The Association of German Banks released a paper in which it says that the economy needs the digital euro.
German banks have presented a position paper in which they make several arguments for the digital euro.
On Oct. 30, in a paper released by the Association of German Banks (Bankenverband), which represents more than 200 private commercial banks and eleven member associations, banks stated that the “economy needs a programmable digital euro.”
Monetary policy is the state’s responsibility, says Bankenverband
The paper states that the responsibility for the monetary system lies with sovereign nation-states and that any currency provided by banks or private companies must fit into a state-determined system. “Anything else would ultimately lead to chaos and instability,” the paper reads.
The banks make the case for a cryptography-based digital euro which, they state, should be created on the condition that a concurrent, common, pan-European payments platform is also established, further adding:
“The user of a digital euro – whether man or machine – must be clearly identifiable. This requires a European or, better still, a global identity standard. With every form of digital money, customers should be identified using a standard that is just as strict as that which banks and other obligated entities are required to apply under current legal framework pursuing the combat against money laundering and terrorist financing.”
However, according to Bankenverband, a competitive payment system can only be based on a common standard and a common currency. It stated, “In order to maintain Europe’s competitiveness, satisfy customers’ needs and reduce transaction costs, the introduction of euro-based, programmable digital money should be considered.”
Although the private German banks are convinced that, in a digitized economy, this form of digital money will rapidly gain in importance, they state that the existing monetary system must not “be endangered by the provision of crypto-based digital money.”
A private global digital currency, such as Facebook’s Libra, competing with the official key currencies in the world economy would most likely be a source of considerable economic and political conflict, the paper adds.
The banks further call on national and international policymakers to act responsibly and assure that competition with private currencies should not be allowed.
While a digital euro seems appealing, German officials criticize crypto
The German finance minister Olaf Scholz echoed similar sentiments when he recently advocated for the idea of launching a digital euro coin, stating that such a digital payment system would be beneficial for Europe and that they “should not leave the field to China, Russia, the U.S. or any private providers.
Mario Draghi, president of the European Central Bank, recently said that private stablecoins and cryptocurrency in general are of little value, adding:
“Thus far, stablecoins and crypto-assets have had limited implications in these areas and are not designed in ways that make them suitable substitutes for money.”
The president of the European Central Bank is joined in his sentiments by the German federal parliament, which recently released a statement in which they said that cryptocurrencies such as Bitcoin (BTC) are not real money.
Moreover, the statement points out that stablecoins are no alternative to fiat money and explains that the government intends to limit their adoption:
“It will be ensured that stablecoins do not establish themselves as an alternative to state currencies and thus call into question the existing monetary system.”
Swiss crypto broker Bitcoin Suisse has purchased a minority stake of CoinRoutes Inc., a provider of pan-exchange smart order routing and algorithmic trading software.
Swiss crypto broker Bitcoin Suisse has purchased a minority stake of CoinRoutes Inc., a provider of pan-exchange smart order routing and algorithmic trading software.
The investment and a new director
Bitcoin Suisse announced the news on Oct. 22, specifying that it acquired a $3 million share of CoinRoutes. Niklas Nikolajsen, the chairman of the Bitcoin Suisse Group, became a member of the board of directors of CoinRoutes’s United States and Swiss entities.
Bitcoin Suisse had tested CoinRoutes’ Smart Order Routing and patent-pending Consolidated Best Bid & Offer offerings for a year prior to the acquisition to assess the products’ capabilities. The company eventually fully integrated the technologies into its own brokerage and trading platform.
Bitcoin Suisse in other news
Bitcoin Suisse recently introduced a range of developments such as a partnership with fintech firm Amun to launch a new cryptocurrency exchange-traded product on the country’s stock exchange SIX. In July, the broker also applied for banking and securities dealer licenses from Switzerland’s finance regulator.
Following the approval of the Blockchain Act by Liechtenstein’s Parliament on Oct. 5, Mauro Casellini, CEO of Bitcoin Suisse in Liechtenstein, outlined the importance of the Act, saying:
“The positive decision without dissent from the Liechtenstein government shows the importance of the ‘Blockchain Act’. The TVTG [the Act on Tokens and Entities Providing Services Based on Trusted Technologies] not only creates legal certainty for all market participants, but also heralds a new era, the token economy. With its pioneering role, Liechtenstein proves once again that it is the ideal location for FinTech and Blockchain companies and thus for us too, in the heart of Europe.”
The German Federal Ministry of Finance has expressed concerns about using privacy tokens due to their association with criminal activities and difficulties to track them down.
The German Federal Ministry of Finance has expressed concerns about rising use of privacy tokens due to their association with criminal activities and difficulties in tracking them.
Published on Oct. 19, the ministry’s “First Money Laundering and Terrorist Financing National Risk Assessment” for 2018-2019 provided analysis aimed at the identification of existing and future risks in the field of anti-money laundering (AML) and terrorism financing (TF) in Germany. Among other challenges, the report examines circulation of cryptocurrencies in the darknet for criminal purposes.
Pseudo-anonymous vs. anonymous tokens
The report marks a distinction between pseudo-anonymous and anonymous tokens, noting that pseudonymity allows the analysis of transactions in public blockchains and the evaluation of suspicious movements, while fully anonymous tokens like Monero (XMR) and Zcash (ZEC) enable transactions to remain untraceable and are thus vulnerable to involvement in illegal activities.
In this regard, the Ministry urges oversight of anonymous cryptocurrencies in the future. Although the market capitalization of such coins is still relatively low, the report notes, they are gaining popularity and acceptance in the darknet and eventually may become a real alternative to Bitcoin (BTC).
