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Central Banks to Cross-Examine Libra’s Founders in Switzerland

The European Central Bank (ECB) officials and 25 global central banks will be meeting with Libra’s founders to assess the project.

Libra previously reaffirmed its stance where the long launch schedule was to welcome any engagement with regulators and politicians. ECB executive, Benoit Coeure recently warned that Libra has to clear a “very high” bar as EU finance ministers have worried that cryptocurrencies such as Libra could destabilize finance and undermine the authority of government banks.

Reported by the Financial Times on September 14, Libra’s representatives are due to meet with the Committee on Payments and Market Infrastructure (CPMI) of the Bank of International Settlements in Switzerland on September 16. The CPMI of the Bank of International Settlements is a member of the Financial Stability Board which consists of 28 member banks, including the Bank of England, Deutsche Bundesbank, and the Federal Reserve Bank of New York.

Facebook has presented Libra as a way to democratize finance while providing banking to the unbanked and creating a universal format that is not exclusive and dependent on any one country.

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European Central Bank Plans to Take the Lead on Stablecoins

The European Central Bank (ECB) has announced its plans to get “ahead of the curve” on stablecoins and accelerate their efforts in the digital currency space.

During her debut press conference on Thursday, the new ECB President Christine Lagarde urged the ECB to take the lead regarding stablecoins, citing increased interests in the space from central banks in Britain, Canada and China. Lagarde highlighted the ECB is in the process of establishing clear objectives for the bank’s digital currency task force, which will be announced in 2020.Stablecoins are digital currencies pegged to physical assets, such as gold, or fiat currency and are designed to minimize price volatility.

Responding to the Demand

During the conference, Lagarde said, “My personal conviction is that given the developments, we are seeing, not so much in the bitcoin segment but in the stablecoins projects.” She reiterated “We’d better be ahead of the curve if that happens. Because there is clearly demand out there that we have to respond to.”

The debate has raged within Europe regarding whether the ECB should issue its own digital currency but there has been considerable resistance from EU authorities.In September, the IMF released a paper entitled, Digital Currencies: The Rise of Stablecoins outlining the significant benefits stablecoins could bring to society. The IMF also said that banks could lose their intermediary roles as the public would most likely switch to stablecoin providers.

Lagarde was head of the IMF at the time and appears to be responding as to this issue with her role in the ECB, by mandating the central bank to compete with its own innovation.

The Changing of Lagarde

Lagarde appears to be on a completely different page to the former ECB President Jean Claude Triche who, last month at Caixin’s conference in Beijing, expressed his strong doubts that cryptocurrencies could ever become the future of money. “The [crypto]currency itself is not real, with the characteristics that a currency must have.” He further stated that buying a cryptocurrency is “in many respects pure speculation,” said Trichet, who led the ECB from 2003 to 2011, after a decade as governor of the Bank of France. “Even if [the cryptocurrency] is supposed to be based on underlying assets, I am observing a lot of speculation. It is not healthy.”

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ECB Report: Striking the Balance Between Allowing Privacy and Ensuring Compliance with CBDC

The European Central Bank has recently developed an “anonymity voucher” to safeguard potential central bank digital currency (CBDC) users’ privacy for low-value retail transactions, while ensuring that high-value transfers are subject to anti-money laundering (AML) approvals.

The new concept provided by the ECB aims to solve the issue of anonymity in digital currency transactions, striking a balance between allowing Europeans to have private transactions as well as satisfying the need for regulators’ demand of AML rules.

The report read: “Against the background of the ongoing digitalization of the economy, the payments ecosystem needs to find an answer to an issue that concerns all citizens: the question of how to allow some degree of privacy in electronic payments, while still ensuring compliance with AML/CFT regulations.”

The proof of concept was drawn up by the European System of Central Banks (ESCB), to demonstrate the possibility of a simplified CBDC payment system, allow for some degree of privacy for transactions.

