US Treasury Dept And Federal Reserve Are ‘Studying’ Possible Launch Of A Digital Dollar

Speaking during the online Atlantic Council webinar, the U.S Deputy Treasury Secretary, Justin Muzinich, said his department, alongside the Federal Reserve, is looking at launching a central bank digital currency (CBDC) tied to the dollar in the future.

This announcement follows a trail of the Federal Reserve’s previous efforts to launch digital dollar wallets liable to the central bank. Federal Reserve Bank of Cleveland President Loretta Mester, revealed last month that legislation is being set up so each American would own a digital dollar account with the Feds.

Notwithstanding, the Boston Federal Reserve announced in August that they are testing over 30 blockchain projects to prepare a digital dollar. However, the research and development process for a CBDC is set to take years to complete – having begun in 2015 – the Boston Fed said.

Muzinich stated the learning curve in launching a digital dollar on a distributed ledger would produce “efficiency benefits and cost benefits.” He further targeted the slow U.S. efforts in introducing its own dollar:

“And I also think, more broadly, it’s important for the government to embrace innovation and not be scared by it.”

However, there are still a few factors to consider in launching a CBDC, including regulation of the CBDC to prevent money laundering activities while maintaining users’ digital privacy.

On regulation of a digital dollar, Muzinich states governments worldwide – especially Europe – should work to regulate cryptocurrencies globally. This arises from the different functions of cryptocurrencies, away from payments.

Questions of money laundering have taken center-stage in the adoption of cryptocurrencies. Still, other issues such as financial stability and monetary base of the cryptocurrency should also be put in check. To keep the consumers and users of the digital dollar safe and secure, Muzinich stated the existing laws governing fiat currencies should be extended to crypto.

“Treasury has made it clear that the obligation to comply with U.S. laws is the same, regardless of whether a transaction is denominated in traditional fiat currency or digital currency.”

“Existing laws apply to digital assets in no uncertain terms.”

He explains that even if cryptocurrencies comply with the KYC/AML/CFT rules, there’s still a danger of foreign parties disrupting the monetary base creating financial instability. This could arise if a stablecoin issuer shifts its reserve ratio from fully backed to partially backed, or changing the composition of assets in reserve.

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Author: Lujan Odera

Chainalysis And Integra FEC Win $625k Grants From IRS To Track Monero (XMR) Transactions

Announced this last Wednesday, The U.S. Department of Treasury has awarded two grants to blockchain tracking and monitoring firms, Chainalysis and Integra FEC. Both firms received $625,000 in grants in a bid to develop privacy-focused blockchain transactions such as Monero and Layer-2 protocols.

In early September, the Internal Revenue Service (IRS) called out firms and companies building blockchain tracking and monitoring tools to submit proposals on cracking privacy blockchains – especially Monero (XMR). The taxation authority incentivized companies to apply with a $625,000 grant promised to the winning contracts.

In less than three weeks, the IRS has made its decision selecting blockchain analysis firm, Chainalysis, and data forensics analysis firm, Integra FEC. Both the companies will receive a total of $1.25 million, shared equally, with authority looking for solutions to trace and monitor the privacy coin.

An IRS spokesperson confirmed a total of 22 companies in the blockchain space applied for the grants, with the two firms winning the bids. The winning teams will receive an initial payment of $500,000 to develop the privacy-based monitoring and tracking tool, and the rest of the amount will be released once the prototype of the tool is released and inspected.

The New York-headquartered blockchain analysis firm is a relatively known company in the crypto space. Chainalysis recently announced a partnership with the Wyoming state financial regulator to monitor public blockchain transactions and cryptocurrency mixers.

Integra FEC is a Texas-based data forensics firm that is relatively unknown in the crypto space despite partnering with the U.S. securities regulator, SEC. The firm built a consultation service, “Other Scientific and Technical Consulting Services,” for the SEC.

Also Read: Gemini Rolls Out Zcash (ZEC) Shielded-Address Withdrawals For Transaction Privacy

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Author: Lujan Odera

OFAC Blacklists Three Russians’ Crypto Addresses Linked to 2016 US Presidential Election

The Treasury Department of Foreign Assets Control, OFAC in short, announced sanctions for three Russian hackers involved in meddling in the 2016 Presidential elections. The statement further added cryptocurrency addresses attached to the Russian Troll group, Internet Research Agency, were also sanctioned.

