stablecoin - Pwim.Net

"Buckle Up" For Bitcoin's Next Bull Run, Cameron Winklevoss Says

Gemini CEO and co-founder Cameron Winklevoss believes that the next Bitcoin bull run coming up will be “dramatically different,” due to the innovative financial resources that crypto investors have access to nowadays and to the current economic infrastructure.

Winklevoss Anticipates Next BTC Bull Run

Compared to previous bull markets, the billionaire crypto philanthropist said that with the rise of infrastructure, the influx of capital, and better projects at hand, Bitcoin (BTC) is set for its next bull run:

“The next Bitcoin bull run will be dramatically different. Today, there’s exponentially more capital, human capital, infrastructure, and high-quality projects than in 2017. Not to mention the very real specter of inflation that all fiat regimes face going forward. Buckle up!”

The Winklevoss brothers are on the same page regarding Bitcoin. Last week, Cameron’s twin brother and co-founder of Gemini, Tyler Winklevoss, commented on the US Federal Reserve’s economic stimulus strategy having a positive impact on Bitcoin and its pricing on the crypto market. Winklevoss stated that the Federal Reserve had set the stage for BTC’s next bull run. He referred to the fact that the US government is actively printing money in bulk in order to deliver an economic stimulus package to its citizens, to provide pandemic relief.

Americans Use First-Time Stimulus Check for BTC

What seems to be interesting however, is that according to a report by Coinbase CEO Brian Armstrong, instead of using their funds towards goods and services, many Americans directd their first-time stimulus checks of $1,200 towards investing in BTC funds.

So despite coronavirus and the economic downfall happening worldwide, things appear to be looking up for the cryptocurrency market. Data points hint that crypto investors’ capital have been on the rise. Furthermore, with the increase in regulatory policies and the clarity of them, the infrastructure of the crypto market has been improving considerably.

Why Was More Money Involved In the Last BTC Rally?

Researchers looked at two key points to explain why more money has been involved in the latest Bitcoin rally, where the dominant cryptocurrency underwent a huge surge.

First of all, Tether(USDT), the market capitalization of Tether, the biggest stablecoin on the cryptocurrency market, has surpassed $10 billion in assets. Secondly, Grayscale Investments, the big-time cryptocurrency investment firm, has recently achieved a new high in the Assets Under Management (AUM) department.

Stablecoin Tether On Top of Its Game

Tether has been up to now the biggest stablecoin on the crypto market. Investors worldwide have therefore relied a lot on the stablecoin to trade crypto. Countries with poor regulatory policies revolving around cryptocurrency regulation have favored Tether, as it is a stablecoin. With the rise in market cap of Tether to $10 billion, this may mean that cryptocurrency exchanges might be on the brink of a huge money influx, with more funds being used on them.

As to further explain why more money has been involved in the latest BTC bull run, researchers turn towards Grayscale’s crypto-asset trusts as an explanation. The crypto asset trust funds of the large-scale investment firm are arguably the most utilized investment vehicles employed by businesses and networks looking to gain exposure to cryptocurrencies.

Grayscale Investments Reaches $5.1 Billion

Recently, the assets under management by Grayscale Investments have achieved a new record, reaching an all-time high of $5.1 billion.

On the subject matter, CEO of Grayscale Investments, Barry Silbert, said that Bitcoin has too much support from US government officials to ever be dismissed and shut down. The CEO thinks that blockchain firms’ success with regulatory policies put forth by officials can be attributed to pro-blockchain groups, such as Blockchain Association. The latter is a group who has advocated for digital firms by appealing to the US Securities and Exchange Commission in the past.

Silbert thinks that the blockchain industry has come a long way, with more and more investors looking at Bitcoin as an interesting hedge. In a Twitter post, he spoke about his own personal experience with his cryptocurrency investment firm. Silbert said that in 2013, when his company launched a Bitcoin investment fund, everyone thought they were crazy. “Well, look at us now…,” he added.

