Ethereum-based decentralized stablecoin DAI is now spendable where Visa cards are accepted and Tether sees more use by e-commerce organizations.
Ethereum-based decentralized stablecoin DAI is now spendable where VISA cards are accepted and leading stablecoin Tether (USDT) is seeing increasing use by e-commerce organizations.
DAI now usable in E.U. stores
According to a press release shared with Cointelegraph Oct. 29, collaborative financial platform 2Gether added DAI support to its platform. A spokesperson claimed that this is the first stablecoin added to the platform.
As a result of the addition, 2Gether users can now spend their DAI like euros, without fees, anywhere where Visa is accepted with the dedicated card. Furthermore, 2Gether will also enable DAI holders to buy and sell 13 cryptocurrencies, without fees, and send DAI to external addresses. The firm explains what it hopes to achieve with the addition of the crypto asset to its platform:
“The addition of Dai to 2gether’s crypto catalog offers the possibility of operating with a cryptocurrency that’s both decentralized and stable at the same time.”
E-commerce picks up on Tether’s USDT
Paolo Ardoino, chief technical officer at both Tether and crypto exchange Bitfinex, told Cointelegraph that Tether is expanding to e-commerce organizations and claimed that Tether is an effective way to improve the speed of activity, since it is faster than credit cards and traditional payment systems. He noted:
“Merchants need to have a stablecoin in order to protect their businesses from the volatility of other crypto assets such as Bitcoin. Tether is being widely used by merchants and e-commerce outfits but as this is a new trend we are still collecting and evaluating the data.”
This is in line with recent reports that USDT is gaining popularity as a payment method, with some analysts seeing it catching up with Bitcoin (BTC) and Ether (ETH).
That being said, the future of stablecoin use as means of payment is in danger given that the United States Congress is considering a draft bill that claims all managed stablecoins must be seen as investment contracts and therefore as securities.
As Cointelegraph reported earlier today, the German government announced the intention to forbid stablecoin adoption, declaring:
“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.”
Bakkt announced its coming app for consumer payments, with Starbucks on board as the flagship retailer starting next year.
Cryptocurrency custody and futures trading platform Bakkt has announced its coming entry into mobile payments with a consumer app.
Per an Oct. 28 blog post from the company, Bakkt will follow its recent successes in trading Bitcoin (BTC) futures with a consumer app. According to the company, the app will help consumers “unlock the value of digital assets, as well as ways in which they can transact or track them.”
Starbucks on board
Though the announcement is vague on the specifics of the app’s functionalities, coffee empire Starbucks is the first major retailer to commit to the new payments application. Maria Smith, Starbucks’ vice president of partnerships and payments, said:
“As the flagship retailer, Starbucks will play a pivotal role in developing practical, trusted and regulated applications for consumers to convert their digital assets into US dollars for use at Starbucks.”
What’s new in the app?
Bakkt’s announcement broadly indicates a desire to speed up the conversion of digital assets into locally useful payment systems. It reads:
“We’re working to reduce friction in the use of digital assets to reflect their aggregate value and to reflect an increase in purchasing power that was previously siloed.”
The mechanism that Bakkt will be using for exchanging digital assets at points-of-sale remains unclear. Smith mentioned 15 million Starbucks Rewards members as a template for payments, but operations involving competing retailers and depending on cryptocurrencies present different challenges.
Bakkt’s futures and futures options trading
Bakkt has been busy in recent months. In September, the company opened trading of physically delivered Bitcoin futures on its platform.
On Oct. 24, following an all-time high in BTC futures contracts traded, Bakkt announced that it would be launching fully regulated BTC futures options trading in December.
Libra considering the use of fiat-pegged stablecoins for its basket while navigating through a wave of negative criticisms from regulators.
Amid the regulatory storm facing Libra, the project’s hierarchy is looking to change one important detail of the payment system: using fiat-pegged stablecoins rather than a token supported by a basket of national currencies. The Libra Association says such considerations are part of efforts to create a more agile payment platform.
Meanwhile, the furor over the controversial Libra has begun to take a more political undertone, both within and outside the United States. Arguments for and against the project now seem to include issues surrounding the trade war between the U.S. and China.
In Europe, China’s response to Facebook’s crypto project (the creation of yuan-pegged digital currency) and Libra itself, have sparked some commentators calling on the European Central Bank to adopt a digital currency for the EU. In some ways, it appears Libra has ignited a new currency war, one that might take place in the digital realm, with several counties floating their own central bank digital currencies (CBDCs).