The sanctions stretch to several crypto addresses, including Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Zcash (ZEC), and Bitcoin SV (BSV). As of the publishing of the sanctions, “all property and interests in property of these targets that are subject to U.S. jurisdictions are blocked,” the statement adds. U.S. citizens are also prohibited from engaging in transactions with the listed persons.

The three sanctioned persons – Artem Lifshits, Anton Andreyev, and Darya Aslanova – are listed for controlling the crypto wallet accounts and dealing with the IRA. The statement reads,

“Russian nationals Artem Lifshits, Anton Andreyev, and Darya Aslanova, as employees of the IRA, supported the IRA’s cryptocurrency accounts. The IRA uses cryptocurrency to fund activities in furtherance of their ongoing malign influence operations around the world.”

OFAC first listed IRA operations using cryptocurrency in 2018, accusing the firm of participating in meddling in the 2016 U.S. Presidential election.

Russia is not the only nation the U.S. agency is focusing on. In November 2019, BEG reported OFAC was accelerating its efforts to sanction cryptocurrency addresses from two Iran nationals in relation to ransomware attacks within the country.

The list of Russian cryptocurrency addresses that have been blacklisted by the U.S. Treasury Department.

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Author: Lujan Odera

People Using Cash-Savings to Load Up on BTC as Protection in a Record Low-Interest Rate World

The 10-year Treasury note yield fell to its record low stretches, not seen in 234 years, according to Deutsche bank.

“The U.S. has been through depressions, deflations, wars, restrictive gold standard regimes, market crashes and many other major events and never before have we seen yields so low back to when the Founding Fathers formed the country,” said Jim Reid, chief credit strategist at the bank.

“In the year 2007, it was normal to get a fixed return of 5% when lending your money to the U.S. government for ten years. Today, you’ll be lucky to get 0.5%,” wrote analyst Mati Greenspan in his daily newsletter Quantum Economics.

With yields falling into negative territory — if we factor in inflation over the next 10-years, you are going to lose even more — and the Fed deciding to keep the interest rates virtually zero, investors are running out of ways to get meaningful returns. And this is why gold and digital gold make an attractive option.

As such, people are increasingly using their interest-earning cash savings to load up on bitcoin, especially as volatile assets take off, said Bloomberg.

The coronavirus pandemic has actually been a boon for account balances — not only lockdowns cut consumer spending, but central banks also injected money at a record pace. The personal savings rate in the US rose to a record 32.2 in April but fell to 19% in June, still at historically high levels. Also, between March and June, customers deposit 16% more into their accounts compared to last year.

What’s Attractive

But is it really the time to hold onto money when the US dollar continues to lose its value thanks to the Fed printing trillions of dollars and the interest rate on traditional safe vehicles falling.

Being up 58.81% in 2020, Bitcoin sure looks appealing just like gold, which has risen 29%, setting a new record. The largest cryptocurrency has been actually the best performing asset of the last decade.

A few months back, billionaire investor Paul Tudor Jones also announced that between 1% and 2% of his assets were held in bitcoin as protection in a low-interest-rate world.

Stocks that have been surging since bottoming out in March — recording its best 100-day performance between March 23 to July 1 since 1933 are also preferred by people in such an environment.

Americans have gained confidence in the market in the long run. A Bankrate survey found 28% of Americans, up from 20% last year, said the stock market was their top choice for long term investment. Cash investments meanwhile hit their lowest level in eight years at 18%.

Bitcoin coming to your near bank

While bitcoin started rallying last week, hitting a new 2020 high today, national banks have got the green light from OCC to offer custody services, which may open new doors for the crypto industry. It may have started with national banks, but it won’t be surprising if state-chartered banks jump in too.

“The door’s just been opened for funds, institutional players, and investment advisers” to expand their relationships to crypto, Kari Larsen, partner at Perkins Coie LLP in New York, told Bloomberg.

This decision has been made after the OCC received questions from several banks about holding digital assets, said acting Comptroller of the Currency Brian Brooks, a former Coinbase employee.

Agency’s decision to allow banks to hold bitcoin and crypto is “a recognition that tens of millions of Americans are invested in this asset,” he said at a virtual conference hosted by the American Bankers Association.

The OCC’s decision would also make it easier for crypto companies to work with banks, which viewed them as high-risk customers due to concerns regarding anti-money laundering (AML) and compliance with the Bank Secretary Act.

