Apex Crypto News – Central Bank Digital Currencies and Their Role in the Financial System
Central bank digital currencies are a digital representation of a country’s fiat currency. They are effectively a government-issued cryptocurrency designed to replace the traditional, physical form of fiat currencies.
The term CBDC is broad because its implementation involves several critical decisions on the part of an issuing central bank. The primary decision is whether a CBDC should be a general-purpose in that it’s available to be used by the general population. If not, then the issuing authority may decide to make it available for “wholesale” transactions, which means the CBDC is only used for settlements between banks. Finally, a CBDC could also only be used among central banks.
In its research paper covering CBDCs in-depth, the Bank for International Settlements, or BIS, defines these categories using a Venn diagram called the “money flower,” shown below. The gray area represents various types of CBDCs, while Bitcoin (BTC) and other cryptocurrencies are deemed to be private digital tokens.
According to the BIS, the idea of CBDCs has been around for many years, predating Bitcoin by over two decades. However, the concept has gained prominence over recent years. This has been mainly due to advances in the fintech arena, including developments in blockchain technology, allowing the issuance of digital tokens that represent a store of value.
Furthermore, the move toward CBDCs supports the general trend of a more cashless society. In countries such as South Korea, China and Sweden, cash is well on its way to becoming a redundant means of payment.
CBDCs offer many comparable benefits to cryptocurrencies, such as Bitcoin. Hours of operation for banks limit the availability of transactions, whereas CBDCs could be available to transact on a 24/7 basis. Banks could decrease their reliance on clearinghouses, which would save costs.
Like cryptocurrencies, CBDCs could be available to anyone who has a smartphone, helping to improve financial inclusion, particularly to people in rural areas without access to physical banking infrastructure such as ATMs. Countries such as Kenya have already seen an improvement in financial inclusion due to the popularity of M-Pesa, a cashless payment app based on SMS.
There are other benefits in using CBDCs beyond the general advantages of digital currencies. Central banks spend money to print money, with the average cost of minting a one-dollar bill racking up around $0.077 per note. Digital currencies are cheap or sometimes even free to produce once the underlying code is there.
Central banks could also implement monetary policy directly using a CBDC. This may mean paying interest on the token itself rather than on bank deposits.
Finally, governments could find it easier to distribute cash to citizens, using CBDCs. For example, COVID-19 led to a crisis that prompted the United States government to issue Economic Impact Payments in the form of checks and debit cards, which are prone to theft and fraudulent use. With a CBDC, the government could issue relief funds directly.
Along with various benefits, CBDCs also come with some considerable risks on the part of central banks, governments and individual citizens.
Perhaps the biggest risk is cybersecurity. China’s efforts in testing a CBDC have already been hijacked by scammers, which is alarming because the full version hasn’t been officially launched yet. The risks of a network attack or creating new loopholes for fraud or money laundering are a real concern for any central bank looking to launch a CBDC.
On the flip side of this risk is privacy. The greater visibility a government has into who is using a CBDC, the more the cybersecurity risks can be reduced. However, if citizens believe that using a CBDC may mean the government could overstep the boundaries of privacy rights, it may not gain adoption.
Finally, while governments could use a CBDC to implement monetary policy, the new possibilities that this opens could also create some degree of risk. For example, using a CBDC to charge negative interest rates in a time of crisis could fundamentally change economic paradigms, making it too costly for citizens to store their wealth in the new digital cash.
Although many central banks use some form of digital money as reserves or settlement account balance, no central bank has yet issued any general CBDC. However, several banks are already in various stages of research and development, including the five major currencies of the world — the U.S. dollar, the euro, the Japanese yen, the British pound and the Chinese yuan.
In May, a U.S. thinktank published a white paper outlining the aims of the “digital dollar.” Since then, events have been making significant headway.
The most recent news from Japan is that the central bank has appointed its leading economist to head up a team researching a yen-based CBDC, while the Bank of England has appointed Accenture for its own CBDC development. Meanwhile, the European Central Bank appears to be leaning toward a retail CBDC, and given the fact it would operate across 19 countries, this makes it the biggest project at the moment.
However, China has been undoubtedly leading the pack, having hit several headlines for months with plans for its CBDC launch. The latest is that the government is planning to target the financial dominance of domestic payment firms, Alibaba and Tencent.
The Philippines has also confirmed that it has been looking into issuing its own digital currency, while Thailand is already in the test phase.
In late July, the U.S. Office of the Comptroller of the Currency issued a memo giving the green light to all federally charted banks to offer cryptocurrency custodial services. This effectively allows hundreds of OCC-member banks to integrate crypto services. The Federal Deposit Insurance Corporation insurance for crypto holdings is also now within the realms of possibility.
Banks now only need to implement the necessary software, hardware and security policies to be ready to start processing cryptocurrencies, which could also include a CBDC.