This Week’s Bitcoin Bull Run

Overall, projects and companies in the Bitcoin and crypto industry seem to be increasing in quality. With the latest Bitcoin rally that happened earlier this week, there seems to be an indication that the cryptocurrency industry is on the rise. Bitcoin surged past the $10,000 mark on Monday, creating a buzz in the financial industry.

CEO of financial consultancy firm deVere Group, Nigel Green, was even bold enough to state that the cryptocurrency is set to potentially “knock gold from its long-held position” of being a safe-haven asset.

Image source: Shutterstock

Elizabeth Warren Urges Treasury Secretary Yellen to Implement Strong AML/CFT Measures for Stablecoins

In a letter addressed to Treasury Secretary Janet Yellen, US Senator Elizabeth Warren has expressed her support for the implementation of robust Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) measures for stablecoins. Warren’s letter emphasizes the importance of adopting the full suite of AML tools requested by the Treasury Department in a November 2023 letter to Congress.

Warren highlights the growing threat that cryptocurrencies, particularly stablecoins, pose to national security. She specifically mentions the reliance of Iran and Hamas on crypto to fundraise and finance terrorist attacks. To effectively combat this threat, Warren argues that any new crypto legislation must include the comprehensive AML/CFT authorities requested by the Treasury Department.

The Senator references Deputy Secretary Adewale O. ‘Wally’ Adeyemo’s testimony before the Senate Committee on Banking, Housing, and Urban Affairs, where he emphasized the need for additional AML authorities to counter the threat posed by cryptocurrencies. Warren points out that excluding key players in the digital asset ecosystem, such as miners and validators, from AML/CFT requirements would allow bad actors to profit from the increased crypto trading facilitated by stablecoin legislation.

Warren’s stance on the regulation and oversight of crypto aligns with her previous efforts to rein in illegal activities and protect consumers, the financial system, and national security. She has been an advocate for closing loopholes in AML rules that allow sanctioned entities like Iran to earn revenue through crypto transactions. Additionally, Warren has raised concerns about the use of crypto in terrorist financing and has called for stronger rules to protect consumers and national security in stablecoin-related legislation.

Image source: Shutterstock

Most European Regulators Have Scrutinized Facebook's Libra, Except One: Who’s the Odd One Out?

What happened recently with the Libra Association?

Made up of more than two dozen companies and based in Geneva, a few of the founding members, including PayPal, Mastercard, Visa, Stripe, Booking Holdings, and eBay, decided to leave the Libra project. A five-member board governance board was formed after the Libra Association reaffirmed its commitment by holding its inaugural meeting in Geneva, Switzerland, on Oct. 14.

However, the Libra Association quickly defended, saying, “we’re better off knowing about this lack of commitment now, rather than later.”

Libra announced that the launch was planned for June 2020; however, the global watchdogs stated, “we are surprised and concerned that this further detail is not yet available.” On Sept. 16, Libra representatives met with the Committee on Payments and Market Infrastructure (CPMI), a part of the Bank for International Settlements (BIS) – a group for 60 central banks and monetary authorities across the globe to discuss the regulatory hurdles around stablecoins developed by large corporations.

Despite the global uncertainty of the stablecoin, the Libra Association will continue with its plan to launch with the 100 members initially envisaged when it was announced in June. The association also believes that new financial and banking partners will be joining.

The European Union

Benoit Coeure, an executive at the European Central Bank, warned that regulators are cautious of cryptocurrencies by large corporations similar to Libra. He mentioned, “as a new technology, stablecoins are largely untested, especially on the scale required to run a global payment system. They give rise to a number of serious risks related to public policy priorities.” He believes that Libra needs to be well understood and thoroughly tested in a real-world environment to see whether it is scalable to run a global system for its official launch.

The executive branch of the European Union sent a questionnaire to Facebook and the Libra Association regarding clarification about the stablecoin. These questions come after the European Union antitrust regulators’ preliminary investigation into Facebook’s plans. The EU regulators were concerned about the use of information and data, along with the integration of Libra wallets with WhatsApp and messenger services.