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Author: AnTy

Australia’s NSW Treasury Department Pushes for Advanced Blockchain Regulatory Framework

Australia’s New South Wales Treasury Department has released a research paper looking into the regulation of blockchain and another emerging tech. According to the city’s authorities, catching up with the rapid technological progress could save New South Wales a significant amount of money in compliance costs. The paper reads,

“Even small improvements to our regulatory framework have the potential to drive significant economic benefits. A saving of just 5 percent of compliance costs in New South Wales could result in a net benefit between $0.6 billion and $4 billion.”

The research acknowledges that COVID-19 has indeed changed the outlook of businesses in New South Wales, making it necessary to review the current regulatory frameworks. Notably, one of the propositions towards changing the landscape is outcome-focused legislation. This means that legislation will be informed or follow innovation hence giving more space for ideas to thrive.

“Outcome-based regulation can provide the flexibility for businesses to innovate, adapt, and realize the potential of emerging technologies, without having to seek permission from regulators.”

Another factor that the NSW Treasury Department plans to look into is the overlapping of regulation. Currently, some of the laws in this state create quite an overlap when it comes to processes such as registration, compliance, and reporting. This has since made some businesses stall, especially those that heavily depend on a swift action by the NSW market watchdogs.

It is, therefore, not surprising that the NSW state has decided to play catch up or ‘pace the problem’ by fast-forwarding considerations on emerging tech regulatory frameworks. In doing so, the Australian city is optimistic that it will seamlessly recover from the effects of COVID-19 under proper oversight while adopting the latest tech,

“With new tools providing a roadmap for reform, the way forward for New South Wales is clear … Technology and AI can continue to play a role in assisting regulators to target opportunities for burden reduction and streamline reform moving forward.”

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Author: Edwin Munyui

U.S Treasury Secretary Says the Country Will Not Shut Down Despite Second Wave COVID-19 Fears

U.S Treasury Secretary, Steve Mnuchin, has ruled out the possibility of a second lockdown despite a spike in new COVID-19 cases within the United States. This comes as Wall Street and Asian markets dipped towards the end of last week in fears of possible second wave.

Mnuchin was speaking to CNBC reporter, Jim Cramer, on June 11 as he made these remarks. He went on to defend the position of keeping the economy open noting that a contrary move would cause more damage,

“We can’t shut down the economy again. I think we’ve learned that if you shut down the economy, you’re going to create more damage.”

Furthermore, many vital areas such as medical have been put on hold and ought to bounce back according to Mnuchin. The Treasury Secretary noted that they foresee a bounce back in the remaining two quarters of 2020.

The Optimistic Outlook

While the U.S remains as the highest country with active COVID-19 cases, Mnuchin signaled an optimistic future for the leading economy. He emphasized that President’s Trump approach was prudent coupled with the $3 trillion stimulus approval from the House of Reps and Senate. Notably, only about $ 1.6 trillion of the injected funds are the in U.S economy. Mnuchin has since highlighted that another $1 trillion will be pumped into the economy within the next month.

Following this progress, the U.S Treasury Secretary, said that his number one job is getting everybody to work; an initiative that is already underway in collaboration with the Trump administration. Mnuchin said,

“We have the Fed program, we have Main Street [lending program], which is going to be now up and running, and we’re prepared to go back to Congress for more money to support the American worker.”

Recently, another $3 trillion stimulus package was passed by the House Democrats sparking debate but is yet to be voted in the Republican-dominated Senate. The latter, however, prefer a more conservative approach towards increasing federal deficit to ease the COVID-19 economic effects.

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Author: Edwin Munyui

Square to Allow Users to Deposit Coronavirus Stimulus Relief Payment Directly to Cash App

The Internal Revenue Service and the Treasury Department launched a new web tool on Friday that will allow those Americans who don’t file a tax return or had too little income to file to register for stimulus payments.

The IRS also shared that the stimulus payments will be distributed to most Americans from next week. IRS Commissioner Chuck Rettig in a statement said,

“People who don’t have a return filing obligation can use this tool to give us basic information so they can receive their Economic Impact Payments as soon as possible.”

If a US citizen or permanent resident made less than $12,200 or in case of a married couple $24,400 or didn’t file an income tax return in 2019, one can still apply for the $1,200 ($2,200 to married couples) and $500 per child stimulus.

According to the IRS, 80% of Americans are eligible to receive the stimulus payment.

