US CFTC Commissioner Says Crypto Derivative Contracts Had an Enormous Positive Impact on the US Economy

United States Commissioner of the Commodities and Futures Trading Commission (CFTC), Brian Quintenz, spoke about the current and future regulation in Fintech at the Singapore Fintech Festival held last week.  

Quintenz started by saying that one of the main values that the Commission stands by is to “first do no harm, then be technology-neutral.”  

LabCFTC working with technologists, innovators, and the public 

As stated by Quintenz, CFTC has been engaging with innovators and technologists, “to understand what they were doing, to help them understand if what they were doing implicated our rules, and to help the CFTC understand if there is any technology we can take advantage of as an agency to enhance our own processes.”

LabCFTC, the CFTC’s financial technology research wing, has been very active with over 350 different private meetings held with innovators in the last two years, as Quintenz mentioned. LabCFTC has published three primers to the marketplace based on their understanding of smart contracts, artificial intelligence, and crypto assets. They have also looked into how these three categories are evolving outside of, or challenging the current regulatory dynamic.  

Two requests for information, the first on crypto assets and the different proofing constructs that back consensus mechanisms such as proof of stake, proof of work, and zero-knowledge proofs were asked from the public. The CFTC was curious to understand the proliferation of derivatives contracts on different assets with different underlying proofing constructs.  

Structuring innovation competition and its hurdles with the regulatory sandbox 

The second included the request for information on innovation competitions. This helps the CFTC to understand where the lines draw in terms of sandboxes. The regulator is prohibited by law from having a regulatory sandbox due to the legal structure of the US, viewing that there should be free use of technology, which would be an “unauthorized gift” under the US ethics laws, as explained by Quintenz. 

“I think it was kind of an unintended consequence of how those rules are written,” commented Quintenz. “There is a discussion right now in Congress to change that, but in the meantime, we’re thinking about how to structure innovation competition because that focuses on our rule set, our processes and if we can bring technologists in-house to compete and solve some of those issues, and to get a better sense as to what the solutions are and how that innovation is evolving.” 

Self-certification for a positive impact on the US economy 

Quintenz stated: “The provision of derivatives contracts into different parts of the economy has and an enormous positive impact on the US economy to be able to manage that risk and provide stable prices for goods and services, building apps and government involvement and to the private sector.” 

The CFTC has led an effort to help exchanges and clearinghouses through the creation of the self-certification process. Exchanges that are looking to list a new contract would not have to go to the CFTC and request approval. Instead, they can list the contract and “self-certify” that meets all the necessary requirements from the CFTC. 

The results of implementing self-certification have been quite significant; in the last 15 to 20 years, since self-certification existed, exchanges have listed 8000 new contracts, compared to the 800 contracts listed between 1920 to 2000 prior to self-certification.

LedgerX Co-Founders Put on Leave Following US CFTC Scrutiny

Ledger Holdings, Inc., the parent company of LedgerX, feels pressure from the United States Commodity Futures Trading Commission (CFTC) after it has been reported that LedgerX physically settled Bitcoin futures products have not been approved. 

The CFTC continues to push for regulation and full approval before any crypto company wishes to offer commodities trading to US Citizens sparking what many believe could be seen as major problems for Ledger Holdings, Inc..

In July Ledger began to offer the trading services on its platform which has led to many in the CFTC commenting that this is not certified and should be. 

Ledger X Co-Founders Paul and Juthica Chou have been placed on administrative leave effective immediately. Larry Thompson is appointed as the interim CEO and lead director of Ledger Holdings who has over 30 years of wall street experience.  The reason for the personnel change remains unclear. 

With board changes and regulatory scrutiny from the CFTC, it is expected that Thompson needs to step up and negotiate the best next steps for Ledger.

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Telegram Appeals Federal Court Injunction to Stop Gram Distribution

Telegram has filed an appeal to yesterday’s ruling by a United Stated federal court in favour of the US Securities and Exchange Commission (SEC) which has prohibited the issuance of Gram tokens for the time being.

Court Sides with SEC early

The SEC has won an important decision in their court case against Telegram over the legal status of the latter’s $1.7 billion Gram  token offering in 2018. The SEC has maintained throughout that the tokens sold were unregistered securities and yesterday the US federal court granted the regulator an injuction to halt the distribution of Grams as the legal battle continues.