With the support of Accenture and R3, the digitalization solution via distributed ledger technology (DLT), the user’s identity and transaction history would not be seen by the central bank or intermediaries other than the user, while still complying with AML/CFT compliance procedures.

There are four main principles the proof of concept is based on. The first, the CBDC is assumed to have cash-like features, emphasizing on the users’ privacy on lower-value transactions, and balances are not remunerated.

Source: ECB

The second, the design is built around intermediaries in a two-tier model. The central bank would rely on intermediaries that have access to central bank accounts and draw on balances held at the central bank and provide CBDC to the users, rather than the central bank servicing the users directly.

Third, the central bank is the only entity that would issue CBDC units, also allowing them to remove them from circulation at any time.

Lastly, a “dedicated AML authority” would be responsible to perform AML/CFT checks, checking the identities of users involved in large-value transactions.

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Fed Governor Warns ECB Forum that Libra Risks are Immense

The Governor of the Federal Reserve, Lael Brainard warned a European Central Bank (ECB) forum in Germany, that the risks posed by the potential mainstream adoption of Facebook’s proposed stablecoin Libra, are too immense.

According to an article by Forbes published on Dec.18, Brainard cautioned the ECB forum that the risks already associated with cryptocurrencies within the financial system would be exacerbated by a widely adopted stablecoin for everyday transactions. As Facebook’s active users account for nearly one-third of the global population, the possibility for quick massive adoption of Libra is very real.

Brainard indicated that cybercrimes relating to fraud and theft are expected to significantly increase to $4.4 billion in U.S. dollars in 2020 which is more than double the $1.7 billion in 2019.

She cited that crypto exchanges are vulnerable to hacking and losses are incurred by individuals who are targets through scams, malware, and ransomware. Brainard further argued that the lack of central bank protections associated with stablecoins, such as insurance and strong regulatory safeguards, is in direct opposition to the expectations of citizens and consumers.

Brainard asserted to the ECB audience, “Not only is it not clear whether comparable protections will be in place with Libra, or what recourse consumers will have, but it is not even clear how much price risk consumers will face since they do not appear to have rights to the stablecoin’s underlying assets.”

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Christine Lagarde Announced EUR 750 Billion Bond Buyback, Bitcoin Surged 10%

Since Mar 7, 2020, the crypto market has witnessed some of the worst days ever since its inception with market capitalization losing more than $140 billion in a week span. In our previous article, we analyzed how the fluctuation in the oil market and the coronavirus outbreak have made a major contribution in this bear market.

One of the worst hits in the bearish market was Bitcoin. which faced a nose crushing fall of more than 40% in 5 days with the price falling down from USD 9,120 to USD 3,500 before jumping back to USD 5100 by Mar 17, 2020.

For the last 3 days, the Bitcoin price fluctuation was stable hovering in the range of $5100 to $5300. In the last 24 hours, however, Bitcoin has witnessed a surge in its price and is currently touching a $6,000 mark.

Bitcoin Price on 19 Mar 2020

Source: CoinMarketCap

The surge in the price has come around the time when the European Central Bank (ECB) announced to launch a €750 Billion Pandemic Emergency Purchase Programme (PEPP) on Mar 19, 2020. The buyback of the bond aims to stimulate the European economy amidst the lockdown due to the Covid-19 outbreak.

“Extraordinary times require extraordinary action. There are no limits to our commitment to the euro. We are determined to use the full potential of our tools, within our mandate.”
ECB President Christine Lagarde

Not many analysts were expecting such an upward movement in the Bitcoin price charts. In our previous article, we mentioned how Peter Brandt predicted that Bitcoin’s price could go as low as $1,000.

ECB President Christine Lagarde went on the record and said that the bond purchase will continue until the ‘crisis phase’ of Coronavirus pandemic is over.