However, Dante Disparte, Head of Policy and Communications for the Libra Association, stated, “the Libra Association welcomes this public policy dialogue and multi-stakeholder process that will help unleash the economic and social potential of digital currencies.”

Valdis Dombrovskis, the European Union’s finance commissioner, pledged to propose new rules to regulate cryptocurrencies similar to Libra. Dombrovskis’ served as Latvia’s prime minister and finance minister and was a member of the European Parliament from 2004 to 2009. If reappointed as the Executive Vice President of the European Commission, Dombrovskis would be handling “An Economy that Works for People” and will be working to “deepen Europe’s economic and monetary union.” Dombrovskis advocated for the EU’s need to address “unfair competition, cybersecurity, and threats to financial stability.”

The European Commission

Margrethe Vestager, the Executive Vice President-Designate of the European Commission, questioned the motives behind Facebook’s Libra stablecoin. Vestager addressed competition as a possible impact from Libra’s launch due to Facebook’s multimillion user base and a distortion of competition in the payment services market.

Vestager added:

“It’s a pretty new thing that we are starting to question something that does not exist yet. But it is so far in the future that we cannot tell if this is going to be a problem. And the problem may be that you get a completely closed ecosystem that has nothing to do with the rest of the economy.”

Vestager further questioned, “What does it mean that you have your own currency that works within this space — and which can only be used within this space? So, what about the values that get caught there? Those who sell with the Libra as a means of payment then get a special advantage over those who come and want to pay in all sorts of other ways?”

France

France said in September that it would be blocking the development of Facebook’s Libra in Europe. Bruno Le Maire, French Finance Minister, said that plans for Libra could not move ahead unless concerns over consumer risk and governments’ monetary sovereignty were addressed. Le Maire commented on virtual currencies:

“I want to be absolutely clear: In these conditions, we cannot authorize the development of Libra on the European soil.” He added, “the monetary sovereignty of countries is at stake from a possible privatization of money… by a sole actor with more than 2 billion users on the planet.”

Le Maire also mentioned that there is a risk of countries having to bail out the currency if it goes under and facing other risks such as money laundering on a more challenging level, and terrorism financing. He suggested that Facebook could look at creating another separate “public digital currency.” Another concern that Le Maire expressed was that Libra might “substitute itself as a national currency” and potentially cause financial disruption. He said, “I don’t see why we should dedicate so much effort to combating money laundering and terrorist financing for so many years to see a digital currency like Libra completely escape those regulatory efforts.”

However, Disparte said that Le Maire’s comments emphasized the importance of the project’s backers working together with global regulators. He clarified, “We recognize that blockchain is an emerging technology and that policymakers must carefully consider how its applications fit into their financial system policies.”

Germany

Along with the French, Germany’s finance minister has also been against private currency projects like Libra, although support the digitization of the euro. Olaf Scholz, German Federal Minister of Finance, stated that he would be keen on developing an “E-euro,” claiming:

“A payment system like that would be good for Europe as a financial center and its integration into the world financial system.”

However, he also commented by saying he is “very, very skeptical” of Facebook’s stablecoin, and added, “a core element of national sovereignty is currency issuance; we would not leave that to private businesses.”

Portugal

Ricardo Mourinho Felix, Portugal’s Secretary of State for Finance expressed concerns about Libra in early October, announcing that it should not circulate in the market until the risks it could pose for the current financial system are mitigated.

Felix addressed Facebook’s stablecoin at a conference, “it is clear from the outset that is a high-risk phenomenon with systemic implications. It is essential that no ‘stable currency’ project like Libra – is launched until all concerns have been duly addressed.” He further highlighted that Portugal also shares the same concerns as stated by other European countries regarding Libra.

Felix highlighted the “risk that Libra could limit the reach of traditional monetary policy tools,” and could have a significant effect on the policies which today promote the stability of the financial system.”