The injunction states, “For reasons that will be more fully explained, the Court finds that the SEC has shown a substantial likelihood of success in proving that Telegram’s present plan to distribute Grams is an offering of securities under the Howey test to which no exemption applies. The motion for a preliminary injunction will be granted.”

The SEC believes through its examination via the Howey test that the contracts governing the Telegram’s token issuance qualify Gram tokens as securities. Per the filing, ““Under the Howey test, the series of contracts and understandings centered on Grams are a security within the meaning of the Securities Act of 1933 (the “Securities Act”).”

Telegram immediately filed a notice of appeal with the Court of Appeals for the Second Circuit.

Former SEC Counsel Has Little Hope for Appeal

The evidence being presented to the court by the SEC’s Howey Test appears to have compelled them to act in favour of the regulator early in the legal proceedings – this cannot be a good sign for Telegram and their TON network.

On Feb. 18, Telegram’s lawyer, Alexander Drylewski had criticized the application of the SEC’s Howey Test, citing that a test designed to categorize securities does not apply to digital assets that are offered with a promise of managerial oversight, that will increase their value over time. The lawyer argued that when TON blockchain launches, Grams will not be securities but commodities.

Philip Moustakis, attorney at Seward & Kissel LLP and former SEC counsel told Blockchain.News that Telegram’s defense was not looking good and believes the SEC has applied the Howey test correctly.

Moustakis said,“Telegram argues the “interests in Grams” are one transaction and the “delivery of Grams,” another.  However, the court, rightly in my view, held the Howey test requires it to examine the entire series of understandings, transactions, and undertakings at the time they were made, meaning the totality of the facts and circumstances underlying the economic reality of the investment, including at the moment in time when investors separated with their money.” He concluded, “In other words, an issuer cannot avoid application of the federal securities laws by separating in time the capital raise and the delivery of the digital representation of the investor’s interest in that capital raise. And, at delivery, in my view, the Grams would still represent the series of promises and understandings that led up to their distribution”

The case between the SEC and Telegram is ongoing and we will continue to bring you updates.  

FATF Assessment Finds Majority of US Exchanges are Compliant with Virtual Asset Guidance

The Financial Action Task Force (FATF) has published an assessment of the US’s compliance with its revised criteria for anti-money laundering (AML) and terrorist financing (CTF) through virtual assets and found that most virtual asset providers are compliant.

Recommendation 15 – Travel Rule

It began in June of 2019, one of the most authoritative regulatory organizations worldwide, the Financial Action Task Force (FATF), issued new guidelines on how digital assets should be regulated.

A point that caused great concern and confusion for exchanges was the “travel rule,”: which refers to section 7(b) in the Interpretative Note to Recommendation 15 in the FATF Guideline, which requires Virtual Asset Service Providers (VASPs) to collect and transfer customer information during transactions.

While the recent FATF assessment concludes that, “the US remains rated as Largely Compliant with R.15,” it still cited minor deficiencies such as the requirement for US-registered money services to only be obligated to keep records of transactions of $3,000 or more, a limit three times that recommended by FATF, which the regulatory watchdog believes could be manipulated by bad actors. From the assessment, FATF wrote,“This higher threshold is not clearly supported by low ML/TF risks.”

The FATF also concluded that US Regulators, such as FinCEN and the SEC, are also behind in their investigations of convertible virtual currency (CVC) business. The watchdog was critical of the US Regulating bodies’ strategy which “does not specifically identify higher risk virtual asset service providers (VASP),” making their “various” examinations of high-volume exchanges and peer-to-peer networks insufficient.

Advantages of the Travel Rule

In a previous interview with RegTech expert and CEO of IComply, Matthew Unger told Blockchain.News about the advantages of implementing Recommendation 15 despite the concerns of many VASP and exchange operators. 

Unger said, “First and foremost, there’s the mainstream adoption—because this is the last piece of compliance needed for crypto assets to be held to the same standard as the rest of the financial industry.”

“Secondly, without the FATF travel rule or something similar to the travel rule, the security token industry will never survive because every platform is creating its own protocol, which is causing massive fragmentation.” He concluded, “Finally, the use of the travel rule enables more institutional investors to trade cryptocurrencies for their clients while lowering the cost and manual compliance work required for each trade.”

Couple Charged by the SEC for Defrauding 500 Investors in Fraudulent Water-Backed Cryptocurrency Scheme

The Securities and Exchange Commission (SEC) has persecuted a former Texan pastor and his spouse for allegedly conning hundreds of innocent investors. The SEC said that the Texan couple used alkaline water-backed crypto, TeshuaCoin, to con the investors.  

