has continued to expand its application in tax, justice and finance. As per him, the problem that the blockchain can solve must be in line with the nature of the business and conform to the laws of business.

It’s interesting to note how in the recent years, BAT (Baidu, Alibaba and Tencent) have increasingly invested in blockchain, focusing more on the research and development side of technology – trying to ascertain how blockchain can play the most significant role in all walks of life.

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Author: Sakshi Jain

Nobel Prize Winner Joseph Stiglitz: Only A Fool Would Trust Facebook’s Libra

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Ever since Facebook launched the Libra’s white paper, the whole crypto community is been abuzz. Some are strongly criticizing the project while some see it as the future or the savior of crypto. Joseph Stiglitz, a Noble Prize winner economist, is teaming up with the people that distrust Facebook’s Libra.

According to a recent article published on MarketWatch, Stiglitz affirmed that only a fool would trust Libra. He believes that Facebook is not the kind of company that anyone should trust and that the banking sector took way longer to reach this level of distrust.

There are several problems with Facebook’s initiative. According to him, Libra could work as a shadow economy, a vehicle that could be used in illegal activities such as money laundering.

He does acknowledge that the banking currently has problems, but he affirmed that they are mostly due to the lack of competition, especially in how to make payments. This lead people to pay a lot more than they should for their transactions.

Stiglitz also noted that a possible business model for Libra could be to keep an interest paid on assets that used to be the underlying value of the stablecoin and that it makes no sense to deposit money there is there is no interest at all.

According to him, many people who are engaged in criminal activities are willing to pay a lot to avoid having their corruption detected and that governments should shut Libra down if they believe that this is the goal.

He also believes that Facebook could profit from the data of the transactions made by Libra, which is another considerably big problem in his view. Facebook has been faced with a choice between money and honoring their promises before and we all still remember that Zuckerberg picked money.

Japanese Regulators Are Afraid Of Libra

The Noble Prize winner is not alone in his crusade against Facebook’s Libra. Harukiko Kuroda, the governor of the Japanese central bank, affirmed that people need to be careful in order to increase the acceptance of such a token because it could have a negative impact on the financial stability of the country.

As the users buy Libra, the money goes to a basket of tokens, but no one knows what assets currently comprise this basket. This was, in his view, mostly done to avoid the national regulation of any country in particular. The users will not receive an interest rate on the assets, too, which means that Facebook probably will.

It seems that no one is actually very trusting that Facebook’s project will be something good for society, so we’ll possibly see a lot of controversy coming up soon.

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Author: Gabriel Machado

We Have More Questions Than Answers About Facebook’s Libra and the Future Apps Being Built

We-Have-More-Questions-Than-Answers-About-Facebooks-Libra

The world stopped when Facebook decided to reveal the white paper of its Libra project. However, as soon as everybody read it, the first impression was that there were more doubts than actual certainty about the future of the project.

Many regulators have openly criticized the project, but they are not alone. In a considerably rare move, the crypto community has agreed with regulators: yes, the project is somewhat inconsistent in some points and it seems that it may lack actual decentralization.

While many people in the community were happy to see Facebook becoming a part of the crypto world, this is far from what most of them actually expected. Libra can be good for the image of the crypto world, but it just looks way too centralized.

Another important issue is that the project talks a lot about its humanitarian aspirations and not so much about how it will work. Obviously, there is still the need to pass all the regulatory issues before the project is approved, so this may be why Facebook is still somewhat secretive about this project.

Will Libra Be Used For Criminal Activities?

Perhaps it is a cliché, but the truth is that most people were very worried that Bitcoin would be used for crime (and some still are). If Libra has the potential to even surpass Bitcoin and to become even more centralized, can it be used for crimes?

Facebook and the Libra Association want everybody to use Libra, obviously. So there seem to be some doubts about how the Libra-based projects will actually be used.

Will there be any kind of protection for the consumers? Will there be Know Your Customers to ensure that people are not using the platform for fraudulent activities?

As pointed out by some experts, Facebook did not keep the information of its customers very well, so we have our doubts about leaving money on their accounts. Digital currency theft is, unfortunately, very common, so what will Facebook do about it?

All these governance questions were not addressed by the white paper, so we can only wonder what will happen if a developer steals money from the users on the platform.