For Libra, the regulatory hassle might constitute only part of its trouble, as the project could face stiff competition from payment giants, especially in China and other parts of Asia. Some of these payment companies are already identifying Libra as a potential competitor ahead of its launch.
Single Libra token or individual fiat-pegged stablecoins?
As previously reported by Cointelegraph, David Marcus, the co-creator of Libra and head of the Calibra wallet, said the project is open to using various fiat-pegged stablecoins rather than its original idea of creating a token. In its white paper, Libra proposed that its token would be supported by a basket of various national currencies. In a statement shared with Cointelegraph, Dante Disparte, the Libra Association’s head of policy and communications, remarked:
“The Libra Association is committed to pursuing responsible innovation in open collaboration with applicable regulators and stakeholders, to ensure the public interest is always protected and remains at the heart of this project. We have a long launch runway by design and are actively engaged with regulators and policymakers around the world.”
Such a move could change the nature of the project drastically, as Libra will be presenting itself as a payment gateway that utilizes digital versions of national fiat rather than a new currency supported by a basket of fiat deposits. For one, its original idea would likely have meant the existence of a private exchange rate mechanism that is firmly in the control of the Libra Association.
In a conversation with Cointelegraph, Randolf Zhao, vice president of operations at cryptocurrency derivatives trading platform BaseFEX, remarked that the move signals Libra’s intention to smoothen some of the regulatory wrinkles hampering the project:
“If you tie your stablecoin to USD, such as Tether, you are not undermining the dominance of USD because people still consider it as a virtual version of USD that is backed by USD reserves companies like Tether possess. But if your coin is backed by a basket of fiat currencies, you are introducing something whose percentage of USD dependency is much less than a USD-backed stablecoin, which is, in essence, challenging the dominance of USD.”
For Zhao, governments around the world will be hard-pressed to allow a project like Libra to operate, considering the vast userbase commanded by Facebook that counts more than 2 billion users across the globe.
Regulatory scrutiny and loss of banking relationships
Earlier in October, a couple of U.S. senators sent cautionary letters to Stripe, Mastercard, Visa, and other U.S.-based early backers of Libra. An excerpt from one of these letters reads:
“If you take this on [being a member of the Libra Association], you can expect a high level of scrutiny from regulators not only on Libra-related payment activities but on all payment activities.”
As previously reported by Cointelegraph, PayPal pulled out of the Libra Association at the start of October. Other early backers like Visa, eBay, Mastercard and Stripe have also announced their exit from the project. Meanwhile, none of the current Libra backers have yet made any financial commitment to the association.
Facebook CEO Mark Zuckerberg spent more than six hours on Oct. 23 responding to several questions from members of the U.S. Congress. The grilling was the latest in a series of appearances by Facebook and Libra before U.S. lawmakers concerning regulatory issues surrounding the project.
As reported by Cointelegraph, Facebook’s role within the Libra Association was one of the major talking points of the hearing. Amid the barrage of questions, Zuckerberg declared that Facebook would have to quit the Libra Association if it fails to secure the green light for the project from U.S. regulators.
Reaffirming its commitment to complying with regulatory provisions, Libra’s Disparte told Cointelegraph, “From the beginning, we’ve said we’re committed to taking the time to get this right,” and went on to say that the publication of a white paper was intended to kickstart a dialogue with the regulators and policymakers, adding that:
“As a member of the Libra Association, we will continue to be a part of this dialogue to ensure that this global financial infrastructure is governed in a way that is reflective of the people it serves. Facebook will not offer Libra through its Calibra wallet until the Association has fully addressed regulators’ concerns and received appropriate approvals.”
For Disparte, the Libra Association is working to ensure that the project adheres to global best practices in the payments industry. As part of the statement to Cointelegraph, Disparte said:
“Our goal is a digital payment system that replicates or exceeds current standards for consumer protection, financial stability, and the prevention of money laundering and illicit finance — while preserving national sovereignty over monetary policy.”
To this end, Disparte said the Libra Association will continue to liaise with regulatory agencies from around the world, adding, “We look forward to collaboration with applicable policymakers on a path forward that addresses their questions and concerns.”
Meanwhile, regulatory concerns might not be the only problem for Libra and its partners. According to Ralph Hamers, the head of Dutch global financial behemoth ING, Facebook might lose valuable banking relationships due to its involvement with Libra.
