U.S. policymakers should not attempt to deter Bitcoin’s tech
U.S. congressman McHenry, who represents North Carolina’s 10th District, urged that American authorities should not stifle the new technology in a tweet on Oct. 31.
According to the official, policymakers should facilitate the development of new technologies. McHenry reiterated his previous bullish sentiments about Bitcoin, stating:
“The world that Satoshi Nakamoto envisioned, and others are building, is an unstoppable force. As policymakers, we should not attempt to deter this technology, but instead ask ourselves: what are we doing to meet the challenges & opportunities of this new world of innovation?”
Bitcoin has big potential in protecting privacy
Rep. Davidson outlined Bitcoin’s potential to protect online privacy, retweeting Cointelegraph’s article on Bitcoin’s whitepaper turning 11 years old. The congressman stated:
“Eleven years ago, this anonymous white paper opened up infinite possibilities for technological innovation and #privacy protections. It’s time the US harnesses this potential and establishes a framework for American #blockchain innovators.”
Earlier in October, Davidson suggested that Facebook adding Bitcoin to its native crypto wallet Calibra would be a “way better idea” than launching their own cryptocurrency Libra.
In a blog post on Oct. 31, major U.S. crypto exchange and wallet service Coinbasepointed out that Bitcoin’s adoption has been developing much faster than other transformative technologies such as email and television. The exchange wrote:
“The television set was invented in 1927 but by the end of the 1940s only 2% of American families owned one. Bitcoin, on the other hand, went from an idea in 2008, and a first transaction in 2009, to over 27 million users in the US alone in 2019, or 9% of Americans.”
According to a survey last spring, as much as 11% of the American population owned Bitcoin as of April 2019.
Canada’s volatile history of mainstream adoption and fraud is directly impacting the future of cryptocurrency in the country.
Recently, Canada’s central bank has been leading working groups with global partners exploring a blockchain future. Their crypto presence has soared with Ernst & Young’s announcement that it is using Toronto to test its public government expenditure blockchain. But what is the cryptocurrency landscape currently like in Canada?
The history of crypto in Canada may seem as volatile as a token with a small market cap, yet mainstream use and adoption have been on a consistent incline since 2013, when Canadians started pushing mainstream adoption. Now, the Canadian government is leading working groups. What else has the country been up to in the blockchain space?
The first thing that comes to everyone’s mind when it comes to the Great White North is that the founder of Ethereum, Vitalik Buterin, grew up in Canada — but Etherum isn’t all the country has provided to the crypto space. Here are some more notable stories from Canada’s blockchain history.
The world’s first Bitcoin ATMs
Canada contributed to Bitcoin’s (BTC) mainstream use early on by opening the world’s first Bitcoin ATM at a coffee shop in Vancouver in 2013. The ATMs were released by Bitcoiniacs and Robocoin. Bitcoin was trading at around $200 at the time and, during the first day, the kiosk performed 81 Bitcoin transactions equaling around 81 BTC.
The ATM is considered a strong driver for attracting new people to cryptocurrency, with around a third of its users new to Bitcoin. In an interview with Cointelegraph back in 2013, Robocoin CEO Jordan Kelley marveled at how easy it was for people to get started with Bitcoin. According to industry monitor CoinATMRadar, there are at least 715 cryptocurrency ATMs in Canada, with 85 in Vancouver and 227 in Toronto.
It is easy to agree that the initial coin offerings (ICOs) craze produced more losers than winners, as many took advantage of the hyped-up funding method to conduct scams. In response, state and provincial securities regulators in the United States and Canada launched probes into potentially fraudulent crypto investment programs as part of the North American Securities Administrators Association’s Operation Cryptosweep in 2018. The initiative is reportedly the largest coordinated investigation held by state and provincial officials targeting suspicious crypto investment products, and has resulted in over 200 investigations of ICOs and crypto-related investment products.
Operation Cryptosweep has issued at least 77 actions against crypto programs, including the infamous BitConnect, which has gone down in history as one of the largest cryptocurrency scams.