Lawsuit against Texan couple

According to the report, the SEC announced a federal court lawsuit filed against former Texas pastor Larry Donnell Leonard and his wife Shuwana Leonard. The report shows that the accused mainly targeted African Americans and managed to defraud over 500 victims from all over the nation. The SEC claimed that the perpetrators used their two firms – Teshuater and Teshua Business Group to accumulate about $500,000 in three fraudulent offerings from over 500 investors.

SEC stated that the Leonards first sold fake stock certificates in their firm Teshuater, a firm that bottled and sold alkaline water. The two culprits informed investors that the alkaline water bottle company would produce short-term investment returns of nearly 3,000 percent and would raise up to $291,044. They allegedly tried to conduct a $20 million sale of cryptocurrency TeshuaCoin, claiming that the crypto coin was backed by the company’s water products. The Leonards, while comparing TeshuaCoin’s usability to Bitcoin, claimed that TeshuaCoin is better since the crypto coin is backed by the water company. But it was not so, Teshuater alkaline water company never backed the TeshuaCoin. The SEC mentioned that the former pastor expected to raise $20 million with his fraudulent scheme, and until today, the Leonards have earned $170,395.

Furthermore, the couple allegedly collected funds and stole $25,544.96 from investors in Teshuater’s non-existent Bitcoin mining investment. The SEC said that the culprits did not reveal the speculative nature of the crypto mining and did not invest the stolen funds within the mine. The report stated that to date, the Leonards have conned a total number of 500 investors and stolen $486,984.28 from them.

The SEC has charged the couple and their two firms for the violation of the Securities Act’s registration and anti-fraud provisions.  The commission is further looking for conduct-based and permanent injunctions, civil penalties, and disgorging illicit profits.

New crypto fraud schemes on the rise

Fraudsters have been making money from innocent people who want to invest in the latest cryptocurrencies, but don’t understand how the technology works. Cases of crypto-related scams have been on the rise. While fraudsters must be held accountable for the actions, it is important the general public do their diligent research and act responsibly to avoid becoming victims. The public must remain vigilant as cases of fraud-related activities are rising, and fraudsters are becoming more sophisticated. Scammers are using various tactics in attempts to entraps victims.

Through their professional looking and well-designed websites, clever use of social media faked celebrity endorsements, and even aspirational imagery, fraudsters are able to give their products as a veneer of legitimacy. They utilize a potent mix of psychology and advertising to prey on people’s subconscious desire for money and wealth. The general public may not know the difference between a legitimate project and a scam. Any project that promises a guaranteed profit or return is almost certainly a scam. Therefore, the public should watch out to avoid scams.  

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Can US Lawmakers Really Just Mint Two $1 Trillion Coins to Back a Digital Dollar COVID Stimulus with "No Additional Debt"?

As the economy continues to deteriorate in the ongoing COVID-19 pandemic climate, US Lawmakers are once again pitching the creation of a sovereign digital dollar to quickly distribute the proposed stimulus packages.

Congresswomen Rashida Tlaib (MI-13) and Pramila Jayapal (WA-7) unveiled the Automatic BOOST to Communities Act (ABC), legislation to immediately provide a $2,000 payment using BOOST debit cards to every person in America as economic stimulus relief during the COVID-19 crisis.

After the initial payment, the ABC Act will provide a further $1,000 in recurring monthly payments for a full year from the time the coronavirus pandemic has been defeated.

According to a release on 16 April, “the ABC Act would be funded directly from the Treasury with no additional debt issued by minting two $1 trillion coins, and additional coins as necessary.”

FedAccounts and the Two Trillion Dollar Question

While there has been discussion about the Federal Reserve getting involved in the ongoing race for Central Bank Digital Currency (CBDC) dominance with a proposed FedCOIN, the motivations previously revolved around concerns with China’s determination to launch their DCEP and Facebook’s Libra project, which incidentally may be showing up once again on the Fed’s radar with the release of their new white paper earlier today.

The ABC Act would jolt the Federal Reserve into action if passed, and the Fed would be authorised by Congress to create digital wallets for all people and businesses in the US. These digital wallets are called “FedAccounts” in the proposal. The digital dollars that will be distributed are not going to be stablecoins and there is no mention of the payments being based on blockchain infrastructure. 

