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Market Researcher States That Bitcoin is an Indicator for Geopolitical Turmoil

Nicolas Colas, a market researcher and Co-founder of market research firm DataTrek Research, says that Bitcoin could be used as an indication for geopolitical turmoil.

Bitcoin serving as indicators

On August 14, in a CNBC interview, Colas had claimed that Bitcoin was one of the few assets whose price had predicted the Hong Kong’s protest which also involved its local capital flight.

He had said that he believed that Bitcoin was a safe haven when asked by the interviewer. He said:

“We are definitely seeing that, and really are perked up around the Hong Kong protests and some of the currency flight that happened out of Hong Kong and the mainland, and Bitcoin was one of the few assets that we watched that actually predicted that uncertainty ahead of time. Nothing else was really moving, Bitcoin was.”

Colas expressed his certainty about the digital currency’s ability to hit the $20,000 mark again, saying that the currency is still new and in its infant stage and had a lot of room for growth.

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US Awaits Recession While Bitcoin Becomes the Last Resort

What happened this week?

The trade-war worries affected the financial markets on Wednesday, while stocks and commodities tumbled in Europe and the United States. Equities declined more than 1% in the United States after the S&P 500 Index fell 2.93%, the NASDAQ shed 3%, and the Dow Jones tumbled over 3%.

Investors shifted towards the safety of government bonds. Yields on 10-year US treasury bonds inverted against the 2-year yield for the first time since 2007, prior to the Great Recession.

Source: Commercial Loan Direct

30-year treasuries dropped below 2% for the first time, signaling a recession as a sign of how nervous investors are about the immediate outlook for the economy. When shorter-term rates are higher than the longer-term bond yields, an inverted yield curve is formed. The inverted yield curve is a reflection of the investors’ view of the US economy. Treasury yield curve inversions often indicate that the US recessions and bear markets are on their way.

Tom Essaye, the founder of The Sevens Report, noted to clients:

“Historically speaking, the inversion of that benchmark yield curve measure means that we now must expect a recession anywhere from six-to-18 months from today.”

While investors have been continually investing in bonds despite being promised a tiny rate in return, long-term yields are negative in Japan and Germany. The global economy has mirrored the fears of a slump in the United States, notably given the trade war with China.

Bitcoin becoming the last resort in Argentina and Hong Kong

Turmoil in Argentina and Hong Kong encouraged local investors to pay a premium for Bitcoin. As the peso took a dive due to election uncertainty, Bitcoin was trading at a 10% surge on the peer-to-peer platform, LocalBitcoins.com compared to international cryptocurrency exchanges.

Bitcoin was trading at a 4% premium in Hong Kong as anti-government protestors have been clashing with the riot police. Since the protests began in June, the Hong Kong stock market has been seeing losses of up to 15%.

Rayne Steinberg, CEO of Los Angeles based crypto hedge fund, Arca noted:

“Bitcoin is becoming the asset of last resort in areas of extreme currency devaluation and political uncertainty. In the last week alone, Bitcoin is up approximately 50% against the Argentine peso and trading at a significant premium on local exchanges. And they are not alone, joining the ranks of Venezuela, Hong Kong and Turkey who have also experienced similar shocks.”

The price of Bitcoin was expected at a surge due to the inverted yield curve along with the premiums in Argentina and Hong Kong. However, this was not observed in the crypto market. A possible reason explained by Igor Chugunov, CEO of Credits Blockchain, was that the Chinese found crypto to be a safe haven but have since been leaving since trade tensions have loosened.

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Hong Kong Protests Powering Through Bitcoin Adoption

The Hong Kong protests, which has now entered its 12th week, affected Hong Kong’s economy, including the property market, stock exchange, shop owners, and banks. As the demand for democratic rights along with other requests from protesters, the use of tear gas and serious resistance has been observed from police authorities.

Hong Kong-based department store, Pricerite made an announcement on Facebook that it would begin accepting cryptocurrencies including Bitcoin, Ether, and Litecoin in fourteen locations in Hong Kong.