As reported by Cointelegraph, Hamers indicated that banks could consider cutting services to Facebook if it launches the Libra project. The ING chief remarked that banks may choose not to be associated with Facebook once Libra comes online due to money laundering concerns.
Potential for global Libra adoption
Even if Libra obtains regulatory approval, the project still has to contend with achieving widespread adoption in the electronic payment market. For Vikram R. Singh, managing director at enterprise blockchain firm Antier Solutions, Libra could claim a significant market share in the international remittance scene. In an email to Cointelegraph, Singh observed that the world is currently lacking a banking unicorn, adding that:
“All in all, it [Libra] will be a major disruption and the challenge to the status quo of the state’s authority over its money which will force them to redefine themselves by accepting the change. Consumers will win whichever way it goes; this is for sure.”
In major markets like China, Libra may find breaking into the payment market to be a daunting task due to Facebook’s involvement in the project. Zhao of BaseFEX, commenting on Libra’s prospects in China, remarked:
“Alipay and WeChat Pay both achieved wide adoption through their parent company’s massive promotion efforts and the pre-existent penetration of the corporate’s other services — for Alipay that’s Taobao and TMall, for WeChat Pay it is WeChat. So, unless Facebook can launch something in China and make it a killer app here prior to the launch of Libra, I really don’t see similar success coming for Libra.”
Zhao believes that Libra’s problem in China also has a lot to do with its association with Facebook. Commenting on the matter, the BaseFEX executive said: “Facebook has been out of the picture in China for a long while. Only China’s tech and internet industry talk about Facebook and for the 99.9% population, it is irrelevant.”
Several stakeholders within the banking sector have also come out to dismiss the Libra project. JPMorgan Chase CEO Jamie Dimon recently described Libra as a “neat idea that will never happen.”
Prelude to the CBDC wars?
Amid the ongoing talk surrounding the Libra project, the idea of governments creating their own digital currencies continues to be a recurring conversation. At the Oct. 23 hearing before Congress, Zuckerberg declared that China had stolen the lead from the U.S. in digital currency innovation. An excerpt from an official statement issued by Zuckerberg to Congress reads:
“China is moving quickly to launch a similar idea in the coming months. We can’t sit here and assume that because America is today the leader that it will always get to be the leader if we don’t innovate.”
Indeed, there have been reports that Beijing is looking to release its own CBDC — a yuan-pegged digital currency — with some commentators speculating that the move is part of the country’s efforts to block Libra. However, there have been conflicting statements regarding the level of work already completed on the project.
Oct. 24 did see a flurry of news from China, with the country’s president, Xi Jinping, calling for accelerated adoption of blockchain technology. China has also passed its first-ever “crypto law,” which will reportedly go into effect at the start of 2020. Some commentators, including Dovey Wan of Primitive Ventures, say these moves are part of the modalities for the emergence of China’s national digital currency. Zhao of BaseFEX told Cointelegraph that the proposed digital-yuan is still a work in progress:
“The main driving force at this moment is a working group inside the People’s Bank of China (PBoC). It is more like an internal think tank, within the Central Bank. What that group says represents only what they think, not what the entire People’s Bank of China thinks. But allowing this small working group to say things publicly on a regular basis does indicate PBoC’s favorable stance upon this China-crypto.”
However, Zhao maintained that it would take more than the recommendations of a PBoC working group to engineer something like a national digital currency in China. According to Zhao, the introduction of a national cryptocurrency would be a very big deal for the entire nation, and therefore the PBoC will by no means decide on such a move by itself. Zhao also added:
“People who don’t know how Chinese government departments function and work with each other tend to over-react to such news, which is unfortunately very much the case for the English-speaking crypto community.”
CBDCs for all, including Libra
Nevertheless, these reports seem to have been sufficient to spook some stakeholders within the EU. Bruno Le Maire, France’s finance minister, recently called on the European Central Bank to begin working on creating its own digital currency in response to China’s efforts.
Despite identifying the apparent threat of China’s CBDC efforts, Le Maire and other EU policy stakeholders aren’t keen on Libra, tagging the project as having severe implications for the monetary sovereignty of countries in the EU. Both France and Germany have expressed a desire to prevent Libra from operating in Europe.
For some members of the U.S. Congress, however, the fears surrounding China’s reported digital currency project is much ado about nothing. After the Oct. 23 Libra hearing, Rep. Maxine Waters, who is the chair of the House Financial Services Committee, dismissed Zuckerberg’s implication that the U.S. is lagging behind in terms of digital innovation.