Square’s Cash app now offers account and routing numbers to allow people to receive and deposit their stimulus payment directly to their Cash App balance. As per the official blog, to find them, you can tab the Banking tab on the bottom left of your Cash App home screen or get them by activating your free Cash Card.

“Get your $1,200 even if you didn’t file a tax return in 2019,” tweeted Twitter and Square CEO Jack Dorsey.

“Simple and fast instructions on how to get your $1,200 stimulus check from US govt (and yes, you can deposit it directly to cash app for instant use, no bank account needed).”

This stimulus program is in response to the unprecedented downturn the US economy is experiencing due to the coronavirus pandemic outbreak that has the states in a lockdown.

The US government is injecting cash into the economy and this is the CARES Act stimulus where these economic impact payments are being given directly to regular people for the first time in a long time.

And Cash app is helping people get it for instant use faster. The Cash app also allows its users to buy and sell BTC straight from its app. Last month, in an investor call, Square’s CFO Amrita Ahuja said they have been seeing “accelerated” adoption and “engagement” in Bitcoin during this market turmoil.

The company reported over $178 million in Bitcoin purchases volume in 4Q19 and over $516 million worth of BTC sales in 2019.

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Author: AnTy

Modern Monetary Theory (MMT) vs BTC to be the Main Event of 2020

The biggest global emergency of the century, COVID-19 pandemic has the Treasury officials trying to decide on how much they can spend to fight the novel coronavirus.

Before the financial crisis in 2008, people relied on commercial banks to create money, which was in the form of loans. But during the crisis, central banks like Bank of England started creating money via quantitative easing (QE). Now, the banks are back to practicing it, with promises of doing everything they can, everything on the table, and “nothing out of question.”

This crisis is every MMTer’s wet dream

While the BOE is preparing to expand its QE program of $435 billion in outstanding loans by $200 billion, which is just under 10% of the UK’s national income, Malaysia’s stimulus package is worth 17% of its GDP. Fed’s stimulus meanwhile is expected to come at $6 trillion.

Last week, the Fed also bought $183 billion of mortgage-backed securities, to drive down rates. The rates and volatility dropped while the mortgage-related shares rose on Friday. However, this has led some lenders to face margin calls and eroded their working capital.

Because of the Fed’s actions that are meant to help the market, the Mortgage Bankers Associations warned that the housing market could face a “large-scale disruption.”

The Fed’s lending to the US government has already ballooned to $5.2 trillion or 23% of the GDP, but according to Fed Chairman, Jerome Powell, the central bank can go further.

Fed’s coronavirus stimulus also resulted in banking going from “fractional reserve to 0 reserve!” In fractional reserve, banks are required to keep a certain amount of cash on hand, mostly 10% of the deposit. While it can help banks to earn interest on loans, it could result in bank runs as many US banks were and as a result, forced to shut down during the Great Depression.

BTC: The hardest money is challenger

Such measures and stimulus can eat up central banks’ funds but still, the government wouldn’t need to borrow from the market because as the officials themselves have said, they can print.

More QE is their answer. Basically, a form of MMT, this theory which is now in practice says the central bank can print money as long as it likes.

According to Willem Buiter, who was the founding member of the BOE’s monetary policy committee before becoming Citigroup’s chief economist said,

“it would be criminally negligent to allow a design flaw in existing treaties to inhibit the appropriate use of helicopter money at a time of existential crisis.”

On the other hand, the critique of MMT argues it can overheat an economy. Also, taxes would be needed to be increased at one point.

And the alternative to MMT, is Bitcoin. Angel investor Balaji S. Srinivasan, who has been expecting MMT vs BTC to be the main event of the 2020s now thinks it might happen this year as central banks start their money printers.

Source: @balajis

As we have been already starting to see for the past few weeks, Bitcoin price has been reacting to Fed’s unlimited QE announcement with a flurry of trading.

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Author: AnTy

Bitcoin Is ‘Trading’ Like a Risk-On Asset But Gold’s Also Feeling the Selling Pressure

  • Bitcoin, oil, overseas equities, Treasury yields plunging
  • US President Donald Trump promises fell short of what investors were hoping
  • Gold also feeling the pinch from the fall in financial markets

Bitcoin started the day at a deeply red note, tanking to $5,713, a level last seen in May 2019. Overall the crypto market lost more than $50 billion, as altcoins followed bitcoin down.