By utilizing Bitcoin’s Lightning Network, Pricerite will be able to convert crypto payments into Hong Kong Dollars in real-time in a matter of seconds.

There are several cryptocurrency ATM machines run by Genesis Block, which helped provide funds and supplies for those involved in the protests. Supplies such as water bottles and umbrellas can be purchased through cryptocurrencies – primarily Bitcoin Cash and QR codes are used to tell users where they can donate cryptos.

Earlier this month, protesters withdrew large amounts of money from their bank accounts and converted into US dollars as a new tactic.

Bitcoin becoming the last resort in Argentina and Hong Kong

Images via Hong Kong Free Press and Shutterstock

Crypto Exchange Huobi Plans to Reverse IPO in Hong Kong

Cryptocurrency exchange Huobi has reportedly been planning a reverse initial public offering (IPO) according to a document revealed by the Hong Kong Stock Exchange (HKEX).

In a notice published on September 10, the Hong Kong-listed electronics manufacturer Pantronics Holdings Limited, which was a company that was acquired by Huobi in 2018, uncovered that it would be renamed to Huobi Technology Holdings Limited.

Patronics Document. Source: HKEX

According to the disclosed documents, the company transferred more than 221 million ordinary shares in favor of the Huobi Group at the acquisition stage. Resulting in a $77 million deal, Huobi became Pantronic’s largest shareholder with more than a 73 percent stake. It has been assumed that the ultimate goal of the deal was to allow Huobi to conduct a reverse IPO in Hong Kong.

Stricter regulations on reverse IPOs from the HKEX planned ahead for October 1 may affect the company’s move. HKEX stated that it would change current regulations, meaning it would be harder for those that acquire a publicly listed company in different industries based in Hong Kong.

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The Fight for Freedom: Bitcoin and Hong Kong Battle Old World Control

The fight for freedom takes on many forms. Financial, speech, right to choose and right to act.

In 2019, we are all part of a very interesting period in history.

People want freedom. More control over their lives and more trust.

Government and banking are two key factors that regulate people’s freedom.

Depending on where you live, you will need to trust different governments. You trust them to be fair. Manage the currency you work each and every day to earn. As well as the right to certain freedoms being given.

Financial Freedom

Money makes the world go around. Money allows us to travel, eat, have shelter and do business. Money is an ever-important tool in dictating which options are open to all of us.

More options equal more freedom

Bitcoin and blockchain were created to aid in this fight. To ensure people control their own finances. No middle man. No bank. Complete control over money. Money that cannot be inflated or printed. Bitcoin is not stable, but it is getting better.

Hong Kong is undergoing a very special change. 1 country 2 systems. At this moment, there is a divide between ideals. A divide between freedoms. All made possible by powerful governments and money.

Capital restriction is well known in China. Citizens are told how they can spend their money. Even where they can spend it. The government controls the people through banking and law. They have a very distinct system. One that comes at a price. That price is control. The government is in control of the people. In control of finance. In control of the country.

Bitcoin is a system that removes control. There can be no central power. Bitcoin is decentralized. Trust is passed to computing. Exactly the same way we trust our self-driving cars. Handing our lives over to a program, that has been made exactly to drive us safely. We trust in technology every day. Every time we take an elevator. Bitcoin is the same. A technology made with complete security to handle our finances. That we control. With access keys. Again, like a car.

Human error is a problem. We all make mistakes. We can be clumsy or just have a bad day. Bitcoin has no bad days. It doesn’t get sick. It doesn’t need a 2-week break. It never shows up late to work. It’s 24/7, 365 days a year.

Technology is the way forward. In finance and the fight for freedom.

Hong Kong and Bitcoin will both face trials before they get what they want. Many battles lie ahead. People in power do not want to lose it. This applies to those in government. As well as those in finance. The Hong Kong movement and Bitcoin movements threaten the power of an old system. Old methods of doing things. Old systems that are powerful. But not always best when we look back in history.