15,558 physical businesses worldwide accept Bitcoin for payment, up 18% from a year earlier. But in-person transactions are still uncommon.
There’s no easy way to buy, send or spend cryptocurrency in person — not even for a slice of pizza or a cup of coffee, or so it’s been said. Meanwhile, the number of physical merchant locations that accept crypto payments keeps growing.
As of late October 2019, 15,558 business venues worldwide were accepting Bitcoin (BTC) as a method of payment, up 18% from a year earlier, according to Coinmap.org. The crowdsourced heatmap, devised by Satoshi Labs in 2013, draws on input from consumers and merchants.
It also offers up some surprises. While Europe remains the hottest continent for in-person Bitcoin transactions, the most torrid city is now Ljubljana in Slovenia, with 314 venues. Last year, Prague held that distinction. As reported by Cointelegraph, more than 530 locations across Slovenia and Croatia are now accepting crypto on a daily basis, including hotels, shops and restaurants — a big increase from the 240 locations reported in January 2019. The list includes Tus, one of Slovenia’s biggest grocery chains. Ljubljana even has a shopping mall called “BTC City.”
The extent to which the Republic of Slovenia, with only 2 million citizens, is becoming a hub for crypto can be seen in the table below, which ranks Bitcoin-accepting businesses by city on a per capita basis. That is, the size of the population is being controlled, since it would be expected for a city like London with 8.2 million residents to have more Bitcoin-accepting venues than Ljubljana with only 275,000 residents, even though it doesn’t, London has a mere 103 businesses.
The table shows that Ljubljana has more than 10 times the number of Bitcoin-accepting locations as does San Francisco after controlling for population. St. Petersburg, Florida has more than 11 times as many places to spend crypto as New York per capita. Here are the top 10 cities in gross terms (i.e., not adjusted for population):
This table is dominated by European, North American and South American cities. Switzerland’s businesses have long been (relatively) receptive to crypto, and this is reflected in the larger size of its Bitcoin-accepting businesses. Zurich’s Dolder Grand, a luxury hotel, takes Bitcoin, as does the Kessel car dealership in Zug.
By comparison, a walk through midtown Manhattan in New York City, home to some of the most storied names in retailing, finds mostly smaller enterprises willing to be paid in BTC: Forefront Law Group, Gotham Cookies, Toggle Web Media Design, etc. Paris’ famous high-end Rue de Rivoli has virtually no businesses accepting Bitcoin.
In Prague, one can reportedly rent apartments and attend films paying in crypto. The Valmont, a party bar in the city center, invites visitors to “drink champagne and dance on the table” — and accepts Bitcoin. In economically distressed Venezuela, Traki, a big department store, is now taking crypto — at least according to one user who purchased clothing and school supplies with BTC.
Bitcoin-friendly businesses are to be found in Australia’s two largest cities, Sydney (55) and Melbourne (66), but there are relatively few in Asia given its size apart from Seoul (71), Hong Kong (39), Bangkok (52) and Tokyo (81), the continent’s leader. Africa remains almost “heat-free” on Coinmap’s heatmap. Cape Town, South Africa, the continental leader, has 31 businesses accepting Bitcoin.
Why so disinterested?
There have been many reasons offered why crypto doesn’t work for everyday transactions. When online payments company Stripe, one of the first major infrastructure networks to support Bitcoin payments in 2014, exited that business last year, it cited among other reasons the transaction clearance times, which were averaging 60 minutes in mid-2018, and had sometimes dragged on for days. “By the time the transaction is confirmed, fluctuations in Bitcoin price mean that it’s for the ‘wrong’ amount,” the company said.
Some of the newer payment platforms, however, claim that crypto payments made in BTC and Ethereum (ETH), or other cryptos, can be almost immediately converted into a merchant’s local currency, eliminating exposure to sudden price movements.
Hupayx, a South Korean startup, for instance, offers a cryptocurrency point of sale payment solution through a partnership with KIS Information Technologies. It will soon be implemented at more than 400,000 locations in Seoul area alone, according to Aibek Amandanov, the head of global marketing. He told Cointelegraph that duty free shops will be among the first businesses, adding:
“HUPAYX members can transfer crypto instantly among members; when transferring outside our ecosystem it takes longer. When paying at the counter at HPOS supported merchants, we only charge a 0.5% fee and it takes less than 6 seconds to transact.”
