Significant Stablecoin Adoption Could Result in “Excessive Market Power,” says BIS Report on CBDC

Significant Stablecoin Adoption Could Result in “Excessive Market Power,” says BIS Report on CBDC

Central bank money ensures public trust in money and supports public welfare, said the global body policymaker in its latest report on central bank digital currencies (CBDCs).

With new forms of digital money issued by the private sector, such as stablecoins emerging, which has accelerated since the Covid-19 pandemic began, central banks are also ensuring they are able to respond to a digital future system, it said.

But still, private digital assets can coexist with central bank digital currencies, the Bank for International Settlements said in the report, noting CBDcs would rely on banks and other financial institutions to act as intermediaries.

However, significant stablecoin adoption could lead to fragmentation in the payments ecosystem and “excessive market power,” found the report. It further added that private initiatives would have “lower public benefits” because they won’t be interchangeable with other forms of money. According to the BIS, private currencies also lack the protections that come with national currencies.

“Central banks have a responsibility to ensure that citizens have access to the safest form of money — central bank money — in the digital age,” said ECB president Christine Lagarde, who is the chair of this group of central bank governors.

While acknowledging that there were also risks associated with CBDCs, as money and payments develop rapidly, central banks’ plans for CBDC will also evolve, it said.

Currently, seven central banks, the Federal Reserve, Bank of England, European Central Bank, the Bank of Canada, Bank of Japan, Sveriges Riksbank, and Swiss National Bank, are working together with the BIS on retail CBDCs.

These central banks “have already identified that a CBDC could be an important instrument for ensuring that they can continue delivering their public policy objectives even as the financial system evolves,” the study said.

Facilitating international payments with CBDCs would require interoperability or cooperation, where BIS says the IMF would have an important role to play.

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Author: AnTy

New Bill Calls for the Treasury Department to Submit a Report on Foreign Crypto Usage and Mining

New Bill Calls for the Treasury Department to Submit a Report on Foreign Crypto Usage and Mining

With this report on virtual currencies and global competitiveness, the idea is to strengthen U.S.’s role globally, and crypto can play a critical role in that.

US Senators want the Treasury Department to closely examine cryptocurrency mining and share the findings with Congress.

This week, a bill was introduced by Senators Maggie Hassan (D-NH) and Joni Ernst (R-IA) that requires the Secretary of the Treasury to submit a report on virtual currencies and global competitiveness to Congress.

The report on virtual currency wants the department to cover an assessment on how foreign countries use and mine virtual currencies, including identifying their largest state and private industry users and miners.

Policies foreign countries have adopted to encourage crypto’s use, and mining and how they could be strengthened or undermined by allowing this within their borders are also included.

The bill further asked the Department to identify the types and dollar value of virtual currency mined for each fiscal year from 2016 through 2022 within the US, China, and globally, along with any other countries the Secretary of the Treasury determines are relevant.

Furthermore, the report wants to identify vulnerabilities related to supply disruptions and technology availability of the global microelectronic supply chain and opportunities in regard to crypto mining operations.

With this report, the idea is to increase the global competitiveness of the US, and according to Hassan, crypto is critical in that.

“In order to strengthen U.S. competitiveness, our government must get a better handle on the role that cryptocurrency is playing in the global economy and how it is being leveraged by other countries.”

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Author: AnTy

94% Financial Industry Pioneers say Digital Assets will Replace Fiat in 5-10 Years: Deloitte Report

“Participation in the age of digital assets is not an option—it is inevitable,” says the report, as digital assets have a fundamental impact on deposits and with organizations’ current business models at stake.

An impressive 97% of the financial services industry (FSI) Pioneers and more than three-quarters of all respondents see blockchain and digital assets as a way to gain competitive advantage reports Deloitte 2021 Global Blockchain Survey.

The survey was conducted between late March and early April 2021 as a way to gain insights into overall attitudes and investments in blockchain and digital assets. It polled 1,280 senior executives and practitioners in the US, the UK, Mainland China, Germany, Japan, Hong Kong, Singapore, South Africa, and the United Arab Emirates.

According to the survey, nearly 80% of respondents said that digital assets would be “very/somewhat important” to their respective industries in the next 24 months.

“The business imperative of adopting blockchain and digital assets is growing noticeably, as organizations increasingly accept that their current business models are at stake,” noted the report.

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There is also a consensus among the FSI people that digital assets will replace fiat currencies in the next five to 10 years, with 76% believing the changeover will occur. This number jumps to 94% for FSI Pioneers.