Risks associated with stablecoins and cash
According to the report, use of crypto assets in TF is currently low. There is evidence of use of crypto assets in the fields of right-wing extremism and Islamism, however, there is no reliable evidence that cryptocurrencies have been used to a greater extent for TF.
Cryptocurrency volatility reportedly prevents its usage as a means of payment to some extent. However, stablecoins — which are pegged to an asset or fiat currency — can ensure stability of value, and thus could lead to an increase in laundering and TF risks, per the report. The report further reads:
“The use of cash, in contrast to the use of pseudonymous crypto assets, leaves no traceable footprint and is easy to handle, so it can be assumed that, for example, the transfer of funds in the field of terrorism financing alongside hawala and money transfer service providers currently continues mainly via cash couriers.”
On Oct. 21, the United States Financial Crimes Enforcement Network (FinCEN) Director Kenneth Blanco said that fintech firms offering cryptocurrency users anonymity must comply with AML laws “just like everyone else.”
British lawmakers have voted to postpone a crucial Brexit vote and forced Prime Minister Boris Johnson to ask the EU for an extension. News.Bitcoin.com talked to the CEO of a local crypto exchange to find out the effects a no-deal Brexit could have on the crypto industry.
On Saturday, the British parliament voted to put off a decision on Prime Minister Boris Johnson’s deal, forcing him to ask the EU for another Brexit delay. William Thomas, CEO of peer-to-peer exchange Cryptomate, explained to news.Bitcoin.com that many people are calling this deal “‘Brexit in name only’ as it still ties us in with many EU institutions, including future regulatory alignment,” adding that a no-deal Brexit is becoming even more of a possibility.
In the event of no-deal being reached by Oct. 31, Thomas said, “there will be substantial uncertainty within British and EU financial institutions.” However, in terms of whether it will create demand for bitcoin and cryptocurrency in general, “I am not so certain,” he admitted, elaborating:
I would expect to see some upward movement on BTC/GBP markets shortly after the deadline, but since the British pound is a small portion of global crypto volume it may not have a large overall effect on price as some have predicted.
“It will, however, have a positive impact within the British market, but the degree of which this will affect the global cryptocurrency markets is speculative at this time,” he opined.
Cryptomate allows British users to purchase a wide range of cryptocurrencies via instant bank transfer. The platform claims to have served 11,250 customers, filled 44,853 orders worth approximately 14.43 million British pounds (~$18.74 million).
How the UK Crypto Industry Could Be Affected
Thomas further explained to news.Bitcoin.com how the U.K. cryptocurrency industry will likely be affected in the event of a no-deal Brexit. “For larger traditional financial service industries that operate out of London, there are safeguards that will see financial services ‘passporting’ to the EU market will continue until future agreements are made,” he remarked.
However, there is nothing in place and very little guidance from the British Financial Conduct Authority (FCA) about how this should affect the crypto industry and related services. “There is a huge lack of clarity in the area,” he emphasized. Nonetheless, he shared:
It’s my personal belief that a no-deal Brexit would be a huge positive for the U.K. cryptocurrency industry in the long term, as it enables us to create our own regulatory systems without interference from the EU – who are much less friendly to the industry as a whole compared to the U.K.
For European Union customers who use British-based exchange/wallet services and vise-versa, Thomas said that a no-deal Brexit “will have very little impact” on them. “British and EU customers will still be able to use SEPA bank payments which account for most exchange deposits within Europe, so trading volume should remain unchanged,” the CEO continued, noting:
Britain will continue regulatory alignment with the EU the day after we leave (until December 2020) so there’s no reason to think there will be any major disruption to banking or money services on November 1st.
As for Cryptomate, Thomas confirmed: “We will continue to accept European Union customers who have access to UK banking and this policy will not change unless we’re told differently by the FCA.” He added that most sellers on his platform have indicated that they “will be keeping their trading funds in USDT, as opposed to GBP or EUR,” noting:
We would expect to see demand for bitcoin and others increase during November, as a no-deal is likely to see the pound weaken further against the euro (and the euro vs the dollar) as people look for safe havens outside of fiat.
How do you think Brexit will affect the crypto industry? Let us know in the comments section below.
Images courtesy of Shutterstock and the Financial Times.
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German Federal Minister of Finance Olaf Scholz has doubled down on his previous statement that policymakers should prevent the issuance of Libra.
German Federal Minister of Finance Olaf Scholz has doubled down on his previous statement that policymakers should prevent the issuance of Facebook’s Libra stablecoin.
At the International Monetary Fund and World Bank fall meeting on Friday, Scholz stressed that stablecoins could pose international risks, Reuters reported on Oct. 18. Scholz expressed his utter skepticism regarding the social media giant’s plans, stating:
“We will carefully monitor the situation with all the means at our disposal. I am not in favour of the successful creation of such a world currency because that is the responsibility of democratic states.”
Scholz notes that the financial system needs reform
Scholz said that the existing financial system needs reform to improve and streamline cross-border payments, but without threatening the autonomy of states.
Scholz thus reiterated his mid-September statement when he urged policymakers not to accept parallel currencies such as the Libra stablecoin. “The Federal Government will work at European and international level to ensure that stablecoins will not become an alternative to official currencies,” a document seen by Reuters read at the time.
The number of regulators against Libra grows
At its latest meeting, a G-7 task force confirmed that the group of the seven wealthiest nations would not allow any global stablecoin to launch without adequately addressing the related challenges and risks. Once stablecoins are launched globally, a G7 report read, they could potentially threaten the global financial stability and monetary system.