Bitcoin transaction costs have dropped dramatically over the past two years — high fees were another reason cited by Stripe for leaving the business. The average Bitcoin transaction fee reached a high of $54.90 on Dec. 21, 2017, but on Oct. 22, 2019, it was less than one hundredth that amount: $0.53 per transaction.
There are other impediments, though, before in-person crypto payments become part of everyday life. In South Korea, it is prohibited to directly pay in crypto at any store or business location, Amandanov told Cointelegraph: “In response, we made our wallet so that the crypto (BTC, ETH, ETH-20 tokens) can be converted into points and can be paid with those.”
In the U.S., there can be tax issues because the IRS considers Bitcoin and other cryptos an asset, not a currency. Every time a sale takes place, it can be considered a tax event. How to deal with this? Casual Bitcoin users should consider using a reputable crypto wallet provider to help document all transactions, according to tax expert William Perez. Wild variations in crypto prices haven’t helped either. As a spokesperson for Chainalysis, a blockchain analysis firm, explained to Cointelegraph:
“One significant impediment is price volatility. That’s likely behind the rise in popularity of stablecoins, and trust in stablecoins could lead the way to increased commercial use… We think a lot of the benefits of using cryptocurrencies versus traditional payment methods are still to come because cryptocurrencies are more programmable.”
“There’s been definite technical progress in the past year, but no massive adoption on the retail level,” Nick Saponaro, co-founder and chief information officer of The Divi Project, a blockchain startup, told Cointelegraph. “People just aren’t willing to spend an asset with such upside potential.”
There is more in-person crypto spending in places like South America and Africa, Saponaro added. In Venezuela, ravaged by hyperinflation, the local currency is useless, and people are turning to cryptocurrencies to purchase groceries. In economically distressed parts of Africa, people use BTC to purchase vehicles, he said.
All told, a different popular psychology may have to take hold before people begin to spend cryptocurrencies on goods and services more substantial than a pizza slice or a cup of coffee, Saponaro suggested.
Consumers will have to see others purchasing durable goods like automobiles and home appliances with Bitcoin or Ether or other cryptos. When they do, some price stability may be achieved, and then more consumers might jump in and spend crypto, in a kind of virtuous cycle.
Stablecoin Tether (USDT) has gained popularity as a payment method, catching up with Bitcoin and Ether according to a Bloomberg report.
Stablecoin Tether (USDT) is gaining popularity as a payment method, with some analysts seeing it catching up with Bitcoin (BTC) and Ether (ETH).
As Bloomberg reported on Oct. 25, cryptocurrency payments processor CoinPayments registered the rapid increasing of popularity of Tether — a stablecoin pegged 1:1 to a United States dollar — as a means of payment. On the site, which has a 2.4 million user base, Tether currently accounts for 30% of volume, which is 30 times more than a year ago.
Tether undermines Ether’s leadership?
Bitcoin application as a means of payment has seen a nearly 60% drop in volume from 80% last year, according to CoinPayments, while Tether has pushed Ether out of second place. Users purportedly choose Tether due to the stablecoin’s capability to avoid price fluctuations. Sean Mackay, operations lead at CoinPayments.net, said:
“Merchants used to accept Bitcoin, Ethereum, Ripple and convert it into Tether in order to hedge against the volatility. Now we are seeing the payments just being done directly in Tether.”
Also, Tether has seen wider adoption among the types of merchants who have difficulty getting credit-card processing services or who are forced to pay high card processing fees.
Multimillion token mint and new offerings
In mid-September, Tether minted 300 million USDT as part of the swap from the Omni protocol to the Ethereum blockchain. However, no token burn on the Omni blockchain had taken place at the time. In July, Tether accidentally minted and subsequently burned 5 billion USDT tokens.
Also last month, Tether announced the launch of a new stablecoin tied to the offshore Chinese yuan dubbed CNHT. The new currency joins Tether’s other stablecoins backed by U.S. dollars (USDT) and euro (EURT).
As part of its further offerings expansion, Tether plans to release a version of the stablecoin backed by a basket of commodities such as gold, crude oil and rubber.
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.”
Web browser Opera now supports payments with Bitcoin directly inside the browser.
Web browser Opera now allows making payments with Bitcoin (BTC) directly inside the browser.
The company announced the news in a press release shared with Cointelegraph on Oct. 21, detailing that Opera’s 350 million users can now send and receive BTC directly from the browser, as well as use the cryptocurrency for purchasing goods and services on e-commerce websites.