With the growing interest of major institutions and individuals in the cryptocurrency industry, funds also continue to flow into the digital assets market. According to Deloitte, “the fundamental impact on deposits creates an important opportunity for banks and all industries that hold assets.”

As such, nearly half (47%) of FSI survey respondents said that custody of digital assets represented a “very important” role for crypto assets in their respective organizations, ranking as the top role. Safe custody, too, ranks as the top concern around holding or transacting in central bank digital currencies (CBDC) at 57%.

Custody is followed by new payment channels, diversifying investments/portfolios, access to decentralized finance platforms, and tokenization of assets in terms of the role of digital assets in the respondent’s organization or project.

Approximately six in 10 respondents saw regulatory barriers among the biggest obstacles to the acceptance of digital assets.

Meanwhile, nearly 70% identified data security regulation as the greatest need of modification and 71% cybersecurity among the biggest obstacles to acceptance of digital assets — “suggesting that even the most dedicated believers in digital assets have legitimate security concerns.”

Still, there is “shared optimism” about future revenue opportunities from crypto solutions, with 80% strongly or somewhat agreeing.

Coming onto decentralized finance, 83% of FSI respondents said they believe digital assets will play a very or somewhat important role in it.

When it comes to which digital asset types will have a significant positive impact on their organizations, 42% said stablecoins or CBDCs, 38% algorithm-driven stablecoins, and 33% enterprise-controlled coins.

“Participation in the age of digital assets is not an option—it is inevitable,” concludes the report adding, “Leaders are left only to decide how and when their organizations should start—and how to use digital assets and the new global financial service infrastructure to their greatest advantage.”

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Author: AnTy

Four New Firms Report Adding Exposure to GBTC and ETHE as Grayscale Discount Continues to Shrink

Four New Firms Report Adding Exposure to GBTC and ETHE as Grayscale Discount Continues to Shrink

In the latest institutional buying update, several firms added crypto exposure in the quarter ending June 30, 2021.

As first reported by MacroScope, according to the recent filings with the US Securities and Exchange Commission (SEC), Ancora Advisors disclosed holding 13,945 shares of Grayscale Bitcoin Trust (GBTC) and 2,674 shares of Grayscale Ethereum Trust (ETHE).

Cleveland-based Ancora with $6.2 bln assets under its management is a family wealth advisory, retirement plan, and investment management services provider.

Another company to join Ancora is Cleveland-based private investment firm Parkwood which increased its exposure to 125,000 shares of GBTC, from 93,000 GBTC shares at the end of March. It also added 189,275 shares of ETHE to its crypto exposure.

Boston Private Wealth, a part of SVB Financial Group (Nasdaq: SIVB), the parent company of $33 billion Silicon Valley Bank, reported owning 103,469 shares of GBTC, representing an increase of 17.3% from Q1. Boston Private Wealth didn’t report any ETHE holdings.

In addition to this list, Illinois-based wealth management firm Clear Perspective Advisors also reported owning only 7,790 GBTC shares.

GBTC is a $30.9 billion Trust of the world’s largest digital asset manager, Grayscale Investments, which is currently trading at a 10.46% discount, having shrunk from its mid-May high of 21.48% discount, according to Bybt. ETHE meanwhile is trading at a 4.72% discount, having recovered from 14.34% three months back.

Though small holdings, these latest holdings reveal that the mania of crypto has started to take effect and is reaching all the corners of the traditional market, big and small alike.

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Author: AnTy

21Shares Launches First SOL ETP, Goldman Sachs Report Talks About the “Faster” Solana Blockchain

21Shares Launches First SOL ETP, Goldman Sachs Report Talks About the “Faster” Solana Blockchain

As Solana (SOL), a $7.7 billion market cap cryptocurrency is behaving better than most of the coins in the cryptocurrency market, down only 50% from its all-time high a month back and still up 1,456% YTD, 21Shares is launching a Solana ETP.

The Switzerland-based investment product provider has launched the world’s first Solana exchange-traded product (ETP) which will begin trading under the “ASOL” ticker early next week.

Each unit of the ETP is backed by 0.667 SOL at launch with a base fee of 2.5% per annum. Coinbase Custody is the main custodian for the SOL ETP.

21Shares, formerly known as Amun, said this week that the Solana ETP will list on Switzerland’s primary stock exchange, the Swiss SIX. It will also be available on the Stuttgart and Dusseldorf multilateral trading facilities (MTFs) in Germany.