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Dutch Central Bank Aims to Play Leading Role in Developing CBDC in Europe as Part of Plan to Become Increasingly Digital

The Dutch central bank, De Nederlandsche Bank made an announcement in its bulletin, saying that it aims to become the European leader in the development of central bank digital currencies (CBDCs). The report highlighted that the topic of CBDC has gained more public exposure in the Netherlands than in “several other euro area countries for several reasons.”

The Dutch central bank has a positive outlook on CBDCs, as it believes that central bank money is essential to preserve as it is important for people to maintain essential trust in the monetary system.

The European Central Bank (ECB) previously expressed its interest in launching a digital Euro and stated that they have been doing theoretical research and practical experimentation. The report stated that the Netherlands could be a suitable testing ground for its testing. Even after evaluating the potential risks of CBDCs, the Dutch central bank said, “We are ready to play a leading role.”

The central bank emphasized that the use of cash is declining in the country, signaling that its citizens are using less central bank-issued currency for purchases. A CBDC could potentially allow more diversity in the payments market, as well as making cross-border payments to be more efficient, according to the central bank.

Similar to other countries in its catalyst for development for the digital payments, the report stated, “Many stores now ask clients specifically not to pay in cash, which effectively means that only private money is accepted. Due to the coronavirus pandemic, using cash has become more risky due to its risks of transmission.

However, the Dutch central bank was not included in the working group formed by six central banks to share experience on use cases on CBDCs. The six central banks were: the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Sveriges Riksbank, Swiss National Bank, and the Bank for International Settlements.

Sweden’s central bank has also started testing an e-krona, its CBDC to be run on blockchain, to simulate everyday banking activities, including payments, deposits, and withdrawals from a digital wallet on a mobile phone.

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Dutch Central Bank Forces Crypto Firms to Register Within Two Weeks or Face Cease and Desist

The Dutch Central Bank, De Nederlandsche Bank (DNB) has announced that crypto companies must register with the authority by May 18, or to stop operating immediately.

DNB has enforced the Dutch anti-money laundering (AML) laws, which was passed by the Dutch Parliament in April to comply with the Fourth Anti-Money Laundering Directive (AMLD4) laws. The Dutch AML laws are in compliance with the Financial Action Task Force-recommended AML directives and standards.

The AMLD4 laws were amended on April 21 by the Dutch Upper House, which states that firms that offer services to convert crypto and fiat, and crypto custody services must cease and desist if they do not register with the central bank by the deadline. The report did not make it clear regarding why the Dutch Central Bank decided to cite the European’s AMLD4, rather than the most recent directive, the AMLD5.

A draft application could be sufficient to fulfill the registration requirements by May 18, according to DNB’s announcement. The tight two-week notice may have been implemented due to the fact that the Dutch Parliament did not strengthen its AML laws until April 21, although the EU released its fifth EU AMLD in September last year, and all EU members had until early January to implement the directive.

Dutch central bank aims to play a leading role in developing CBDC in Europe

DNB made an announcement in its bulletin, saying that it aims to become the world leader in the development of central bank digital currencies (CBDCs). The report highlighted that the topic of CBDC has gained more public exposure in the Netherlands than in “several other euro area countries for several reasons.”

ECB encourages a robust regulatory structure for stablecoins

The European Central Bank (ECB) published an in-depth report on global stablecoins, focusing on highlighting the requirement for clear regulatory parameters for stablecoins, and the risks it may pose to financial stability. The ECB suggests that a “robust regulatory framework” must be established to address risks before its benefits could be explored.

The ECB recognizes that stablecoins could potentially improve the efficiency of the financial sector and access to financial services across the globe. Comparing stablecoins to cryptocurrencies such as Bitcoin, stablecoins could provide an alternative to volatile cryptocurrencies. The report stated, “A typical stablecoin arrangement (made up of the coin itself and the associated transfer platform and ancillary functions) seeks to reduce price volatility by anchoring the coin to a “safe” low-volatility reference asset or basket of assets.