Switzerland

Mark Branson, the Head of the Swiss Financial Market Supervisory Authority (FINMA) has concerns with the crypto projects that develop without being thoroughly questioned by the officials rather than about Facebook’s Libra.

Branson stated at a Bloomberg event in Zurich, “I am much more nervous about projects which develop in a dark corner in the financial system somewhere, spread themselves out through cyberspace and one day are too big to be stopped.”

He mentioned that Switzerland would not be putting up “extra hurdles” in front of the project. However, Libra will be under strict rules that typically apply to banks and on top of unbending anti-money laundering laws. “We are not here to make such projects impossible. We will respond to them with an open mind, with an attitude that same risks require same rules,” said Branson.

United Kingdom

Mark Carney, Governor of the Bank of England, has been defending Facebook’s decision to create a new currency. According to news outlet TheStar, Carney highlighted the limitations of the current traditional financial system. Carney believes that Facebook and other similar firms should be involved in projects like Libra.

With the high costs of transactions, small businesses are charged as much as 200 basis points per transaction, Carney further explained, “that’s not good enough in this day and age. Those payments should be instantaneous; it should be the same as us exchanging a banknote online. It should be virtually costless, and it should be 100 percent resilient.”

The United Kingdom’s central bank also presented its latest Financial Policy Summary and Record at a Financial Policy Committee (FPC) meeting that was held on Oct. 9. The document presented the resilience of the UK Financial system, discussed the innovative developments in the payments sector while highlight Libra has a great chance to become “a systemically important payment system.”

Images via Shutterstock

Image source: Shutterstock

Why Facebook's Libra Is Not A Real Cryptocurrency

First of all, the Libra white paper does not mention anything about the United States. There is not a single reference to the dollar, US regulatory system or legal structure. This is ironic because the founding members of Libra come from an American company. In the past, Soros sponsored hedge funds had caused trouble in the United States and were warned by the United States government for their unconventional (and unethical) practices. In other words, the hedge funds could operate in other countries but were banned in the USA. Because of this Soros had nearly destroyed the pound and resulted in the Asian Financial Crisis of 1997.

Since Libra is fully controlled by Wall Street we can strongly predict that Libra will not be popular in the USA as many Americans are discouraged by Wall Street corporations. However, Libra will be popular in other countries, especially those with unstable currency.

Secondly, Libra’s white paper, and their reserve assets and operating models say they are based on gold, euros and the Hong Kong dollar without a single mention of the US dollar. Early use of several currency deposits, as well as credible government short-term bonds, were used as Libra’s reserve assets. Libra also aims to establish stability and reputation, but it will transform into a completely open system over time.

In other words, in the early stages of replacing the fiat currency with Libra, we need to guarantee credible reserve assets but gradually will form its own value system. In the future, Libra will decouple from reserve assets and become a new independent world currency. This should be very similar to the 1971 US dollar. After the completion of internationalization, the US dollar separated from gold because of the need for more flexibility.

Thirdly, Libra can be understood as the Hong Kong dollar model. Hong Kong does not have a central bank. Banks can issue money directly, but if you want to issue Hong Kong dollars, you must pay a fixed percentage of the US dollar to the Hong Kong government. Libra will be the same in the next few years. The global cooperation agencies can obtain Libra by paying fiat currency to Libra. Then these cooperatives, like market makers, can carry out two-way exchanges between fiat currency and Libra with ordinary users.

It should be noted that Libra’s reserve assets are not a single currency, so the exchange rate is not solely the rate of the US dollar and your country’s fiat currency, it is a basket of exchange rates. But the dollar will still occupy a large portion of the entire reserve thus continuing to stimulate the exchange among global users. If the development is relatively rapid, the currencies of small countries may accelerate the depreciation or disappear, some governments may even accept Libra to pay taxes and expenses.

Libra has a very similar mission with Bitcoin. When we read the Libra white paper it is as if we read an expanded version of the 2008 Bitcoin white paper, it’s almost as if the two came from the same group or team.