Financial Action Task Force president Xiangmin Liu said that both stablecoins and the companies behind them would be subject to global standards on cryptocurrencies and traditional financial assets, thus joining the growing number of regulators expressing concerns over Facebook’s Libra.
France’s economy and finance minister, Bruno Le Maire also repeated his criticism of Libra, saying he cannot allow its existence.
Binance’s fiat-to-crypto service for European currencies has partnered with a fast-execution crypto platform.
Binance’s fiat-to-crypto conversion branch for euros and British pounds, Binance Jersey, has entered into a partnership with the crypto investment service Caspian, which provides trading, portfolio and risk management on its platform.
Caspian shared news of the partnership with Cointelegraph on Aug. 14. The partnership will purportedly result in improved security for crypto investors, as well as a lower barrier to entry for the crypto market. The managing director of Caspian Chris Jenkins elaborated:
“I am delighted for us to partner with Binance Jersey, a substantial step forward in helping move the wide adoption of cryptocurrency trading forward for the institutional market in Europe […] As increasing numbers of institutions engage in this emerging sector, there is an increasing need for a reliable fiat-to-crypto exchange.”
Binance Jersey CEO Jon Day also remarked that he believes Caspian’s technical system for order and execution will speed up trading on their end:
“Our clients can now benefit from faster order execution and additional features including a larger suite of customizable market data and parent-and-child order slicing, to name but a few.”
As previously reported by Cointelegraph, Binance created Binance Jersey at the beginning of 2019. At the outset, Binance Jersey planned to launch fiat-to-crypto support for euros and pounds with major cryptos Bitcoin (BTC) and Ether (ETH).
Later in June, Binance Jersey announced that it had issued a proprietary stablecoin backed by the pound. According to Binance chief financial officer Wei Zhou, there has been an increasing awareness of the utility that stablecoins offer, as well as growing use cases for this type of token. These reportedly motivated Binance Jersey to add the stablecoin, as well as to pursue more fiat-pegged stablecoins.
Europe is gradually tightening the rules for the crypto space. A wave of new regulations are introducing stricter requirements for companies operating in the industry and cryptocurrency users are going to feel the difference in the coming months. The measures stem from the obligation of member states to transpose EU’s Fifth Anti-Money Laundering Directive (AMLD5) into national law by January. Unfortunately, they often go beyond what Brussels wants them to do.
German Regulations Chase Out Crypto Companies Like Bitpay
Germany, the flagship of the European Union, is one of the first to make the changes. New anti-money laundering (AML) regulations entering into force next year will oblige digital asset exchanges as well as providers of crypto payment and custodian services to apply for licenses from the Federal Financial Supervisory Authority (Bafin). They have to do so by the end of 2019, as the new pan-European legislation is supposed to be implemented in January 2020.
Starting from next year, German financial authorities will consider digital coins a financial instrument. And while some welcome the regulatory clarity regarding the status of cryptocurrencies, others think many more aspects need clarification and even look at the new rules as an obstacle to normal business. Members of the local crypto community believe the government is actually hurting the German blockchain industry and sending crypto companies abroad.
A major industry player that evidently needs some time to think about the matter is Bitpay. The payment processor, which facilitates both crypto and fiat transactions, is not providing services to German customers anymore. About a week ago, the platform announced on its website that it doesn’t currently work with merchants or users based in the Federal Republic among countries such as Algeria, Bangladesh, Bolivia, Cambodia, Ecuador, Egypt, Indonesia, Iraq, Kyrgyzstan, Morocco, Nepal, and Vietnam.
The list of supported markets is regularly updated according to Bitpay’s evaluation and understanding of local laws. And the company says it engages with local authorities to fully understand the rules in order to retain compliance and offer businesses the opportunity to accept blockchain payments. But the fact that it has pulled out of Germany at this point, even if it’s only a temporary step, means that new German regulations are already making it harder for crypto companies to operate freely.
Some serious businesses, like the largest food delivery portal in Germany, Lieferando, have been offering bitcoin as a payment option to their customers through cooperation with Bitpay. Members of the country’s crypto community have been warning that the new rules are going to chase other companies out of Germany in search for a more favorable climate in different jurisdictions in Europe or elsewhere.
Prague Tightens Noose on Nascent Crypto Industry
The Bundesrepublik is not the only EU member state taking the road to much stricter standards for the crypto industry. According to reports by local media, the Czech Republic is now working on its own set of rules, further tightening the noose around cryptocurrency users. For example, failure to register with the national Trade Licensing Office will lead to massive fines for service providers in the space.
Again, these measures have been inspired by the latest European AML directive, but the country’s leading business daily wrote last week that they are going to be tougher than the requirements set forth by the EU. In an article on the subject, Hospodářské noviny recently pointed out that the new cryptocurrency regulations will increase oversight on a wider range of companies than mandated by Brussels, jeopardizing the competitiveness of the Czech crypto sector.
Estonia is another EU member that has been tuning its crypto regulations in recent months. The tiny Baltic nation was one of the first on the continent to create favorable conditions for businesses dealing with digital assets and attracted many of them to its jurisdiction. Towards the end of last year, however, regulators in Tallinn took steps to tighten the existing licensing regime. As a result, it’s going to take longer and it will be harder in the future to acquire an Estonian license.
This spring, the finance ministry presented amendments to the country’s anti-money laundering and counterterrorist financing legislation. One of the changes requires Estonian companies to keep their headquarters in the country and entities incorporated abroad now have to maintain a permanent office in the republic. Estonia adopted its Money Laundering and Terrorist Financing Prevention Act in 2017 to transpose the provisions of the Fourth Anti-Money Laundering Directive.