Vancouver mayor suggests a ban on Bitcoin ATMs
The mayor of Vancouver, Kennedy Stewart, suggested a complete ban on Bitcoin ATMs in the summer of 2019 due to Anti-Money Laundering (AML) issues associated with the ATMs. The associated police report claims that criminals could purchase a Bitcoin ATM for their own needs for a few thousand dollars, and then deposit their cash into that ATM “as many times as required” to profit from or eliminate the transaction fees.
While many Canadian governing bodies have already taken steps against cryptocurrency, British Columbia’s review into the alleged money laundering activities is ongoing. Canada saw the amount of money laundering claims triple last year to 2,466 claims.
When speaking to Cointelegraph, Andrey Peshkov, the CEO of money transfer app USDX Wallet, dismissed the concerns surrounding money laundering using cryptocurrency in Canada, remarking:
“I do not think that cryptocurrency holders try to laundering money in Canada because they are obligated to pay taxes. Many countries do not require holders to pay taxes from their crypto income making them more attractive to bad actors.”
Flexa and Coinsquare integrate physical retail payments for Canada
However, not all news surrounding Canada recently has been negative.The Winklevoss-backed cryptocurrency payments service Flexa, which allows merchants such as TopGolf to accept cryptocurrency, has seen strong acceptance around the country.
Current estimates show that over 7,500 businesses have signed up on the platform to offer crypto payments to their customers, indicating that business owners in Canada see a need to provide payment solutions in crypto.
Canada audits QuadrigaCX exchange
A review of Canada in cryptocurrency would not be complete without talking about QuadrigaCX, a defunct Canada-based exchange. The company began grabbing headlines ever since its CEO Gerald Cotten was declared dead in India without ever having revealed the keys to access the company’s cryptocurrency reserves. When these reserves were discovered inaccessible, the business became insolvent, declaring bankruptcy.
The Canadian company’s bankruptcy trustee was Ernst & Young, a Big Four accounting agency. A bankruptcy trustee oversees the exchange’s insolvency proceedings focusing on auditing from a tax and creditor perspective.
Recently, the widow of QuadrigaCX Founder Gerald Cotten, Jennifer Robertson, paid $9 million in assets to the users of QuadrigaCX through EY. Robertson wrote in a personal statement, “The vast majority of my assets and all of the Estate’s assets are being returned to QCX to benefit the affected users.”
While the widow may not have been aware of her husband’s alleged malfeasance, what happened suggests that Canada is determined to rid cryptocurrency of fraud to protect both investors and holders. According to EY, Robertson’s late husband created fake accounts under several pseudonyms and used them to trade users’ money on the QuadrigaCX platform to show artificial income. The auditor also said that much of the funds were eventually transferred to personal accounts that he controlled.
High-paying employment in Blockchain Consensus report
The Blockchain Consensus report was released on Oct. 4, 2019 by the Chamber of Digital Commerce Canada, exploring the blockchain ecosystem in Canada. The report takes a closer look at Canada’s blockchain ecosystem, breaking down insight by region and company size. The report also states that government commitment is desperately needed to move this highly innovative technology sector forward by providing legal clarity.
Further, the report includes statistics that highlight the average annual blockchain salary in Canada sitting at more than $98,000 Canadian dollars, making blockchain careers among the highest-paying in the country. The CEO of Shortex, Vladimir Prosvirkin, remarked on this report to Cointelegraph:
“Canada is one of the leading countries adopting blockchain technology on a corporate level. Every second company is invested in blockchain somehow last year. Due to the country’s low energy cost, high internet speeds, and favorable regulations, blockchain and cryptocurrency industries have always prospered here.”
Piloting government spending tracking in Toronto
In an effort to increase transparency, EY started tracking how public funds are spent in the capital city of Toronto. As reported by Cointelegraph on Oct. 16, the system can track the government’s public funds as they move through different state agencies, providing transparency to the public.
According to EY, data provided by the platform can potentially be used to better inform future decision making on policies. Upon the pilot program’s launch, EY issued a statement, “Blockchain technology can positively impact processes from tax collection to open data to public spending.” A Bitcoin-conscious and highly functioning city like Toronto may benefit from greater transparency in government spending and provide an important use case.