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Italian Banking Association Wants to Join in on the ECB Digital Euro Central Bank Digital Currency Project

The Italian Banking Association, Associazione Bancaria Italiana (ABI), has announced that they want to participate in projects and experimentations of a European central bank digital currency (CBDC), recently known as the digital euro.

The ABI has set up an expert group last year to explore cryptocurrencies and digital assets and derived specific considerations by the committee. The banks believe that a programmable digital currency represents and innovation that is able to modify the way people conceive and exchange money.

The association of Italian banks has had experience working with distributed ledger technology on the Spunta DLT project, and “want to be part of the change that comes from such an important innovation like digital currency.”

Spunta Banca DLT is a project headed by the ABI and is operational for the interbank reconciliation process, and 55 banks have been operating on the blockchain as of May 2020. Spunta uses R3’s Corda Enterprise to automate the reconciliation of transactions, moving to real-time management for the reconciliation process.

The Italian banks emphasized on the importance of complying with EU regulations, and to protect the personal data privacy of their citizens. With the use of technology to create digital money, the ABI believes the potential currency must gain maximum trust from the public, therefore high standards of regulatory framework, security, and supervision must be put in place.

With the potential availability of a CBDC, the association believes this could foster peer-to-peer value transmission, to facilitate cross-border transactions, while reducing heavy administrative processes. The press release read:

“A key success factor for the adoption of CBDC is to reach a frictionless user experience, ensuring at the same time full interoperability between [the] digital and analogical world and a complete circularity among all ecosystem actors.”

Bank of France successfully tests out the digital euro

The French Central Bank, Banque de France, has recently successfully trialed a central bank digital currency CBDC – the digital euro, operating on a blockchain.

Banque de France launched a program of experiments to test out a CBDC, aimed for interbank settlements, and participants have submitted their applications to experiment with the use of the digital euro.

In November 2019, at the Global Blockchain Congress, which took place in Malaga, Spain, the European Central Bank (ECB) confirmed that it has been working on a digital euro. The Association of German Banks released a detailed plan for a crypto-based digital Euro, which will be launched by regulators.

Dutch central bank also aims to play a leading role in the CBDC

The Dutch central bank, De Nederlandsche Bank, believes that central bank money is essential to preserve as people need to maintain essential trust in the monetary system.

The Dutch central bank emphasized that the use of cash is declining in the country, signaling that its citizens are using fewer central bank-issued currency for purchases. A CBDC could potentially allow more diversity in the payments market, as well as making cross-border payments to be more efficient, according to the central bank.

ECB Plans to Lead CBDC Exploration to Unleash Global Power of the Euro

Fabio Panetta, a member of the Executive Board of the European Central Bank (ECB), stated in his address to the European Parliament that the ECB intends to remain at the forefront of discussions concerning the nature of money in the digital world, including the exploration of the desirability and feasibility of establishing a central bank digital currency (CBDC).

Italian economist and Member of the Executive Board of the ECB, Fabio Panetta addressed the European Parliament via a Frankfurt Am Main video conference on July 7—where he spoke on the Euro’s untapped global potential, citing the necessity to stay ahead of the pack in terms of CBDC development.

Euro’s role in the Global Markets

Referencing the findings of the 19th annual review of the international role of the euro, Panetta highlighted to the ECB members that although the euro has been one of the most profound changes to the international monetary system since the collapse of the Bretton Woods System, the euro’s share in international currency sits at around 19% which is lower than the approximate 50% share of the US dollar, but well ahead of any other currency.

Panetta reflected, “Developments since the outbreak of the coronavirus (COVID-19) pandemic have not changed the picture: investors rushed to the safety and liquidity of the US dollar in March 2020, confirming its pre-eminent role in the global monetary and financial system.”

Panetta stated that the euro’s global potential is yet to be fully realized, “But the right policies could unleash it.”

Covid-19 and the Rise of Digital Money

The Covid-19 pandemic crisis has accelerated the digitalization of money which Panetta believes, “May have implications for the euro’s global role.”