France Introduces Optional Licensing
Other European nations have also taken crypto regulation seriously. Earlier this year, France announced intentions to publish updated rules for the crypto industry. In April, the government in Paris adopted a bill creating the legal framework for service providers in the space and projects conducting initial coin offerings. The law introduces mandatory registration with the French Financial Markets Authority (AMF) for providers of crypto custodian services as well as optional licensing for all service providers including cryptocurrency brokers, dealers and exchange operators.
About the same time, Finland enacted its law regulating crypto service providers like trading platforms, wallet providers and issuers of digital coins. The Act on Virtual Currency Providers entered into force on May 1 after it was approved by the country’s president. The Financial Supervisory Authority (FSA) was tasked with registering and supervising entities that fall into these categories. The new legislation and the introduction of other regulations by the FSA led to changes in the customer verification procedures applied by the peer-to-peer crypto exchange Localbitcoins.
Holland Abolishes Licensing Requirement
Obliging crypto companies to apply for licenses issued by regulators is a step too far and the case with the Dutch AMLD5 legislation demonstrates that. In early July, the Netherlands’ finance minister filed a bill in parliament implementing the directive and amending his country’s Money Laundering and Terrorist Financing Prevention Act. The draft envisaged the introduction of a licensing regime for crypto exchanges and wallet providers.
However, the unnecessary provision regarding licensing was met with a negative reaction from the Dutch Council of State, a body that advises Holland’s parliament on draft legislation prepared by the executive power and provides assessment of bills in terms of compliance with EU law. According to the council, AMLD5 does not offer a choice between licensing and registration, hence the minister’s proposal is not in line with the directive.
In its considerations, the legal portal Lexology reported, the Council of State also notes that the advice of the Dutch Central Bank (DNB) and the Financial Markets Authority (AFM) to introduce a licensing system in order to improve the effectiveness of oversight does not mean such a measure is proportionate, given the burden it imposes on service providers. As a result, the licensing requirement was abolished in the latest version of the law submitted to the Dutch parliament. There’s only a registration requirement, which is in line with EU’s directive and the Council of State’s suggestion.
AMLD5 Must Be Transposed Into National Law by January
The Fifth Anti-Money Laundering Directive was adopted by the Council of the European Union in May 2018 and published in the official journal of the EU on June 19 last year. AMLD5 modifies AMLD4, which was released in 2015. The revision was proposed in the summer of 2016 as part of the European Commission’s Action Plan against terrorism prepared after the terrorist attacks in Paris and Brussels and the Panama Papers scandal.
AMLD5 entered into force on July 9, 2018 and EU member states are obliged to transpose it into their legislation by Jan. 20, 2020. One of its key goals is to extend the scope of anti-money laundering laws to cover crypto exchange platforms and wallet providers. It also contains provisions regarding know your customer (KYC) rules and procedures. The implementation of the new directive is mandatory for EU countries.
In many cases, national laws transposing AMLD5 introduce regulations that are tougher than the directive requires, limiting services that have so far been readily available to the crypto community in Europe. Platforms such as Local.Bitcoin.com offer cryptocurrency users a marketplace where they are free to trade bitcoin cash (BCH) on a peer-to-peer basis and in a secure manner, without the need for KYC.
Why do you think regulators and authorities in EU member states adopt stricter measures than required by the Fifth Anti-Money Laundering Directive? Share your thoughts on the subject in the comments section below.
Images courtesy of Shutterstock.
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The Libra storyline is fast becoming a never-ending soap opera — and we might be reaching the season finale. Facebook used its latest quarterly report to warn investors that its controversial cryptocurrency may never launch at all. The admission at least shows that the social network is taking the concerns of regulators and policymakers to heart. Although the company still expects Libra to be released in 2020 (for now), it looks like Facebook is laying the groundwork for a U-turn, if need be. Who knows what next week’s installment will have in store…
When David Marcus, head of Facebook’s Calibra wallet, appeared in front of Congress last month, he had one warning for U.S. lawmakers: Lead the way on digital currencies, or another nation will. With those words ringing in their ears, some politicians seem to have taken notice. At a hearing of the U.S. Committee on Banking, Housing and Urban Affairs, Sen. Michael Crapo of Idaho broke rank with some of his colleagues. He said he wanted the U.S. to be at the forefront of cryptocurrencies and blockchain, adding the technology “both has incredible potential and incredible risk.” A fellow senator concurred — fearful China might end up getting an upper hand in this fast-moving industry.
The crypto market is often dismissed as a youth-skewed, male-dominated space — but a new report reveals perceptions about the scale of the gender imbalance may be misguided. Previous research has indicated that more than 90% of European crypto investors are male, but this latest study suggests 22% of holders are female. What’s more, they are likelier to be in the top 10% of earners than their male counterparts. Other nuggets of information reveal that Switzerland has the highest rate of crypto ownership in Europe — and even though the United Kingdom languishes in 11th place when it comes to its share of European crypto holders, London has the highest concentration of enthusiasts anywhere on the continent.
Is Down Under down with cryptocurrencies? Potentially, based on a new explanatory memorandum issued by Australia’s government. Although the country plans to ban cash payments for goods and services worth more than 10,000 AUD ($6,900), politicians hope to exclude cryptocurrencies from this rule. Lawmakers say they want to avoid stifling innovation in the burgeoning sector — adding that its research suggests “there is little current evidence” that crypto is being used to facilitate black market activities.