G-7 working group on stablecoins
On Oct. 13, 2019, the Bank of Canada released results from the G-7 working group on stablecoins that was tasked with “investigating the impact of global stablecoins” as a whole. While much has been written about the strong language in the report, such as “Stablecoins pose a threat to financial security,” it also outlines ways in which governments and digital securities can work together. Participants included the Bank of England, the Bank of Canada, the Bank of France, the European Central Bank, the Bank of Italy, the Bank of Japan and the United States Department of Treasury.
On the eve of the G-7 working group, Anthony Pompliano, co-founder and partner at Morgan Creek Digital, noted that it has taken only a decade from Bitcoin’s creation for the “decentralized digital currency to go from basically the fringes of the internet to now being discussed at the G-7 and other regulatory offices.”
Challenges lie ahead for stablecoins
The report goes on to outline the challenges that stablecoins need to overcome in order for them to remain in compliance. Focusing on private stablecoins, the report highlights that stablecoins, regardless of size, pose some major risks such as regulatory, security, and those relating to financial reporting and misconduct.
Further, the paper addresses challenges and risks that globally adopted stablecoins like Tether (USDT) pose to monetary policy, financial stability, the international monetary system and fair competition. Jude Regev, the founder of Element Zero, an open-source network that provides branded stablecoins and a fee-free on-chain SmartSwap, noted to Cointelegraph:
“Private stablecoins will need to be more similar to a shield that protects purchasing power and provides security against hacking. When Central Bank’s like Canada issue their own digital currencies and other countries do the same, being able to create stable interoperability between each countries’ fiat onboarding will add the most value to the ecosystem.”
Based on international conversations and the working session led by Canada in conjunction with other countries, it is clear the country sees both value and risk in stablecoins. The working document shows a future where digital currency will utilize banks only as a means for fiat onboarding. The document seems to address two known stablecoin protocols, an algorithmic stablecoin like DAI and asset-backed stablecoins like Tether.
Toward the future
Canada’s blockchain history is marked by triumph and struggle. The Crypto Canucks are constant drivers and mass adoption is incoming through all the perceived barriers. From the first Bitcoin ATM to considering banning Bitcoin ATMs to leading the international community toward adoption, the Great White North has been at the forefront for both cryptocurrencies’ benefits and risks.
While adoption continues to increase, inappropriate regulation could potentially hinder some projects in the country. Guidelines may end up forcing private stablecoins to comply with securities laws in big countries or to even become banks, significantly raising the barrier to entry. Alternatively, countries may turn to outlawing private stablecoins altogether for fear of harm coming to their existing banking systems.
Bitcoin is digital freedom because it allows making the transactions that others don’t want you to make, Blockstream CSO says.
Hostility to Bitcoin (BTC) from the global regulators is a double-edged sword that can hurt authorities if they lose their power, the Blockstream Chief Strategy Officer (CSO) warned.
During a panel at a Liquid meetup at Litecoin Summit on Oct. 29, Blockstream CSO Samson Mow predicted that regulatory restrictions to Bitcoin could have both favorable and unfavorable consequences for the regulators themselves.
Regulators should be careful while enforcing Bitcoin regulation
The panel is a part of the event hosted by BTC technology firm Blockstream and BTSE exchange in Las Vegas, BTSE’s global marketing director Lina Seiche shared on Oct. 31.
Alongside Mow, the panel also featured Litecoin (LTC) founder Charlie Lee and industry Twitter personality WhalePanda.
During the discussion, Mow pointed out that Bitcoin really solves a lot of issues in the existing financial system such as inflation. He also predicted that global jurisdictions will eventually have to adopt it due to the multitude of benefits of the cryptocurrency.
However, they also might be hostile to it, Mow noted, urging that excessive hostility can lead to unfortunate consequences if regulators’ power is undermined by this borderless technology. He said:
“They might be hostile to it. But the thing is hostility to Bitcoin is a double-edged sword like if you are in power and you ban Bitcoin, and you fall out of power, then you’re screwed. […] People need to be careful when they are enforcing regulation and creating all this policy because you could be on the other side of the sword, down the road if you fall out of favor.”