“These new ETPs deliver what clients asked for,” said 21Shares CEO Hany Rashwan in a statement. “We expect to add two new crypto ETPs in the next months together with new listing and trading venues.”

Earlier this month, Solana Labs, the team behind the Solana network raised $314 million in a token sale led by Andreessen Horowitz, which launched its biggest ever crypto-focused fund of $2.2 billion this week and Polychain Capital.

The Solana ecosystem is also backed heavily by Sam Bankman-Fried, the CEO and founder of crypto derivatives exchange FTX and quant trading firm Almeda Research.

Elsewhere, a Goldman Sachs report name drops Solana several times.

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Talking about blockchains and related software that has been built, Goldman Sachs mentions Solana and Algorand as faster platforms amidst the first of its kind Bitcoin and most actively used for decentralized applications Ethereum.

Launched in 2020 with “some further improvements,” Solana blockchain uses a proof-of-history feature “which many would consider a significant breakthrough in speed and capacity,” it said.

Completing the proof-of-stake (PoS) process, Solana’s proof-of-history makes it “much more efficient” for validators to confirm each block and allows them to run thousands of smart contracts in parallel.

The report notes that Solana can process 50,000 transactions per second with an interoperability feature that is “enhanced by its own unique bridge to Ethereum called “wormhole.”’ This function allows users to leverage Solana’s speed while having access to interoperability.

Not only, the average transaction cost is very low on Solana, it also allows developers to use popular programming languages such as C/C++ or Rust, which are among the world’s fastest, on the Solana blockchain.

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Author: AnTy

PwC Report: Boom Time For DeFi Sector As Crypto Hedge Funds Show Growing Interest

PwC Report: Boom Time For DeFi Sector As Crypto Hedge Funds Show Growing Interest

A newly released report by PricewaterhouseCoopers (PwC) and Alternative Investment Management Association (AIMA) has shown that hedge funds’ interest in decentralized finance (DeFi) is growing.

The research titled the 2020 Global Crypto Hedge Fund Report was conducted in Q1 2020, polling responses from the world’s largest global crypto hedge funds by assets under management (AUM). It specifically focused on funds that invest and trade in cryptocurrencies.

Chainlink, Polkadot, Aave Lead Altcoins In Survey

The report indicated that Chainlink (LINK), Polkadot (DOT), and Aave tokens had grown in popularity as they were in the top five cryptocurrencies hedge funds were investing in.

While the report showed Bitcoin leading as the most popular asset among funds, Ethereum and Litecoin followed suit, featuring 67% and 34% respectively of all crypto hedge funds surveyed. DeFi tokens Chainlink and Polkadot closed up the top five crypto assets with 30% and 28%, respectively, while Aave came at number five with 27%.

The research also noted that some altcoins were more popular than their market capitalizations would suggest. The research reads,

“Among the top 15 traded altcoins, some of them are considerably more popular than their market capitalization would suggest. Litecoin and Chainlink are the second and third most traded altcoins, but their market capitalizations are far lower than Polkadot and Cardano, which fare lower in the trading ranks.”

Also shocking was the discovery that almost 31% of crypto hedge funds use decentralized exchanges (DEXs), according to the report. With Uniswap being the most widely used DEX (16%), followed by 1inch (8%) and SushiSwap (4%).

According to PwC, the total number of assets under management of crypto hedge funds globally doubled in 2020, climbing from $2 billion in 2019 to $3.8 billion.

Crypto hedge funds were also found to be actively involved in staking, lending, and borrowing activities.

Crypto Hedge Funds Push Bitcoin Price By Buying The Dip

According to reports, Crypto hedge funds bought the dip as they saw the crypto market crash as a chance to buy Bitcoin for less.

This was after former Morgan Stanley Trader, Felix Dian encouraged hedge funds to buy the dip, suggesting that this was why they were in the digital currency market.

Professional investors also treated the Bitcoin crash as an opportunity to buy Bitcoin at a discount. Institutions reportedly bought 34,000 Bitcoin on Tuesday and Wednesday last week after selling as much as 51,000 Bitcoin over the previous two weeks.

The buyer pressure was said to have impacted Bitcoin’s price positively by briefly pushing it up to $42.172 before it later dropped to $36,808, following the news of China’s crypto crackdown.

Meanwhile, in recent times banks have launched several cryptocurrency offerings. The latest move was made by investment bank Cowen which partnered with blockchain technology provider PolySign earlier this month to provide qualified institutional clients access to cryptocurrencies.

