Tag Archives: Cryptocurrency

Crypto Regulations: The WEF Want In Recommending A Global Approach For The Crypto Industry

Crypto Regulations: The WEF “Want In” Recommending A Global Approach For The Crypto Industry 

The World Economic Forum (WEF) is notorious for having a far-reaching and perplexing influence over companies and institutions in many countries worldwide. This influence extends to the crypto industry and crypto regulations. The WEF published a crypto regulation white paper in May 2023, which is significant, so we’ll take a look at what they have to say and how it could influence the crypto legislation being proposed worldwide. We’ll also examine how it could affect the crypto market if implemented.


Image source: Weforum.com

The WEF white paper summarized in this article is titled “Pathways to the Regulation of Crypto-Assets: A Global Approach.” The white paper begins with a brief preface by a member of WEF’s Center for the Fourth Industrial Revolution. For context, WEF founder and chairman Klaus Schwab conjured up the Fourth Industrial Revolution. This concept involves replacing all of us so-called serfs with AI and Automation. Another component of the Fourth Industrial Revolution is controlling the population with technology. 

In the preface, the question is asked of how governments can control a borderless, open-source, and decentralized technology. Naturally, the only solution is a globally coordinated approach to regulation. The author of the preface reveals that the WEF has been engaging in “multi-stakeholder consultations” to understand how to roll out global crypto regulations. 

For reference, a stakeholder is a term the WEF uses to describe powerful individuals and institutions, not ordinary people like us. In this case, the author of the preface specifies that the white paper was put together with “significant contributions from members of the Digital Currency Governance Consortium.” (DCGC)

For those unfamiliar, the DCGC was formed in January 2020, including multiple crypto companies. The complete list of DCGC members is private. Still, research on the WEF reveals that Ripple, also the Ethereum company, Consensus, and USDC issuer Circle are all part of the DCGC, as are dozens of prolific personalities in the crypto industry. 

The DCGC has published five reports so far, and the WEF website notes that it is currently in phase two of its master plan, which involves assessing the economic effects of crypto, stablecoins, and central bank digital currencies. (CBDCs) 

The Key Takeaways

The next section of the white paper provides a summary of the key takeaways. Here, the authors argue that global crypto regulations are not only desirable but “necessary.” They seem to suggest this is because of the increasing connections between crypto and traditional finance. The authors explain that many things are standing in the way of global crypto regulations, including: 

  • A lack of universally accepted definitions for different types of cryptos, 
  • A lack of coordination between Regulatory Agencies 
  • Regulatory Arbitrage, meaning some countries are too pro-crypto. 

The authors highlight that many unaccountable and unelected international organizations have been working on global crypto regulations. This includes the Financial Stability Board (FSB) and the Financial Action Task Force. (FATF) The authors admit that the WEF has been in contact with these organizations but insist that academia, civil society, and crypto users will also have a say in global crypto regulations. Of course, the authors don't put a timeline on when we will have a say in this matter; but we have yet to have a say in anything. 

Why Are Global Crypto Regulations Required?

The first part of the report is about why global crypto regulations are required. The authors start by explaining what crypto assets are and include stablecoins under the definition of a crypto asset. Note that these reports seldom refer to cryptos as currencies; they believe cryptos are not currencies. That said, the authors do acknowledge that cryptos have some financial use cases. They say that this is why regulatory scrutiny around crypto has increased. 

As you might have guessed, they refer to the crash of Terra last May and the crash of FTX last November as examples of why regulatory scrutiny is justified. The authors then explain that different jurisdictions have since introduced different crypto regulations. They claim that this increases the risk to the global financial system and benefits bad actors in the crypto industry. 

They also highlight the inconsistency in crypto definitions. The authors then suggest that smart contracts could be one way of ensuring regulatory compliance. This is not surprising considering that the WEF is a massive fan of programmability in payments. Again, the WEF and its affiliates ultimately want to control what people do, and programmable payments are one way to do just that.
 
When it comes to regulating cryptocurrencies, the authors say the first step is identifying where the crypto activity is taking place, if possible. The second step is to determine who is engaging in the crypto activity, and the authors say that privacy coins, personal wallets, and DeFi protocols make this problematic. This is a worry because it implies that personal wallets will be a target of global crypto regulations. 

Although, in fairness, the authors of this white paper don't seem to be that opposed to personal wallets. That's because they know that if you buy your crypto through an exchange with KYC, it's easy to identify which wallet belongs to who with the help of blockchain analytics companies like Chainalysis.  According to the authors, the third step to regulating crypto is determining who is responsible for any crypto activity. They admit this is sometimes difficult, mainly when dealing with decentralized protocols. They note that this will become easier if DAOs become regulated entities.

Crypto And Traditional Finance Connections

In the next section, the authors dig deeper into the connections between crypto and traditional finance. They start by saying that the crypto market’s correlation to BTC's price is a sign of maturity. Now this is arguably incorrect; a decoupling between different crypto categories would be a sign of maturity. What the authors do get right, however, is that institutional interest in crypto has been on the rise. 


Image source: Finoa

They cited a series of statistics from pro-crypto sources, which should be taken with a grain of salt. Genuine institutional interest and investment will come once crypto regulations are introduced everywhere. The authors also note that retail interest in crypto is on the rise and imply that this could cause problems for financial stability. This could explain why some countries, such as Canada, closely aligned with the WEF, have started introducing restrictions on retail investors in crypto. 

Besides contagion risks, the authors correctly underscore concentration risks as another concern. The crypto market relies on a handful of stablecoins, a handful of exchanges, and even a handful of cryptos. Oddly enough, the authors claim that Layer 2s on Ethereum lower this concentration risk. This is odd because many Layer 2s still rely on Ethereum for their security, which logically increases concentration risk, never mind that many of these Layer 2s are highly centralized and backed by the same investors. 

Challenges To Global Regulation 

The second part of the white paper is about the challenges to global crypto regulation. The authors start by reiterating that the absence of universally accepted crypto definitions is the biggest problem. They propose a potential taxonomy but admit that there are exceptions to every crypto definition. They then explain that this is a problem because it makes consensus about specific crypto regulations impossible. It increases the cost of crypto compliance worldwide, making it difficult to protect consumers. 


Image source: Weforum.com

According to the authors, regulatory arbitrage is the second challenge to global crypto regulation. They take issue with the fact that crypto developers can relocate wherever they want. It’s becoming all too clear that the WEF would like nothing more than to control the movement of people. 

On a related note, did you know that the WEF is also trying to turn almost every major city into a Smart City? More about that in an upcoming article. Meanwhile, Smart technology is already causing issues for consumers. 

The authors admit it might still be too soon to push for global crypto regulations. Most governments are still trying to wrap their heads around the technology. Some jurisdictions are further along than others, such as the EU, which recently passed its MiCA crypto regulations. 

The authors then reveal that these early crypto regulations, including MiCA, will come into force starting early next year. This is significant because this could make institutional investors comfortable allocating to crypto again. It means the crypto market could rally starting early next year. And this, coincidentally, corresponds with the next Bitcoin halving. 

The authors also take issue with so-called crypto hubs. They seem to imply that the crypto hub is code for ‘less crypto regulation’ and appear to blame them for causing regulatory arbitrage. If the WEF starts pulling the strings, this could be awkward for places like the UAE, Dubai, Hong Kong, and Singapore

Geopolitics

This ties into another vital angle the authors raised regarding crypto regulations – Geopolitics. International relations are deteriorating, making it difficult for certain countries to comply with global crypto regulation recommendations. It's safe to say that this trend will continue. 

The above relates to the third challenge to global crypto regulation: "Fragmented monitoring supervision and enforcement.” The authors reiterate that a lack of international cooperation is one of the core causes of this fragmentation, coupled with the rapid evolution of crypto-related technologies. 

The authors then provide the FATF's infamous travel rule as a case study. The travel rule requires all transactions above a certain threshold to be tracked and KYC’d. The authors complain about the fact that compliance with the FATF's travel rule has been slow when it comes to crypto. 

While we’re on that topic, you should know that the FATF has reportedly been pressuring countries to restrict or even permanently ban crypto to get off its grey list. Any country on this so-called naughty list is refused bailouts from the IMF, so a clean report from the FATF may be a political priority. If there is any truth to this, crypto hubs could face financial sanctions if they don't comply with the FATF’s crypto recommendations; perish the thought. 

Approaches To Regulating Crypto Globally

The third part of the white paper is about the possible approaches to regulating crypto on a global scale. The authors provide a de facto list of regulations the WEF wants to see. 

  • Crypto-specific 
  • Stablecoin-specific
  • Know Your Customer (KYC) /Anti Money Laundering (AML) 
  • Consumer protection, including restricting retail access to crypto 
  • Strict regulations around crypto marketing 
  • Regulation of DeFi and DAOs 

The authors then detail the five primary approaches to crypto regulation. 

1: The first is Principles-based regulation. This involves regulating around a series of broad principles rather than specific rules. The benefits of this approach are innovation and flexibility. The drawback is regulatory uncertainty. 

2: The second approach is Risk-based crypto regulation and involves applying the same risk/same regulation principle, meaning that crypto should abide by existing financial regulations. The benefit of this approach is regulatory certainty, and the drawback is difficulty in assessing risks. 

Notably, the WEF is a massive fan of this same risk/same regulation approach. It's why you see it in many existing regulatory recommendations for crypto. If that wasn't concerning enough, in this section, the WEF advocates for eliminating cash and going digital to ensure that KYC/AML is followed. 

3: The authors call Agile regulation the third approach to crypto regulation. This effectively allows regulations to evolve in response to new innovations. The benefit of this approach is that it is flexible. The drawback is that it requires much coordination and collaboration with the crypto industry. 

4: The fourth approach to crypto regulation is Self- and co-regulation. It involves allowing the crypto industry to set standards. The benefit of this approach is that it builds trust. The downside is that it can lead to capture; For instance, one company determines all the standards. 

5: The fifth approach to crypto regulation is one we’re all familiar with: Regulation by enforcement. It involves taking crypto companies and projects to court and using the precedent as de facto regulations. The benefit is accountability, and the drawback is zero innovation.

Interestingly, the authors asked their so-called stakeholders which regulatory approaches are best. The results can be seen in the image below. As one would expect, Risk-based regulation is the most popular, especially considering that the WEF is a fan of this particular approach. 


Image source: Weforum.com

The authors confirm that the other unaccountable and unelected organizations, such as the FSB and FATF, have been adhering to the WEF’s Risk-based approach to crypto regulation. It's preposterous to consider just how much influence the WEF has, and this is just the public stuff. 

WEF’s Recommendations for Global crypto regulations.

The fourth part of the report contains the WEF’s recommendations for Global crypto regulations. The authors explain that these recommendations are meant for international organizations, governments, and “industry stakeholders” who are presumably part of the WEF. 

In other words, these recommendations are what most crypto regulations will look like, regardless of what we, the people, say or do. The authors again claim that the average person will get the chance to give their input someday, but we’ll just have to wait and see if that happens. 

The first set of recommendations is specifically for international organizations. These are to;

  • Create definitions for different types of cryptos and crypto activities 
  • Set standards for how these cryptos and activities should be regulated
  • Share data about registered entities with all organizations. 

It brings into question whether ‘registered entities’ include the average crypto user. As it’s the WEF, the answer is probably, yes. After all, the endgame of these international elites is to create a global government with a global digital ID and a global centrally controlled digital currency. 

The second set of recommendations is specifically for governments. These are to; 

  • Coordinate regulations between jurisdictions.
  • Create regulatory certainty for the crypto industry.
  • *Use technology for regulation by design. 

*The latter means regulation at the blockchain level via Smart contracts. Remember, the WEF loves programmability. 

The third set of recommendations is specifically for the crypto industry. They are; 

  • To set standards 
  • To share best practices
  • Ensure “Responsible Innovation.” 

This seems to be code for adhering to ESG criteria, given that the term refers to environmental, social, and economic risks. 

If you've been following articles about ESG, you'll know it's an investment ideology to ensure the UN's sustainable development goals or SDGs are met. Every country is supposed to meet the UN's SDGs by 2030. My research suggests that all the dystopian stuff being pushed has its roots in the United Nation's SDGs, be it CBDCs, digital IDs, smart cities, or online censorship. 


Image credit: Markethive.com

What Affect Will It Have On The Crypto Market? 

So the big question is, how could the WEF’s global crypto regulation recommendations affect the crypto market if implemented? The short answer is that it would result in the crypto industry being absorbed into the existing financial system, which is precisely what the WEF wants. 

The practical effect of Risk-based regulation is that crypto is forced to comply with existing financial regulations. As the authors tacitly admit, these risks posed by crypto aren't always clear. Many argue that the risks are significantly different and justify different regulations. The WEF’s recommendations would make crypto worse than the existing financial system. That's because they would require information about all registered entities to be; 

  1. Shared with international organizations 
  2. Require regulations to be enforced via Smart contracts
  3. Require all cryptos to be ESG compliant 

These three unsuitable recommendations have one thing in common: Governance, more succinctly, control. This article about ESG and Bitcoin explains that the environmental aspect isn't the problem; it's the governance. Bitcoin can't be controlled because it has no traditional governance structure. In case you missed it, this is the core issue the WEF and its allies are trying to address. How do we control something that is designed not to be controlled? 

It's possible, if not likely, that the endgame of the environmental-focused attacks on Bitcoin is to track all Bitcoin miners and nodes. It’s something that the WEF’s global crypto regulations would prescribe because Bitcoin miners and nodes would presumably need to be registered. 

Their information would therefore have to be shared with all international organizations. At that point, it would become possible to control Bitcoin in theory. In practice, the WEF’s global crypto regulations will never come to pass, which the authors have also tacitly admitted. 

In addition to the geopolitical tensions, it's practically impossible to introduce the same crypto regulations in every single country simultaneously. This means that there's going to be some regulatory arbitrage, whether it's intentional or not. This regulatory arbitrage will exist for years, and in some countries, it will persist for decades. 

So long as there's a country out there that the WEF can't influence, it won't be able to entirely corrupt crypto. Also, because crypto innovation is essentially exponential, there's a high likelihood that it will evolve to the point that the WEF and its allies can’t control it. This is the most important takeaway – Crypto is too fast for the WEF. 

Klaus & Co will never be able to keep up, and crypto will eventually win the race. Right now, though, there are many hurdles facing the crypto industry, and the WEF’s white paper suggests that it played a role in putting those hurdles in place. The WEF's fingerprints are there, whether it's the FSB or the FATF. It’s also common knowledge that there are WEF allies in the crypto industry. 

Even so, many in the crypto industry who are on the right side of history, and we at Markethive, genuinely believe that the incentives of crypto are more robust than the WEF’s cronyism. Imagine helping to create a powerful crypto or protocol that allows the average person to preserve their purchasing power, grow their wealth, and maintain their financial freedom. In that case, you are rewarded in every possible way.  

As purchasing power, wealth, and financial freedom continue to erode, the incentive to create robust protocols with crypto will only increase. Eventually, the incentives will become so strong that the WEF’s hurdles will become irrelevant. The people will want freedom, and they will achieve it through crypto. 

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

References: World Economic Forum, Coinbureau

 

 

Editor and Chief Markethive: Deb Williams. (Australia) I thrive on progress and champion freedom of speech. I embrace "Change" with a passion, and my purpose in life is to enlighten people to accept and move forward with enthusiasm. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.