“Bitcoin is essentially digital freedom”
Mow further emphasized Bitcoin’s decentralized and deflationary nature as one of the major benefits for soon-to-come global adoption, forecasting that people will eventually find out those advantages. He also cited the growing adoption of Bitcoin in China, claiming that both people and the government in the country love Bitcoin. The Bitcoin bull declared:
“Bitcoin is allowing you to make the transactions that people don’t want you to make. It’s essentially digital freedom.”
Earlier this year, Mow claimed that Bitcoin is not ideal for payments, but this could be solved by the Lightning Network, a second layer payment protocol that works on top of Bitcoin to increase transaction capacity.
Understanding the new IRS guidance for cryptocurrency.
The United States Internal Revenue Service (IRS) is continuing to focus its efforts in cryptocurrency. After sending a recent enforcement letter, the IRS has released two new pieces of guidance for taxpayers who engage in transactions involving digital currency.
The new guidance includes Revenue Ruling 2019–24 and FAQs, including guidance for using the specific identification method. Additionally, the IRS has published a new draft for form 1040 Schedule 1, including a broad declaration regarding crypto holdings or trade.
Here is a breakdown of these publications.
Revenue Ruling 2019–24: airdrops and hard forks
So, what are airdrops and hard forks, and what do they mean for the tax obligations of crypto holders?
In short, an airdrop occurs when a company distributes its tokens to a user’s wallet, free of charge, in order to raise funds, and in certain other cases, such as after hard forks. A hard fork is when nodes of the newest version of a blockchain creates a permanent separation from the previous version, creating a “fork” in which one path follows the new and upgraded blockchain, while the other follows the old path.
In Bitcoin (BTC), a hard fork is the result of changes in the blockchain rules, sharing a transaction history with Bitcoin up to a certain time and date. The most famous hard fork occurred in August 2017, when some Bitcoin developers and users decided to initiate a hard fork known as Bitcoin Cash (BCH).
The new IRS guidelines distinguish between hard forks and airdrops, stating that not every hard fork should be treated as an airdrop. Those who received new currencies in a hard fork are considered as having received them through airdrop and should report it to the IRS as gross income.
The new ruling also acknowledges the possibility that a taxpayer did not receive an airdrop, detailing that if a taxpayer receives new currency from an airdrop into a wallet managed by an exchange that does not support the airdropped currency, the taxpayer is off the hook. But, if the exchange later ends up supporting that airdropped crypto, the taxpayer is considered to have received the new currency at that time and is therefore liable to taxation.
While the IRS has made significant steps in regulating crypto, the new guidance raises questions about the request to tax airdrops when the crypto holder receives them as gross income, unlike regular crypto which it’s taxable events occur only on selling or exchanging.
Frequently asked questions
Back in 2014, the IRS issued Notice 2014–21, which describes how existing general tax principles apply to transactions using digital currency. This notice contained 16 Q&As, which have now been amended and added to the 2019 ruling, resulting in a whopping 43 questions and answers that cover the entirety of crypto taxation issues.
These are the main issues you should know:
1. Understand what Fair Market Value is:
Fair Market Value (FMV) is typically defined as the selling price for an item to which a buyer and seller can agree.
Cryptocurrency value is determined by the cryptocurrency exchange and recorded in U.S. dollars. However, when it comes to peer-to-peer (P2P) transactions or other transactions not facilitated by an exchange, the FMV is determined according to the date and time at which the transaction was recorded on the blockchain.
2. Determine the cost basis:
Cost basis is the original value of an asset for tax purposes. For digital currencies, the cost basis is the amount you spent to acquire the digital currency, including fees, brokerage commissions from exchanges, and other acquisition costs in U.S. dollars.
Your adjusted basis is your basis increased by certain expenditures and decreased by certain deductions or credits based on marital status, income, etc. To calculate an accurate cost basis, you must first determine which units of currency were sold, exchanged, or disposed of and match the buying cost for every unit sold.