Additionally, the browser now enables adding a Bitcoin and TRON (TRX) card into the built-in Crypto Wallet to keep track of the cryptocurrency owned. Charles Hamel, head of crypto at Opera, commented on the new feature launch:
“We believe that opening our browser to more blockchains, including Bitcoin, is the logical next step to making our solution more relevant to anyone who has a Bitcoin crypto wallet and would like to do things with their cryptocurrencies beyond just keeping them in an account.”
The features were previously released in the Beta version of the browser this summer, while the first cryptocurrency available for purchase through the browser was Ether (ETH) in February.
Opera’s Web 3-focused developments
In recent months, Opera has actively presented new developments related to Web 3, the term referring to a new evolution of the web, with the creation of high-quality content and involvement of blockchain, decentralized computing and digital currencies.
The company released the iOS version of its mobile web browser, Opera Touch, that supports Ethereum protocol and Ethereum Web3 apps, and a Web 3 explorer, which enables users to conduct transactions and interact with Web 3.
Although Opera’s market share among other browsers accounts for only 3% as of September 2019, its latest development is another step forward to “an experimental integration of Web 3” and further adoption of cryptocurrencies.
As Hamel previously claimed, the company aims to remove the friction involved in “using cryptocurrencies online and accessing Web 3 via special apps or extensions,” in a bid to make the emerging technologies more mainstream.
In the meantime, cryptocurrency-powered browser Brave claimed high user engagement, with daily active users standing at over 2.8 million, and the number of creators subscribed to its web advertisement network also reportedly increased substantially.
Alipay denies providing support for Bitcoin trading amid reports of Binance accepting fiat deposits via popular payment channels.
Earlier in October 2019, Binance announced a fiat on-ramp for crypto trading via Chinese payment services Alipay and WeChat. This move was part of the exchange giant’s peer-to-peer (P2P) trading rollout for Bitcoin (BTC), Ether (ETH) and Tether (USDT) against the Chinese yuan.
The public nature of this announcement did bring questions to the fore regarding the use of payment channels like Alipay and WeChat for crypto trading. Alipay did, in fact, release statements distancing itself from cryptocurrency trading activities, with Binance later clarifying that it wasn’t working directly with the aforementioned payment services.
Meanwhile the evolving narrative around the situation speaks to the legal status of Bitcoin and cryptocurrencies in China. Even with a trading ban in place, there are whispers of a booming P2P trading arena, with authorities in Beijing seeming to adopt a “see no evil, hear no evil, speak no evil” approach.
However, whenever these reports do make it into the public domain, Chinese authorities and businesses are swift to put a lid on them. Perhaps the arrival of the country’s proposed digital currency might necessitate the emergence of more clear-cut handling of crypto commerce in China.
Alipay wants nothing to do with Bitcoin
As previously reported by Cointelegraph, Alibaba-owned payment channel Alipay has moved to ban transactions involving Bitcoin and other cryptocurrencies. In an email to Cointelegraph, a spokesperson for the platform wrote:
“Alipay closely monitors over-the-counter (OTC) transactions to identify irregular behavior and ensure compliance with relevant regulations. If any transactions are identified as being related to bitcoin or other virtual currencies, we immediately stop the relevant payment services.”
This statement came in response to reports that Chinese crypto traders were using the platform as a P2P trading marketplace. Crypto exchange giant Binance even announced that it had enabled support for fiat deposits via Alipay and WeChat.
Cointelegraph spoke with Filipe Castro, co-founder and chief information officer of Utrust — a Swiss-based digital payments processor — about the Alipay announcement. “AliPay, as many other established companies are still focused on their traditional business models and see this ecosystem as a challenger,” Castro said.
For the Utrust chief, Alipay’s status as a major player in China’s electronic payment arena means it has to work toward balancing the need for increasing revenue streams and compliance with directives from authorities in Beijing. Castro also highlighted the less than favorable standing held by the crypto industry in China, noting:
“Mainland China has strict laws banning gambling, and many still see cryptocurrency as such. Alipay and other providers still look at other cryptocurrency providers as investment outlets and not payment vehicles. Thus, until this perception changes, it is likely that current measures will stay in force.”