 

 

 

 

Also published @ BeforeIt’sNews.com; Steemit.com; Substack.com

 

Tim Moseley

The Great Disconnect: Exploring the Global De-banking of Crypto Businesses

The Great Disconnect: Exploring the Global De-banking of Crypto Businesses.

Cryptocurrencies emerged as a disruptive force, challenging the traditional financial system and centralized control. With their potential to revolutionize cross-border transactions, enhance financial inclusion, and provide secure and transparent transactions, cryptocurrencies gained momentum among investors, businesses, and individuals seeking alternative financial solutions. However, traditional financial institutions have not met this radical shift towards decentralized finance with open arms.

In recent years, a concerning trend known as de-banking has emerged, where banks and other financial institutions systematically sever ties with crypto-related businesses. This process entails closing accounts, denying services, and declining partnerships with companies involved in cryptocurrency-related activities. While financial institutions cite concerns over regulatory compliance, money laundering risks, and reputational damage, critics argue that de-banking stifles innovation and hampers the growth of the burgeoning crypto industry.

This article aims to provide a comprehensive analysis of the global de-banking phenomenon, shedding light on its underlying causes, consequences, and potential implications for the future of cryptocurrencies. By examining real-world examples from various countries and industries, we will delve into the factors contributing to this widespread debanking trend. Additionally, we will explore crypto-related businesses' legal and regulatory challenges, often prompting financial institutions to distance themselves from this sector.

Furthermore, this article will explore the immediate and long-term consequences of de-banking on the affected businesses and the broader cryptocurrency ecosystem. We will delve into the difficulties crypto entrepreneurs encounter in accessing banking services, obtaining loans, and establishing partnerships, as well as the potential implications for financial stability and the overall adoption of cryptocurrencies. 


Image credit: Markethive.com

De-banking Phenomenon

De-banking refers to the systematic severance of ties between financial institutions and businesses whose operations are perceived not to be in line with legal and governmental regulations. This process involves banks closing accounts, denying services, and declining partnerships with companies engaged in such activities. While financial institutions often cite concerns over regulatory compliance, money laundering risks, and reputational damage as reasons for de-banking, critics argue that this approach stifles innovation and hampers the growth of the burgeoning crypto industry.

To truly understand the de-banking trend, we must explore the underlying causes. One of the primary factors is the regulatory landscape surrounding cryptocurrencies. Governments and regulatory bodies worldwide have struggled to keep up with the rapid development of this new technology. The lack of clear and comprehensive regulations has created an uncertain environment for financial institutions, leading them to adopt a cautious approach.

The anonymity and pseudo-anonymity offered by some cryptocurrencies have raised concerns about potential money laundering and illicit activities. While the blockchain technology behind cryptocurrencies provides transparency, it can also be exploited by individuals seeking to conceal their identities and engage in unlawful practices. Although wary of potential legal and reputational risks, many financial institutions have chosen to distance themselves from the crypto industry.

The debanking phenomenon is not limited to a specific country or region; it is a global trend affecting businesses operating in the cryptocurrency space worldwide. For example, many crypto-related startups have struggled to establish banking relationships in the United States. Banks often view these businesses as high-risk due to regulatory uncertainties and the perceived association with illicit activities.

As a result, companies have faced difficulties accessing basic banking services, such as opening business accounts and obtaining loans. Europe has also witnessed a similar debanking trend. Several major European banks have halted services to crypto-related businesses or imposed severe restrictions, hindering their ability to operate smoothly. The situation in Asia is no different, with countries like Iraq imposing a de facto ban on cryptocurrencies and financial institutions wary of engaging with crypto-related entities.

Traditional lenders are reluctant to extend credit to companies operating in the cryptocurrency space due to perceived risks and uncertainties. Access to capital is needed to improve the growth and expansion of these businesses, limiting their potential for innovation and development. These entrepreneurs face significant challenges in accessing banking services, which are vital for day-to-day operations. Without a bank account, businesses struggle to receive and manage funds, pay employees, and transact with suppliers. This creates a substantial operational burden, forcing companies to rely on alternative and often less efficient solutions.

The impact of de-banking extends beyond individual businesses to the broader adoption of cryptocurrencies. The inability to establish partnerships with financial institutions inhibits the integration of cryptocurrencies into the mainstream financial system. It hinders the ability of consumers to use cryptocurrencies for everyday transactions, limiting their utility and slowing down the overall adoption process.

However, it is crucial to consider the perspectives of all stakeholders involved in the de-banking debate. Financial institutions are tasked with ensuring regulatory compliance and managing risks associated with the cryptocurrency industry. With increasing regulatory scrutiny, banks face immense pressure to prevent money laundering, fraud, and other illicit activities. By distancing themselves from crypto-related businesses, they aim to protect their reputation and avoid potential legal repercussions.

Regulators, however, grapple with the challenge of striking a balance between fostering innovation and safeguarding financial stability. Developing clear and effective regulatory frameworks for cryptocurrencies is a complex task that requires careful consideration of the unique characteristics of this digital asset class.

Crypto enthusiasts advocate for a more collaborative approach, where financial institutions work with the crypto industry to address concerns and find mutually beneficial solutions. This includes implementing robust know-your-customer (KYC) and anti-money laundering (AML) measures and enhancing transparency and cooperation between regulators and industry participants.

Moreover, de-banking crypto-related businesses can have significant implications for financial inclusion. Cryptocurrencies have the potential to provide financial services to individuals and companies that are underserved by the traditional financial system. For example, in many developing countries, traditional banking services are limited, and many individuals and businesses rely on mobile money services to manage their finances. 

Cryptocurrencies have the potential to provide an alternative to these services, offering faster, cheaper, and more secure transactions. However, the de-banking of crypto-related businesses can limit the ability of these individuals and companies to access these services, further limiting their financial inclusion.

The Impact of De-banking on the Crypto Industry

Lack of access to traditional banking services can create significant operational challenges for crypto-related businesses. Moreover, the lack of access to conventional banking services can also limit the ability of crypto-related businesses to establish partnerships with other companies and organizations. This can limit the potential for collaboration and innovation in the industry, further limiting the growth potential of cryptocurrencies.

The potential implications of these challenges for financial stability and the overall adoption of cryptocurrencies are significant. Without access to traditional banking services, crypto-related businesses may be forced to rely on alternative banking relationships or operate entirely outside the conventional financial system.

This can create significant risks for financial stability, as these businesses may be more vulnerable to fraud, money laundering, and other forms of financial crime. Without the ability to easily convert cryptocurrencies into fiat currency, many consumers and companies may hesitate to adopt these assets as a form of payment or investment.

There are several reasons why some banks and financial institutions decide to de-bank crypto businesses. Some of them are:

 Regulatory uncertainty: Cryptocurrencies' legal status and regulation vary across jurisdictions and are often unclear or inconsistent. This challenges banks and financial institutions to comply with anti-money laundering (AML), counter-terrorism financing (CTF), and other rules and regulations. Some banks and financial institutions may prefer to avoid dealing with crypto businesses altogether rather than risk facing fines, sanctions, or legal actions.

•  Compliance risks: Even if the regulation of cryptocurrencies is clear and consistent, banks and financial institutions still face compliance risks when dealing with crypto businesses. For example, they may have difficulty verifying their crypto customers' identity and source of funds or have to deal with complex and costly reporting requirements. Some banks and financial institutions may also be concerned about the reputation risk of being associated with crypto businesses involved in illicit activities or scams.

•  Volatility: Cryptocurrencies are known for their high price volatility, which can pose risks for banks and financial institutions that provide services to crypto businesses. For example, if a bank offers a loan to a crypto company that uses cryptocurrencies as collateral, the value of the collateral may fluctuate significantly and affect the repayment ability of the borrower. Similarly, suppose a bank provides a payment service to a crypto business that accepts cryptocurrencies as payment. In that case, the value of the payment may change drastically between the time of the transaction and settlement.

 Competition: Cryptocurrencies are also seen as a potential threat to the traditional financial system, as they offer alternative ways of storing and transferring value that may challenge the dominance and profitability of banks and financial institutions. Some banks and financial institutions may view crypto businesses as competitors rather than customers or partners and seek to limit their growth or market share by debanking them.

Operation Chokepoint

Operation Chokepoint, introduced in 2013 by the United States Department of Justice (DOJ) under the Obama administration, primarily focused on combating fraud in high-risk industries by pressuring financial institutions to sever ties with specific businesses. The operation targeted sectors such as payday lending, firearms, ammunition sales, online gambling, and debt collection. The strategy involved pressure on banks and payment processors to cut off services to these industries, effectively choking off their access to the financial system.

The primary concern driving Operation Chokepoint 1.0 was to curtail fraudulent activities in industries that posed higher risks. The DOJ expressed concerns that some businesses in these sectors were engaged in deceptive practices, leading to consumer harm and financial losses. By leveraging its authority and coordinating with other regulatory agencies, the DOJ sought to disrupt the economic infrastructure supporting these industries and minimize their ability to carry out activities.


Screenshot: Twitter

The connection between Operation Chokepoint 1.0 and Operation Chokepoint 2.0 lies in extending the original concept to the crypto industry. Operation Chokepoint 2.0 indicates the application of similar tactics employed in the initial operation to the crypto industry. Just as Operation Chokepoint 1.0 sought to target high-risk sectors by pressuring financial institutions, Operation Chokepoint 2.0 involves exerting pressure on banks, payment processors, and other financial service providers to sever ties with cryptocurrency-related businesses. 

The victims of Operation Choke Point 1.0 are thus all too familiar with what the participants in the crypto economy are now experiencing. The campaign begins with a series of vague policy pronouncements and ominous warnings issued as informal guidance to the banks. Then there is a flurry of decisions by banks to terminate their banking relationships with the targeted industry, of accounts closed either without any explanation or with the decision being attributed to “compliance requirements,” to “your business being outside of our risk tolerances,” or to “risks associated with your business.” All these are gimmicks to destroy the crypto industry.

Examples of De-banking in the Crypto Industry

It has been a common practice for banks to distance themselves from companies they perceive as high-risk for many years. However, the de-banking of crypto-related businesses has become increasingly prevalent in recent years as the industry has grown and regulators have struggled to keep up with the pace of innovation.

Binance US is halting US dollar deposits and withdrawals from its platform as of June 13, 2023. This comes after the US Securities and Exchange Commission (SEC) filed a lawsuit against Binance and its CEO, Changpeng Zhao, for allegedly violating securities laws and operating an unregistered exchange. The SEC also asked a federal court to freeze Binance US assets.

The de-banking of Binance US could be a concern for the crypto community because it could affect the liquidity and accessibility of the crypto market in the U.S. Binance US is one of the largest crypto exchanges in the country, with over 2 million users and more than $1 billion in daily trading volume. 

If Binance US users cannot deposit or withdraw fiat currency, they may have to resort to other platforms or methods that could be more costly, risky, or inconvenient. Moreover, the SEC's crackdown on Binance could signal a more aggressive and hostile stance towards the crypto industry, which could discourage innovation, investment, and adoption of digital assets.

On May 18th, 2023, Binance Australia announced that it had suspended Australian dollar (AUD) PayID deposits "with immediate effect" due to a decision made by its third-party payment service provider. It also said that bank transfer withdrawals would also be impacted. According to Binance Australia's statement, its payment processor's partner bank Cuscal had decided to end AUD deposit services for Binance Australia without providing any specific reason. 

In July 2022, FTX, another major crypto exchange, lost its banking partner Signature Bank after the SEC filed a lawsuit against the company for allegedly operating as an unregistered securities exchange. FTX had to suspend its U.S. operations and refund its customers. Signature Bank said it ended its relationship with FTX due to “regulatory concerns” and “reputational risk.”

One of the most high-profile examples of de-banking in the crypto industry is the case of Bitfinex. In 2017, Wells Fargo, one of Bitfinex's banking partners, announced that it would no longer process wire transfers for the exchange. This move left Bitfinex unable to process withdrawals for its users, leading to a significant drop in trading volume and a loss of trust among its user base.

Another example of de-banking in the crypto industry is the case of Coinbase. In 2017, the US-based exchange was forced to suspend trading in Hawaii after failing to secure a banking relationship in the state. This move left Coinbase unable to serve its Hawaiian customers, highlighting the challenges crypto-related businesses face in obtaining banking relationships. 

These debanking cases illustrate some of the challenges and uncertainties that crypto businesses face in the U.S. and Europe, significantly as regulators increase their scrutiny and enforcement actions against the industry. In contrast, regulators and policymakers postulate that debanking is necessary to protect consumers and investors from fraud and risk, but is that their true intention for doing that? If the government had full control over Bitcoin and other altcoins, which gives them enormous control over your financial freedom, would they have aggressively fought against the industry? Think about that.

The Future of De-banking in the Crypto Industry

The future of de-banking in the crypto industry is a topic of much debate and speculation. While it is likely that the de-banking of crypto-related businesses will continue in the coming years, there are also signs that the industry is beginning to adapt to these challenges.

One of how the industry is adapting is by exploring alternative banking relationships. Some of these businesses are beginning to work with smaller banks or payment processors that are more willing to work with them. These alternative banking relationships can help these businesses access the traditional financial system while mitigating cryptocurrency risks.

Some countries are beginning to develop more supportive regulatory frameworks for cryptocurrencies. For example, in the United States, the Securities and Exchange Commission (SEC) has started to provide more guidance on the regulatory status of cryptocurrencies, which has helped to clarify the legal landscape for crypto-related businesses.

Similarly, the European Union has developed a comprehensive regulatory framework for cryptocurrencies, known as the Fifth Anti-Money Laundering Directive (5AMLD). This framework requires crypto-related businesses to register with national authorities and comply with anti-money laundering and counter-terrorism financing regulations.

These more supportive regulatory frameworks can mitigate the perceived risks associated with cryptocurrencies, making it easier for banks and other financial institutions to work with crypto-related businesses. These frameworks can build trust in the crypto ecosystem, making it more attractive to mainstream investors and companies.

As the industry continues to evolve, regulators, banks, and crypto businesses must work together to build a more inclusive and supportive financial ecosystem that embraces the potential of digital assets while mitigating the associated risks. By working together, these stakeholders can help to build a more resilient and sustainable financial system that benefits businesses, individuals, and the global economy.

 

 

About: Prince Ibenne. (Nigeria) Prince is passionate about helping people understand the crypto-verse through his easily digestible articles. He is an enthusiastic supporter of blockchain technology and cryptocurrency. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.

 

 

 

 

Tim Moseley

What are the Indicators of the Next Crypto Bull Market? Are they at odds?

What are the Indicators of the Next Crypto Bull Market? Are they at odds?

Recognizing if a crypto bull market is returning depends on which indicators we look at ultimately. Some indicators suggest that a bullish crypto market is just around the corner, while others suggest that the bear market will soon reoccur. This article examines these conflicting indicators, sheds light on what they signify in simple terms, and elucidates where the crypto market could be headed.

Price Action

First up is price action, as it’s everyone’s favorite indicator. Many crypto experts define a crypto bull market as a long period of positive price action. In other words, multiple months of higher highs and higher lows for the most significant cryptos. As the graph below indicates, BTC has had four consecutive months of positive price action, which began in January. BTC is, therefore, in a new bull market, according to Coinbureau’s basic definition. 