An alarming notion is the insinuation that the FED must recognise the two newly minted Treasury coins valued at a trillion dollars each to back the payments with “no additional debt” and the explanation given seems like an exercise in creative accounting. According to Fortune, “Under the plan, the Treasury would mint the two $1 trillion coins, then deposit them at the Federal Reserve. Forced by law to recognize the coins as legal tender, the Fed would add $2 trillion to the Treasury’s account. The Treasury would then use this money, under Congress’s direction, for stimulus.” 

FinTechs Enlisted in the Fight Against COVID

The bill was introduced as concerns continue to be raised regarding the timeliness of the $1,200 stimulus payments authorized under the CARES Act. While the IRS has been distributing the stimulus, it has not been an easy or quick process so far.

An appeal to Congress by Financial Innovation Now (FIN), on March 19, for FinTech companies to help distribute the loans digitally was given the green light by Lawmakers over the last week.

PayPal, Square and Intuit have received the US Government’s approval to take part in the Small Business Administration’s (SBA) Paycheck Protection Program(PPP) which was established in response to the COVID-19 pandemic triggered global financial crisis. 

FIN is a FinTech alliance which includes Square, PayPal, Intuit and Stripe. In the letter addressed to lawmakers they argued that they had “the reach, relationships, and digital capabilities to reach those businesses most vulnerable” in a more timely fashion while the traditional US insititutions were left wanting in this regard.

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FinTech Giants PayPal, Intuit and Square Capital Approved to Digitally Distribute US Govt COVID-19 Small Business Stimulus

PayPal, Square and Intuit have received the US Government’s approval to take part in the  Small Business Administration’s (SBA) Paycheck Protection Program(PPP) which was established in response to the COVID-19 pandemic triggered global financial crisis. 

The approval was granted following an appeal to Congress by Financial Innovation Now (FIN), on March 19, for FinTech companies to help distribute the loans digitally, citing concerns that many small businesses would run out of working capital before they received any of the $350 billion stimulus package. 

FIN is a FinTech alliance which includes Square, PayPal, Intuit and Stripe. In the letter addressed to lawmakers they argued that they had “the reach, relationships, and digital capabilities to reach those businesses most vulnerable” in a more timely fashion while the traditional US insititutions were left wanting in this regard.

PayPal First Non-Bank Participant

Paypal was the first of the non-bank institutions to announce they had received official approval to help distribute the funds under the SBA program, which is part of a larger US Congress approved economic stimulus relief package totalling $2 Trillion USD.

The global payments giant has been offering small businesses loans and cash advances since 2013.

In a Linkedin post on April 11, Dan Schulman, President and CEO of PayPal said, “We are eager to deploy our capital and expertise to do our part in helping small businesses survive this challenging period.”

Shulman also revealed that the first loans have been applied for and issued. He said,“ We expect more loans to be issued in the coming days. Thanks to Congressional leaders and the Administration for ensuring the CARES Act allowed companies like PayPal to help distribute funds quickly to those businesses that are most impacted.”

Square Capital Joins In

Jack Dorsey’s newly founded Square Capital also announced it had received SBA approval as a PPP lender in partnership with Celtic Bank.

Jackie Reses, Capital Lead and People Lead at Square took to Twitter yesterday to announce, “Square Capital has received U.S. Treasury and SBA approval to be a PPP lender, and we will start rolling out our PPP loan applications this week. We continue to work with our partner Celtic Bank as they have existing expertise as a leading SBA lender.”

The announcement also stated that sellers would be notified through the Square Dashboard when their applications are available.

Intuit Demystifys Stimulus Programs and PPP

Joining PayPal and Square Capital, Intuit has also received approval as a non-bank lender for the SBA’s PPP via its QuickBooks Capital.

Intuit appears to be taking things a step further in demystifying the whole process for American citizens. Their software simplifies the application process and offers guidance on which relief funds the small business owner’s are eligible to claim. Intuit automates the application in coordination with the SBA to distribute the PPP funds quickly.

On Monday, Intuit also announced the details of several of its new programs launched in response to the COVID-19 global financial crisis and the resulting US federal government aid programs. The FinTech company set up Intuit Aid Assist as a free website designed to help small business owners and those who are self-employed assess how much federal relief they’re eligible for under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

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Blockchain for Gun Control in the US: The Great American Dilemma

August 1, 1966, began just like any other day in the town of Austin, Texas. Summer weather in the Lone Star State is bone dry, scorching, uncomfortably hot, with a daily average of 96.3F. August 1, 1966, was, in fact, the hottest day of that month, as daytime temperatures reached 104.9F.