As one country tries to provide clarity on cryptocurrencies, another is making matters murkier. The Financial Conduct Authority, Britain’s regulator, announced this week that it will not oversee Bitcoin and Ether because they are outside of its remit. To further add to the sense of confusion, the FCA says it can monitor security tokens and utility tokens — potentially resulting in a fractured landscape for regulation.
Winners and Losers
At the end of the week, Bitcoin is looking up at around $10,701, Ether at $219 and XRP at $0.32. Total market cap is around $287 billion.
The top three altcoin gainers of the week are TRONCLASSIC, Ubricoin and Formosa Financial. The top three altcoin losers of the week are Infinitus Token, EscrowCoin and BQT.
“The increase in proliferation of digital asset projects outside the U.S., the movement of companies to leave the U.S. and projects to get started outside the U.S. is definitely getting people’s attention.”
“There is little current evidence that digital currency is presently being used in Australia to facilitate black economy activities. Given this, the Government has decided at the present time to effectively carve digital currency out from the cash payment limit.”
“For years, Richard Castro used the dark web to distribute prolific quantities of powerful opioids. […] Castro thought he could hide behind the anonymity of the internet. […] Thanks to our law enforcement partners, ‘Chems_usa’ is now in U.S. prison.”
Joe Kernen used to be a Bitcoin bear. Not anymore, it seems. The Squawk Box host stunned his guest by predicting the dominant cryptocurrency could hit $55,000 by May 2020 — a price surge of 500% in less than a year’s time. Indicating that he’s undergone a full conversion to BTC maximalism, Kernen predicted that the upcoming halving of mining rewards will increase scarcity and result in greater demand. Kernen recently became an unlikely hero of crypto enthusiasts after he said Libra didn’t excite him at all. Appearing alongside Anthony Pompliano this week, he also warned the “first country to buy Bitcoin will force others to play catch up.”
Thursday saw Brazil introduce new measures that mean citizens must share information about their crypto transactions with the state’s Internal Revenue Service. The new measure applies to individuals, companies and brokerages — irrespective of whether the activity involves buying and selling coins, making deposits and withdrawals, or donating to a good cause. In a move that’s going to result in an immense amount of paperwork for Brazilian hodlers, updates will need to be shared with the taxman every single month — with eye-watering punishments if they fail to comply. In addition to penalties of between $25 and $130, up to 3% of the value of nonreported transactions can be charged as a fine.
A man from Florida has pleaded guilty to having a role in a multimillion-dollar drug dealing conspiracy that was enabled by Bitcoin. Richard Castro admitted money laundering and distributing three controlled opioid substances over the dark web. He operated under several usernames — including “Chems_usa,” “Chemical_usa” and “Jagger109” — and will forfeit assets worth more than $4.1 million as a part of the ruling. Prosecutors in the U.S. have called Castro naïve for thinking “he could hide behind the anonymity of the internet,” and he’ll be sentenced in October.
Forged statements by a former Singaporean prime minister are being used to dupe unsuspecting consumers into a Bitcoin scam online, regulators have claimed. The Monetary Authority of Singapore says articles are circulating that claim ex-leader Goh Chok Tong has a method to help citizens become rich in seven days — but warns the statements were “either false or were taken out of context and used in a misleading way.” Victims were urged to deposit $250 into a trading platform that claims to execute automated traders on a user’s behalf.
Crypto’s censorship-resistant, pseudo-anonymous nature has led it to becoming a popular payment method in the adult entertainment industry. In this documentary, Cointelegraph looks at how crypto startups are revolutionizing the way pornographic content is purchased — and asks whether it could disrupt the industry.
Bitcoin has now been around for 10 years, but the debate about whether the cryptocurrency can be considered “digital gold” rages on. We’ve asked a range of crypto and blockchain experts for their take.
Back in 2014, a group of foundational experts led by David Johnston presented the Decentralized Applications (DApps) framework. This in-depth article examines whether Libra’s ecosystem could end up becoming the largest DApps network to date (if it launches), and whether Facebook should be regarded as a villain.
As Bitcoin enjoyed exponential growth, especially toward the end of 2017, the crypto trading sector has flourished too. This Cointelegraph article profiles some of the analysts who are making a killing trading BTC by using a vast array of investment techniques.
German Bitcoin bank Bitwala announced that it received €13 million (almost $14.5 million) in funding.
Germany-based Bitcoin (BTC) bank Bitwala announced that it received €13 million (almost $14.5 million) in funding in a press release shared with Cointelegraph on July 31.
Connecting Bitcoin and banks
Per the release, an international investor consortium led by Sony Financial Ventures, Global Brain and British investment company NKB Group invested in the German bank. Furthermore, half of the funds have been reportedly provided by investors Earlybird Venture Capital and coparion. Jan Goslicki, co-founder and Chief Compliance Officer at Bitwala declared:
“We started Bitwala to do something that nobody thought was possible: to connect Bitcoin and the conventional financial system while fulfilling the requirements of the strict German banking regulation.”
A wide presence on the territory
The bank claims to have clients in all the 31 member countries of the European Economic Area (EEA) and to be the only bank providing a free account with integrated Bitcoin wallet and trading functionalities. The firm also states that deposits are insured up to €100,000 (over $111,000) and that Bitcoin is held in multi-signature wallets to prevent having a single point of failure vulnerable to hackers.
As Cointelegraph reported in January, Bitwala was affected when a great many of Visa’s cryptocurrency debit cards ceased working as the company ended its relationship with a debit card provider called WaveCrest.
As investor confidence in crypto grows, some of crypto’s biggest name launch cards.