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Hong Kong’s Securities and Futures Commission Sets New Regulations for Crypto Exchanges

The Securities and Futures Commission, Hong Kong’s financial regulator, has set out new regulations for Bitcoin and cryptocurrency exchanges on Nov. 6. Announced by Ashley Alder, Chief Executive of the Hong Kong SFC made an announcement in his speech at the Hong Kong FinTech Week 2019. Following his speech, the SFC also published a new regulatory approach to “virtual asset trading platforms,” on its website.

The approach is technology-neutral

Alder started his speech by saying that the regulator has been contending with the growing list of issues, including the application of existing regulations in the “context of increased automation and the adoption of artificial intelligence and machine learning.”

The SFC has been concerned about financial services that have been outsourced to “big tech” companies, and issued a statement last month on how to make records accessible when firms use cloud computing.

Alder reiterated: “We recognize that we must be open to the benefits of innovation, but our bottom line is that we need to stay vigilant about the risks of new technology. The basic approach is technology-neutral.”

The new regulatory approach to crypto exchanges

Following last year’s announcement on a conceptual framework for the potential regulation of crypto exchanges, the SFC has considered whether it is appropriate to grant licenses to exchanges and regulate them.

These new standards seek to address regulatory concerns regarding custody, know-your-client (KYC) requirements, anti-money laundering (AML), and counter-financing of terrorism (CFT) and others for trading crypto.

Licenses could be granted to the crypto exchanges that choose to include “security virtual assets or tokens for trading,” where investors will be able to differentiate between regulated platforms from those that are unregulated.

Although the SFC is open to supervising crypto exchanges, it has made clear that “the virtual assets traded on the platform are not subject to the authorization or prospectus registration provisions that apply to traditional offerings of “securities” or “collective investment schemes.”

The SFC will also not be able to take action against market misconduct in the traditional securities and futures markets as it cryptos are not recognized as “securities” or “futures contracts,” even if the exchange is licensed. Licensed exchanges will also be placed in the SFC Regulatory Sandbox for some time under close and intensive supervision.

Libra and stablecoins

Apart from the growing interest of Bitcoin futures, which has started offerings in the US by established exchanges, stablecoins such has Libra also caught the SFC’s attention.

“These typically claim to have a mechanism to stabilize their value by backing a virtual token – or coin – with fiat currencies, commodities, or a basket of other crypto assets. That’s not to say that these are 100% stable,” said Alder.

This calls for attention in the areas of domestic data privacy, financial stability, competition, anti-money laundering, and consumer and investor protection.

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FinTech Remains as a High Priority Sector, Says Hong Kong Chief Executive Carrie Lam at the Asian Financial Forum 2020

The 13th Asian Financial Forum, taking place as a two-day event starting on Jan. 13, 2020, in Hong Kong, gathering the most influential leaders of the global financial, government, and business sectors, groundbreaking discussions on inclusiveness, innovation, and fintech.

Fintech as one of the high priority sectors in Hong Kong

In the opening session of the forum, the Chief Executive of Hong Kong, Carrie Lam, gave a speech acknowledging that Hong Kong has faced challenges and economic turmoil in the past year due to anti-government protests, as well as the US-China trade war. However, she defends the city’s financial system saying that the city’s financial systems “have not been undermined although we have experienced considerable unrest and challenges in recent months.” She added that financial technology would remain one of the high priority sectors in the city. Having issued eight virtual banking licenses and two virtual insurer licenses, according to Lam, the instant payment system launched in 2018 has reached US$307 million in total transactions every day.

Paul Chan, the Financial Secretary of Hong Kong, gave a short speech at the Keynote Luncheon at the forum. While tackling the challenges for Hong Kong, especially the social unrest affecting the financial market Chan emphasized the importance of “finding the path for a renewed prosperity and to make progress.” Hong Kong has been providing seamless financial connections to Mainland China, the Middle East, North America, and Europe. “Banking systems are still running smoothly, with ample liquidity as well,” he added. Green finance has also been an area of focus going forward, and fintech is an area that the government is striving to accept. He concluded, “Hong Kong is and will remain the business bridge between the Mainland and the rest of the world, count on Hong Kong to help you build your business in the Mainland.”