If the white paper on Bitcoin in 2008 was to use a blockchain approach to create a technical currency that transcends sovereignty, then today’s Libra white paper is actually a comprehensive commercial application, based on a blockchain technically credible issue proved by Bitcoin. This is similar to the trending 5G network, starting from a long-term test of one or two base stations and then entering the large-scale commercial phase.

Bitcoin and Libra both try to solve the same problem, high transaction costs of daily micro-payments. This problem seriously affects the popularity and inclusiveness of financial resources around the world from these developers.

Libra’s mission is to enable a simple global currency and financial infrastructure that empowers billions of users.

This document outlines our plans for a new decentralized blockchain, a low-volatility cryptocurrency, and a smart contract platform that together will aim to create a new opportunity for responsible financial services innovation.

Working together, technology companies and financial institutions have found solutions to help increase economic empowerment around the world. Despite this progress, large swaths of the world’s population are still left behind — 1.7 billion adults globally remain outside of the financial system with no access to traditional banks, even though one billion have a mobile phone and nearly half a billion have internet access.

Whereas today, access to financial service is limited or restricted to those who need it most — those impacted by cost, reliability, and the ability to seamlessly send money do not have access to necessary services.

All over the world, people with less money pay more for financial services. Hard-earned income is eroded by fees such as remittances, wire costs, overdraft, ATM charges, and many others. Payday loans can charge annualized interest rates of 400 percent or more, and finance charges can be as high as $30 just to borrow $100. When people who are “unbanked” are asked why they remain on the fringe of joining the existing financial system the answer is usually the same. Those who remain “unbanked” indicate that not having sufficient funds, high and unpredictable fees, banks being too far away, and lacking the necessary documentation are the main reasons for this.

Micro-payments in developed countries such as the United States must pass through banks and credit card systems making transaction costs very high. This is not the case in China as this problem has been solved by the implementation of mobile payment. China’s mobile payment can maximize efficiency by transferring a red envelope, while the United States has to mobilize its bank settlement systems in order to transfer funds. Because of these problems and the delay of mobile payments by traditional financial institutions, it has directly stimulated the birth of Bitcoin and Libra.

So what do we reflect on, what are we losing after we gain the advantage of mobile payment?

Image source: Unsplash

Bitfinex and Tether's Appeal Rejected by New York Judge

Earlier this year, the New York Attorney General’s office has made allegations against Bitfinex of using up Tether’s cash reserves in April 2019. The accusations were made regarding the cryptocurrency exchange of losing $850 million, and thereafter taking funds from Tether’s reserves to cover the loss. The NYAG office started to investigate iFinex Inc, the company was registered in the BVI and owns both Bitfinex and Tether.

In a press release by New York Attorney General Letitia James, she stated:

“Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million dollars of co-mingled client and corporate funds. New York state has led the way in requiring virtual currency businesses to operate according to the law. And we will continue to stand up for investors and seek justice on their behalf when misled or cheated by any of these companies.”

The lawyers of Bitfinex and Tether asked Judge Joel Cohen of the New York Supreme Court to dismiss the case, the main argument is that both firms do not have any clients in the state of New York. It was later on revealed that on July 10, the Metropolitan Commercial Bank of New York shut down accounts associated with Tether.

Photo: Judge Cohen

Judge Cohen reportedly decided to give a 90-day extension to the case, which will give the New York Attorney General’s office to continue investigating. Judge Cohen also dismissed Bitfinex and Tether’s motion to appeal after the ruling.

The Government is Taking Action on Bitfinex, Who’s Next?

Judge Cohen image via Law.com, thumbnail image via Shutterstock

NYDFS Approved: Binance and Paxos New Stablecoin Collab & Paxos Gold-Backed Token

Binance and Paxos Team Up to Launch a New USD-Backed Stablecoin

Crypto exchange giant Binance, and digital asset trust company Paxos recently announced their partnership to launch a USD-backed stablecoin. The announcement comes after the approval from the New York State Department of Financial Services (NYDPS).