Until recently, cryptocurrencydebit cards appeared to fall short of expectations. Despite many failed efforts in recent years, crypto debit cards are enjoying a second wind thanks to a surge in crypto prices over the summer. With some of the crypto world’s biggest names launching crypto debit cards, Cointelegraph takes a look at the latest updates in the burgeoning payments sector.
What are cryptocurrency debit cards and how do they work?
Cryptocurrency debit cards are almost exactly the same as the bank card you carry around every day in your wallet, except for the fact that you can use them to deposit and convert cryptocurrencies. Crypto debit cards represent the transitional stage that cryptocurrencies are currently evolving through. Merchants — for the most part — aren’t ready to accept payments for everyday items and services in crypto, along with the fact that many cryptocurrencies still face issues with transaction time. Consequently, many exchanges only offer the possibility to trade cryptocurrencies for other existing cryptocurrencies, presenting an issue for investors looking to convert their tokens to fiat.
In this respect, crypto debit cards present a happy middle ground for both investors and merchants alike. Payments with a crypto card does not require the merchant to have any technology to accept cryptocurrency payments, as they use the existing Visa/Mastercard infrastructure widely used by businesses the world over. Crypto cards either convert currency seamlessly for the payment or give the user the opportunity to transfer it into a dedicated fiat account for payments.
New Litecoin Foundation partnership rolls out new card
The Litecoin Foundation, a nonprofit organization dedicated to advancing and promoting blockchain technology, announced that it has teamed up with Bibox Exchange and the blockchain firm Ternio to roll out its own crypto debit card.
The new card, dubbed “BlockCard,” will be released as a joint venture by the companies and, for the meantime, is restricted to U.S. customers only. According to a post published by the Litecoin Foundation, BlockCard will enable customers to spend cryptocurrency both online and in-store worldwide. It might not come as a surprise that the most prominent cryptocurrency available to service users is Litecoin (LTC). Customers will also be able to use Bibox Exchange’s and Ternio’s native tokens, Bibox Token (BIX) and Ternio (TERN) respectively.
While Bibox Exchange is set to act as the custodian of users’ funds and to leverage north of $200 million worth of cryptocurrency trading volume, Ternio aims to provide a dedicated blockchain platform.
Litecoin creator and managing director of the Litecoin Foundation, Charlie Lee, said the card launch represents an opportunity to get more people spending Litecoin:
“This is an exciting partnership for us as it furthers the Litecoin Foundation’s mission to create more use cases for spending Litecoin in everyday life. Leveraging Ternio’s BlockCard platform with Bibox’s exchange engine gives Litecoin holders unparalleled access to use their LTC at merchants around the world.”
Although a cursory glance back at recent efforts to launch crypto debit cards may prove a sobering experience for most entrepreneurs, Ternio founder and CEO Daniel Gouldman told Cointelegraph via email that the payments industry is there for the taking:
“The payments industry is currently $4 trillion a year on its way to being $5.5 trillion. Commerce literally is about exchanging value. More and more people are figuring out that cryptocurrencies hold some tremendous advantages over traditional systems which are archaic. When you have JP Morgan, Facebook, Mitsubishi bank, Samsung and other multinationals all employing a cryptocurrency of some kind — it’s clear that not only tech savvy bitcoin enthusiast/anarchists see the value. Cryptocurrencies are going to revolutionize payments.”
Since Bitcoin’s resurgence in the summer of 2019, many top cryptocurrencies are riding the back of a bullish market. Consequently, the launch of several new crypto card initiatives isn’t really that surprising. Despite an increasingly crowded market, Gouldman thinks that BlockCard has what it takes to outshine its competitors:
“Unlike other crypto cards — they force you into fiat at the moment of your deposit which means you’re carrying around a glorified prepaid card that you could buy at Walgreens or Wal-Mart. They charge you for the deposit directly — undercut the value of your asset (by a lot) and then you’re stuck in cash with no easy way to get back into crypto. We allow the users to stay in crypto so they can easily withdrawal whenever they want and the process is seamless.”
Historically, the crypto community has complained about high fees and regulation issues in connection to previous efforts to launch crypto debit cards. Gouldman said that the Ternio team shares the community’s disappointment and has developed BlockCard with the goal of giving customers the best deal possible:
“There was this thought process that the banks were ripping people off and it really soured people on large institutional players. But we traded this lack of trust in banks and other fintech companies for crypto companies that are gouging people. It’s really disgusting. If a company isn’t giving you a square deal — it’s because their values are very different than certainly ours but also — I suspect most consumers. We’re not perfect but our thesis is about lowering costs and making it more convenient. […] And creating competition is good because it’s good for markets and good for consumers. We’re pro-consumer. That’s who we are and that’s who we’re always going to be.”
In the crypto world, competition is tough, with a lot of companies vying for the top spot in a niche sector. However, Gouldman said that the spate of card launches is a sign that things are changing for the better:
“There are a lot of great card companies out there and I’m excited for the entire industry. We won’t and shouldn’t live in a world filled with only one option; more options means consumer choice and forces innovation. The industry hasn’t seen crypto really break out for payments but it’s really about to. Write that down. Buy the t-shirt. It’s about to get real.”
Coinbase Card rolled out in six European countries
On June 11, Coinbase launched its Visa debit card in six European countries. Customers in Spain, France, Italy, Ireland, Germany and the Netherlands will be able to sync the cards to their Coinbase accounts to spend their cryptocurrencies at any merchant that accepts Visa cards. This latest offering from Coinbase comes in two formats: a mobile app for iOS or Android, and a physical card that can be used to make fiat withdrawals from ATMs. News of a European launch followed the April announcement of Coinbase Card, a service previously limited to United Kingdom customers.