Will Libra Try To Replace Fiat?

Everybody knows that Bitcoin wants to replace fiat. So far, it hasn’t been able to, mostly because it lacks adoption. Libra will certainly not lack adoption since Facebook is already huge. So, will Libra try to achieve Bitcoin’s dream but in a way more centralized way?

Many people accuse Libra of trying to replace fiat, as it wants to be a global coin and it affirms that it wants to “help” people in countries in which they need to rely on weak fiat.

Also, not a lot was actually affirmed about how the token will maintain its allegedly stable price. The white paper affirms that fiat from developed countries and government bonds will be used as collateral, however, the controllers of the fund can buy whatever they like.

Will It Be Really Decentralized?

If you have been reading with attention, you might have noticed that a major problem looms over Libra: the company is just not decentralized.

Facebook has chosen 100 companies to be the nodes of the network. Is this decentralization? It is worse than EOS, which is repeatedly criticized for lacking decentralization. It will work just a central bank, an actually private central bank.

The value of the Libra will have a direct relationship with the ability of its managers to maintain the value of the money and the blockchain will not be validated by unknown individuals but by large institutions which were selected by a single company. This gives them too much power, especially when it will be a conflict with their interest.

Some crypto fans are not too fond of governments, but at least they were elected. Who elected Mark Zuckerberg, soon to be the world’s most powerful unelected dictator, according to CNBC’s Ran NeuNer?

While some non-crypto folks have been praising how decentralized Facebook’s Libra is, we are still calling it Facebook’s Libra, aren’t we? The truth is that decentralization is not real if people cannot be a part of the democratic process.

If anyone can create a node, then at least anyone can participate and this is why Bitcoin is way more decentralized than Libra will ever be.

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Author: Gabriel Machado

International Organization of Securities Commission Looks to the Public Crypto Regulation Suggestions

International Organization of Securities Commission Looks to the Public Crypto Regulation Suggestions
  • IOSCO requested feedback from public in new paper on the concerns of regulating cryptocurrency around the world.
  • Some considerations that IOSCO requests feedback for include the protection of access, price integrity, and the technology of the crypto market.

Determining the best way to regulate the cryptocurrency industry has been a goal of multiple jurisdictions around the world. Now, the International Organization of Securities Commissions (IOSCO) has published a recent consultation paper on the matter, which was published on May 28th. The IOSCO is a standard setter for global securities regulations.

In the news release for this paper, the organization clarifies that they regulate about 95% of the securities markets around the world, while impacts 115 jurisdictions. Within the IOSCO, the organization works towards adherence to a mutual and consistent standard, determining the regulations and how they are enforced in the global securities sector.

The consultation paper is called “Issues, Risks, and Regulatory Considerations Relating to Crypto-Asset Trading Platforms.”

The paper requests feedback from the public that will help the organization understand the risks and other concerns associated with the cryptocurrency industry, as identified by IOSCO. The public will need to submit all of their comments by July 29th this year.

In the report, the company outlines certain considerations, which includes:

  • Access to CTPs
  • Protecting assets
  • Conflicts of interest
  • CTP operation
  • Market integrity
  • Price integrity
  • Technology

This innovative approach follows a G20 2018 communique that was already presented to the various entities that set the standards for regulations. The communique discussed the continuance of regulating cryptocurrencies and addressing their risks, “according to their respective mandates, and asset multilateral responses as needed.”

In some cases, the new release states that the cryptocurrency assets will end up covered by the traditional framework of the securities laws already in place. However, that circumstance will only be implemented if the local regulatory authority in that area has determined that the crypto asset is considered a security that would already be covered by the phrasing in their securities laws.

The fact that CTPs could be regulated brings up another potential issue for the authorities, according to IOSCO. For that reason, the paper states that it may be helpful to use their detailed analysis of considerations as a baseline for regulators, as they determine their revised approach.

The IOSCO established the Initial Coin Offering Consultation Network in January 2018, as a way to learn about the experiences of the ICO market. Some of the issues addressed in the annual conference that year revolved around the challenges associated with this budding asset class. As such, the challenges impacted the approaches that securities regulators worldwide took on in their governance of the industry.

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Author: Krystle M