In an interview with Cointelegraph, Celine Lu, founder and CEO of BitDeer — a hashpower sharing platform — provided further insight. According to Lu, the Chinese government pays particular attention to the activities of popular third-party payment processors like Alipay:
“In these regulations, the state clarifies the nature of Bitcoin as a virtual commodity. At the same time, for the purpose of prevention of risks to the financial system, the relevant regulations limit the participation of financial institutions and payment institutions in Bitcoin-related activities.”
Alipay isn’t alone in coming out to distance itself from Bitcoin OTC trading. Back in May 2019, WeChat changed its payment policy, forbidding the use of its platform for P2P transactions.
Is it all about the narrative?
However, despite Alipay coming out to deny the use of its platform for Bitcoin OTC trading, several commentators say the practice is common in China. The summary of the arguments posited by many is that such activities while illegal on paper, fall into a regulatory gray area.
To clarify, Bitcoin OTC trading is not in itself illegal in China. Back in May 2019, the government revealed that the 2017 trading and initial coin offering (ICO) ban did not affect Bitcoin’s legal status as a property that can be held or exchanged via P2P channels.
Indeed, following the 2017 trading and ICO ban, reports began to emerge of growing P2P Bitcoin trading in China. Platforms like WeChat became marketplaces for the convergence of prospective buyers and sellers.
There are even reports that major crypto exchanges use these backchannel avenues to conduct P2P Bitcoin trading in China. These exchanges reportedly mask such activities by using the guise of running a P2P trading desk for the BTC/USDT trading pair. OTC P2P trading reportedly accounts for the overwhelming majority of Chinese BTC/CNY trading. Users place manual buy and sell orders, with the exchanges acting as the go-between.
Given the informal nature of the arrangement, counterparty risk becomes a major problem. The buyer reportedly has to send fiat payments first before receiving the agreed-upon Bitcoin. Thus, these marketplaces tend to put in a lot of effort in ensuring that participants hold to their respective ends of the bargain.
The fiat payment part of the deal requires channels like WeChat, Alipay or wire transfers. However, financial institutions in mainland China are barred from facilitating crypto transactions. Thus, users of such channels usually run the risk of having their accounts terminated.
However, some commentators allege that such practices are possible not because of regulatory loopholes but due to an unwritten “implied consent” of some Chinese government officials. These people claim that crypto exchanges have forged useful relationships with key actors in Beijing that help to smoothen any legal wrinkles.
While the Alipay/Binance situation was unfolding, a Twitter account named Blocfilo posted some startling revelations about the Chinese crypto trading scene. Allegedly, despite the trading ban, many cryptocurrency exchanges still operate and have their headquarters in mainland China. The self-professed crypto exchange analyst also tweeted that government officials are prepared to look the other way as long as they receive bribes from the platforms. Excerpts from the thread read:
“You just gotta pay the government officials some money and you can operate just fine under the radar. A lot of crypto exchanges have already become banks to certain extent. Only the legitimate ones will survive in the long run though.”
Cointelegraph reached out to several Chinese crypto exchanges to ascertain the veracity of these claims. The platforms that responded declined to comment on the matter. If such statements are true, then it appears authorities in Beijing seem more concerned with optics rather than actual trading activities.
Crypto-yuan: To be or not to be?
Back in April 2018, Chinese social media-based news platform cnLedger revealed that there was a booming Bitcoin OTC trade for crypto bulls in the country. As reported by Cointelegraph at the time, traders in China were paying a premium for BTC via these OTC desks. Chinese traders exchange CNY for USDT, which is then used to purchase BTC overseas. Such activities bring capital control issues with yuan deposits leaving the country.
Indeed, one of the objections raised by China to Facebook’s proposed Libra cryptocurrency project is the potential impact on its capital control efforts. Some countries in Europe, such as Germany and France, say Libra could have troubling implications for the monetary sovereignty of nations.
There has been talk for some time of the People’s Bank of China (PBoC) creating a digital yuan currency. Some commentators suggest that such a move even presents greater prominence following the Libra announcement.
China already has a well-developed electronic payment ecosystem with the likes of Alipay and WeChat dominating the scene. The coming of a digital yuan is seen by some as an effort by the government to prevent the penetration of cryptocurrencies into the space.
Cointelegraph asked Utrust’s Castro about the potential impact of Alipay’s announcement distancing itself from Bitcoin trading on the future of crypto payments in China. According to Castro, Alipay’s stance is not surprising given what it has said in the past, adding:
“The advent of an e-Yuan digital currency, natively developed in China could help shape its strategic stance going forward. Competition from Libra and other private initiatives can undoubtedly act as a catalyst that accelerates this process.”