Powered by customers’ Coinbase account crypto balances, Coinbase Card allows transactions worldwide in multiple cryptocurrencies, such as Bitcoin, Ethereum and Litecoin. According to the press release, cryptocurrencies stored in users’ account are instantly converted to fiat currency at the moment of purchase. The card will also be supported by an app that enables service users to select which crypto wallets are used when spending. The app also provides receipts and transaction summaries.
Coinbase’s European offering will also allow customers to choose which cryptocurrency to make payments with, which Coinbase converts to cash for a fee.
At the time, news of the UK crypto debit card launch received a mixed response from online members of the crypto community. While some advocate that this is a necessary step towards greater adoption, others noted that the restriction to U.K.-based customers and reports of transaction fees could prevent the product from taking off.
Coinbase Card is issued, authorized and regulated by the electronic money institution Paysafe Financial Services Limited.
Coinbase cancels Shift Bitcoin debit card
Coinbase’s previous efforts to maintain a crypto debit card service have not always been so successful. Coinbase’s Shift Bitcoin debit card reportedly ceased operations on April 11, according to an email allegedly from the Shift team that was posted on Reddit on Feb. 18. The shutdown of Shift was the latest blow to the crypto debit card sector, following a number of high-profile companies also throwing in the towel.
Launched in November 2015, Shift was part of what initially seemed a promising new innovation: cards that allowed users to spend Bitcoin (BTC) via the existing Visa debit infrastructure. Although there are numerous companies in different countries still offering them, their much-touted global appeal has waned.
According to the screenshot uploaded to Reddit, the Shift BTC card service terminated on April 11, 2019. The company did not give an official response stating the reason for the shutdown of the product. The company did assure current service users that the product will function as usual up until the advertised cut-off date.
Comments on social media indicated that a lack of demand was the reason behind Coinbase’s decision to withdraw the Shift BTC card.
Where did it all initially go wrong for BTC cards?
While the summer of 2019 is proving to be a popular time for card launches, the market was not always so buoyant. One of the most prominent setbacks for the sector occurred in January, when Visa ended its relationship with debit card provider WaveCrest. At the time, the decision from the payment titan set the cat among the pigeons in the crypto community. The company later revealed that the relationship had been terminated due to WaveCrest violating Visa’s policies:
“We can confirm that WaveCrest’s Visa membership is being terminated due to continued non-compliance with our operating rules. All of WaveCrest’s Visa card programmes will be closed as a result.
“Visa has other approved card programmes that use fiat funds converted from cryptocurrency in a number of jurisdictions. The termination of WaveCrest’s Visa membership does not affect these other products.”
This is not the only time that payments giants have created uncertainty for crypto debit card providers. Back in October 2018, Finance Magnates reported that both Mastercard and Visa would classify cryptocurrency and initial coin offerings (ICOs) as “high risk.” Quoting undisclosed sources, the publication reported that a ban would be applied to brokers operating from “unregulated or loosely regulated environments.” Unfortunately this description would spell disaster for many crypto debit cards, as there is no universal policy for regulating crypto payments. Consequently, many debit card companies offering crypto services would appear as not having applied the necessary due diligence to their business.
Ex-Visa exec launches own card
Although Mastercard and Visa have a lukewarm approach to cryptocurrencies, the same cannot be said for ex-Visa exec Steven Parker, who now heads Crypterium, a crypto payment firm that announced it has shipped around 4,000 crypto debit cards since its launch.
The company, based in Estonia, launched the Crypterium Card on June 12, offering users a prepaid card compatible with several major cryptocurrencies, such as Bitcoin, Ether, Litecoin and USD Coin, along with Crypterium’s own CRPT token.
Having delivered 3,736 cards to roughly 70 countries in the week following the product’s launch, Crypterium said it was experiencing “booming demand” on the back of the BTC price surge and fledgling bull market. Crypterium co-founder and chief operating officer, Austin Kimm, spoke to Cointelegraph through email about how crypto debit card providers had had a tough time in the past:
“Timing is everything. Being the first is not always the best idea as the world needs to be ready to accept a shift in thinking. Many people couldn’t see the benefit of the internet when it first launched. Until now, crypto debit cards have had to fight on multiple fronts.”
Kimm named a number of factors that had previously held back the growth of crypto debit cards, including price volatility and institutional investment domination:
“A dramatically falling crypto market (by value) limited owner desire to spend what is probably a lot less in value than it was when they first bought or received it. Lack of trust by a wider community limiting the spread of currency. The vast bulk of Crypto owners bought their crypto as an investment, very few earned it as income (miners apart) compounding the lack of incentive to spend crypto.”
Although many still consider Visa and Mastercard to be the gold standard in terms of global customer reach, Kimm said that this belief is misplaced:
“Many companies might say they are able to issue their cards worldwide, but it is simply not true. Visa and Mastercard have a regional strategy limiting the reach of card crypto card issuers. The history of TenX is interesting in that they had a regional issuing capability for Singapore, but shipped cards worldwide. This led to Visa blocking their services completely and in the process destroying the value of their card issuing partner wave crest holdings. This regional strategy means that all cards are being issued in the same places, USA, UK, Singapore. But where is cryptocurrency having the greatest impact? Latin America, Asia and many developing markets. The use case in developing markets is significantly greater than that in developed markets.”
Kimm said that its strong customer base in the Asia-Pacific region influenced his decision to partner with Union Pay International:
“They are huge in the developing markets, and they have no regional issuance restrictions. That means that with one single partnership, Crypterium can issue cards to any citizen in any country in the world (we still require usual KYC information) reaching those users that need us most and whom everybody else has ignored. Users that will want to use the card for everyday transactions.”