Screenshot: Coinmarketcap.com

However, there are a few caveats: First, this multi-month rally has yet to happen for most major altcoins apart from ETH.  Almost every major altcoin has been moving sideways over the last four months. In an actual crypto bull market, you see breadth in the positive price action meaning that most altcoins ride on BTCs’ coattails. 

The absence of this effect is evidence of a bear market rally, not a bull market. ETH's price action can provide additional proof of this being a bear market rally. ETH didn't have the same double top as BTC during the previous bull market. ETH’s price action looked more like what you'd see in a standard market cycle and could be due to institutional investment. 

Comparing ETH’s price action to the famous Wall Street cheat sheet suggests we're just past the anger stage. That said, ETH could easily be in the disbelief phase that comes before the beginning of a new bull market. 


Image credit: Newtraderu.com

This ties into the second caveat, and that's trading volume. Data from Coinmarketcap suggests that trading volume for BTC has continued to decline as prices have risen. This effect is even more pronounced for ETH. This divergence of increasing prices and falling volume is further evidence of a bear market rally and also suggests that a reversal could be imminent. 

However, this decline in trading volume could be due to institutional investors investing in crypto via centralized proxies like futures contracts that are settled in cash due to concerns around crypto regulation. It would explain why ETH's trading volume is so low relative to BTC. 


Screenshot: Coinmarketcap.com

Also, ETH has been looking extremely weak against BTC and has been in a long-term downtrend against BTC since around July of last year. The same trend can be seen in most major altcoins. Again for this to be an actual crypto bull market, there must be breadth and broad participation, at least among most major altcoins. 

To be fair, we could soon start to see more money rotate out of BTC into ETH and most major altcoins. If this happens, it will be additional evidence of a new bull market. For the time being, though, Bitcoin dominance continues to increase. For context, Bitcoin dominance measures how much of BTC’s total market cap comes from crypto. Bitcoin dominance is currently at around 46% and has been in a long-term uptrend since last September, showing no signs of slowing. 

Regulations 

If BTC doesn’t rotate into ETH and the most significant altcoins, it could be due to another factor previously mentioned: Crypto regulations. Like it or not, crypto regulations are required for institutions to invest their trillions into the crypto market. The largest institutional investors are based in the United States. US institutional investors were likely the most significant contributors to the previous crypto bull market. Unfortunately, the regulatory situation in the US has deteriorated significantly over the last few months.

In addition to the threats against specific crypto projects and companies by the SEC, the Fed and other banking regulators have been actively working to de-bank the crypto industry. Their primary targets have been 24/7 payment systems analogous to the Fed's upcoming Fed Now payment system. 

Stablecoin issuers are at the top of the Fed's hit list. It’s problematic because the crypto industry relies heavily on stablecoins to function. If anything were to happen to a stablecoin issuer in the United States, it could severely damage the crypto market and be a disaster for the entire DeFi niche. 

However, not all stablecoin issuers are based in the United States, and most crypto trading happens against offshore stablecoins, namely, Tether’s USDT. This means the crypto market would be mostly fine if a US-based stablecoin were taken down. A crackdown on a US stablecoin issuer may also not materialize. More importantly, other countries with many institutional investors are introducing sensible crypto regulations. 

This article about the countries that will drive the next crypto bull market discusses that the list includes the UAE, Saudi Arabia, Hong Kong, Singapore, and France. These jurisdictions will introduce these sensible crypto regulations very soon. France has technically done so already. The Markets in Crypto Assets (MiCa) regulation was passed by European politicians less than a month ago. Money is already flowing into EU crypto startups as a result.

Moreover, it looks like Hong Kong is next. Officials there recently announced that crypto licensing requirements would be revealed by the end of the month, with retail access to crypto coming on June 1st. Lots of money from the Chinese Mainland may enter the crypto market via Hong Kong. It's also likely that lots of crypto companies will relocate to the region. That's because Hong Kong requires banks to open accounts for crypto clients.

This is significant because crypto companies in crypto-friendly jurisdictions, like the UAE, are still reportedly struggling to open bank accounts. The caveat is that crypto investment from Hong Kong will reportedly be limited to the largest cryptocurrencies by market cap, and crypto niches like DeFi could be completely off-limits. Even so, there are many ways of accessing altcoins once you've acquired a crypto like BTC or ETH. 

Notwithstanding, the passing of favorable crypto regulations in these countries will likely be enough to increase the conviction in crypto’s recent price action and confirm that it's the beginning of a new bull market. However, this assumes that macro conditions encourage crypto investing in these regions. 

Interest Rates 

Interest rates are the primary macro factor moving the crypto market, specifically the interest rate decisions coming from the Federal Reserve. The fact that the Fed is near the end of its rate hiking cycle has contributed to the recent rally. Another contributor has been the expectation that the Fed will soon be forced to pivot, i.e., start lowering interest rates. Investors believe the Fed will do this in response to a crisis; an example could be the stress in the commercial real estate sector.

The irony to this expectation is that if the Fed is forced to pivot in response to a crisis, chances are the situation will also crash the markets. Case in point, sudden rate cuts have historically corresponded to stock market crashes, not rallies. A rate cut may have the same effect on the crypto market. However, in the absence of a crisis, only falling inflation will convince the Fed to pivot. As it happens, headline inflation has fallen fast over the last few months. The question is whether inflation will fall to the Fed’s 2% target, and the answer here is unclear. 


Image source: In2013dollars.com

Core inflation figures of all kinds suggest that services-related inflation isn't coming down nearly as quickly. If core inflation gets stuck at 4%, the Fed will likely keep interest rates slightly above that level. The longer the Fed keeps interest rates high, the higher the likelihood that markets will crash, that something in the financial system will break – or both. Risk assets like cryptocurrencies could be hit the hardest because they rely on lower interest rates for positive price action. 


Image source: Advisor Perspectives

For those who are wondering why this is, the answer is liquidity. Liquidity is the amount of money circulating in the market and the economy. As interest rates rise, liquidity gets drained out of the financial system as people rush to pay off more expensive debts and have difficulty accessing loans. As it happens, the supply of money in the US economy, as measured by M2, has been shrinking faster over the last few months than in decades.

This situation should have caused risk assets like crypto to crash, but they pumped instead. The simple explanation is that there is more to the world than the United States. Although the money supply has decreased in the US, countries like China and Japan have continued to stimulate, and this money has been slowly but surely finding its way into US assets. The caveat is that this stimulus may not continue for much longer, at least in China, where economic growth is returning. 

Another reason why risk assets have rallied is because of the Fed and the treasury. The Fed recently expanded its balance sheet in response to the banking crisis. Meanwhile, the treasury has been spending money from its de facto checking account due to the debt ceiling, which is increasing liquidity. However, the Fed's balance sheet recently started decreasing again, and the debt ceiling will soon be raised, allowing the treasury to reissue bonds. Both factors could further drain liquidity, further prolonging a crypto bear market. 

Geopolitics

As stated earlier, there is more to the world than the United States. Much of the world has been trying to escape the US dollar. This could positively affect the crypto market during the next bull cycle. Some countries, such as Iran, reportedly use crypto for trade, and others, such as Russia, may follow suit. This could change crypto's categorization from a risk asset to something analogous to a commodity, like gold, at least in these regions. 

Steady crypto demand from these regions could create a price floor for significant cryptos like BTC and ETH, the same way central banks created an apparent price floor for gold, and they accumulated record levels of gold last year. This was predominantly due to the sanctions against Russia, which caused many central banks to think twice about keeping large reserves in US dollar assets. 

In retrospect, sanctions could be the catalyst that killed the dollar. While these central banks haven't begun accumulating crypto yet, the Bank for International Settlements announced last December that central banks will be allowed to hold up to 2% of their balance sheets in crypto starting in 2025. By then, the crypto bull market should be in full swing, and if it's not, that will likely be the catalyst that kicks it off. Some central banks may have begun secretly accumulating crypto already. 

Additionally, trust in the financial system is deteriorating at a rapid rate, and the crypto market will continue to grow as trust in the traditional financial system continues to decline. This is evidenced by how much the crypto market pumped in response to the banking crisis. If the banking crisis continues in some form, you can expect to see more of the same positive price action for most cryptocurrencies.

Even if the banking crisis doesn't continue, central bank digital currencies (CBDCs) are coming, and they could have the same effect on the crypto market. The reason is that CBDCs will allow governments and central banks to control how you spend and save. As with the banking crisis, the average person will quickly realize that government money is not a safe place to store their wealth and will seek alternative stores of value.

The average person will likely allocate a small percentage of their portfolio to assets outside the financial system, including crypto. This percentage will become more extensive as these alternatives become easier to use. It's already happening worldwide; individuals and institutions are turning to crypto because their currencies are collapsing, their banking systems are struggling, or because CBDCs are being rolled out. This combined buying could set a price floor for many cryptocurrencies; this price floor will likely rise as the appeal of traditional currencies continues to decline. 

As such, we could be at the beginning of a crypto super cycle, or at least a crypto market cycle unlike any other. The caveat to this is that the incumbents will not go quietly. This potential supercycle will likely be accompanied by unprecedented price volatility as entities in the existing financial system try to crush or control crypto. Some would say this has already started, and the recent price action is proof.

The Crypto Market Cycle

As you may be aware, crypto tends to follow a four-year cycle and is believed to be because of the Bitcoin halving, which occurs roughly every four years. The last Bitcoin halving happened in May 2020, and what followed was an almost two-year-long crypto bull market. However, many argue that the crypto bull market began before the previous halving. BTC had already been in a strong uptrend for months, hitting $14k in May 2019. That early 2019 rally looks eerily similar to the one we're seeing now, four months of green; all be it with much more volume. 

This begs the question of whether history will repeat itself, specifically whether BTC will experience a flash crash that retests its bear market lows of around $15K. In theory, this is unlikely because the previous flash crash, when we saw BTC sink to about $3K, was caused by the beginning of the pandemic in March 2020. 

In practice, however, this is still possible, and that's because there are so many similar catalysts to choose from. 

  • A 2008-style financial crisis caused by commercial real estate, 
  • a war between China and the US over Taiwan, 
  • civil wars due to inflation and political polarization, 
  • or that global cyber attack predicted by the World Economic Forum. 

Even if history repeats, a retest of the crypto bear market lows will likely be short-lived. The fact remains that we're in the same time frame when the previous crypto bull market arguably began – one year before the next Bitcoin halving, which is scheduled for April 2024. However, this analysis only applies to BTC. 

As shown in the graph below, the historical price action of most major altcoins flatlined between May 2018 and the Bitcoin Halving in May 2020. You'll also see that most of them only hit their bottoms during the pandemic flash crash. This means that even if the crypto bull market has begun, you still have at least a year to accumulate your favorite altcoins, and you may still manage to catch the bottom of some of them. 


Screenshot: Coinmarket.com

The caveat is that some of these altcoins will never recover, especially if interest rates stay higher for longer. However, the effects of high-interest rates on the crypto market are not evident because the crypto market has never experienced a period of sustained high rates. Some argue that most cryptocurrencies, possibly even prominent altcoins like ETH, will not fare well under such conditions.

For established Proof of Stake cryptos, like ETH, the yield on staking rewards needs to be higher than the yields on traditional financial investments to capture the interest of institutions. In some cases, the rewards must be much higher to compensate for the additional risk of investing in crypto, e.g., Crypto vs. Bonds. 

For most other altcoins, there needs to be lots of speculation to receive heavy inflows, and these levels of speculation and inflows require lower interest rates. Some say the most speculative cryptos are all the Ethereum competitors, as they stand to capture the most value if they succeed. 


Image credit: Markethive.com

Speculation

As shared by Delphi Digital, “Crypto has primarily been a speculator’s market, and that’s still true today. But speculation isn’t inherently evil. The term “speculation” tends to carry a negative connotation. But, like most things, it sits on a spectrum. Hype and excitement drive interest, which attracts capital and gives entrepreneurs the resources to build innovative products leveraging new technologies.” 

Without speculation, capital wouldn’t flow to such risky ventures, and society would still be stuck in the stone age or the throes of tyranny due to escalating adverse events of today. Arguably, speculation is more than beneficial; it’s imperative at this stage. The crypto industry has gone through multiple hype cycles, each fueled by speculation on the back of emerging innovation triggers. Each hype cycle brought more attention, users, and capital to the crypto ecosystem and built upon the advances made by those previously.

This article explains why experts say a bear market is a good thing. There’s much truth in the mantra “bear markets are where you build” – many of today’s prominent protocols and applications were built in the depths of prior downturns. In the early stages of any emergent technology, much attention must be focused on the technical aspects of what’s being built.

The building is on one side of the equation; demand is on the other. It’s what’s needed to maximize the value of all the sweat equity that goes into bear market building. Demand leads to more usage, leading to faster feedback cycles, and better products, leading to more demand and use.

The visionaries and entrepreneurs see the need for innovation as the increasing pressure from the centralized totalitarian regime orchestrated by globalists tightens. To shift the balance of power, decentralization with an alternative financial system to the one currently failing us is a solution. 

A primary example of this is Markethive – The Ecosystem for Entrepreneurs. It is a community-funded pioneer in the blockchain and cryptocurrency space's social media, marketing, and broadcasting sector. 

Markethive is consistently delivering new integrations and updates to its platform in preparation for its launch into the crypto industry, and the timing couldn’t be better. It’s an entirely different animal and one of the most promising projects in the entire social media and marketing niche, with varied use cases and real-world applications that have the potential to change the media landscape. 

This next-generation platform perfectly exemplifies how this technology can benefit more people beyond just leveraged speculation. Markethive provides valuable utility for its community that understands the potential of applications in this new world.

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

 

 

Editor and Chief Markethive: Deb Williams. (Australia) I thrive on progress and champion freedom of speech. I embrace "Change" with a passion, and my purpose in life is to enlighten people to accept and move forward with enthusiasm. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.

 

 

 

 

 

Tim Moseley

Stablecoins: The Anchors in the Storm of the Global Economic Crisis

Stablecoins: The Anchors in the Storm of the Global Economic Crisis

The global economic landscape is undergoing a remarkable transformation as the winds of change sweep across borders and the concept of de-dollarization takes center stage. De-dollarization, a term that has gained significant traction in recent years, signifies a paradigm shift aimed at reducing the reliance on the U.S. dollar in international transactions. This phenomenon has captured the attention of economists, policymakers, and financial experts worldwide, heralding a potentially seismic shift in the global economic order.

A confluence of factors has fueled the momentum behind de-dollarization. Geopolitical tensions, trade wars, and the ascent of emerging economic powers have all played instrumental roles in reshaping the global economic climate. In the face of these multifaceted challenges, an intriguing alternative has emerged – stablecoins. These digital currencies, designed to maintain a stable value and minimize the volatility associated with traditional cryptocurrencies, have garnered considerable attention and are poised to disrupt the prevailing financial status quo.

This article aims to delve deep into the concept of stablecoins and elucidate their relevance in the context of de-dollarization. We will explore stablecoins comprehensively, and their potential implications for the global economic landscape. By shedding light on stablecoins and their intricate relationship with de-dollarization, this article aims to provide readers with a nuanced understanding of this fascinating development and its potential ramifications.

Historical Background: The Rise of Stablecoins

We can trace the rise of stablecoins as a significant player in digital currencies back to the early years of cryptocurrency development. While the concept of stable value digital currencies has existed for decades, the advent of Bitcoin in 2009 sparked a revolution in the financial world and laid the foundation for stablecoins to emerge.