Refining growth, technology for innovation and inclusiveness

In the plenary session, “Redefining Growth: Innovation ∙ Breakthrough ∙ Inclusiveness,” the Hungarian Minister of Foreign Affairs and Trade spoke about enhancing financial inclusiveness in the nation. According to Péter Szijjártó, in the last ten years, the national economy has changed rapidly, due to the role of policies in the nation. “Ten years ago, Hungary ranked 28 out of 28 in terms of economic growth in the European Union (EU), and at the end of 2019, Hungary ranked number one in economic growth,” said Szijjártó. He explained that the nation carried out an unorthodox strategy on the economy that led to the improvement of its performance.

The minister added that the elimination of the tax system and implementing a flat tax system was the key for the nation on becoming the leader of the economic growth rates in the EU. “Entering the digital era, jobs require higher skills and higher skills require higher salaries. Students will be having the necessary skills to join the labor market’ we have a clear target to become the first 5G hub in Central Europe,” he explained.

Dr. Uttama Savanayana, Thailand’s Minister of Finance, stated that the most important aspect of the national investment strategy is a reform. Thailand launched a reform agenda as a core part of the national investment strategy, to drive for an inclusive financial sector, and innovation. He added, “We can foster innovation in a friendly ecosystem, through our reform strategy.” With its national e-payment system, Promptpay, Savanayana believes that it will provide opportunities for the financial sector, innovation, and will also foster startups. He concluded that Thailand’s infrastructure will bridge all areas in the country, and promote inclusiveness as a first step to sustainable growth.

Fintech lowering the costs in the financial services sector, increasing accessibility

In the policy dialogue session focusing on the global outlook and opportunities in the financial sector in 2020, the moderator of the panel Arthur Yuen, the Deputy Chief Executive of the Hong Kong Monetary Authority (HKMA), suggested that fintech knowledge has the potential to bring down the costs in the financial services sector, hence making the industry more accessible. With the growth of virtual banks in Hong Kong, there have been more suggestions made to the regulator in using stablecoins as a method of cross-border payment, which also brought a lot of risk factors that the authority needs to pay attention to, including cybersecurity, regulation advisory framework, and regulation technology (regtech).

Martin Raiser, the Country Director for China and Mongolia, and Director for Korea and the World Bank Group stated that 50% of citizens from low-income countries do not have bank accounts, and of this cohort, two-thirds are women. With financial inclusion, this cohort is a target group to keep in mind. Most of their payments are for agricultural goods, government transfers, remittances, that are received in the form of cash. According to Raiser, this creates opportunities for fintech companies to cater to this market, to lower access barriers, and the cost of financial transactions. There has also been a surge of mobile-based banking transactions in sub-Saharan Africa.

Disruptive technology could serve to change the landscape for the financial sector, and for regulators in the industry. From a risk perspective, Raiser believes that there is competition among services in the platform-based industry. Other risks include data protection, cybersecurity, managing the credit cycle, as it is not currently part of the financial system. There is a need for stronger international cooperation, as regulation around new disruptive technology should be regulated globally.

“Financial inclusion is a promise that fintech holds, blockchain can bring secure transactions, we see an opportunity here, risks must be managed,” said Raiser. “We are going to see new structural changes, some fintechs need to show that they are sustainable,” as most fintech companies have sought investment in the past.

If Libra succeeds, similar projects would be initiated in the future

Burkhard Balz, Member of the Executive Board of Deutsche Bundesbank, mentioned that it has been observed that there has been an increase in the use of digital payment solutions, especially from the BigTech side. Balz touched on Facebook’s Libra stablecoin, saying, “Facebook’s Libra has led to a flurry of activity around the globe. If Libra was successfully introduced, it could become relevant to central banks, as it is necessary that central banks and regulators have a close eye on this project.” The European Council and the European Commission say that no global stablecoin arrangement should be launched unless the risks have been adequately identified and addressed. Guaranteeing a level-playing field between Libra and other competitors, Balz said, “If Libra gets off the ground, similar initiatives will be started in the future.” He concluded that central banks and supervisors need to review their existing regulatory framework. “If we find that it contains loopholes for fintechs, we need to develop it quickly, and it is important that regulators around the globe work together, as we cannot regulate a global initiative nationally. What is the alternative here – there really is a need for regulators to cooperate on a global basis.”