3. Choose the calculation method carefully:
Here is the big news: For the first time, the IRS has clarified the preferable method of calculation for cryptocurrency, advising to use the “specific identification” method. This means identifying the exact unspent output Bitcoin transaction (UTXO) you have sold out of all the Bitcoin you had in your wallets, and then calculating your tax liability based on the sale of the actual Bitcoin UTXO.
If you are not using it already, you should use the first in, first out (FIFO) method. This method does not take real-time user activity into consideration. Basically, to calculate in the FIFO method, you need to make a list of all purchases and another list of all sales. Then, to do the matching, take the first item in the purchase list and calculate the tax results as if you sold it at the same price and on the same date as the first sale in the sales list. FIFO results can cause overtaxation, especially if you bought your first Bitcoins in the early years.
To get a complete and accurate report, taxpayers are encouraged to use the specific identification method. This method is used to track individual units of virtual currency. It is applicable only when individual units can be clearly identified to provide a complete report of crypto-asset movements, including addresses, wallets, exchanges, etc.
Taxpayers can identify specific units by unique digital identifiers such as private and public keys and addresses, or with records showing the transaction information for all units of a specific digital currency (such as Bitcoin) held in a particular account, wallet or address. Specific identification must exhibit the date and time each unit was acquired, the cost basis and FMV of each unit at the time of acquisition, as well as the date, time, FMV and sale value or price of each unit when it was sold, exchanged or disposed of.
When compiling a report and filling out the appropriate documentation, taxpayers must report all income, gains and losses incurred by all taxable transactions, regardless of the amount. IRS codes and requirements are to maintain thorough documentation on receipts, sales and exchanges in order to establish validity on their tax returns.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Or Lokay Cohen is the vice president at Bittax, a crypto tax calculation platform. Or has 10 years’ experience with regulation, managing a leading tax consultant firm. She holds a LL.M. law degree, a B.A. in communications and an M.A. in management and public policy. In her work at Bittax, Or promotes the goal of bridging the gap between cryptocurrency and the taxation reality to enable tax reporting under a clear, regulatory framework and specific identification methods.
The MSFA cautions the public that an entity dubbed “Bitcoin Future” appears to display “the same deceitful characteristics” as a separate scam, dubbed “Bitcoin Revolution,” for which it has already issued two public warnings this year.
The statement notes that such scam operations appear to constantly resurface on the web as adverts, switching their names to avoid detection.
Suspicious adverts peddle false slogans such as “A way to build your life better” and a “Unique opportunity for Maltese,” the MSFA notes, pointing readers to specific URLs where these fake ads are currently hosted. The watchdog characterizes the culture and strategies of these exploits, noting that:
“Bitcoin Future is promoting itself by means of fake news articles which misuse images of local personalities and images of local government institutions. The fake articles are advertised on various social media platforms and falsely claim to be linked to these individuals.”
As a corrective, the MSFA clarifies that Bitcoin Future is emphatically not a Maltese-registered company, is not authorized to provide financial services to or from the country and is not an entity operating — as it purports — under the transitory provision in terms of Article 62 of Malta’s Virtual Financial Assets Act.
In summary, the regulator says Bitcoin Future appears to be an international “get-rich-quick” scam and asks the public not to engage in business or transactions with the entity in any of its identified guises.
As reported, this September the MSFA published a strategic plan to actively monitor and manage business-related risks related to cryptocurrency firms.
A strategic outline for 2019–2021 revealed that the watchdog will modernize its regulatory approach and work closely with the Financial Intelligence Analysis Unit, alongside other national and international authorities, including the newly formed Malta Digital Innovation Authority.
Earlier this year, United States-based blockchain security firm CipherTrace was appointed by the MSFA to monitor crypto businesses’ activity in Malta to help combat money laundering and financing terrorism risks.
The firm has this month expanded its crypto intelligence platform to trace 700 tokens.
A veteran Chinese regulator urges those tasked with steering the strategic development of Sichuan province to tap surplus hydropower for the blockchain industry.
A veteran Chinese regulator has told those tasked with steering the strategic development of Sichuan province to tap surplus hydropower for the blockchain industry.