After the initial fiasco involving Visa cancelling its working relationship with WaveCrest in January, many companies found themselves in the awkward position of attempting to offer crypto debit card services without actually having a card provider themselves. One company, Wirex, found itself this predicament, however, due to the fact that the company had begun to seek out relationships with other card providers prior to WaveCrest’s collapse, Wirex soon landed on its feet. Having ridden out the whole debacle, Wirex co-founder Dmitry Lazarichev spoke to Cointelegraph about the intricacies involved in launching a crypto debit card:
“There are several challenges when trying to launch a crypto supported card in every country. First and foremost, although over-simplifying its classification, the entity issuing the card and accounts should be licensed by the appropriate local regulator as an e-money/money transmitter institution or the local regulatory equivalent.
“Second, a ‘BIN sponsor’ is required — that is a company which holds principal membership with a card payment network – Visa and Mastercard being the best-known and having widest coverage. In January 2018, WaveCrest ceased operating under Visa’s network, which essentially stopped all companies overnight who relied on WaveCrest’s card services. Wirex was one of very few companies, if not the only one, to find another card issuer and BIN sponsor, in Contis Financial Services.”
Lazarichev added that gaining approval as an authorized agent of Contis, along with successfully passing a number or due diligence tests, gave their reputation a boost after the initial knockback with WaveCrest:
“We had been approved as an authorised agent of Contis, an FCA e-money license holder, which helped in terms of credibility to secure the card issuance. This required thorough checks of our policies for KYC [Know Your Customer] and AML [Anti-Money Laundering] purposes, specifically processes and controls. We successfully passed the audit for PCI- DSS which we were awarded later during the year (we are level 1 certified — the highest in the industry). We are not ICO funded. Traditional institutions are historically wary of working with ICO funded companies.”
Australia’s bullish environment proves stable for crypto cards
Despite the struggles facing many crypto debit card companies in Europe and beyond, BTC.com.au launched its own Bitcoin card. Australia, famous for its bullish approach to crypto, has proven to be a healthy environment for this latest crypto venture. BTC.com.au CEO Danny Ariti spoke to Cointelegraph, stating that BTC.com.au has seen an increase in customer demand for the product since its official launch last year:
“We’ve personally seen a massive uptake and interest in our cards since officially launching the program. We believe this to be the result of making the card an easy and intuitive product with a focus on removing many of the pain points associated with other cash out options. Cards can be loaded with multiple coins with support for additional coins constantly being added, funds are instantly loaded onto the card when a transaction is made – there is no waiting for clearing times that you’d see with regular cash out options, all made more appealing to users with cards operating outside of the traditional banking system.”
The BTC.com.au CEO emphasised that a lack of crypto understanding is partly to blame for the lack of more widespread adoption along with the current requirement to rely on third party companies and investors:
“One of the main challenges is institutional and mainstream company pressures and restrictions. This is mainly due to a lack of understanding of cryptocurrency and blockchain technology. We don’t believe this to be limited to only a lack of understanding, but also a fear of the exceptional concept that is cryptocurrency and blockchain technology. As we rely on third party companies and institutions in order to develop these card products, their restrictions in the understanding of cryptocurrency is prevalent. An example of this, specifically within Australia, is the $999 limit attached to our card program. This is a result of insurance companies evaluating businesses operating in this space as ‘high-risk’ making it difficult for cryptocurrency-related businesses to obtain the necessary insurances to meet the regulatory requirements to have these limits raised. With widespread use of the cards, we’re hoping that this high-risk view will decrease.”
Ariti also touched on the damage dealt to the sector by Mastercard and Visa’s policies towards cryptocurrency businesses, but remained cautiously optimistic about renewed interest from card issuers:
“The industry has seen some curve balls thrown at it with many of the earlier card programs operating on the Mastercard and VISA networks having their programs pulled as result of cryptocurrency-related businesses being heavily scrutinised and being placed in a high-risk industry category. While in Australia we presently only have the ability to operate over the domestic eftpos card network, we’re now seeing renewed interest from card issuers potentially approving new cryptocurrency card programs back onto these global payment networks.”
Overall, Ariti maintains a positive outlook for the future adoption of BTC debit cards, commenting that the potential benefits and ease-of-use, together with the eventual merchant acceptance of cryptocurrency, will win out in the end:
“We are optimistic about the future of cryptocurrency cards; they allow users to easily integrate cryptocurrency into their everyday lives with little learning curve by taking a new technology and coupling it with a familiar system and user experience, essentially bridging the gap between the ‘old’ and ‘new’. This of course is all part of a much larger movement until more merchants begin natively accepting cryptocurrency, but this small stepping stone will eventually translate into a much larger revolutionary leap as adoption continues.”
Despite 2018’s prolonged bear market, it’s clear from the recent spate of launches and service expansions from existing providers that entrepreneurs in the crypto industry see opportunities to exploit a potentially fertile market. Much like any business environment, the crypto world has witnessed its fair share of egos and cut-throat competition. For now, there appears to be a certain sense of shared optimism and community spirit regarding the potential for crypto debit cards to facilitate wider adoption of digital currencies. Although more companies are throwing their hats into the ring, there are still plenty of options for card providers to attract customers, with competitive fees, increasingly diverse coin portfolios and user experience all being low-hanging fruit for potential clients. However, as both 2019’s so-called bull run enters a bout of serious volatility and Facebook’s Libra project faces mounting regulatory difficulties, it remains to be seen how institutions, customers and centralized card providers across the crypto sector will react.