Hong Kong’s Central Bank and Bank of Thailand Announce Results of Blockchain-Based CBDC Study

The Hong Kong Monetary Authority (HKMA) and the Bank of Thailand published the results in a research report of the Project Inthanon-LionRock, by the two central banks on the application of distributed ledger technology and central bank digital currencies (CBDCs) on cross-border payments. In May 2019, the two authorities signed a Memorandum of Understanding (MoU) on fintech collaboration, as Thailand is one of Hong Kong’s top 10 principal trading partners.

Project LionRock, native to Hong Kong’s central bank, started in 2017, along with three note-issuing banks, R3 consortium and Hong Kong Interbank Clearing Limited, and proof-of-concept (PoC) was developed. Currently, the banks that are involved in the project are the Hong Kong Shanghai Banking Corporation Limited, and ZA Bank, a virtual bank that is licensed by the HKMA, and formerly known as ZhongAn.

Project Inthanon started in 2018 and has arrived at its third phase. The two projects are exploring how distributed ledger technology and blockchain could be used for cross-border funds transfers. The two authorities have agreed to continue to further research in relevant areas, including the involvement of other banks and relevant parties in facilitating cross-border fund transfer trials. In the third quarter of 2019, eight banks in Thailand joined the central bank to develop the cross-border funds PoC.

Not made for retail

One of the key findings from the study concluded that due to the highly efficient and trusted retail and wholesale payment infrastructures in Hong Kong, there is not an urgent need for a CBDC at both the retail and wholesale levels. Although there is little value in developing a CBDC for retail payments, the study found that there has been an increase of interest in cross-border payments in funding solutions. The two authorities hope the study will help both jurisdictions in terms of trade.

Comparing to China’s CBDC

As China has been reportedly ready to launch its own CBDC, used mainly as digital cash issued by the central bank, the HKMA believes that there would not be an area for partnership, as China’s CBDC is primarily focused on the retail market. Although China also has other methods of payment, including Alipay and WeChat Pay, Pou explained that Hong Kong still does not have a need for a retail CBDC.

Solving the current pain points of the existing cross-border funds model

The study also aimed to solve the current pain points of the existing cross-border funds transfer model, such as the inefficiencies in settlement time, high fees involved in currency exchange, and the involvement of extensive intermediaries. The development of CBDC in both jurisdictions will allow for a seamless experience with cross-border remittances, with the access of competitive foreign exchange pricing, liquidity management, and saving mechanisms, and improving the transparency of transactions to fulfill regulatory requirements.

Mathee Supapongse, the Deputy Governor of the Bank of Thailand said, “Building on pain points and business cases, the novel cross-border model is designed and developed as a PoC.”

By utilizing blockchain, liquidity management and saving mechanisms could be automated, smoothening the payment process, including transaction queuing and conversion. Cross-border funds transfers could be completed in real-time, with fewer intermediaries involved and settlement layers. So far, only a Thai Baht to Hong Kong Dollar corridor has been tested with the 10 participating banks from Thailand and Hong Kong, the model is designed to be scalable and could be used with other jurisdictions as well.

Edmond Lau, the Senior Executive Director of the HKMA added, “Our joint research project with the Bank of Thailand marks an important first step to solve the pain points of low efficiency and high costs in traditional cross-border payments. With the use of blockchain technology, the innovative and unique solution not only addresses different technical issues in practical applications, but also offers good references to the central banking community on the use of CBDC.”

Practical solution and assessing hurdles

“What makes our study different is that we actually offer practical solutions to address the most well-known pain points in cross-border remittances […], not just theoretical or technological; so we hope we can offer some useful references to the central banking community,” said Colin Pou, the Executive Director of Financial Infrastructure of the HKMA.