The new stablecoin, Binance USD (BUSD) is reportedly available later this month for direct purchase and redemption 1:1 for US dollars on the Paxos platform. Trading will be available against Bitcoin, Binance Coin, and Ripple on the Binance.com platform.

Changpeng Zhao, CEO of Binance, mentioned that Paxos is a leader in the digital trust sector and has expressed excitement to work with them in the development of their native stablecoin.

Paxos co-founder and CEO Asia Rich Teo shared with the Cointelegraph that gaining the NYDFS’s approval for the BUSD was a crucial step head for the stability of the global digital currency market.

He mentioned:

“We are proud that our stablecoin as a service offering enables trusted companies like Binance to introduce products customized for their users. The Paxos brand symbolizes regulatory integrity, consumer protection, and transparency for all of our partners.”

Paxos to Launch Gold-Backed Ethereum Token, PAX Gold

New York-based exchange and stablecoin operator, Paxos launched a gold-backed Ethereum-based token named Pax Gold (PAXG). Each token will be backed by a physical bar of gold stored in the Brink’s London vault. PAX Gold will be pegged one-to-one to an ounce of gold.

The NYDFS also approved of the issuance, stating it as the “first gold-backed virtual currency in New York State.” In a press release, Paxos also announced that the product is “the first crypto-asset redeemable for physical gold.”

Charles Cascarilla, CEO of Paxos mentioned to Coindesk:

“It’s not a representation of the commodity and its actual legal title to it. This is the exact point of the blockchain, the exact premise, that you can now make [assets] easily moveable and divisible and not be tied to a manual, physical process. We’re going to do more products like this where we are taking real-world assets and putting them on the blockchain.”

Paxos will be charging fees on on-chain transactions involving the token, including PAX Gold creation and destruction.

Images via Shutterstock and Business Insider

Global Currency Organization Launches New USD Stablecoin USDD

The Global Currency Organization (GCO) comprising of a group of former employees from TrustToken, Intel, and JPMorgan has announced the establishment of a new USD Digital (USDD) token. It is a US dollar-backed stablecoin that will be instrumental in institutions’ revenue sharing.

The GCO’s objective is to avail of an innovative stablecoins’ approach through the new token. As a result, the institutions that will utilize it will have the chance to use the revenue sharing model incorporated. Notably, a fifty-fifty concept has been inculcated to entice adoption from businesses, traders, and exchanges yearning for a stable crypto-asset.

The GCO’s CEO, Joe Vellanikaran, noted that the unveiled USDD token would be pivotal in availing more options to traders and institutions.

Vellanikaran stipulated:

“It’s the best of both worlds. They get the stablecoin, and they get the revenue that GCO shares with them.”

Vellanikaran was previously employed by TrustToken. As a result, he worked on the TrueUSD token. He asserted that stablecoins are fundamental as they offer value for individual and institutional investors, especially in the movement of money across different markets.

Vellanikaran said:

“Let’s say you’re a Japanese student living in the U.S. and you want your parents to send you funds. With the current process, you’d either need a U.S. bank account or be subjected to long delays and conversion fees. With our stablecoin, you should be able to receive your funds in a matter of days.”

He trusts that a paradigm shift will be experienced in the global spectrum, whereby blockchain-based currencies will thrive in the next 10 to 20 years.

Image via Shutterstock

Stablecoin and Its Potential Business Uses

Blockchain innovation has significantly changed the way we thought in the traditional financial sector. All of those concepts and business models, such as decentralization, cryptographic tokens, and digital ledger, also brought us more imaginations toward the future forms of money. Although we are still facing the disorder from the 2017–2018 ICO chaos and increasingly strict regulatory frameworks, the overall trend of crystallization should be irreversible. The development of financial digitalization and proper use of technologies can empower our economy, even provide a great opportunity to overcome those development challenges. The concerns, therefore, can be argued that how we can bring awareness and build trust to consumers, and how to monitor and eliminate those crypto risks for the financial institutes and regulators?