The sun blazed high in the clear sky over Austin, but the town would soon become acquainted with a now all too common darkness.

The University of Texas is one of Austin’s best-known landmarks, and one of the town’s most recognizable buildings. The university campus’ nickname – The Forty Acres- comes from the fact that the state of California had originally earmarked that exact amount of land to build the university in. 

The Forty Acres is now a square-shaped tract of land bordered by 21st Street, Guadalupe Street, 24th Street, and Speedway, with College Hill standing at the center, anchored by the campus’ Main Building, atop which sits The Tower.

Rising 307 feet up into the air, The Tower is one of the most recognizable landmarks in the entire state, and sadly, it became the scene of a tragic mass shooting in 1966.

On August 1, 1966, Charles Whitman, a former Marine and student at the university, armed himself with several automatic weapons, took a vantage position at The Tower’s Observation Deck, and began shooting. He killed 14 people and wounded 31 others before being shot dead by a police officer and a civilian. The incident became the deadliest mass shooting by a lone gunman in the United States up to that point. Whitman’s grim record would stand until the San Ysidro McDonald’s massacre 18 years later. And the death toll from mass shootings has steadily risen ever since.

The issue of gun control in the United States: A brief overview

Gun violence in the United States has been a problem for decades. An estimated 1.4M people died from firearm-related incidents in the United States between the years of 1968 and 2011. This figure includes all deaths involving firearms, including suicides, homicides, and accidental deaths.

Gun ownership, and the constitutional enshrining of the right to bear arms, has been one of the most hotly debated issues in the history of the country. Mass shootings occur in the United States with alarming regularity, and every time one of these incidents takes place, the debate is briefly reignited, only to fade away once more when the dust settles.

In practicality, lawmakers have done next to nothing to alleviate the issue of gun violence across America. Gun lobbyists, weapon manufacturers, and the deeply-rooted idea that guns are there ‘to protect’ people have ensured that guns are still widely available across the country, and are relatively easy to access by just about anyone. And despite virtue-signaling and vapid discourses by people across the entire political spectrum in America, it appears that there’s very little real appetite to change the status quo when it comes to gun ownership and availability.

The Second Amendment

In his paper “A Blockchain solution to gun control, Thomas F. Heston, an Associate Professor at Washington State University, says ” Blockchain technology can be utilized to improve gun control without changing existing laws. Firearm-related mortality is at epidemic levels in the United States and not only has a significant impact on public health, but it also creates a large financial burden. Suicide is the most common way guns kill. Through better gun tracking and improved screening of high-risk individuals, this technological advance in distributed ledger technology will improve background checks on individuals and tracing of guns used in crimes.”

America has had a long-standing love affair with guns, going as far as enshrining the individual’s right to bear arms in the Constitution’s Second Amendment. In other words, not only is it legal to own a gun, but it’s actually a basic right of the American citizen to do so. Only two other countries (Mexico and Guatemala) have made such provisions in their constitutional documents.

Gun culture is deeply embedded in the psyche of the American people. The roots of this trait can perhaps be traced to the country’s very origin. The American nation was born out of a thirst for independence from the British Crown. The American Revolutionary War, also known as the American War of Independence (1775-1783) was a bloody struggle to defeat British forces and turn America into an independent state. The birth of the free United States occurred on July 4, 1776. 

It is important to note that America did not have a standing army at the time. The war against the British (who had the largest standing army of the era) was fought by armed militia, rather than enlisted men. In other words, men and women came together and armed themselves to repel a foreign ruler. The War of Independence ultimately ended with the defeat of the British and the rise of the United States as a free nation. And it also meant that the notion of an armed militia (i.e., of ordinary people arming themselves against a common foe) became ingrained into the collective mind of America. The Second Amendment, ratified as part of the Bill of Rights in December 1791, hammered that point home. Today, the United States has the largest standing army ever assembled by any nation. And one could argue that it also has the largest militia, too, in the form of the National Guard. In a somewhat ironic twist, America’s common foe is itself.