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Author: Jimmy Aki

ING Report: How Blockchain & DeFi Will Change The Financial Landscape

ING Report: How Blockchain & DeFi Will Change The Financial Landscape

Multinational banking services provider ING bank has lent its voice in the ongoing debate surrounding decentralized (DeFi) and centralized finance (CeFi).

In a detailed whitepaper published on its website, the Amsterdam-based financial institution expounded on the pros and cons surrounding DeFi and how centralized finance could help institute a new economic system.

Collaboration Between DeFi and CeFi Beneficial For Global Finance

The paper titled “Lessons Learned from Decentralized Finance (DeFi)” opens by admitting the radical change decentralized finance (DeFi) has brought into the financial space.

Noting that DeFi aims to replace intermediaries with automated digital smart contracts, ING argues that negative opinions surrounding the emerging technology paint it as a foe rather than an ally.

In the 22-paged document, the European financial powerhouse noted that CeFi could help address DeFi’s area of weakness, pointing out know-your-customer (KYC) protocol.

It concluded by saying that if both entities collaborate, this could see the best of both worlds coming together to birth a new financial order.

Speaking on the document, ING’s blockchain lead Herve Francois argues that DeFi could substantially be more disruptive for the finance sector than Bitcoin has been.

Decentralized finance (DeFi) follows on the back of Bitcoin’s decentralization ethos of 2008. This nascent industry has grown exponentially in the last four years, with the largest DeFi facilitator Ethereum, boasting over $76 billion worth of assets under management (AUM) single-handedly.

The booming crypto market has seen other decentralized protocols springing up, with many providing legacy-backed services for a fraction of the cost.

Legacy Institutions Could Help DeFi

Pointing to some of the key takeaways from its study of the DeFi ecosystem, ING noted that counterparty risk is replaced with technical risk in the purely digital form of financial services.

The paper highlighted eight key features of the DeFi ecosystem that makes it rise above the current financial system naming composability, flexibility, decentralization, accessibility, innovation, and three other points.

The borderlessness that comes naturally to DeFi is a major plus, given that conventional financial institutions spend so much time and resources complying with local laws of countries they branch out to.

However, ignoring anti-money laundering (AML) and KYC requirements were the weak feet of DeFi, and this is an important area centralized finance could come in.

Using DeFi lender Aave as a case study, ING said that this disruptive technology had more accuracy, transparency, and speed than its centralized counterparts. However, it agreed that the novelty of the protocol came with inherent technical risks.

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Author: Jimmy Aki

A Net Inflow of $93 Million Pushes the Price of Bitcoin 1% Says Bank of America Report

“No good reason” to own Bitcoin except wealth preference, says bank’s report on cryptocurrency filled with bad takes.

There is no limit to bad takes on cryptocurrencies, especially from the mainstream financial service providers. And this week, the crypto market experienced a few.

To start with, Europe’s top markets regulator warned investors of “significant risks” involved in investing in crypto. Using its twice-yearly report on Wednesday, the European Securities and Markets Authority cautioned that “crypto-assets are highly risky and speculative” and that “consumers must be alert to the high risks of buying and/or holding these instruments, including the possibility of losing all their money.”

This week, Bank of America also released its research note, calling Bitcoin “exceptionally volatile” that makes it “impractical” as a store of wealth or payment mechanism.

As a matter of fact, according to the bank’s analysts, there’s “no good reason to own bitcoin unless you see prices going up.” So, according to them, if you prefer wealth, then do invest.

“The main portfolio argument for holding bitcoin is not diversification, stable returns, or inflation protection, but rather sheer price appreciation, a factor that depends on bitcoin demand outpacing supply,” the note said.

The report clung to bitcoin’s anonymity utilized by terrorists and its environmental impact, saying Bitcoin’s network emits about 60 million tons of CO2 per year, apparently the same as Greece.

The bank failed to make an effort to even understand the data, saying 95% of supply is controlled by the top 2.4% of addresses, which isn’t true, and compared it with the top 1% of Americans controlling 30.4% of the nation’s household wealth.

While Morgan Stanley, JPMorgan, BNY Mellon, Goldman Sachs, and others are working on their crypto strategy, Bank of America is busy with its report titled “Bitcoin’s Dirty Little Secrets.”

While talking about the leading cryptocurrency being correlated to risk assets and not at all tied to inflation, it says Bitcoin is “sensitive” to increased dollar demand.

The report further argues that “a net inflow into Bitcoin of $93 mn may result in a 1% price rise, while the analogue for gold is more than 20 times higher.”