The stablecoin may be a possible solution in a world that fiat is in flux while the innovation has the possibility to transform the landscape of financing and banking. By definition, stablecoin is a cryptocurrency — an internet-based medium of exchange, backed by valuable assets in the real economy. If you take US dollars between 1945–1970 as an example, each USD should be equivalent to 1/35 of an ounce of gold (however President Nixon tore apart the Bretton Woods Agreement in 1971 but that’s another story). In the crypto world, stablecoin services in a very similar function, it can be traded as the medium in any transaction because the stablecoin itself pegs its market value to some external reference, for example, USD, other fiat currencies, or commodities such as gold. Indeed, the most common style of stablecoin is backed by fiat currency at the 1:1 ratio, like USDT and Tether — both are backed by USD. Ideally, the stablecoin requires sufficient reserve assets to keep the volatility-free valuation of that “coin”, then it can be used in daily exchange — from trading other cryptocurrencies in exchanges to buying food in a physical shop.

Another interesting private project is QDAO — a fully decentralized stablecoin backed by crypto assets, which brings the discussion to the next level. While other stablecoins pledge to assets such as US dollar or gold, QDAO chooses to accept Bitcoin (or potentially other crypto assets) as the fundamental collateral (it needs to deposit or lock up certain amount of his crypto asset) and the user can decide if he wants to create any fiat-based stablecoin for further use. For example, the term “USDQ” represents a fully USD-backed token while another term “JPYQ” means the token is supported by Japanese Yen or “CNYQ” with Chinese Yen as the target. Of course, according to the basic rule, the reserve assets should always exceed the value in circulation, PLATINUM ENGINEERING (the team initiated this idea) has designed algorithms, deposit & settlement mechanisms and smart contract-driven ecosystem for supporting such stablecoin creations. The way that stablecoin is still pegged to the fiat at a 1:1 ratio but take BTC as the underlying collateral has become more popular and flexible for business cases in recent years. Actually, many decentralized finance (DeFi) projects (including QDAO) already applied this “over-collateralization” principle to develop their lending models. It’s believed that the proper stablecoin mechanism should not only defense against malicious actions/speculations, but also it should provide price stability and security for the transaction, payment, and further utilities in the financial market.

Besides those brilliant private sectors, government and public sectors also start paying more attention to a crypto solution, especially the stablecoin (due to conservative governments may not be in favor of anything “unstable”), and how to optimize our banking and even the monetary policy. The synthetic central bank digital currency (CBDC) has been introduced by the World Bank Group since the beginning of 2019. The framework aims at offering a possible path that trustable private sectors could work with the central bank and inject digital money into the market, or we can even call it the fin-tech public-private partnership for the future economy. If you are a believer in free market, the sCBDC should be an exciting approach that unlock the last economic power from sovereign government — the seigniorage (note that it assumes most of the commercial & financial activities have been privatized in the modern democratic nations, but the seigniorage is still solely and completely controlled by the central bank). Indeed, the idea of “decentralization” or “reconstruction of power” is not new, 40 years ago the Anglo-Austrian economist, Friedrich Hayek, already argued something similar in his book “The Denationalization of Money”. But of course, at that moment, the word “digital” was not yet brought to public attention.

Blockchain technology, cryptocurrency, and stablecoin should be regarded as the disruption for the financial landscape, and the monetary value can be electronically stored and pegged to a safe and liquid asset also sheds light on new payment and the accessibility to financial services. We have more than 2.5 billion individuals and 200 million SMEs lacking access to basic credit and financial support (World Bank, 2014), thus it’s persuasive that digital finance, or in more specific mean — the stablecoin, should be able to create more opportunities to not only advanced markets but for people in developing regions. The government and central bank might move slowly in this unfamiliar territory, however, the private sector can actively act as the infrastructure builder and service provider.