Gun control in America today

Acquiring guns in the United States is a relatively easy and straightforward process. Anyone intending to purchase a gun will have their name checked against three databases: National Crime Information Center (NCIC), the Interstate Identification Index (III), and the NICS Index. If no match is found, the sale can proceed. This usually takes mere minutes. In case that the database finds a match, three days are granted to allow for further investigation, so even these databases might prove useless. And crucially, background checks are not required if the transaction is between private parties. Stricter measures to curb the acquisition of firearms have been vehemently opposed by the NRA, even in the face of massacres such as the Vegas shooting on October 1, 2017, where a 64-year-old Nevada native named Stephen Paddock armed himself with fourteen AR-15 rifles (all of them equipped with bump stocks), eight AR-10 rifles, a bolt-action rifle, and a revolver and began shooting from his room on the 32nd floor of Vegas’ Mandalay Bay Hotel. By comparison, the police report filed after Whitman’s death stated that the shooter had gone up the clock tower with two rifles, a carbine, three pistols, and one sawn-off shotgun. Paddock killed 58 people and injured over 400 as he sprayed concert-goers at Las Vegas Village, a concert venue directly below his hotel balcony. The motivations for the shooting died with him.

The incident -the deadliest mass shooting in the United States to date- re-ignited the perennial debate about gun control in the country, and while the NRA did call for ‘additional regulations’ for bump stocks (these are devices that enable semi-automatic weapons to fire faster, like an automatic weapon would), the organization also said that it was ‘time to further relax laws permitting Americans to carry concealed firearms.’. The incident caused some seemingly illogical consequences, too. Stock prices for gun manufacturing firms rose significantly in the immediate aftermath of the attack, for example, and when US President Donald Trump visited Vegas three days after the shooting, he responded ‘we’re not going to talk about that today,’ when questioned about the introduction of further gun control measures. Donald Trump is a fervent defender of the Second Amendment. 

Using blockchain to enact gun control

Heston’s paper delves into the possible role that blockchain can play in the control of firearms, focusing on three particular aspects: Background checks, gun tracking, and the development of a stable economic environment. In other words, a holistic approach to the controversial issue of gun control.

Blockchain technology offers two key advantages over ‘traditional’ data checks and storage means. Immutability, and decentralization, both invaluable assets in the context of gun control.

All background check queries are routed through single hubs of information, centralized databases in other words. A centralized database carries two inherent weaknesses: One, it presents a ready-made target for a determined hacker, and two, it is prone to human error. An FBI report highlighted the fact that as many as 3,000 people manage to pass the database background check every year, and might have been able to access guns when they shouldn’t.  A blockchain-powered system presents a far higher fault tolerance factor than single-point databases because data is distributed across network nodes, each containing an identical copy of the information. 

Blockchain technology can also become an effective method for tracking guns and gun ownership. There currently are an estimated 393m plus privately owned guns in the United States, to a population of just over 328m in 2019. In other words, there are more than 120 guns owned per 100 people.  The reality is that there are probably far more guns than that.

Many of these guns are registered. The vast majority are not, which leads to the question of where are all these guns? Who owns them? Who owned them before? Blockchain could track the path of a gun like no other technology would, by marking every single gun with a unique digital print, similar to a QR Code, at the point of manufacture. From that point on, the path of that gun can be accurately traced, with every intermediary -individual, organization, or third party- being immutably registered on the chain. 

Conclusion

Though there is no ‘hard’ definition of what constitutes a ‘mass shooting’ in the United States. Some sources refer to it as ‘mass killing’, that is, an incident involving firearms in which three or more people lost their lives. Regardless of the terminology, gun-related deaths rank in the thousands. Using the ‘mass killing’ metric, for example, USA Today reported a total of 1,358 fatalities between 2006 and 2017 alone. 

Blockchain can become a valuable technological asset for gun control in the United States and elsewhere, for sure, but gun ownership and use -for legal, or illegal purposes- is a far deeper issue that runs into the very fabric of what American society is today, and has been since its very inception. Unless attitudes radically change, both in the political sphere and within American society as a whole, the body count will only go one way.

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Ohio Democrat Lawmakers Propose Blockchain Voting in Bill For Election Overhaul

In the Ohio House of Representatives, Democrats have included a new voting system pilot based on blockchain as part of their elections law overhaul bill. The system will be used to count and track the votes of military personnel stationed outside of the US but registered to vote in Ohio.

On May 5, the Ohio Democrats introduced the elections overhaul bill which requests the set up of a pilot program for blockchain voting specifically for Ohio registered U.S military voters stationed overseas.