According to Pou, the corridor network is meant to be a “trusted platform” for remittances, a platform that users can count on since it was created by central banks.

The next areas of focus of the study was said to be more extensive research on the technical, legal, and governance requirements of the CBDC. However, the HKMA representatives did not give a specific time for the potential launch, as other hurdles need to be assessed before setting a time for the launch.

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Hong Kong Blockchain Startup Bitspark Announces Closure Amid Coronavirus Outbreak and Protests

Bitspark, a blockchain remittance startup based in Hong Kong, recently announced its abrupt closure, stating internal restructuring issues.

The company was co-founded by Bitspark CEO George Harrap and COO Maxine Ryan, a college drop-out in 2014, and quickly became one of the major blockchain-based financial services firm in the Asia Pacific region, serving countries such as Vietnam, Philippines, and Indonesia. Ryan was also named as one of the 30 under 30 in the Asia Finance and Venture Capital category in 2018 by Forbes.

Harrap emphasized the company’s excellent performance a year prior, with the release of its Cash Point product, which has seen 400 percent month-over-month growth.

Although the company mentioned the reasons behind the closure was due to internal restructuring issues, Harrap added, “While the HK protests and now virus epidemic haven’t affected us much, it hasn’t helped either.”

Ryan announced her intention to step down as her position as the Chief Operation Officer. She stated that she made the decision a month ago, she explained, “This paired with the landscape of Hong Kong with protests and the coronavirus where Bitspark HQ is located. The team and shareholders decided this was the best way forward to prevent integrity decay of the company.”

Bitspark users would be able to withdraw their cryptocurrencies from Feb. 3 to Mar. 4, as the company stated that its platform would be available during this period. After this period, account logins will be disabled, and users will only be able to withdraw their funds using the Bitspark customer support.

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Unauthorized Cryptocurrency Betting Jeopardizes Jockey Racing Integrity, Warns HKJC Expert

During a presentation at the Asian Racing Conference in Cape Town, South Africa, Tom Chignell, a Hong Kong Jockey Club expert, warnedthat illegal cryptocurrency betting markets were causing more harm than good to jockey racing integrity. He raised his remarks as he noted that illegitimate global crypto bookmakers were gaining traction, and this posed a considerable risk to the integrity of the jockeys racing.

Crypto growth in the gambling world

The evolution of cryptocurrencies in gambling is no longer in oblivion as they are carving out a niche in this sector.

Chignell, who also serves as the Jockey Club executive manager of betting analysis and racing integrity, asserted that dynamics in the sporting sphere were continuously changing. As a result, his team was looking keenly on new developments.

He noted, “We’re looking at a new emerging but vastly expanding cryptocurrency market, with some websites specializing in horse racing globally, not just in Hong Kong. They are actually offering fixed-odds betting across the globe.”

Additionally, he asserted that huge amounts of money had been poured in the illegal cryptocurrency betting markets, and this was hindering jockey racing transparency.

Unregulated markets prompt race-fixing

On the issue of crypto-aided fixed betting, Chignell asserted, “They are not obliged to report suspicious betting and corruption to racing authorities. They are an emerging threat, which we are closely monitoring.”

He acknowledged that the unregulated nature of cryptocurrency markets was propelling race-fixing, and the racing authorities had to roll up their sleeves and get serious when it comes to monitoring them.

It was also revealed that due tot he anonymous nature and lack of compliance, the biggest threat to the integrity of racing was the possibility that trainers and jockeys preventing horses from winning while betting on themselves to lose on the illegal market without fear of being discovered.

Chignell posed, “If you are looking to race-fix or match-fix, why would you bet with the legal market where there are healthy, established reporting channels when there is a large illegal market where these are non-existent?”

He, therefore, felt that the regulation of crypto markets would be instrumental in hindering illegal betting that was tarnishing jockey racing integrity.

Nevertheless, blockchain technology is speculated to transform sports betting. For instance, in October 2019, Betmatch.io, a popular crypto sports betting platform, deployed a blockchain solution to assure bettors that their winnings would not be manipulated, ripped off, or cancelled.

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