As reported by Cointelegraph, there is still no official consensus on the exact release date for the proposed digital yuan currency. Back in August, reports emerged that the PBoC was ready to roll out the central bank digital currency, or CBDC. However, conflicting revelations emerged a month later saying the central bank still required more time to study the pros and cons.
China’s proposed digital currency coupled with Facebook’s foray into the market has also reportedly spooked several key actors within the European Union. In an op-ed in the Financial Times, Bruno Le Maire, France’s finance minister, urged the EU to consider creating its own digital currency. According to Le Maire:
“We [the European Central Bank] should consider the creation of central banks’ own digital currencies, in the medium to long term. We cannot let China be the only player in this field. Our independence is at stake.”
Le Maire’s aversion to the involvement of private institutions in global monetary affairs echoes some of the sentiments the Utrust co-founder shared with Cointelegraph. During the interview, Castro highlighted the still-prevailing negative rhetoric surrounding the industry, stating, “There are many challenges still ahead, namely the establishment of a good, credible and trustworthy brand reputation for the cryptocurrency ecosystem.”
For now, the likes of Alipay need to maintain a public perception of crypto-aversion, even if private dealings reveal otherwise. Perhaps a time will come when governments will no longer be able to cast the industry in a bad light and cryptocurrencies will usher in the expected global electronic payment revolution.
California-based luxury electric car manufacturer Karma Automotive has begun accepting Bitcoin as a means of payment at one of its stores in Newport Beach.
California-based luxury electric car manufacturer Karma Automotive has begun accepting digital currency as a means of payment at one of its stores in Newport Beach.
Karma Newport Beach now enables customers to pay in Bitcoin (BTC) for new vehicle purchases and related services, according to a company press release on Oct. 15. Announcing the new offering, Karma CEO Lance Zhou said:
“We are opening our platform to serve as a test bed to help convert theoretical blockchain applications to practical use. Karma’s flagship store will support our efforts to prove emerging technology and provide the latest VVIP customer treatment offerings by accepting Bitcoin cryptocurrency.”
The Chinese Wanxiang Group bought Karma’s assets from Fisker Automotive in 2014 for $149.2 million. It began building its flagship Revero vehicle in 2016, the new model of which retails for over $135,000. The Revero can reportedly travel 37 miles before needing a recharge.
Crypto and luxury goods
Cryptocurrency has found its way into the luxury goods industry, both in forms of function and payment. In September 2018, Swiss luxury watch brand Hublot released its “Big Bang Blockchain” watch that could exclusively be purchased with Bitcoin.
Other high-end timepieces from Franck Muller have integrated cryptocurrency wallets. Franck Muller’s crypto wallet watches retail from $9,800 to $50,600.
Blockchain technology in the automotive industry
Car manufacturers around the world have been experimenting with crypto’s underlying blockchain technology, with the Ford Motor Company looking into blockchain and geofencing to accurately track the number of “green miles” driven by its energy-efficient vehicles. BMW, General Motors, Ford, Renault and Honda started testing a blockchain car identification and payment system in the United States.
In September, Indian automobile manufacturer Tata Motors announced plans to apply blockchain solutions in various aspects of the automotive industry, including the parking marketplace, demand prediction algorithms and real-time monitoring of fuel quality.
Aliant launched its crypto processing system for merchants, dubbed CryptoBucks, back in 2017 and developed a proprietary, fully compliant solution in July 2018 to process crypto payments, converting them to USD, and offering merchants next day payouts.
In a statement, Aliant CEO Eric Brown proposed that:
“Adoption happens when you’re able to earn cryptocurrency, and then go on to spend it.”
Brown further underscored that with the inclusion of cryptocurrency into employee compensation packages, each member of the Aliant team will have “a vested interest in cryptocurrency not just as something they work on in the office.”
Merchant solutions and in-house employee adoption
Alongside Aliant, other industry firms have been working to diversify crypto processing solutions for merchants.
Blockchain technology firm Bitfury Group has launched e-commerce software for merchants and several other tools — including an open-source Bitcoin (BTC) wallet and a hardware payments terminal — in a bid to drive wider adoption of Bitcoin’s off-chain scalability layer called Lightning Network.
Meanwhile, workplace initiatives to drive crypto adoption among employees include the recent move by Big Four audit firm Deloitte to enable staff to pay for canteen purchases using a mobile Bitcoin wallet.