In the early days of cryptocurrencies, Bitcoin gained attention for its decentralized nature and potential as a peer-to-peer electronic cash system. However, its extreme price volatility hindered its practical use as a medium of exchange and store of value. Bitcoin's value fluctuated wildly, often experiencing significant price swings within short periods.

Recognizing this volatility as a significant barrier to mainstream adoption, developers, and innovators in cryptocurrency began to explore ways to create digital assets that maintained a stable value. Their goal was to bridge the gap between the advantages of cryptocurrencies, such as efficiency and borderless transactions, with the stability of traditional fiat currencies.

The first stablecoin, Tether (USDT), was introduced in 2014 to address this issue. Tether value was pegged to the U.S. dollar on a 1:1 ratio, providing stability and liquidity for cryptocurrency traders. Despite its controversies and regulatory scrutiny in subsequent years, Tether laid the groundwork for stablecoins and demonstrated the demand for digital assets with stable values.

As the cryptocurrency market matured, stablecoins gained traction, leading to the development of alternative types of stablecoins beyond fiat-collateralized ones. One notable development was the introduction of commodity-backed stablecoins. These stablecoins were designed to be backed by tangible assets like gold or oil, providing stability through the inherent value and strength of the underlying commodities.

Another type of stablecoin that emerged was algorithmic stablecoins. These stablecoins utilized complex algorithms and smart contracts to maintain their value stability. By automatically adjusting the supply and demand dynamics, algorithmic stablecoins aimed to achieve stability without needing direct collateralization.

The popularity and adoption of stablecoins expanded significantly in 2019, especially during periods of market volatility. Stablecoins offered a refuge for traders and investors seeking to preserve the value of their assets during market downturns. Their stability and liquidity made them an attractive alternative to holding traditional fiat currencies in uncertain economic conditions.

The concept of stablecoins gained further momentum with the rapid development of blockchain technology and the rise of decentralized finance (DeFi). Stablecoins became an integral part of the DeFi ecosystem, providing a stable and reliable medium of exchange, collateral, and liquidity in decentralized lending, borrowing, and trading platforms.

Today, stablecoins continue to evolve and diversify, with many projects and protocols entering the market. Governments and central banks have also started exploring the potential of central bank digital currencies (CBDCs) as a form of stablecoin, aiming to leverage the benefits of blockchain technology while maintaining control over monetary policy.

The historical background of the rise of stablecoins showcases the ongoing quest for stability in digital currencies. From the early days of Bitcoin to the present era of DeFi and CBDCs, stablecoins have emerged as a promising solution to address the volatility inherent in cryptocurrencies. With each passing year, their relevance and importance in reshaping the global financial landscape continue to grow, making stablecoins a fascinating phenomenon to observe and explore.


Image credit: Markethive.com

The Great Currency Shift

De-dollarization, a trend gaining momentum in various parts of the world, is driven by geopolitical tensions, trade wars, and the rise of new economic powers. Countries like China, Russia, and Iran have been actively reducing their dependence on the U.S. dollar in international transactions, and this trend is expected to continue in the coming years. It will potentially have an impact on the stability of stablecoin.

The implications of de-dollarization for stablecoins and the broader crypto market appear chaotic at first glance. As the use of the U.S. dollar declines, demand for stablecoins pegged to the U.S. dollar, such as Tether (USDT) and USD Coin (USDC), may decrease. This shift in demand could create opportunities for alternative stablecoins pegged to other major currencies like the euro, yen, and yuan.

According to Bloomberg, the Chinese yuan surpassed the U.S. dollar as China's most popular cross-border currency, rising to a high of 48% of transactions from a low of almost 0% in 2010. This is an illustration of the de-dollarization process in operation.

If the U.S. dollar loses its dominance as the global reserve currency, stablecoins pegged to the dollar would also lose their value and stability. To address this issue, there is a need for new stablecoin legislation to bolster the U.S. dollar. The Circle founder has suggested that Congress pass new stablecoin legislation to strengthen the greenback and prevent de-dollarisation's adverse effects on stablecoins. However, some experts argue that weaponizing the dollar will destroy its reserve currency status, leading to a further rise in de-dollarization


Image credit: Markethive.com

The Future of Stablecoins

Stablecoins can revolutionize how we conduct financial transactions, particularly in the context of de-dollarization. They can provide a secure and stable means of conducting cross-border transactions, investments, and hedging against currency fluctuations. However, governments must address several regulatory challenges and opportunities to ensure widespread adoption.
The future of U.S. pegged stablecoin will depend on several factors, including the continued dominance of the U.S. dollar in the global economy, the development of stablecoin regulations, and the ability of stablecoin to adapt to changing market conditions.

According to CoinMarketCap, every stablecoin with a market cap exceeding $1 billion is pegged to the U.S. dollar, which suggests that stablecoin's success is closely tied to the strength of the U.S. dollar. However, as de-dollarization continues to gain momentum, stablecoin may need to explore alternative pegs to maintain its stability and relevance in the market.

Stablecoins can be created in a variety of methods, but the ones that are currently in use are exogenous (backed by assets from outside the stablecoin's ecosystem) and fully/over-collateralized. Moving away from U.S. pegged stablecoins may likely not result in liquidity problems as long as the stablecoins have enough collateral, especially when a large amount of the collateral is held as highly liquid assets.

Several stablecoin projects are already addressing the challenges of de-dollarization and enhancing financial inclusion. One example is the Stellar network, which uses its native stablecoin, Lumens (XLM), to facilitate cross-border transactions and provide low-cost remittance services. Another example is the MakerDAO project, which uses its stablecoin, Dai (DAI), to provide a stable store of value that is not subject to the volatility of other cryptocurrencies.

Regulatory Challenges

Stablecoins are still largely unregulated, and concerns about their potential impact on financial stability and consumer protection exist. Regulators around the world are grappling with how to regulate stablecoins. This is a concern since stablecoins are very different from conventional crypto. Stablecoins cannot survive as they do without special national regulations. Regulation is a highly jurisdictional issue since, as we can see, crypto laws do vary slightly in different countries.

In the U.S., stablecoin regulation could be more explicit, but the SEC needs to make that happen. The United States may be delaying their response because they intend to release the digital dollar. Additionally, several organizations, including the Commodity Futures Trading Commission (CFTC), the Office of the Comptroller of the Currency (OOC), and the Financial Crimes Enforcement Network (FinCEN), must apply their own federal rules to stablecoins. In addition to federal requirements, states may have their own rules, further complicating the situation. 

Japan has been seeking to regulate cryptocurrencies uniformly. However, because of their peculiar character, stablecoins are expected to undergo special regulation, much as the nation may not even regulate the U.S. dollar-pegged Stablecoins as cryptocurrencies; instead, laws may be based on the real asset they are backed by.

In a developed nation like Singapore, stablecoins are said to comply with legal requirements if the Securities and Futures Act (SFA) is applicable. Before creating a stablecoin there, one must take caution because they come under such regulations. The digital asset shouldn't have any issues functioning in the Singaporean economy if it can comply with certain regulations.

Regarding stablecoin regulation and cryptocurrency in general, Russia has been highly erratic. The nation declares that particular "digital rights" laws put out by the government in 2019 must be followed by crypto-related crowdfunding platforms and projects. Stablecoins are not specifically mentioned in this law; thus, it is reasonable to presume that the same restrictions apply to assets backed by fiat as well.

General Guidelines Regarding Stablecoin Regulation

You are now aware of the many regulations that apply to stablecoins. But because cryptocurrencies are a worldwide commodity, it's critical to recognize the global legislation parallels. Fiat-backed currencies, for example, all plainly emphasize the transfer of value. Therefore, governments will need to ensure that parties may use stablecoins without risk. To prevent these transactions from being utilized for tax avoidance, they will also need to declare them.

The issue of what to do with the stablecoins follows. Some people could utilize them to send money overseas for payments. Others could view them as an alternate means of holding and investing in commodities like gold. Finally, these nations must consider global stablecoin law. In other words, they should observe how other countries accomplish the goals they seek to achieve. Authorities must also discuss if a single worldwide regulatory approach is preferable to several separate ones.

Stablecoins have emerged as an alternative to traditional currencies, offering stability, security, and transparency. In the context of de-dollarization, stablecoins have the potential to play a significant role in navigating the future of the global economy. However, several regulatory challenges and opportunities must be addressed to ensure widespread adoption. As the world shifts away from the U.S. dollar, stablecoins will become increasingly relevant, providing a secure and stable means of conducting cross-border transactions, investments, and hedging against currency fluctuations.

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

 

About: Prince Ibenne. (Nigeria) Prince is passionate about helping people understand the crypto-verse through his easily digestible articles. He is an enthusiastic supporter of blockchain technology and cryptocurrency. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.

 

 

 

 

Tim Moseley

Citibank Report Says Asset Tokenization a Killer Use Case for Blockchain and CBDCs What About Crypto?

Citibank Report Says Asset Tokenization a “Killer Use Case” for Blockchain and CBDCs. What About Crypto?

Citibank's latest global perspectives and solutions report claims that tokenizing financial and real-world assets could be the "killer use-case" and a multi-trillion dollar opportunity. The report focuses on Asset Tokenization as the “killer use case” that blockchain needs to drive a breakthrough, with trillions of dollars worth of securities tokenized by the decade's end, forecasting up to $4 trillion. 

Citi is an investment bank on the list of the “Too Big To Fail” banks. Its 165-page research report is titled ‘Money, Tokens, and Games. Blockchains Next Billion Users and Trillions in Value’ and contains bold projections for Blockchain, NFTs, and Central Bank Digital Currencies. 

The report noted that the crypto industry is “approaching an inflection point,” and conversations by a few key figures in the crypto industry were aggregated in the research paper. The list includes Algorand founder Silvio Micali, Aave founder Stanley Kulechov, Ava Labs president John Wu, Polygon Labs president Ryan Wyatt,  and even Zooko Wilcox, the founder of Zcash.

The report pdf is very long, so here’s a summary of a few noteworthy sections and some counter-arguments of why it may be a little askew in these areas. Could it be intentional, or  maybe it’s just wishful thinking on their part? And what does it mean for the crypto industry?


Image credit: Citi GPS pdf
 

Report’s Brief Introduction 

The report begins with a brief introduction from Kathleen Boyle, the managing editor at Citibank, who, presumably, put this report together. She commences by explaining that the potential of blockchain has been overlooked primarily because it's a back-end technology, not a front-end technology like ChatGPT. She says successful blockchain adoption will be achieved when “Blockchain has a billion-plus users who do not even realize they are using the technology.” 

However, she does not say this adoption will come from crypto; it will come from Central Bank Digital Currencies (CBDCs). She also implies that the trillion-dollar opportunity of asset tokenization will come from the blockchains that power these CBDCs, not cryptocurrency blockchains. 

This starkly contrasts what the crypto headlines say about the report. – As DeFi Edge points out there are already some prominent crypto protocols focusing on real-world asset tokenization. This underscores the importance of whenever you hear an institution, be it a mega bank or a government, talking about the benefits and potential of blockchain technology, 99% of the time, they are not talking about cryptocurrency. In almost every case, they talk about private and permissioned blockchains they will control. 

This is why it's a bit scary to see Kathleen explain that blockchain needs “decentralized digital identities, zero-knowledge proofs, oracles, and secure bridges to achieve mass adoption.” She's probably not talking about the same technology we use in crypto. She's talking about different technology. Kathleen also notes that “regulatory considerations are also necessary to allow adoption and scalability without ‘hindering innovation’.” 


Image credit: Citi GPS pdf

Kathleen and her crew estimate the mass adoption of blockchain, not crypto, is 6 to 8 years away. Some would argue that the mass adoption of crypto will come much sooner than that, and the value of the assets tokenized on cryptocurrency blockchains will exceed the $4 trillion the report is projecting. Moreover, the sentiment of crypto heavyweights et al. believes the adoption of CBDCs and asset tokenization on private blockchains will be much lower than the authors' pitch. 

That's because data from the Bank for International Settlements (BIS), the bank for central banks, shows that only 4% – 12% of people will voluntarily adopt CBDCs. The same goes for tokenized assets on private blockchains. If governments control these blockchains, then having all your assets tokenized means you won't truly own them; the government will own them. This is precisely what entities like the World Economic Forum are pushing for. This article explains how you can reject what the globalists are planning.

Central Bank Digital Currencies – CBDCs 

The first part of the report worth covering is about CBDCs. The report projects that between 2 and 4 billion people will voluntarily adopt CBDCs. This is inconsistent with the adoption projections from the BIS and actual CBDC adoption in countries like Nigeria, where adoption is a fraction of a percent. 

It begins by revealing that the obsession with CBDCs comes from the fact that they will allow governments and central banks to micromanage monetary and fiscal policy. In other words, they can control how much you can spend, how much you can save, what you can buy, and so on. Citi’s authors estimate that as much as 20% of all the currency in circulation will be converted into CBDCs by 2030. They also claimed that; 

“The successful launch and adoption of CBDCs would lead to more stablecoin projects becoming mainstream. This is because the stablecoin protocol is now able to hold reserves in CBDCs, which are more stable and liquid than money market instruments.” 

For context, stablecoins are currently backed primarily by US government debt. This is a double-edged sword because it allows the US government to subsidize its spending but also risks crashing the bond market in the event of a stablecoin run. It sounds like stablecoins will soon be backed by CBDCs instead. This is concerning because if CBDCs back stablecoins, it gives governments and central banks de facto control of all the stablecoins in circulation. 

This, in turn, would give governments and central banks control of cryptocurrencies, whose ecosystems rely on stablecoins, such as Ethereum. Ethereum creator Vitalik Buterin said that stablecoins like USDC would have the power to decide future blockchain forks. What’s needed is a genuinely decentralized stablecoin to be developed that will protect crypto projects, like Ethereum, from future stablecoin control. 

The authors list countries that are working on CBDCs and include notes about which technologies they're using. Australia and Norway appear to use Ethereum as part of their CBDC development. It's safe to assume they will use some private version. To their credit, the authors also list risks associated with a CBDC rollout. These include competition between central banks because of currency competition, a loss of privacy, a loss of bank deposits leading to financial instability, and limited adoption. Critics argue that the latter isn't a risk.


Image credit: Citi GPS pdf

Regarding the adoption aspect, the authors highlight the less than 0.05% adoption rate of Nigeria’s eNaira and the slow adoption of the Bahamas Sand Dollar, with FTX’s collapse and C-19 said to be contributing factors to the loss in momentum. This makes their projection of wide-scale CBDC adoption that much more implausible. They blame the absence of said adoption so far on a lack of financial literacy. Arguably, financial literacy is precisely why people aren't adopting CBDCs. 

As explained in this article, it’s important to note the difference between CBDCs and cryptocurrencies. Certain institutions are already trying to market CBDCs as having the same benefits as cryptos as cryptocurrency adoption continues to rise.

Citi’s report presents timelines for when some CBDCs will be deployed. It states a digital Euro will be up and running around 2026. The digital pound will be ready by 2030, but the digital dollar is yet to be determined, and it slams the few brave US politicians for trying to stop its development. 

Decentralized Social Media – DeSo

The second part of the report is about decentralized social media (DeSo). Unfortunately, this chapter is relatively short because DeSo is highly critical due to the overwhelming efforts of governments to censor the internet. This article explains that governments worldwide are in the process of passing online censorship laws. In the European Union, these online censorship laws have already passed and are set to go into force in June this year. 