Jiang Yang — former vice-chairman of the China Securities Regulatory Commission — advised strategists that:
“Sichuan should study further about how the province’s cheap hydropower resources can attract digital currency-related businesses.”
Yang’s remarks were noted in an Oct. 30 report from South China Morning Post.
Use cryptocurrency mining to absorb excess output
Sichuan, located in south-western China, has a protracted rainy season and is thus the country’s biggest producer of hydropower.
In 2018 alone, the province generated 78.2 gigawatts — that’s 78.2 million kilowatts — of power and exported 104 billion kilowatt-hours (kWh), 30% of its total output, to other regions.
With this abundant resource, Sichuan’s electricity tariffs are reportedly as low as 2 US cents per kWh during the rainy season — as compared with the 11 US cent rate reported in Guangzhou and Beijing.
Even outside of the season, costs remain at a modest 4 US cents per kWh — a major draw for cryptocurrency miners, for whom electricity consumption commands the lion’s share of operating costs.
Most crucially, cryptocurrency mining is thought to have the potential to help absorb excess energy output, which reportedly remains a missed export opportunity for hydropower plants lacking in infrastructure. This could significantly boost the local economy, SCMP notes.
Calls for a breakthrough in blockchain finance
Jiang told strategists that China continues to mine 70% of the world’s Bitcoin (BTC), followed by India (4%) and the United States (1%), citing cheap hydropower as a major driving factor.
He called for China to seek a breakthrough in the application of blockchain to finance, noting that:
“In finance, the application of blockchain technology has been through digital currency, which today is primarily driven by Bitcoin.”
Leon Liu — CEO of retail crypto trading platform Bitkan — told reporters that since President Xi’s high-profile endorsement of blockchain development last week, the volume of Bitcoin traded on the platform has surged by four times.
Increased mining is also expected to trigger a major uptick in Bitcoin trading volumes, as miners cash out their rewards to pay for operating costs.
This could represent a fraught issue for China’s main macroeconomic planning agency, the National Development Reform Commission, which has endeavored to clamp down on Bitcoin mining.
China has, moreover, banned all domestic crypto exchanges since Sept. 2017, meaning that this trading is likely to occur on offshore platforms.
Yesterday, Cointelegraph reported that the People’s Bank of China and the country’s market regulator will jointly implement a new system to certify 11 types of fintech hardware and software products relating to digital payments.
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.”
Cryptocurrencies like Bitcoin are not real money, according to a statement published by the German federal parliament.
Cryptocurrencies such as Bitcoin (BTC) are not real money, according to a statement published by the German federal parliament on Oct. 28.
Not a payment vehicle, not a store of value
Per the announcement, the assets offered by the current cryptocurrency landscape — such as Bitcoin — provide only a very limited portion of the features expected of traditional money. The statement – titled “Crypto tokens are not real money” – is based on an answer provided by the German federal government to a question from the Free Democratic Party parliamentary group.
The answer provided defines the basic features of money as the following: exchange and means of payment, store of value and unit of account. The announcement points out that the volume of payments carried out using crypto is limited when compared to fiat currencies.
Stablecoins are not an alternative to fiat money
Moreover, the author of the statement also claims that the fluctuations reported by the value render crypto-tokens unsuitable to be a store of value. The answer provided by the government states that stablecoins attempt to solve the issues caused by excessive price fluctuations. Still, the government explains that it intends to forbid 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.”
Lastly, the government also noted that they had yet to determine whether Facebook’s Libra would be compliant with German law. The white paper of the project is not an appropriate source of information to judge the matter and more information is needed, the statement reads.
Crypto’s most recent bull run began last Friday, October 25, after a significant plunge in prices just days earlier that had some prognosticators worried about a return to late 2018 and early 2019’s bleak crypto winter. Since the recent spike, prices have held relatively steady, suggesting this rally is not just a flash in the pan. That being the case, a look at bull runs of times past and what this could mean for the market today is in order.
With BTC plummeting almost $1,000 from October 22-24, some crypto sages were poised on their soapboxes in the Twitter town square ready to announce the coming cryptocalypse. As seen recently though, prices have reinvigorated with gusto and stabilized around the market as a whole. 2017’s November and December mega rally was preceded by a rapid plunge in prices across the market in mere days as well, prompting some to view current conditions as a consolidation signal similar to those times.