The Italian economist highlighted that Europe has stepped up its efforts in meeting the challenge to create a true European and modern payment solution through the European Payments Initiative. The initiative is a collaboration of 16 European banks and aims to create a unified payment solution for consumers and merchants across Europe, encompassing a payment card and a digital wallet and covering in-store, online, and person-to-person payments as well as cash withdrawals. Panetta said, “This is essential to ensure the autonomy of the European payments market, in the face of increasing dominance by foreign players.”

CBDC Could Raise the International Status of the Euro

The ECB will continue to monitor how new technologies change payment behaviors and intends to remain at the forefront of the discussion—including the exploration of the desirability and feasibility of establishing a central bank digital currency (CBDC).

Panetta said, “A CBDC would have domestic implications for the euro area in areas such as monetary policy, financial stability, and payment systems, which would need to be thoroughly assessed.” But according to the ECB member, “If the CBDC is allowed to be used outside the euro area, it is likely to have implications for the global monetary and financial system too.”

Panetta believes that the euro’s international status could be greatly strengthened if the CBDC represented and an attractive payment vehicle or store of value for non-euro residents. He said, “It could have implications for capital flows and the exchange rate of the euro, with potential knock-on effects on the euro area and global economic developments. It could amplify the real and financial cross-border spillovers of domestic monetary policy shocks by creating a new channel for their propagation. The magnitude of such effects would depend on the design of the CBDC.”

Towards the end of his speech, Panetta asserted, “Regardless of the choice of technology, the stability of money and payment systems should continue to rest on the firm foundations central banks provide. Maintaining the unit of account, guaranteeing the finality of payments, providing liquidity, and conducting oversight remain essential public goods that are provided by central banks. They are paramount to maintaining trust in a currency and safeguarding monetary sovereignty.”

Jul 13 Trading Analysis: Dont confuse the lack of volatility with stability

Trading Crypto with Eugene is a series of daily commentary of market analysis and trading advice shared by Eugene Ng of Matrixport, a veteran trader with 10 years of experience in top-tier global investment banks. If you like the article, please follow us here on Blockchain.News so you won’t miss our future publications.

BTC has been relatively unaspiring this weekend as ALTs continue to steal the limelight with LINK, Tezos, and Defi names making good gains. For example, ChainLink has hit an all-time high over the weekend with the market pundits citing near record network usage and mainstream adoption (over 45 partners since April). Staking and DeFi names also put on a good show and isnt surprisingly given the low vol environment in BTC. For DeFi, over $2bn has been locked across the various platforms this weekend and wrapped BTC on ETH has now exceeded $100 million. ETH however has been rather dull with headlines over the weekend that ETH 2.0 Phase 0 may not go live until 2021.

In macro-land, this week, we got EU summit on Friday – leaders will discuss the recovery fund, ECB and BoJ and others make their latest monetary policy decisions, U.S. earnings season kicks off with banks kicking off this Tuesday and China’s Q2 economic data. Despite Florida’s biggest daily increase in Covid19 cases, Saudi Arabia proposing to reduce cuts in Oil, and continued US-China rhotheric over the weekend (from trade war to tech), we are still heading into the week “risk-on” with U.S. equity futures showing an uptick in early Asia trading. Strategy: Continue to load up BTC options 8-8.5k puts and 10-10.5k calls. While I am a little surprised that it’s been risk-on from Monday open, I’ll be a little cautious on where we head in the next few days. Gdluck, and speak to me if you want to discuss trade ideas.$9,350 should see some stops and potential leg higher in BTC… May be temporary and highly dependent where S&P 500 moves this week....

More than $2bn locked across various platforms in DeFi…

DisclaimerOpinions expressed are solely the analyst’s own and do not express the views of Matrixport the company.The views and opinions expressed in this article are those of the contributor and do not necessarily reflect the view of Blockchain.News.