Since trust in institutions has been declining for decades and slumped after all the pandemic restrictions, their need for this crackdown makes sense. Trust in institutions is crucial for the financial status quo to continue. The recent banking crisis exemplifies what happens when that trust is entirely lost. This is why the authors note that “Blockchain's ability to create a shared, immutable, digital record of transactions could also help users see where particular information originated in order to judge its credibility. This could help build trust.”

The catch is that trust only exists when the blockchain is trustless. The report also notes that with DeSo, “ownership of content and control over the distribution channels remains with users.” This is required to resist online censorship, and it's the same principle that underlies all crypto. You are only financially free when you own and control your assets. 

The report’s authors include a conversation with Aave founder Stanley Kulechov; the remainder of the section is an interview with him. This is primarily because Stanley and the Aave team are working on the Lens protocol, a decentralized social media protocol that will serve as the backend for future DeSo platforms. Stanley believes that games and social media might be how most people become aware of blockchain technology. 

They are unaware that a monolithic crypto project in the DeSo space has been in development and is now up and running for the most part. The founder and architect of Markethive, Thomas Prendergast, envisioned the dystopian system we are experiencing currently and is ahead of the curve with a decentralized platform incorporating a social, marketing and broadcasting network for entrepreneurs that services as a cottage industry. Markethive is an ECOcentric DNA system. 

The Markethive ecosystem culminates with its unique, comprehensive economic center housing the wallets and account facilitation for the user, with merchant accounts for eCommerce facilitation, and enables creators to monetize their content. Its cryptocurrency, Hivecoin, is the cornerstone of this decentralized economic sanctuary and is a portal to sovereignty and financial freedom with gamification thrown in. This is where people are learning about and experiencing crypto and blockchain technology. 

Decentralized Digital Identity – DID

Another section of the report is about decentralized identity. Citi starts with a spooky sentence: "Decentralized identity is a core technology component that will enable regulatorily compliant uses of blockchain while still preserving anonymous/pseudonymous access.” 

They seem to suggest that the purpose of decentralized digital ID is not to do things like interact with cryptocurrency protocols but to be the “identity layer for the entire internet.” Logically, this means whoever controls this identity layer will have unprecedented power. 

Moreover, the report specifies that decentralized digital ID “Does not imply a lack of centralized parties in identity issuance or verification, but that the mechanism of owning, sharing and verifying identity is done in a permissionless, decentralized manner.” 

This is a problem because if the issuance and verification of a decentralized digital ID are centralized, the issuer or verifier can revoke your ability to interact with online services. That's not decentralization, underscoring the need for crypto to find a way to issue and verify digital ID in a decentralized manner. 

Consider that a decentralized digital ID tied to a government-issued document is no different from a centralized stablecoin. Ponder a scenario where your government-issued ID is digitized like the CBDCs backing stablecoins. Additionally, governments worldwide are actively working on rolling out Digital IDs. Countries are at different stages, but skepticism and pushback have existed. 

Naturally, the authors say that the need for digital ID comes from the relentless data collection by big tech. They don't say that most of these big tech companies are aligned with governments and that these so-called decentralized digital IDs will likely just provide this data directly to said governments. 

The authors showcase the recently released Polygon ID as an example of a decentralized digital ID solution, and the infographic suggests that it's built exactly how the authors describe it. There's a centralized issuer and verifier – you only control what you reveal on-chain. 


Image credit: Citi GPS pdf

The report also provides an example of an actual decentralized digital ID: the Ethereum Name Service (ENS). ENS lets you buy a decentralized domain name ending in .eth for those unfamiliar. It has no central issuer or verifier; it's entirely decentralized and is run by a DAO. With that said, you could argue that DAOs aren't that decentralized due to their governance structures. 

The authors appear to argue that an actual decentralized digital ID isn't a solution because it's not tied to so-called verifiable credentials such as government-issued IDs. Instead, they shill their version of decentralized digital ID, which they also call “Self-sovereign identity. They then provide examples of self-sovereign identities and include digital IDs developed by Microsoft and the European Union. To add insult to injury, the authors omit centralized control as one of the risks associated with this technology but imply that crypto is a risk. 

Smart Legal Contracts – SLC

The last part of the report is about so-called Smart Legal Contracts (SLC), also called Contracts 2.0. The authors start with a statistic, and that's that 60% – 80% of all business transactions involve a contract. They note that companies lose 9% of their profits and miss out on an additional 40% of profits from bad contracts. Nick Szabo is the creator of Smart Contracts; however, SLCs are not the same as his smart contracts. It’s the authors that deem them an official subset of Smart Contracts but with different characteristics. 

They clarify that smart legal contracts have no universally agreed-upon definition, but the main difference is they don't involve blockchains. Smart legal contracts are also legally enforceable in their countries of origin. By contrast, legal enforceability is rarely a consideration in smart contracts.

This begs the question of why smart legal contracts are required at all, and the authors reveal the answer. “Smart legal contracts are more dynamic to changing circumstances – to achieve legal compliance, they must include terms that allow them to be paused, modified, or rectified.” 

It sounds like the authors are insinuating that smart contracts cannot be legally compliant due to their immutability. If smart legal contracts don't exist on blockchains, can be adjusted on a whim, and occasionally require human execution, as noted by the authors, then it begs the question of what makes SLCs different from a standard digital contract. The authors don't have a clear answer here. 

To their credit, they concede that smart contracts are likely to be much more popular than smart legal contracts because they provide the following benefits. 

  • They can exist indefinitely.
  • They are transparent.
  • They are tamper-proof.
  • They are secure.
  • They are built on a single source of truth. 

This section of the report is long and consists of the authors tripping over themselves to try and explain why smart legal contracts are the future despite being objectively inferior to smart contracts.


Image credit: Markethive.com

What Does This Mean For Crypto?

So here’s the big question – What does Citibank’s report mean for crypto? If anything, it reveals that institutional investors are looking at the crypto industry through a radically different lens from us retail investors. CBDCs, de facto digital IDs, and changeable smart contracts are not crypto. 

The few sections of the report about crypto were much shorter than those about dystopian technologies inspired by crypto. As mentioned, the chapter about decentralized social media was the shortest of all and could be interpreted as not a coincidence. 

Consider that the purpose of cryptocurrency is to replace megabanks like Citi, as well as most of the institutions that the other authors of this report work for. The first step to this replacement is the awareness of what crypto offers and why it's valuable. This information can be found on social media for now; however, with all the plans and legislations to continually broaden censorship of what authorities deem as mis/dis-information may see it disappear from the mainstream. 

In fact, leaked documents from the Department of Homeland Security stated that the US government was looking to censor information on social media, which fosters distrust in the financial system. Whoever still doubts that the government would resort to censoring financial information look no further than the recent banking crisis. In the subsequent hearings about the crisis, multiple US politicians pointed to social media as the cause of the bank runs that precipitated it. 

If you read this article about bank bail-ins, you'll know that US government officials discussed censoring discussions of bank runs on social media in their bank bail-in simulation late last year. It's more than likely that other governments would secretly consider the same behind closed doors. Now, I mention all of this because Citibank's report is part of what can only be described as an ongoing information war against cryptocurrency by the establishment. 

Another example is mainstream media articles about how Bitcoin mining is killing the planet, which is untrue. When it becomes clear to the establishment that they are losing this information war, they will resort to censorship to ensure that the trust in their increasingly unstable financial system remains. 

This crossroads is coming sooner than people think because everyone is waking up to CBDCs. People are also starting to wake up to the fact that not all cryptocurrencies are created equal, and the establishment is co-opting some crypto projects, companies, and technologies to usher in a dystopian new system. This system requires a digital ID; their fake decentralized digital IDs are the trojan horse. 

Always remember that blockchain does not equal crypto, and take every statement about crypto from megabanks and central banks with a massive grain of salt. The same goes for headlines about how mega and central banks embrace crypto. The likelihood is that they're doing the exact opposite. 

 

 

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

 

Editor and Chief Markethive: Deb Williams. (Australia) I thrive on progress and champion freedom of speech. I embrace "Change" with a passion, and my purpose in life is to enlighten people to accept and move forward with enthusiasm. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.

 

 

 

 

Tim Moseley

Meme Coin Mania Meets Bitcoin: BRC-20 Offers New Challenges for Bitcoin Investors

Meme Coin Mania Meets Bitcoin: BRC-20 Offers New Challenges for Bitcoin Investors.

The world of cryptocurrency is no stranger to innovation and disruption. From the advent of Bitcoin in 2009 to the rise of Ethereum and the explosion of decentralized finance (DeFi), the crypto space has been at the forefront of technological advancement and financial experimentation. But in recent months, a new phenomenon has taken the crypto world by storm: meme coins.

These digital assets have little to no fundamental value but have gained massive popularity thanks to social media hype and viral marketing. Some of the most famous meme coins include Dogecoin, Shiba Inu, and SafeMoon. These coins have captured the imagination of millions of people worldwide, leading to a surge in demand and a corresponding increase in their market value.

But meme coins may not totally be a fad. They are also changing how we think about digital assets and blockchain technology. And with the introduction of the BRC-20 token standard, meme coins are now becoming part of the Bitcoin ecosystem, offering new opportunities for investors and enthusiasts alike. Investors are now experiencing a massive shift in the Bitcoin (BTC) ecosystem thanks to the new experimental token standard called "Bitcoin Request for Comment," or BRC-20, which has attracted much interest.

Over 4 million Ordinal inscriptions have been recorded on the Bitcoin blockchain as of the time of this writing. This new invention has the crypto community buzzing, with about 18,266 BRC-20 tokens created utilizing Ordinals and a soaring market capitalization reaching $409 million. Recently, non-ordinal BRC-20 transactions have been eclipsed by transactions involving the deployment, minting, and transfer of tokens. The proportion of BRC-20 transactions peaked on May 7 at 65%, demonstrating the protocol's expanding uptake.


Video source: Coindesk.com

Unlocking Bitcoin's Potential

For usage in smart contract applications, BRC-20 tokens are a cryptocurrency that operates on the Bitcoin network. BRC-20 transactions, in contrast to standard Bitcoin transactions, require the user to inscribe a new ordinal, lengthening the queue in the Bitcoin mempool. The size of BRC-20 tokens is around ten times smaller than picture inscriptions, although the mempool memory utilization is now lower than in March.

The average transaction price increased to $18.9, the highest level since May 2021, despite the decreased mempool utilization. This is brought on by the lengthy mempool wait, which makes users pay a higher gas charge for the miners to complete their transactions. The percentage of fees from Ordinals transactions has risen to 61%, with 99.5% coming from BRC-20. The fact that there has been a noticeable increase from the previous levels shows that BRC-20 is becoming increasingly popular within the Bitcoin community.

The percentage of transaction fees increased significantly from the 1-2% level seen since July 2021 to 31% on May 7. It's vital to remember that the costs are modest when expressed in BTC, even though this fee increase may worry some Bitcoin users. 

The Revolutionary Approach And Utility Of BRC-20

BRC-20 tokens have attracted much interest in the cryptocurrency sector, but their usability and DeFi capabilities still have the potential for improvement. BRC-20 tokens may see an upgrade in their DeFi capabilities due to the possibility of a layer 2 solution like Stacks to bridge BRC-20s, which may draw in additional users and investors. It will be interesting to see whether BRC-20 tokens can surpass their present restrictions and gain more excellent traction as a cryptocurrency.

Despite rising popularity and market capitalization, the utility of BRC-20 coins is still constrained by the absence of smart contract functionality. However, the possibility for a layer 2 solution might improve their DeFi capabilities, which could lead to a cryptocurrency that is more commonly used.


Image source: Twitter

Bitcoin Community Reacts

Since its introduction by a developer going by the fictitious name Domo in March, the BRC-20 token standard has generated a lot of discussion within the Bitcoin community. Using the Ordinals protocol, BRC-20 tokens make it simple for developers to manufacture fungible crypto assets. Individuals must encode JSON data containing crucial token information to produce a BRC-20 currency. Similar to an ERC-20 token contract on Ethereum, this information would provide essential information about the token, such as its name, symbol, and total quantity.

As of this writing, there are over 300,000 unconfirmed transactions in the Bitcoin mempool due to the spectacular issue of over 18,266 BRC20 tokens and the spike in Ordinal inscriptions exceeding 4 million. Ordspace has a complete list of these 10K+ BRC20 currencies and a US dollar value for each token. The BRC20 token economy has seen tokens soar with increases in the triple digits.

These tokens include PEPE, MEME, ORDI, $OG$, PUNK, SHIB, and DOMO, to name a few. A contentious discussion about whether fungible and non-fungible tokens (NFT) built on BTC merit confirmation alongside financial transactions has been rekindled by the storm of BRC-20s and Ordinal inscriptions.

Ethereum supporter Ryan Berckmans described the rivalry between BTC Core devs, miners, and ordinals as a "civil war." BRC-20 meme coins and ordinals are viewed as spam by several developers, including Dashjr. As a result of the rising demand for block space, transactions, and fees have surged, giving the impression that it is experiencing an "Ethereum moment", yet they are advantageous to Bitcoin miners who are making huge profits from this disaster. Divisions within the Bitcoin community are nothing new; they have existed in the past and will probably do so again as long as the crypto sector continues to exist.


Image by Markethive.com

Final Thoughts

The current situation makes it untenable for many who want to use Bitcoin for its intended purpose. When you look at the ideas behind meme coins, you will understand that they are purely pump and dump coins with no actual utility attached to them. However, some argue that utility may come on afterwards, such as in the many NFT projects that started off as a joke. 

The thing here is that most of these meme coins are launched by rogues who anonymously build a community through massive advertising campaigns that make people believe in the project. After a while, the project dies off, causing people to lose millions of dollars. The bitter truth about meme coins is that the people are the products or the actual jokes in these projects. Having these projects launched on the Bitcoin Blockchain creates many uncertainties and opportunities, as many would believe.

If you are a Bitcoin maximalist, there's a reasonable probability you're angry. Why? Several people waste block space and pollute the king of crypto with pointless projects. Unfortunately, since NFTs and DeFi on Bitcoin are such a big concern, you can't stop people from doing this.

Bitcoin takes out the corruption of humans because the humans that created it stepped away. Certainly, people will build corrupt and disruptive systems around it, as we see with the meme coins, but Bitcoin remains a simple, pure, and elegant currency. Bitcoin's lack of control by any institution or government empowers individuals with economic freedom and personal sovereignty. It's a game-changer. However, will the era of meme coin end anytime soon? Is Bitcoin the ideal place for this kind of project? Most likely not! We will have to wait and see how it all works out.

 


 

About: Prince Ibenne. (Nigeria) Prince is passionate about helping people understand the crypto-verse through his easily digestible articles. He is an enthusiastic supporter of blockchain technology and cryptocurrency. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.

 

 

 

 

 

Tim Moseley

Which Countries Are Set To Drive The Next Crypto Bull Run?

Which Countries Are Set To Drive The Next Crypto Bull Run? 

Many in the cryptocurrency industry have attempted to predict when the next crypto bull run will commence. Much of it is speculation, so we can’t be sure when, but a few crypto veterans believe they know what regions will drive the next crypto market bull run. In February of this year, Gemini crypto exchange co-founder, Cameron Winklevoss, said that the next crypto bull market would come from the East.