There is no shortage of theories and speculation as to where things may go next, or why the dynamic moves of last week occurred. Bitcoin core prices spiked over $2,500 from around $7,300 to the $10,000 mark in a matter of a couple days, and other top market cap cryptocurrencies experienced significant positive moves as well, and remain strong.
Past Bull Markets – Similarities and Differences
As zealous as those in the crypto game might be to call each and every bullish signal the beginning of hyperbitcoinization and each slight dip a shocking death knell, the markets tell a more stable and sensible story from a macro perspective. Prices and percentages of market capitalization of leading cryptos understandably follow more gradual contours, long-term. The diversity of leading assets at the very top broadens where capitalization is concerned, while the market as a whole narrows and becomes more focused on select assets.
If 2017’s skyrocket into green was a crypto-wide gamble taking everyone along for the exhilarating ride, recent spikes have been a more seasoned bet, leaving legions of washed up altcoins out to dry. As far as speculated causes for the most recent bull trend goes, there are a few favored explanations – and many being shot down with equal conviction.
BTW China‘s leadership is anti-privacy,pro-surveillance&pro-control.Stop pretending Xi‘s speech (where #blockchain was a placeholder for any hip tech) said “we like #bitcoin“.It insults even #CT‘s intelligence.Reason for pump was Bearish positioning& #tether printing air-money 😉
Similarities across bullish trends have luminaries, experts and economists attempting to draw sound connections. For example, Bitcoin’s April 2018 rally was attributed to institutional interest and “flights to decorrelation” by experts, bearing similarity to current speculation and prediction centering around global economic turmoil and the bitcoin futures market. Last spring and summer saw bitcoin core jumping back to $10,000 in June, signaling a bull market that was attributed by many, once again, to a combination of tech industry hubbub such as Facebook’s groundbreaking Libra announcement, government economic policies and futures markets.
Regarding the current rally, Binance CEO Changpeng Zhao referenced positive signals from stocks in the Chinese blockchain industry, tweeting on October 28:
Those gains in stock markets will spill over to crypto soon… Told ours guys to scale up system capacity, waiting.
Also of interest to speculators is a breakaway gap on the Chicago Mercantile Exchange’s (CME) futures chart following last week’s spike. Trader @TheCryptomist predicted the gap would be filled before BTC heads back upwards toward $12,000.
Top Performers and Future Moves
As far as price performance in the context of the most recent rally goes, barchart.com paints a picture of the last five days, with NEO, BCH and BTC leading the pack. NEO has seen a near 50% gain in price, BCH over 16% and BTC 14% at press time.
If the crypto market tells us anything, it’s that no prediction or position is sacred, no matter how vaunted the status of the speaker, or how statistically sound the forecast may seem to be. Crypto speculation is always open to being dashed to smithereens against the unforgiving rocks of market reality. Still, when zoomed out far enough, even volatility can take on a calmer appearance. Steady growth and sustained interest in the crypto space is a constant narrative for now.
What are your thoughts on the recent crypto market moves? Let us know in the comments section below.
China has been on a roll with a series of crypto-related announcements. President Xi Jinping’s speech to accelerate the development of blockchain technology in China was followed by the passing of a cryptography bill. Meanwhile, China’s Center for Information and Industry Development has continued to evaluate and rank crypto projects, and the central bank is preparing to launch its own digital currency.
As China embraces blockchain technology and prepares to launch its own digital currency, the country’s Center for Information and Industry Development (CCID) has continued to publish crypto project rankings. The CCID is a scientific research institute directly under China’s Ministry of Industry in Information Technology. The first ranking, published in May last year, took the crypto industry by surprise.
The latest set of rankings consists of 35 crypto projects, ranked based on the CCID’s Global Public Blockchain Technology Assessment Index. There are three sub-indices: basic technology, applicability, creativity. Collectively, they make up the overall ranking.