The bill was introduced by Democrat Reps. Beth Liston and Michele Lepore-Hagan with the signatures of 16 other Democrat party members.

While no technology vendor has been named as of yet, the proposal is explicit about the role that blockchain will play in the new system. Should the bill be passed, the votes of military personnel will be encrypted, transmitted and be protected and secured by blockchain technology.

A board of elections would be selected and then physically print the incoming military votes for counting. The selection of the election board responsible for the counting falls on the Ohio Secretary of State, Frank LaRose, as the bill reads, “The Secretary of of state shall select the boards of elections that shall participate in the pilot program.”

Potential US Congress Blockchain Government Voting Overhaul

Blockchain voting systems appear to be increasingly part of the US Government’s discussion on elections.

The Ohio Democrats’ proposed pilot for military members comes at a time when US Congress is also considering using blockchain technology to enable the Senate to conduct remote voting on national affairs during the ongoing COVID-19 pandemic.

According to a Senate staff memo, the Covid-19 pandemic has forced the shut down of many sectors of the society. As the two chambers of Congress have always met in person to conduct deliberation and vote, there is an expressed need to change the system to follow social distancing orders and to protect member voters.

Voting enabled by blockchain could allow the process to be conducted remotely while offering a high level of security. “Blockchain can provide a secure and transparent environment for transactions and a tamper-free electronic record of all the votes. It also reduces the risks of incorrect vote tallies,” read the memo.

US-China Cold War Could Benefit Bitcoin

An internal Chinese report presented to Chinese Leader Xi Jinping and his top party members on May 4, concluded that anti-China sentiment is currently at its highest since the 1989 Tiananmen Square crackdown according to Reuters.

The report was created by China’s top intelligence agency, the China Institutes of Contemporary International Relations (CICIR), a think tank affiliated with the Ministry of State Security. People close to the report’s content said that Beijing will face a US-led wave of anti-China sentiment in the aftermath of the COVID-19 pandemic and must be prepared for a worst-case scenario which could include a military showdown between the two superpowers.

China has been heavily criticized on the world stage for its alleged  lack of transparency of information on the COVID-19 pandemic and now appears to be doubling down on its censorship efforts. With the US-China trade war already well underway, there are now signs that things could escalate into a full-blown Cold war.

Following the Tiananmen Square incident in 1989, China was heavily isolated and sanctioned by international powers. But China is not the poor toothless nation it once was, it has now grown to the second-largest economy and a base for the majority of manufacturing in the world, and is unlikely to yield to any foreign powers demands.

Bitcoin and the Cold War

According to an article by Forbes on May 11, a source close to the letter compared it to the Novikov telegram, a warning letter sent by a Soviet Amassodar in 1946 to the Soviet Union of American foreign policy which is reported as a major catalyst for the subsequent decades-long Cold War between the USA and the USSR. 

For Bitcoin, there are some notable downsides should the US-China tensions escalate to that of a Cold War scale. A larger break in economic ties could be a catalyst for stricter China imposed capital controls on the Chinese population and an even greater acceleration into the development of its own central bank digital currency or DCEP in attempt to completely dissociate from the broader crypto industry.

But there is potential for cryptocurrencies and Bitcoin to shine. Notably there would be significant disruption and roadblocks placed in front of existing fiat gateways been China and the US which could drive further adoption of peer-to-peer transactions of Bitcoin and crypto. China’s economy is still driven largely by exports and there will be a need to build new bridges for capital to flow, and cryptocurrency was designed for such a role. 

A Cold War could see China and the US effectively divide up the world economy according to their ability to economically influence them. China most likely will retrench towards the Belt and Road countries of Asia, Africa and parts of Europe while the US will follow suit with the Americas and European allies.

Both sides are expected to suffer greatly from the lack of free trade and will likely result in a further decrease in global economic growth which is already buckling under the strain of the COVID-19 disruption and lockdown.

Billionaire investor Paul Tudor Jones, has made the argument that the effects of these stimulus policies will help highlight the strength of deflationary cryptocurrency economics in contrast to the current inflationary policies of world monetary authorities.

While a Cold Trade War between the largest economies in the world is unwanted, the long term effects for Bitcoin look quite positive. Recently the Bloomberg April 2020 Crypto Outlook also revealed that the creative financial measures of the US Lawmakers and Central banks around the world appear to be accelerating the status of Bitcoin to a new type of digital gold.

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