Well, it has been just this year that, just over a decade old, Bitcoin became a trillion-dollar crypto asset, up more than 14x from March 2020 low and 2x from its last bull run ATH. As of writing, BTC/USD is trading just under $58,000, down 6.4% from its $62k peak from this past weekend.

As for the precious metal, the hundreds of years old bullion has a $10 trillion market whose spot price is $1,725 per ounce, 12% down from its $2,075 ATH in August, beating the August 2011 high of $1,920, a mere 8% outperformance.

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Author: AnTy

UK Treasury-Ordered Report Calls for A 5 Point Plan; Includes FinTech Fund & Crypto Regulation

UK Treasury-Ordered Report Calls for A 5 Point Plan; Includes FinTech Fund & Crypto Regulation

Treasury report based on the U.K. fintech, concludes govt needs to run a specific regime for Crypto-asset’s regulations and control.

U.K. chancellor, Rishi Sunak, triggered that review back in March 2020, under Ron Khalifa’s supervision (former WorldPay boss). Afterward, the Treasury-ordered review points out a plan to make U.K.’s fintech a leading market in the world.

According to the report named “Khalifa Review of U.K. Fintech,” the country can play a vital role in crypto-mania and become a globally recognized center for trade, issuance, clearance, and exchange of cryptocurrencies.

Khalifa addressed the European finance’s progress after the crypto favored the proposal, MiCA (Markets in Crypto-assets), has come in force, so the U.K. also has to “act quickly” to put its fintech firms ahead of the curve. Khalifa’s Review states,

“The U.K. should aim to be at least as broad in ambition as MiCA – but should also consider whether it can develop a bespoke regime that is more innovation-driven. A bespoke regime for crypto assets should adopt a functional and technology-neutral approach, in line with the principles of the current regulatory framework, as well as the concept of ‘same risk, same regulation,’ while being tailored to the risks arising from crypto asset-related activitie.”

Also, there are no reasons to be ‘flexible’ to do with future challenges such as Decentralized Finance (DeFi), another spot that needs attention for being regulated in the state, says the report.

The review concludes that to have engagement in deploying policies and regulations for crypto-favored areas, U.K. must join the group of international regulators, Global Financial Innovation Network (GFIN).

The U.K. Treasury has announced a consultation worldwide that started in January to depict the regulatory experience approached digital currencies and stablecoins. The program is still accepting feedback till March 3.

U.K. commissions have been aggressive to crypto trading and investments so far. On January 6, derivatives and exchange-traded notes sale was shut down by Financial Conduct Authority (FCA) which alleged the products ill-suited due to the potential harm they pose.

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Author: James W

UN Report Points to North Korea Behind the 1 Million Theft from Crypto Exchange Kucoin

UN Report Points to North Korea Behind the $281 Million Theft from Crypto Exchange Kucoin

Approximately $316.4 million virtual assets have been stolen by the DPRK from 2019 to November 2020.

The theft of $281 million worth of assets from cryptocurrency exchange last September links to North Korea, states a preliminary United States inquiry into the situation.

The same blockchain transactions related to this hack is also apparently tied to a second hack that occurred last October in which $23 million was stolen, as per a confidential report by independent sanctions monitors to U.N. Security Council members.

“Preliminary analysis, based on the attack vectors and subsequent efforts to launder the illicit proceeds, strongly suggests links to the DPRK,” the monitors wrote. DPRK is North Korea’s formal name, the Democratic People’s Republic of Korea.

They also accused Pyongyang of using the stolen funds to support its nuclear and ballistic missile programs to circumvent sanctions that they have been subject to since 2006.

Seychelles-based KuCoin is expected to be the victim of the digital currency heist here, which is not named in the report but reported a theft of $281 million in digital currencies on Sept. 25 with no other significant hacks occurring during that period.

“According to sources familiar with both hacks, the attackers exploited ‘defi’ protocols — i.e., smart contracts that facilitate automated transactions.”

80% of the stolen funds were reported to be recovered by KuCoin after other exchanges froze the funds.

North Korea-linked hackers continued targeting financial institutions and digital currency platforms last year, as noted by the latest report from the U.N. sanctions monitors which reads, “A clear trend in 2020 was that the DPRK cyber actors have been conducting attacks against defense industries around the globe.”

North Korea has generated an estimated $2 billion using “widespread and increasingly sophisticated” cyberattacks to steal from cryptocurrency exchanges and banks, the monitors reported in 2019.

The latest report said, “According to one member state, the DPRK total theft of virtual assets, from 2019 to November 2020” was approximately $316.4 million.

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Author: AnTy