Occupying the number one spot overall is EOS, which has been at the top of the overall rankings since the center started evaluating it back in June last year. The second position has changed from the previous ranking, with TRON replacing Ethereum. NULS remains in the fourth position, while Bitcoin remains in the 11th spot. Bitcoin Cash now ranks 30th, down a few positions from the 26th spot previously.
The institute explained that the average value of the basic technology sub-index is mostly unchanged from the previous period. The average value of the creativity index has marginally increased, while the average value of the applicability index has increased substantially. Two projects, Gxchain and XEM, have been removed for further observation because “a dynamic adjustment mechanism was introduced to adjust the public chain whose code update rate is too low,” the CCID explained.
The indices are compiled by the CCID (Qingdao) blockchain research institute, an entity established by the CCID. The rankings and evaluation work are carried out every two months in collaboration with multiple parties such as the CCID think tank and the China Software Evaluation Center. “The result of this assessment will allow the CCID group to provide better technical consulting services for government agencies, business enterprises, research institutes, and technology developers,” the institute previously explained. The CCID provides professional services to the government including research, consulting, evaluation, certification, and research and development, its website describes.
China’s CBDC and Cryptography Law
While the CCID has been evaluating crypto projects for over a year, China’s central bank has been researching the possibility of issuing its own central bank digital currency (CBDC) for much longer. The People’s Bank of China (PBOC) set up a research team in 2014 to explore launching its own digital currency, reportedly to reduce the costs of circulating traditional paper money and boost policymakers’ control of money supply.
The project was recently accelerated following the announcement by social media giant Facebook regarding the Libra digital currency project. Having hinted to the media that its CBDC was “almost ready,” the PBOC later stated that more research was needed. Governor Yi Gang clarified earlier this month that there was no timeframe for the launch and more time is needed for further research, testing, trials, assessments, and risk prevention. Nonetheless, some people are more optimistic about the time frame. Huang Qifan, Vice Chairman of China Center for International Economic Exchanges, talked about the country’s digital currency electronic payment (DCEP) system in his keynote speech at the Bund Summit, a financial conference in Shanghai, on Monday. He remarked:
The PBOC has been studying DCEP for five or six years, and is likely to be the first central bank in the world to launch a digital currency
While Chinese authorities have indicated that its digital currency would be similar to Libra, some experts have reservations about the DCEP system. Zhang Anyuan, chief economist from China Securities, was quoted by The South China Morning Post as saying: “DCEP anchoring purely on [the yuan] won’t be able to compete with Libra, despite it may draw the participation of internet giants like Alibaba and Tencent.” He elaborated that, based on the details revealed so far, “its internationalization will not succeed without a monetary theory breakthrough or a money creation innovation,” the publication conveyed.
Further, China’s official state-run press agency Xinhua News Agency reported late on Saturday that a cryptography law has been passed and will take effect on Jan. 1, 2020. This law is aimed at “facilitating the development of the cryptography business and ensuring the security of cyberspace and information,” the publication explained, citing parliament.
Xi Jinping Elevates Blockchain in China
Chinese President Xi Jinping, while still silencing protesters in Hong Kong, managed to gain immense popularity within the crypto community last week when he said that China should expedite the development of blockchain technology as the core for innovation.
He emphasized that the integrated application of blockchain technology plays an important role in new technological innovation and industrial transformation, Xinhua reported and quoted Xi as saying:
We must take blockchain as an important breakthrough for independent innovation of core technologies, clarify the main directions, increase investment, focus on a number of key technologies, and accelerate the development of blockchain and industrial innovation.
“Chinese president seldom elaborates on a particular tech,” commented Twitter handle Cnledger. “Previously, only [the] internet and artificial intelligence were specifically elaborated on and collectively studied in the Central Political Bureau. This means blockchain is at least raised to the same level as A.I. in China.” Following Xi’s statements, blockchain-related stocks spiked. Xunlei, a company selling cloud downloading services claiming to be heavily invested in blockchain, for example, doubled its market cap overnight.
What do you think of the CCID’s rankings, President Xi’s speech, and the PBOC preparing to launch a central bank digital currency? Let us know in the comments section below.
Images courtesy of Shutterstock and the CCID.
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