The rout deepened on Thursday for the stock market as well as S&P 500 opened the market at 6.6% losses and the Dow Jones Industrial Average plunged 1,700 points.

CME Group meanwhile is closing its Chicago trading floor on Friday “at the close of business,” as a precaution due to the coronavirus.

Coronavirus also led the National Basketball Association to suspend its season indefinitely after Utah Jazz players tested positive for the new virus. Academy Award-winning actor Tom Hanks and his wife Rita Wilson also tested positive for the coronavirus.

Investors’ expectations not met

From bitcoin, oil, overseas equities to Treasury yields everything plunged today after the World Health Organization declared Coronavirus a “pandemic”. Coronavirus (Covid-19) has infected 126,000 people globally while the US death toll was at 38 early Thursday with over 1,310 confirmed cases.

On Wednesday, US President Donald Trump restricted travel from Europe to the US for 30 days starting Friday. Trump pledged to provide financial aid and promised liquidity and capital but offered few details.

“Donald Trump’s public address fell short of what investors were hoping for,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

Today, European Central Bank decided not to cut interest rates despite the market expectations for a 10 basis point cut to stimulate the euro economy amid fears that a recession is about to hit the region. Both the Bank of England and the Federal Reserve cut rates over the last week.

Though the rates weren’t cut, the central bank did expand its asset purchase program by 120 billion euros ($135 billion) and announced measures to support bank lending.

Investors looking to de-risk

Gold, on the other hand, rose on worries about the economic impact of the coronavirus. Spot gold rose 0.5% to $1,642.46 per ounce, but down from the 7-year high $1,702 hit on Monday.

However, on the flip side, traders are selling gold to fund margin calls which are capping the yellow metal’s gains. Vandana Bharti, assistant vice-president of commodity research at SMC Comtrade said,

“Gold is now feeling the pinch from the fall in financial markets and travel ban. So, investors will keep money out of the markets for some time or book profits from the high levels, because of which we’ve seen some selling pressure in gold.”

Bitcoin meanwhile continues to follow the stock market which indicates the cryptocurrency is a risk-on asset.

“Bitcoin is trading like a risk-on asset. Not a safe haven, but the exact opposite,” said economist and trader Alex Kruger. However, the trader explained that the flagship cryptocurrency is trading like a risk-on asset and not being one as “investors are now looking to de-risk.”

However, Gabor Gurbacs, a digital asset strategist at VanEck maintains that both bitcoin and bullion are “safe-haven competitors against negative yielding government debt.”

The recently turned negative-yielding government bonds are relatively new, and “the next decade may redefine fundamental investment axioms about safe-haven assets.”

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Author: AnTy

US Treasury Dept and Industry Leaders Met to Discuss The Challenges In Crypto Compliance

The US Treasury Department, along with important figures in the crypto industry, have met to discuss the regulatory challenges in the crypto space.

On March 2nd, the Treasury made an announcement that it will be meeting with crypto experts and leaders in order to address the supervision and regulation of crypto assets.

Steven Mnuchin, the secretary of the Treasury, said he welcomes any responsible innovation that has the potential to make the financial system more efficient.

Innovation Compromising National Security?

Mnuchin also mentioned that national security may be threatened by innovation in the financial system, noting that:

“We must ensure that we balance innovation with the need to protect our national security and maintain the integrity of our financial system.”

According to the announcement released yesterday, the US Treasury Department focuses on preventing money laundering, terrorist financing and other illegal activities done with the help of crypto assets.

It further added that the US will fight for crypto regulation and that it won’t tolerate cryptocurrencies being used for any illegal activity.

The US Has Always Been in Conflict with Cryptocurrencies

Many US financial regulators have been very cautious and even hostile towards the subject of cryptocurrencies.

Even Mnuchin insisted last summer that Bitcoin (BTC) is laundered more than cash. In December, one of the US Federal Reserve’s governors stated that one-fourth of the people who use BTC are criminals and half of the BTC transactions are related to crimes.

The association of cryptocurrencies with illegal activities leads to the financial system being deprived of collaborations involving crypto assets.

Not long ago, the ChangeOutput blockchain communications shop’s founder, Justin O’Connell, mentioned that there are many banks not facilitating crypto-operating businesses just because there’s a belief that cryptocurrencies are being used for all sort of illicit actions.

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Author: Oana Ularu