His statement on Twitter referenced that countries in the East have been embracing crypto by introducing sensible regulations that could result in record levels of institutional investment. As per the sentiments of Coinbureau.com, this article explores five countries that could be the primary drivers behind the next bull market, when they could pass pro-crypto regulations, and 
which cryptocurrencies will benefit. 


Image source: Twitter

United Arab Emirates

The first country to watch is the United Arab Emirates (UAE). The UAE introduced its first pro-crypto regulations in 2018 when it announced its Blockchain Strategy 2021. However, it wasn't until early 2022 that the crypto industry started to migrate to Emirate cities like Dubai. That's because early 2022 is when the UAE announced that it would introduce a federal license for so-called Virtual Asset Service Providers (VASPs), including cryptocurrency exchanges. 

This federal license effectively combined all the crypto licenses the country had created by that time. In the following months, there were plenty of headlines about businesses, such as international schools accepting crypto payments and government agencies dabbling in Metaverses and NFTs. The UAE Ministry of Economy even set up a virtual headquarters in a custom metaverse. 


Source: YouTube

By the end of 2022, the UAE was home to over 1.5K crypto projects and companies. Most of these projects and companies moved to Dubai, which caused FOMO from other Emirate cities, such as Abu Dhabi. It announced multibillion-dollar crypto initiatives to get in on the rush. Earlier this year, the UAE Minister for foreign trade announced that crypto would play a significant role in UAE trade. 

Although the UAE's crypto adoption is bullish, banking access is one minor issue holding it back from its full potential. According to UAE crypto regulation analyst, Wealthy Expat, pro-crypto regulation has yet to make UAE banks more comfortable opening accounts for crypto clients. It may have to do with the fact that the Financial Action Task Force (FATF) put the UAE on its grey list last March. 

For reference, being grey-listed means it becomes harder to transact with the global banking system, as explained in this article highlighting five institutions' efforts to thwart the crypto industry. It’s not ideal for crypto projects and companies seeking to cater to International clients, and it's a big part of why the UAE has taken proactive steps to get itself off the FATF's grey list. 

Such steps include tightening regulations around privacy coins and demanding more information from crypto projects and companies. As noted by Wealthy Expat, these revamped crypto regulations should make UAE banks more comfortable servicing crypto clients. And with a bit of luck, also be enough to get the UAE off that grey list. If both outcomes occur, it will finally open the floodgates for crypto capital in the country. 

However, there is one hindrance to crypto investing in the UAE, as there continues to be uncertainty about which cryptos are allowed according to Islamic law. For context, gambling is forbidden in Islam; it's safe to say that much crypto investing is no different from gambling. That's why it makes sense that the UAE is especially keen on the Metaverse and NFTs. The digital property aspect of these two crypto niches makes them more palatable from an Islamic perspective. 

As such, Metaverse and NFT cryptos could see the most significant inflows from the UAE's ongoing crypto adoption. While it's unclear when the UAE will finalize its revamped crypto regulations or get off the FATF's grey list, both will likely happen by the end of the year. This ultimately depends on how much the UAE complies with requests from the US government, which controls the FATF. 


Image source: Al-Monitor

Saudi Arabia

The second country to watch is Saudi Arabia. In contrast to the UAE, the Saudi government banned banks from processing crypto-related transactions in 2018. The government also declared that crypto trading was illegal, but there are reportedly no punishments for those who trade. The absence of penalties is probably why a significant percentage of Saudi citizens hold and trade crypto. 

According to a survey by KuCoin in May last year, around 14% of Saudi adults had held or traded crypto over the previous six months. Another 17% were interested in crypto. Now, the apparent popularity of crypto in Saudi has given rise to so-called Halal-approved crypto products, which began making the crypto headlines late last year. 

Around this time, the Saudi Central Bank announced that it had hired a crypto expert to assist in crypto policy. Also, Binance is already doing business with the country, proving that Saudi is seriously considering pro-crypto regulations. Further evidence can be found in the unexpected announcement in February that the Saudi government had partnered with the crypto project, The Sandbox, for metaverse development. This further underscores the appeal of the Metaverse and NFT niches to countries with Islamic considerations. 

Although it's still too soon to say if Saudi Arabia will adopt crypto to the extent of the UAE, geopolitics is pushing the oil kingdom in that direction. As some may have heard, Saudi Arabia's relationship with the United States is getting weaker while its relationship with China is getting stronger. 

Saudi Arabia is reportedly considering pricing some of its oil sales to China in Yuan. This is a big deal because Saudi Arabia is supposed to price all its oil in US dollars. Pricing even just a portion of its oil in Yuan would weaken the US dollar, upsetting the United States. Here's where things get very interesting. 

The Saudi Riyal is pegged to the US dollar at a rate of 3.7 SAR to 1 USD, which has been the case since 1986. If Saudi Arabia was to do something to upset the US, such as sell its oil in foreign currencies, the US could retaliate by restricting Saudi Arabia's access to USD. The Saudi government is hyper-aware of this, and possibly why the Saudi Central Bank is considering the development of a Central Bank Digital Currency (CBDC). A digital Saudi Riyal could allow Saudi Arabia to eliminate its currency’s dependence on the US dollar. 

That approach may be problematic as other countries may feel uncomfortable accepting a Saudi CBDC as payment. One solution could be to develop a new kind of Reserve currency, such as the one being considered by the BRICS countries, or they could simply adopt cryptocurrency instead. 

The crypto approach may seem far-fetched until you consider that Iran, another Islamic country, allowed businesses to use crypto for trade last year. Moreover, China recently brokered a peace deal between Saudi Arabia and Iran, so Iran may use crypto for trade with Saudi Arabia which could make Saudi more comfortable doing the same. 

If Saudi Arabia does start using crypto for trade, the Gulf countries would likely follow suit because the currencies of most Gulf countries are also pegged to the US dollar. Chances are,  they're itching to escape US influence as much as Saudi is, and possibly why the UAE is rushing to roll out a CBDC too. 


Image source: Cryptopolitan

Hong Kong

The third country is Hong Kong which is essentially part of China, highlighting the importance of Hong Kong's crypto adoption because it bodes China doing the same. For reference, China banned crypto in 2018 and eradicated what was left of the industry in 2021. Hong Kong was initially seen as a safe haven for Chinese crypto companies and projects, but this changed after the heavy-handed takeover of the authorities following mass protests in 2019 and 2020. 

In late 2020, Hong Kong banned retail crypto trading and cracked down on the crypto industry. In early 2022, Hong Kong started targeting stablecoins. Officials later confirmed this was because stablecoins could undermine a Hong Kong CBDC. The Hong Kong dollar is also pegged to the US dollar, suggesting that Hong Kong could likewise be trying to escape US influence with a CBDC. 

In mid-2022, Hong Kong officials noted that some NFTs require additional regulations. This suggests that the country may not be as open to Metaverse and NFT niches as the UAE and Saudi Arabia, and this may be due to China's strict control of social media and the desire to maintain it. In late 2022, Hong Kong officials noted they wanted CBDCs used in DeFi. Officials later explained that they wanted to create a CBDC-backed stablecoin. 

Then, Hong Kong officials out of nowhere announced they were considering legalizing retail crypto trading and investing. By the end of 2022, Hong Kong had committed to attracting over 1,000 crypto companies and projects to its jurisdiction over the next three years—a complete 180° in attitude. 

Earlier this year, Hong Kong officials specified that they wanted to restrict retail crypto investment to the largest and most liquid cryptocurrencies. This suggests that cryptos like BTC and ETH could be the biggest beneficiaries when retail crypto trading and investing become legal on June 1st, 2023. 


Image source: Twitter

Not surprisingly, it was reported that the Chinese government had signed off on Hong Kong's crypto plans. Also, Chinese banks are reportedly trying to provide banking services to crypto companies and projects in Hong Kong despite crypto being illegal on the mainland. Hong Kong banks have also begun offering crypto-to-fiat conversions to their clients. 

Meanwhile, in China, the courts confirm that holding crypto is entirely legal despite all the restrictions. In combination, this suggests that the crypto inflows from Hong Kong will be truly massive. However, there are just two caveats: First, Hong Kong officials appear to oppose everything except crypto investing. Non-CBDC stable coins will be off-limits, and DeFi will be restricted too. One Hong Kong official noted last year that financial privacy would not be permitted either.  

Still, the inflows into large-cap cryptocurrencies could be enough to kick-start a new crypto bull market. Consider that Cameron's comments about the crypto bull market coming from the East were a reference to Hong Kong. Other crypto heavyweights, like Arthur Hays, have said the same. If all this becomes evident, it will likely result in pro-crypto competition in East Asia, much like the pro-crypto competition in the Middle East. It could result in Hong Kong removing many of its stablecoin, NFT, Metaverse, and DeFi-related restrictions to remain competitive. 


Image source: CNN

Singapore

The fourth country to watch is Singapore, which seems to have a love-hate relationship with cryptocurrency. The government denied hundreds of crypto licenses, banned crypto-related advertising, and shut down crypto ATMs early last year. On the flip side, however, KPMG found that crypto investments in the country had increased by more than 13x in 2021. 

Singaporean banks started expanding their services to retail investors in early 2022, and multiple large crypto companies, including Circle and Coinbase, secured crypto licenses. Moreover, Singaporean companies have been exploring crypto payments, and the Singaporean government has been exploring tokenizing assets on Smart contract cryptocurrencies.

Yet, between these bullish headlines, there's been no shortage of bearish crackdowns on the crypto industry. Most of the crackdowns came after the crypto hedge fund Three Arrows Capital (3AC) collapsed, based in Singapore. Given that 3AC’s failure was caused by the implosion of Terra’s UST stablecoin, stablecoins were among the crypto niches Singaporean regulators targeted. 

Singaporean regulators also floated the idea of restricting the participation of retail investors in crypto but opted to introduce revamped crypto regulations for everyone instead. In late 2022, they discussed requiring retail investors to take an exam before investing. More recently, Singaporean regulators have been working on streamlining the screening process for crypto projects and companies seeking to secure bank accounts in the country. Note that banking access is the most prominent crypto industry issue, so this initiative could be very bullish. 

There are just two problems crypto could encounter in Singapore. First, the country experienced direct financial damage when FTX went bankrupt due to the government-owned investment firm Temasek losing around $275M when the exchange went down. This experience has made Singapore skeptical of cryptocurrency exchanges in general, and this has apparently been causing issues for Binance and others. 

That said, there seems to be more to Singapore's supposedly selective scrutiny of cryptocurrency exchanges and companies. Singapore has been reportedly working closely with the Federal Reserve on a CBDC. It suggests that the country is more geopolitically aligned with the United States and, unlike the other countries, is not trying to escape American influence using a CBDC.

It may explain why Singaporean authorities scrutinized Binance but not FTX, and the country continues to flip-flop between accepting and rejecting crypto. For those who don't know, Binance has been facing much scrutiny from US regulators as of late, as has the rest of the crypto industry, which means that Singapore's impact on the crypto market could go either way. 

It could be very positive if the country decides to compete with its neighbors on crypto regulations, but it could be very negative if it chooses to follow in the footsteps of the US. In all probability, Singapore will walk a very fine line. In any case, it's clear that the demand for crypto from elite investors in Singapore is very high. Once the country has finalized its crypto regulations, the inflows could be comparable to those from Hong Kong. The difference is that no crypto niches will be off-limits; Singapore will invest in everything. 


Image source: BeinCrypto

France

Last on the list of countries to watch is France. Some say France is a wild card, but it’s becoming the most crypto-friendly country in Europe, outside of Switzerland, and possibly the most crypto-friendly country in the West. It appears to be because of President Emmanuel Macron. Since Macron was re-elected in April last year, there has been an avalanche of pro-crypto news coming out of France.

For starters, Binance secured a digital asset registration in the country in May 2022. This move was significant because Binance has faced much scrutiny elsewhere in Europe. Last September, one of France's largest banks began offering crypto custody services to institutional investors and subsequently secured the same digital asset registration as Binance to provide even more crypto services. It came about when US banks started facing scrutiny for doing the same. 

Earlier this year, Binance partnered with a French company to test crypto payments in the country. French Regulators also announced that they would revamp and introduce better crypto regulations. This is noteworthy because the EU is working on its own crypto regulations, and France is front-running. As a cherry on top, USDC stablecoin issuer Circle recently chose France to host its European headquarters. Considering that Circle understands crypto regulations everywhere and has the money to set up anywhere, choosing France confirms that the country is highly pro-crypto. 

Notably, one of the only anti-crypto headlines from France was about DeFi from earlier this month. The Bank of France wants DeFi protocols to be certified and incorporated so they can be regulated. The silver lining is the bank wants different regulations for DeFi from TradFi, which is the opposite of what regulators in the United States and its other allies have been calling for. They've been saying that Decentralized Finance should be regulated the same as Traditional Finance. Therefore, France's deviation on crypto policy and other international issues could be evidence of substantial geopolitical changes. 

This article about online censorship laws being introduced worldwide highlights that the EU has introduced a set of laws that target US tech companies. It relates to the possibility, if not likely, that the EU's initial pro-crypto regulations were a similar kind of retaliation. 

The abridged version is that the US is trying to attract Europe's most prominent industries with significant incentives, particularly the renewable energy industry. These industries are struggling with high energy costs and inflation due to the war in Ukraine, which most know by now, is a proxy war between the US and Russia. Macron is the only European leader willing to protest the precarious position the EU has been put in because of the US's foreign policy. 

Case in point, he recently doubled down on his comments that the EU should not get involved in a conflict between the US and China over Taiwan. France’s pro-crypto stance seems to be an extension of this sentiment, and the countries and the continents attempt to retain economic growth in the face of terrible economic fundamentals. 

The question is, how long can France maintain this divergent stance? Well, nobody knows the answer but Macron. Something else to consider; France may not be the best place for a crypto Hub: Besides the high taxes and strict employment laws, France will constantly face pressure from other countries in the EU if it goes down this pro-crypto path, which could even result in punishments. Still, if France continues against the grain, it could inspire other countries to do the same, not just in Europe. 

French is one of the world's most widely spoken languages. More importantly, it's spoken in many African and Middle Eastern countries actively trying to escape the US dollar. It would be easy for these countries to follow in France's footsteps, which could lead to other unforeseen network effects in both regions. Eventually, every country will realize that crypto adoption is inevitable. The sooner they adopt it, the higher they will be in the new pecking order—Game Theory at its finest. 

 

 

Editor and Chief Markethive: Deb Williams. (Australia) I thrive on progress and champion freedom of speech. I embrace "Change" with a passion, and my purpose in life is to enlighten people to accept and move forward with enthusiasm. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.

 

 

 

Tim Moseley

Cryptocurrencies Could Be the Answer to De-Dollarization

Cryptocurrencies Could Be the Answer to De-Dollarization

In today's globalized world, cross-border transactions have become a routine part of our lives. However, these transactions can be expensive and time-consuming, often requiring intermediaries such as banks and payment processors. Moreover, the dominance of the U.S. dollar in international trade has created dependencies and vulnerabilities in the global financial system. As a result, many countries are exploring alternatives to the U.S. dollar and seeking ways to facilitate cross-border transactions that are cheaper, faster, secure, and, most significantly, an alternative that would be politically neutral.