As Mr. Jin-Young Cai, the CEO of International Finance Corporation (IFC), pointed out in the CGAP event speech that “the benefits of digital finance extends well beyond conventional financial services; it can also be a powerful tool and an engine for job creation in developing countries”, it’s foreseeable that the role of stablecoin, digital money, and DeFi solution will become more important, especially for SME businesses and eventually be adopted by the general public. The following regulatory complexities and impacts on other fields shall be the nest essential topics to everyone.

Libra Forms Governing Board Despite Shrinking Membership

The Libra Association has reaffirmed its commitment in creating a payments-oriented stablecoin, holding its inaugural meeting yesterday in Geneva, Switzerland. According to a report from Reuters, the backers of Facebook’s cryptocurrency project selected a five-member governance board voted on articles of association, as mandated by Swiss law. The ruling council will need to reach a majority vote on most major decisions. Any proposed changes to management or membership arrangements will require a two-thirds majority vote.

The five-member board includes Facebook’s David Marcus, representatives from non-profit Kiva Microfunds, PayU, venture capital firm Andreessen Horowitz and Xapo Holdings Limited.

Optimism Amidst Desertion

The meeting took place in spite of a significant loss of support being reported over the last week which included major payments networks PayPal, Mastercard, Visa and Stripe who were joined by online auction giant eBay. The latest member defection came from the online travel company Booking Holding earlier on the same day.

According to Reuters, the only remaining payments firm in the Libra Association is Netherlands-based PayU, which purportedly does not operate in the United States, Canada and many areas in Africa and the Middle East.

At the recent meeting, the Libra Association expressed optimism and pledged their commitment to persevere and go ahead with the project. Dante Disparte, Head of Policy and Communications, Libra Association, stated that they perceive the recent desertion of major backers is “a correction; it’s not a setback.” Disparte did acknowledge that the coin could face delays as regulators continue to scrutinize the project.

Stablecoins Under The Microscope

On the same day as the Libra Association’s inaugural meeting, the G7 group of nations released a report outlining nine major risks that digital currencies, such as Facebook’s proposed Libra, pose to the global financial system.

The G7 report warned that even if member firms of the governing Libra Association properly addressed regulatory concerns, it still may not necessarily be approved. From the report, “The G7 believe that no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed,” concluding that, “Addressing such risks is not necessarily a guarantee of regulatory approval for a stablecoin arrangement.”

The G7 report did not specifically single out Libra, however, it is difficult to interpret it as good news for the digital payments system. In the face of increasing scrutiny, Facebook CEO, Mark Zuckerberg will testify before Congress later this month in an attempt to address lawmaker’s concerns regarding the proposed Libra stablecoin.

Image via Shutterstock

Crypto Tax Payments Permitted in Bermuda

Circle, a worldwide financial services firm, revealed on Oct.16th that Bermuda has started accepting tax payments using its stablecoin known as USD Coin (USDC).

This undertaking is a part of a broader strategy by the Bermuda administration to utilize decentralized financial services and protocols, as well as the United States dollar-backed stablecoins.

Circle CEO and co-founder Jeremy Allaire noted:

“Bermuda’s Premier made a broader announcement today about embracing stablecoins as the future of the financial system, with a focus on innovations in fintech that can deliver value not just for Bermudians, but also globally via company’s licensed under their Digital Asset Business Act.”

Presently, Bermuda’s economy is dependent on the United States dollar to back up its Bermudian dollar. Allaire, therefore, trusts that this approach will be instrumental in ensuring that USDC is embraced in governmental services.

Circle also acknowledged that the company had been given a “Class F” license under Bermuda’s 2018 Digital Assets Business Act (DABA). It has, therefore, been claimed that this accreditation makes the firm the first-ever primary wallet service and cryptocurrency exchange provider to be given such a permit.

Allaire proclaimed:

“Through the DABA, Bermuda is one of the first countries in the world to create a comprehensive regulatory framework for digital currency and digital asset-based products and services, including licensing of firms operating payment systems using stablecoins. It will be interesting to see how other governments will respond to this fundamental innovation.”

In 2018, USDC was established based on a partnership between Circle and Coinbase.

Image via Shutterstock