Countries and organizations are using this de-dollarisation technique more frequently to lessen their reliance on the U.S. dollar, which has been the main reserve currency since the Bretton Woods monetary system was established after World War II. In this context, cryptocurrencies have emerged as a potential solution to the challenges posed by cross-border transactions and de-dollarization. Cryptocurrencies offer a decentralized, borderless, and secure way to transfer value across borders without intermediaries. 

In this article, we will explore the reasons behind de-dollarization's emergence and a possible solution to this problem. Let's get started!

Historical Overview of De-dollarization

The idea of de-dollarization is not new and has been discussed by economists and policymakers for decades. However, it gained more attention after the 2008 financial crisis, which exposed the vulnerabilities and dependencies of the global financial system on the U.S. dollar.

In the years following the financial crisis, countries such as Russia, China, and Iran began to take steps to reduce their dependence on the U.S. dollar. For instance, in 2009, Russia proposed the creation of a new global reserve currency to replace the U.S. dollar, citing concerns about the stability of the dollar and the impact of U.S. monetary policy on the global economy.

China has also been taking steps to internationalize its currency, the Yuan, and reduce its reliance on the U.S. dollar. In 2016, the International Monetary Fund (IMF) added the Yuan to its basket of reserve currencies alongside the U.S. dollar, Euro, Yen, and Pound Sterling. This move was seen as a significant step towards the internationalization of the Yuan and reducing the dominance of the U.S. dollar in the global financial system.

Countries like Venezuela and Iran have turned to cryptocurrencies to bypass U.S. sanctions and reduce their dependence on the U.S. dollar. Venezuela, for instance, launched its cryptocurrency, the Petro, in 2018, which it claimed would be backed by the country's oil reserves. Iran has also been exploring using cryptocurrencies to facilitate cross-border transactions and reduce its dependence on the U.S. dollar.


Image source: Unacademy.com

The five major emerging economies of Brazil, Russia, India, China, and South Africa (BRICS) represent nearly 42% of the world's population and have a combined GDP of over $16 trillion. They have been reducing their dependence on the U.S. dollar and promoting de-dollarization in the global financial system.

One of the critical initiatives of BRICS in promoting de-dollarization is the establishment of the New Development Bank (NDB) in 2014. The NDB is a multilateral development bank that aims to support infrastructure and sustainable development projects in BRICS and other emerging economies. It was created in response to the perceived inadequacies of existing international financial institutions, such as the World Bank and the International Monetary Fund (IMF), in addressing the needs of emerging economies.

Another initiative of BRICS in promoting de-dollarization is the establishment of the Contingent Reserve Arrangement (CRA) in 2015. The CRA is a framework that allows BRICS countries to provide each other with financial assistance in times of crisis without relying on the IMF and the U.S. dollar. The CRA has a total pool of $100 billion, which can be used to provide short-term liquidity support to member countries.

In addition to these initiatives, BRICS countries have also been exploring using their own currencies in cross-border transactions to reduce their dependence on the U.S. dollar. For instance, China and Russia have been conducting trade in their currencies since 2010, and India and Russia have also agreed to conduct trade in their currencies. Brazil and China have also signed a currency swap agreement allowing them to trade in their own currencies without using the U.S. dollar as an intermediary currency.

The BRICS countries are playing an increasingly important political game in promoting de-dollarization and reducing the dominance of the U.S. dollar in the global financial system. By establishing their multilateral institutions and exploring the use of their currencies in cross-border transactions, they are challenging the existing order and promoting a more multipolar world. Cryptocurrencies, with their borderless and decentralized nature, play an unimaginably essential role in this process, offering an alternative to traditional currencies and financial institutions.

Video source: FirstPost.com

How Would De-dollarization Impact The Rest of The World?

The new currency that replaces the U.S. dollar will significantly influence how de-dollarization affects the rest of the globe. As nations and organizations would need to adapt to the changes in their financial systems, a new reserve currency would probably result in significant volatility for the global financial system. The new reserve currency may also impact the system of international commerce since different nations may need to alter their currency exchange rates to account for it.

There will be an increased rivalry between the BRICS nations and the other countries which utilizes the SWIFT system. The BRICS partners are working to create international alternatives to SWIFT and other U.S.-dominated payment systems. The BRICS is motivated by the growth of international commerce and a need to create an alternative global payment network that can't be susceptible to U.S. government sanctions. 

As international banking transactions involving multiple currencies require conversion into U.S. dollars, banks participating in the potentially sanctions-busting alternative to SWIFT risk retaliation from the U.S., which could use its power to exclude sanctioned banks and corporations from the global banking infrastructure. This calls for using intermediate banks with U.S. roots and SWIFT, which, according to nations like China, Russia, Iran, and Turkey, allows countries targeted by the most recent U.S. foreign policy to be cut off from global trade. 

China, the world's second-largest economy in nominal terms of GDP, is attempting to promote the Yuan as a trade alternative to the U.S. dollar. An increasing de-dollarization trend has sparked trade agreements involving Brazil, Russia, India, China, and South Africa. This agreement has captured the interest of 19 countries that recently declared their intentions to join the BRICS.

Apart from the U.S. faltering economy, the government is notorious for its debt trap policies. For countries to maintain the U.S. dollar as the world's reserve currency, the U.S. government must keep it politically neutral and not use it as a weaponized tool against any nation through sanctions.

The Rise of Cryptocurrencies

Cryptocurrencies have significantly increased in popularity and adoption over the past decade. Bitcoin, the first and most well-known cryptocurrency, was created in 2009, and since then, thousands of other cryptocurrencies have been developed.

One of the main drivers of the rise of cryptocurrencies has been the increasing use of blockchain technology, which underpins most cryptocurrencies. Another factor contributing to the rise of cryptocurrencies has been the growing distrust of traditional financial institutions and government-backed currencies. Many people see cryptocurrencies as a way to bypass traditional financial systems and gain more control over their money with a high degree of privacy and anonymity. 

The rise of cryptocurrencies offers a potential solution to the problem of de-dollarization, although more is needed. Cryptocurrencies can help countries reduce their dependence on the U.S. dollar and mitigate the impact of U.S. economic policies and sanctions by providing a stable and reliable means of exchange that operates independently of governments and central banks. 

Countries that rely heavily on the U.S. dollar for trade and finance are vulnerable to U.S. policy decisions, which can have significant economic consequences. By diversifying away from the U.S. dollar, countries can reduce this risk and mitigate the impact of U.S. policies.

Cryptocurrencies, such as Bitcoin, offer several potential advantages for countries looking to reduce their reliance on the U.S. dollar. For example, Bitcoin is not subject to the same geopolitical pressures as traditional fiat currencies, offering high transparency and security. Bitcoin can provide a more stable store of value than fiat currencies, which can be subject to inflation and other economic pressures.

However, significant challenges are associated with using cryptocurrency as a solution to de-dollarization. For example, the value of cryptocurrencies can be highly volatile, making them an unreliable store of value. The regulatory landscape surrounding cryptocurrencies is complex and can change rapidly, making it difficult for countries to incorporate them into their monetary systems.

Despite these risks, the rise of cryptocurrencies shows no signs of slowing down, and they will likely continue to play an increasingly important role in the global financial system in the years to come.


Image by Markethive.com

Cryptocurrencies Offer Freedom In A World Of Financial Slavery By Design

Although cryptocurrencies have long been debated and studied, they are only recently beginning to gain acceptance as financial instruments that may be useful to those who aren't die-hard crypto enthusiasts. Cryptocurrencies have the potential to enable social and economic improvement worldwide, particularly in developing countries, by facilitating access to finance and financial services.

Although there are many advantages that users of cryptocurrencies can take advantage of, the most important one is an unmatched degree of freedom, such as mental and financial independence from controlling one's resources.

Early adopters who became rich overnight and discovered opportunities for financial growth had witnessed the incredible rate at which the crypto sector is evolving. The most well-known cryptocurrency, Bitcoin, has already enabled many people and businesses to prosper. The economy is gradually adapting to fulfill these expectations, and cryptocurrencies can assist.

Over one-third of the world's population lacks access to essential banking services like loans and account opening that might help them during personal financial crises. Even within India, banks charge interest rates significantly over what is fair, making consumers who sought loans feel even more uneasy. Cryptocurrencies can help with this because of their high volatility and straightforward usage.

Using cryptocurrency is made simpler and more accessible by several programs and tools. Massive crypto adoption will usher in an era of economic transformation where everyone will have greater control and empowerment over their finances.

Final Thoughts

De-dollarization is a significant trend to watch because it will significantly impact the U.S. dollar, the U.S. economy, and the rest of the world. It's still being determined how this will play out, but it seems possible that cryptocurrencies will play an essential role in de-dollarization. In the meantime, it's worth watching how countries are moving away from the U.S. dollar and how this affects their economies.

Cryptocurrencies offer several potential solutions to the challenges of cross-border transactions, bypassing U.S. sanctions and reducing reliance on the U.S. financial system. Increased adoption of cryptocurrencies could significantly impact the global financial system. It could reduce the dominance of traditional financial institutions and provide more opportunities for peer-to-peer transactions. 

However, there are potential challenges to adopting cryptocurrencies, including regulatory and security concerns and the need for infrastructure and adoption. Other factors, such as geopolitical developments, trade policies, and macroeconomic trends, are likely to play a significant role in shaping the future of the global financial system. As such, the impact of cryptocurrencies on cross-border transactions and de-dollarization will depend on how quickly these challenges can be addressed and how widely cryptocurrencies are adopted.

 

About: Prince Ibenne. (Nigeria) Rapid and sustainable human growth is my passion, and getting a life-changing opportunity into the hands of people is my calling. Empowering entrepreneurs provides me with enormous gratification. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.

 

 

 

 

Tim Moseley

What Is The State Of Crypto In 2023? A Paradox Unpacked

What Is The State Of Crypto In 2023? A Paradox Unpacked. 

We are currently seeing an antithesis in the crypto world and its market. In one respect, proposed crypto regulations worsen; unbalanced, even nonsensical, and interest rates are increasing. Conversely, coins and tokens are hitting multi-month highs, and new crypto projects are raising billions. 

Crypto VC firm Andreessen Horowitz, also called a16z, unpacks this paradox in its State of Crypto Report for 2023. It was published on March 11, 2023, revealing which issues are holding crypto back and which cryptos are about to explode. This article summarizes a16z's report and explains what it says and means for the crypto market. 


Image source; a16zcrypto.com

The report begins with an overview of what's been happening in crypto. There's been progress in research and development, setbacks from crypto companies collapsing, prices have been following the crypto cycle, bad regulation is creating uncertainty, and decentralization is becoming an opportunity. Note that all of these are related.

Most of the setbacks we've seen have been due to centralization. This centralization occurred because some entities wanted to maximize crypto market cycle gains. It has resulted in harmful regulations, and decentralization is the only real solution to both problems. 

Why Web3 Matters

The report's authors explain that they view Web3 as being more than a financial movement; it's an “evolution of the internet.” They see crypto blockchains as computers, not just ledgers, and therefore see crypto itself as a computing platform, not just an alternative to the existing financial system. 

Replacing the existing financial system is arguably the top priority of crypto projects and their sponsors. If the existing financial system continues on its current trajectory, it will result in Central Bank Digital Currencies and the loss of our economic freedom. But it widens the scope for upcoming decentralized social market networks and their communities’ sovereignty and potential wealth.


Image source; a16zcrypto.com
 

The authors explain that Web3 is built on decentralized cryptocurrency blockchains like Bitcoin and Ethereum. It is governed and owned by the communities of their respective projects and accrues value to the community rather than a centralized tech company, as is the practice with Web2. 

The Crypto Market Cycle

The second part of the report is about the crypto market cycle. According to the authors, crypto market cycles are caused by a positive feedback loop. Prices go up, which drives interest to go up, which generates new ideas to emerge, which causes new projects to appear, which causes prices to go up. 


Image source; a16zcrypto.com

The authors say there have been four crypto market cycles so far. This is consistent with the market cycles driven by the Bitcoin halving, which happens every four years; however, there is no mention of the Bitcoin halving and the vital role it seems to play in crypto market cycles. Instead, they focus on financial and product cycles that also follow a four-year cycle. 

For reference, macroeconomic conditions, such as interest rates, drive financial cycles and can fluctuate unpredictably. By contrast, product cycles are driven by supposedly more predictable consumer behavior and tech trends. As stated in the report, great products get built regardless of financial upswings and downswings. 


Image source; a16zcrypto.com

Some would argue that consumer behavior and tech trends depend heavily on macro conditions. After all, most of the funding for speculative technologies happens during low-interest rate periods. As such, entering a new period of higher interest rates could be bad for more speculative crypto projects. 

Trends To Watch

The third part of the report identifies what trends to watch, saying that blockchains are scaling through multiple promising paths. The authors highlight new Layer 1 blockchains, like Solana and Aptos, application-specific blockchains, like Cosmos and Polkadot, Layer 2s like Optimism and Polygon, and data storage cryptos, like Celestia as areas of interest. 

The authors then applaud Ethereum for cutting its energy use by 99.9% by changing its consensus from Proof of Work to Proof of Stake, known as The Merge, in September 2022. They then highlight the comparison with YouTube’s energy consumption rather than Bitcoin. The authors pointed out that Ethereum consumes 0.001% of YouTube's energy annually. It seems like an odd choice, but maybe they had emerging decentralized social media in mind.  

They reviewed the rising popularity of zero-knowledge proofs, stating that once practically impossible new technologies are becoming very real. The authors then examined the rapid growth of Web3 gaming, which has remained relatively unscathed by the crypto bear market. They say that Web3 games are a huge opportunity to welcome new users to crypto. 

Similarly, it's worth mentioning Markethive, a social media, marketing, and broadcasting platform in the decentralized arena, is ramping up its gamification as a way to earn crypto and for people to familiarize themselves and experience the cryptocurrency landscape. 

Participation in DAOs has also been steadily increasing. The spike in DAO participation over the last few months may have been due to increasing regulatory uncertainty as well as all the exploits and issues that have resulted in emergency proposals. The recent de-pegging of USDC is one of the many examples.

Regarding developer activity, the authors point out that the United States is falling behind. The percentage of crypto developers in the country has been declining for years due to the initially uncertain and now outright hostile regulatory environment, which could continue for some time. 

The authors then say to watch for three proposed crypto regulations. They include the bipartisan crypto bill by Senator Cynthia Lummis and Kirsten Gillibrand, seven pending crypto cases, including the SEC's case against Ripple, and three proposed crypto rules, including the SEC's crypto custody rule.

 
Image source; a16zcrypto.com

Crypto Market Metrics

The fourth part of the report lays out a series of crypto market metrics. The authors begin with the above image, which essentially means, ‘If you build it, they will come.’ This popular approach to cryptocurrency adoption has been successful for many worthy projects.

The first crypto market metric is the number of active developers. They found that the number of active developers rises during bull markets and stays high during bear markets. The second crypto market metric is the number of smart contracts, which continues to hit new, all-time highs, despite the crypto bear market. 

The third crypto market metric is the number of academic research publications related to crypto. The number spiked in 2021 and again in 2022, indicating crypto has become a significant area of academic research. 

The fourth crypto market metric is the number of people seeking crypto-related jobs. This statistic peaked soon after the crypto market did in late 2021, suggesting rising crypto prices generate interest in the crypto job market. The number of people looking for crypto-related jobs has remained high ever since.

Crypto Adoption Indicators

The first indicator is the number of active crypto wallet addresses, which grows steadily as Web3 adoption increases. The same is true for the second indicator, the number of blockchain transactions, which also continues to hit all-time highs due to better scaling technologies reducing transaction fees. 

The third indicator is the amount of transaction fees paid. According to the graph in the PDF report, it’s been on the decline stating that fees increase as demand rises but decrease as scaling tech supplies more blockspace

A similar decline is seen with the fourth indicator, the number of mobile wallet users. The authors give one possible explanation: There are increasingly more ways to engage with blockchains and web3 applications. From DeFi to Web3 games, various new applications create addresses for users to interact with without downloading or connecting a wallet.

The fifth indicator is the amount of trading volume on decentralized exchanges. (DEXs) DEX volume has been rising recently, likely due to a crackdown on centralized exchanges. The most recent spike in DEX volume is plausibly from Curve Finance when it de-pegged USDC

The sixth indicator is NFT buyers. The number of NFT buyers appears to be rising again over the last few months, possibly because NFTs have decreased in price and new buyers have been buying the dip. Also, no official legislation applies specifically to NFTs, so they have been safe from regulations. 

The seventh indicator is stablecoin trading volume which continues to grow. This could be due to the crackdown on centralized exchanges and the loss of trust crisis after FTX collapsed in late 2022.  


Image source; State Of Crypto 2023.pdf

What’s Next?

The last part of the report is aptly titled, What's Next? The authors commenced by estimating that crypto adoption is where internet adoption was in the 1990s, specifically, the mid-90s. Assuming crypto adoption follows the same trajectory, they forecast it will take until 2031 to hit one billion users. 

As per the image above, the authors list 12 things they expect to happen in crypto in 2023 and beyond. The first expectation is that some of the best Web3 products and protocols will be developed during the remainder of the crypto bear market. 

The second is that smart contract security will improve. The authors don't discuss the role of AI in this equation, but it can be used to create and audit crypto code. This will supercharge crypto development and security, providing it’s used ethically.

The third expectation is that zero-knowledge proofs will continue to become more popular. This makes sense, considering institutional investors require financial privacy, which is something that zero-knowledge proofs can provide.

The fourth expectation is that big tech will continue to take greater control of the Web2 internet, showing the average person just how vital Web3 is. We've covered this in the Markethive blog in the context of internet censorship; decentralized social media is the only solution. 

The fifth expectation is that Web3 gaming will become more popular. In short, there are three reasons why people adopt cryptocurrency; speculation, convenience (possibly necessity), or entertainment. That third adoption category has yet to be tapped, but it's coming. 

The sixth expectation is that there will be more crypto-specific hardware, particularly for zero-knowledge proofs. As blockchains have attracted millions of users, two critical demands around privacy and scalability have emerged. There is a movement to optimize algorithms for consumer-grade hardware to preserve decentralization and privacy.

The seventh expectation relates to the fourth: decentralized social networks will become popular due to issues with centralized social media. As previously mentioned, with all the internet censorship and more coming, trust in institutions and legacy media is declining rapidly, and more people will migrate to decentralized platforms. 

Interestingly, the eighth expectation is that “light” clients will make it possible for mobile devices to become more involved in crypto infrastructure. As a fun fact, over 90% of people access the internet from a mobile device. Logically, this means bringing crypto to mobile is a massive untapped opportunity. 

The ninth expectation is that there will be new forms of community governance in DAOs. Many believe that the existing token-based voting systems are leading to centralization; what's required is a radically new approach to governance.

The tenth expectation is that governments will pass bipartisan crypto regulations. This is a direct reference to US crypto regulations, but it could well apply globally.  It won't take long for politicians everywhere to realize that crypto is an economic and social opportunity, never mind all the crypto lobbyists wielding influence with incentives.

The 11th expectation ties into the fifth, and that's that non-speculative crypto use cases will emerge. Hopefully, these non-speculative use cases are related to convenience and not necessity. If they relate to need, it's probably because we're dealing with some seriously dystopian issues. 

The twelfth expectation is a relatively new phenomenon: hiring treasury management and sustainable funding will be a focus for DAOs. This seems to be a subtle reference to a new crypto niche called ReFi or Regenerative Finance, which involves investing in tokenized carbon credits. 


Image source; State Of Crypto 2023.pdf

What Does A16z’s Report Mean For the Crypto Market? 

One of the takeaways stated in the a16zcrypto overview of the report states that,

“Prices have steadied this year from the dizzying highs of 2021. The industry seems to be settling: speculation has cooled, and the story of how people durably, organically use, and interact with Web3 is starting to unfold.”

To others, the report reveals a lot more about how institutional investors are seeing the crypto market rather than how the crypto market is doing or how it's likely to perform in the future. Institutional investors are interested in being on the cutting edge of Web3 and cryptocurrency. However, they're also interested in ensuring they have some say in running these projects and protocols. This is fundamentally at odds with their decentralization imperative. 

It is also why institutional investors are so focused on crypto regulation. Some argue that they don’t care about how these regulations impact financial freedom. Ultimately, they want to know how to legally invest in and influence these projects and protocols.

The incumbents are hyper-aware of this and are actively trying to prevent sensible crypto regulations from being passed. They know that the actual end game of the crypto lobbyists is to replace the old financial system with a new, primarily centralized financial system, not a new decentralized one. 

A prime example is Circle; the stablecoin issuer has been aggressively lobbying politicians worldwide to pass regulations that set up its stablecoin as the gold standard and ban the circulation of decentralized stablecoins. This is not in the best interests of crypto; it is a blatant traditional finance tactic. 

That said, mass crypto adoption won’t happen overnight. Most proposed crypto regulations may be inconsistent with cryptos' core philosophies, but they are a necessary first step. Over time the centralization issues they cause will become more evident, and better crypto regulations will be passed. 

More importantly, the average person will start to understand the significance of things like decentralization. But before they understand the importance, they must know what they are and be comfortable with the associated annex. This will take years, per the author's projections. 

The upside to this situation is that we are, in fact, still in the early stages of crypto adoption, considering the relative absence of crypto regulations in developed countries. Ultimately, crypto regulations are required for institutions to invest in the industry; realistically, institutions have most of the money. They have the means to turn the crypto into a multi-trillion dollar asset class.

A Favorable Scenario

According to Coinbureau, the best part is that retail investors like us will eventually have the advantage because most understand there's more to crypto than paper money profits. The institutions don't see it that way, meaning they will sell every time a coin or token hits some arbitrary number in fiat currency terms. Meanwhile, retail investors will continue to buy regardless of the paper price, and for once, they won't be the ones getting dumped on. 

The money institutional investors get in return will lose value until it's converted into a CBCD, and all their assets will be tokenized on a blockchain the government controls. And when their CBDCs and tokenized assets are frozen because they did or said something against the state, they'll realize that crypto is the only asset that offers true financial freedom. By then, it'll be too late for them. All the retail investors who realize this early on will become the new institutional investors.

In closing, the report has identified an opportunity that recent setbacks emphasize the failure of opaque, centralized systems in contrast to the resilience of decentralized infrastructure. Decentralized crypto computing platforms can also counter the trend of power consolidating into the hands of a few giant tech corporations. The internet needs web3, and those who understand this will fight for the future of these technologies.

 

 

Editor and Chief Markethive: Deb Williams. (Australia) I thrive on progress and champion freedom of speech. I embrace "Change" with a passion, and my purpose in life is to enlighten people to accept and move forward with enthusiasm. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.

 

 

 

 

Tim Moseley

From CBDCs to Cryptocurrency Regulations: G-7 Plans to Promote Financial Inclusion and Investor Protection

From CBDCs to Cryptocurrency Regulations: G-7 Plans to Promote Financial Inclusion and Investor Protection.

A closer assessment of the global events on cryptocurrencies today shows a trend toward more regulation and maturity. Many countries see the potential advantages of blockchain technology across many industries. The regulatory environment surrounding cryptocurrencies and blockchain technology is continuously changing as those sectors of the economy continue to develop and find widespread use.

The Group of Seven (G-7) meeting this year will be presided over by Japan to prioritize cryptocurrency regulations. Politicians perceive a greater need to control crypto assets in light of the bankruptcy of the cryptocurrency exchange FTX last year. Although different nations have differing opinions on regulating cryptocurrency, Masato Kanda, Japan's Vice Minister of Finance for International Affairs, told Reuters that the overall consensus is to control the market.

Also, to help developing nations introduce central bank digital currencies (CBDC) following necessary international standards and define G-7's public policy guidelines for retail CBDC. Talks will focus on these issues. Retail CBDCs, instead of wholesale CBDCs are created for institutional uses such as moving money between banks. According to Kanda, the other area of concentration would be on the debt vulnerabilities of middle-income nations like the Gambia, Ghana, Ethiopia, and Sri Lanka.

Kanda noted that while the quick development of digital technology has its benefits, it has also given rise to new issues like cyber-security, the spread of false information, social and political divisions, and the potential for instability in the financial markets.

Brief History of the Group of Seven (G-7)

The group first came together informally in Paris in the early 1970s when leaders from the United States, United Kingdom, France, West Germany, and Japan gathered to discuss the recession and oil problem of the time. The French President Valéry Giscard d'Estaing was then encouraged to invite the presidents of those nations and Italy to Rambouillet in 1975 for additional discussions on world oil, this time with the country's leaders joining the finance ministers, an attendance list that has persisted for several years. Canada was sent an invitation to join the group the following year.

The host of the G-7 summit, also known as the presidency, rotates annually among member countries in the following order: France, United States, United Kingdom, Germany, Japan, Italy, and Canada.

G7's Expansion to G-8

The G-7 had reacted as the world economy changed, particularly when the Soviet Union announced that it would hold its first direct presidential election and commit to building an economy with more open markets. President Boris Yeltsin organized meetings with the G-7 member nations after a G-7 summit in Naples, Italy, in 1994. These conversations became known as the P-8 (Political 8).

An official Group of Eight, or G-8, was established in 1998 when Russia joined the G-7 as a full member at the encouragement of world leaders, particularly U.S. President Bill Clinton. The G-8 ultimately had a brief existence. 

Russia was expelled from the organization in 2014 due to the annexation of Crimea and the unrest in Ukraine. Russia has yet to receive a G-7 invitation as of this writing.


Image Sourced @ Council on Foreign Relations

G-7 Aims to Assist Developing Nations With the Establishment of CBDCs

The Group of Seven (G-7) announced its commitment to promoting financial inclusion for developing nations by using central bank digital currencies. This move comes as a response to the COVID-19 pandemic, highlighting the need for greater access to financial services.

The G7 has recognized the potential of CBDCs to increase financial inclusion and reduce poverty in developing nations. By providing access to digital financial services, CBDCs can help people currently excluded from the traditional financial system, such as those living in remote areas or without access to banking services.

Moreover, CBDCs can facilitate cross-border transactions and reduce remittance costs. This is particularly relevant for developing nations, where remittances play a significant economic role. In 2020, remittances to low- and middle-income countries reached a record high of $540 billion, according to the World Bank.

The G-7's commitment to promoting CBDCs for financial inclusion is a significant step towards a more inclusive and sustainable global financial system. However, there are challenges to overcome, such as ensuring that CBDCs are accessible to everyone, including those without internet or digital devices, and that people will accept it as a means of exchange. From the look of things, most people may want to transact with Bitcoin and not the CBDC, which keeps them under the government's radar.

Moreover, the G-7 must work with developing nations to ensure CBDCs align with their specific needs and priorities. This requires collaboration and dialogue between the G-7 and developing countries and the involvement of the private sector and other stakeholders.


Image Sourced @ Coingeek.com

G-7 Meeting to Focus on Investor Protection

The leaders will advocate stronger laws to safeguard investors and more openness for cryptocurrency firms. Before meeting later this year in Japan, they intend to progress rules to achieve their goals.

Following the collapse of the TerraUSD stablecoin in early May of last year, the G-7 advocated additional and stricter regulations, according to the report published by Reuters. Japan is one of the G-7 nations with stricter cryptocurrency legislation, while the European Union will implement its Markets in Crypto-Assets (MiCA) law in 2024. The primary goal of the MiCA is to protect consumers and investors from the growing risks of digital assets while improving financial stability within the entire crypto market.

The United Kingdom is progressively establishing its crypto framework, introducing a dedicated category for cryptocurrency holdings on tax forms and ongoing preparations for a digital pound. The Congress of the United States is considering various measures. While we wait, the securities watchdog has taken enforcement action against businesses they claim have broken the law on securities. 

Many crypto enterprises have moved from the United States to Singapore, the United Kingdom, Dubai, and the EU due to what crypto industry participants perceive as lacking commitment to establishing clear regulations for crypto businesses in the States.

Recommendations on controlling, monitoring, and overseeing the markets for crypto assets, stablecoins, and related activities are expected to be presented by July and September. But it still needs to be apparent what the outcome would be.

Some time ago, the IMF urged nations to remove cryptocurrencies' legal currency status in an action plan on crypto assets published in February. It is commonly known that the IMF opposes using cryptocurrencies as legal tender, especially in light of El Salvador's adoption of Bitcoin as its official currency in September 2021.

However, the group has been pushing nations to embrace stricter crypto regulations while also developing an open-source infrastructure for central banks to connect their digital currencies and facilitate international trade.

FASB To Act on Travel Rule

The G-7 leaders’ meeting with the Financial Accounting Standards Board means they could impose rules on the international crypto movement. The leaders work in close relations with the FASB to handle stability risks associated with crypto assets.

They asked the FASB to advance the swift development and implementation of consistent and comprehensive regulation of crypto-asset issuers and service providers intending to hold crypto-assets, including stablecoins, to the same standards as the rest of the financial system.

The G-7 leaders demand further action concerning the travel rule for cryptocurrency assets. Delegates to the Financial Action Task Force plenary in Paris recently resolved to put revised guidelines for the Travel Rule into effect. These standards will enforce the "transmission of originator and beneficiary information" for cryptocurrency.

The virtual asset legislation implemented in 2019 was followed by these stricter enforcement criteria. This rule at the time included a requirement to gather information regarding the origin and destination of transfers of virtual assets.


Image sourced @ CoinDesk.tv

In line with all the fights against cryptocurrency, one cannot help but think whether the G-7's crypto regulation is a weaponized tool against people's Freedom or whether they are acting in their best interest. Decisions made about the issuance of CBDC will undoubtedly impact our financial system and society as a whole. Stakeholders are essential since an isolated decision-making process would certainly be detrimental.

Therefore, the Freedom of stakeholders should be in consideration in the regulation process to ensure that the inclusivity in payments infrastructure and finance that crypto and blockchain technology take satisfaction in contributing to is preserved. If at all, the G-7 should indeed be acting in the people's best interest.

The influence of CBDCs on nations' economies is extensive and varied. CBDCs may undermine conventional banking practices, but they also give banks much more room to innovate and expand financial inclusion. The adoption of CBDC calls for a transparent legislative environment, financial investment in digital infrastructure, and strong security precautions. Nations will need to adapt and change to compete in a world that is becoming increasingly digital as CBDCs gain popularity throughout the globe.

 

 

About: Prince Ibenne. (Nigeria) Rapid and sustainable human growth is my passion, and getting a life-changing opportunity into the hands of people is my calling. Empowering entrepreneurs provides me with enormous gratification. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.

 

 

 

 

Tim Moseley