A week after the memo, Brian Brooks, the acting comptroller of the currency, vocalized his support for a blockchain-based CBDC as an upgrade to the current U.S. banking system. Most recently, Federal Reserve Governor Lael Brainard confirmed that the Boston Federal Reserve Bank will work with the Massachusetts Institute of Technology on CBDC research.
The COVID-19 relief effort is acting as a catalyst for the introduction of “digital dollars” as referenced in the Automatic Boost to Communities Act introduced by the U.S. Congress. This came after the introduction of a bill in March dubbed the Cryptocurrency Act 2020, which attempts to clarify the responsibility for regulating digital assets by federal agencies.
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.
Marshall Hayner is the CEO and co-founder of Metal (MetalPay, Proton and MetalX). Marshall is an expert in the regulatory aspects of cryptocurrencies and was recently among the founding members of a cryptocurrency bill that was presented to Congress. In addition, Marshall started the first Facebook-integrated Bitcoin wallet called QuickCoin in 2014, but he has worked on numerous digital currency projects including Dogecoin, Stellar, Block.io, ChangeTip and the Bitcoin Fair.
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The Crypto Daily – Movers and Shakers – August 23rd, 2020
Bitcoin, BTC to USD, rose by 1.24% on Saturday. Partially reversing a 2.81% loss from Friday, Bitcoin ended the day at $11,673.5.
It was a bearish start to the day. Bitcoin slid to an early morning intraday low $11,369.5 before finding support.
The reversal saw Bitcoin fall through the first major support level at $11,379.67 before rising to a late intraday high $11,692.0.
Falling short of the first major resistance level at $11,783.67, Bitcoin wrapped up the day at sub-$11,700 levels.
The near-term bullish trend remained intact, supported by the latest move through to $12,000 levels. For the bears, Bitcoin would need to slide through the 62% FIB of $6,400 to form a near-term bearish trend.
Across the rest of the majors, it was a bullish day for the majors on Saturday.
EOS (+3.48%), Tezos (+5.69%), and Tron’s TRX (+3.61%) led the way.
Bitcoin Cash ABC (+2.30%), Litecoin (+2.08%), Monero’s XMR (+2.55%), Ripple’s XRP (+2.50%), and Stellar’s Lumen (+2.65%) also found strong support.
Binance Coin (+0.59%), Bitcoin Cash SV (+0.36%), Cardano’s ADA (+1.68%), and Ethereum (+1.96%) trailed the front runners.
In the current week, the crypto total market rose to a Monday high $384.00bn before sliding to a Saturday low $338.56bn. At the time of writing, the total market cap stood at $351.70bn.
Bitcoin’s dominance fell to a Monday low 59.97% before rising to a Wednesday high 62.00%. At the time of writing, Bitcoin’s dominance stood at 61.27%.
At the time of writing, Bitcoin was down by 0.08% to $11,664.5. A mixed start to the day saw Bitcoin rise to an early morning high $11,694.5 before falling to a low $11,660.5.
Bitcoin left the major support and resistance levels untested early on.
Elsewhere, it was a mixed start to the day.
Bitcoin Cash ABC (+0.06%), Bitcoin Cash SV (+0.33%), and Cardano’s ADA (+0.07% found early support.
It was bearish for the rest of the majors, however.
At the time of writing, Tron’s TRX was down by 1.51% to lead the way down.
Bitcoin would need to avoid a fall through the pivot level at $11,578 to support a run at the first major resistance level at $11,787.
Support from the broader market would be needed, however, for Bitcoin to break out Saturday’s high $11,692.0.
Barring an extended crypto rally, the first major resistance level would likely cap any upside.
In the event of a crypto breakout, Bitcoin could test the second major resistance level at $11,901 and resistance at $12,000.
Failure to avoid a fall through the $11,578 pivot level would bring the first major support level at $11,465 into play.
Barring an extended crypto sell-off, however, Bitcoin should avoid the second major support level at $11,256.
In the event of an extended sell-off, Bitcoin could test support at $11,000 before any recovery.
This article was originally posted on FX Empire
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Author: Bob Mason
Bad Crypto News of the Week
It’s back to stability for Bitcoin this week as the currency continues to knock at the $12,000 ceiling. Where will it go next? One analyst sees a Battle Royale as whales try to push towards $14,000. Other investors are more optimistic. They see Berkshire Hathaway’s recent sale of bank stocks and purchase of stock in a gold mining company pushing the price to $50,000. If Warren Buffett is souring on the banking system though, he’s late to the party. Kim Dotcom got there two years ago — and has reminded his followers that he advised them to buy Bitcoin.
The Federal Reserve might be catching up though. Governor Lael Brainard has revealed that the Fed is conducting research into a digital dollar. One partner to that research is MIT, which will develop, test, and research a digital currency over two to three years.
The Fed isn’t the only one waking up to the power of the blockchain. The United States Postal Service has applied for a patent for a secure voting system. The system uses the blockchain to secure mail-in voting. A start-up in Bulgaria is offering cryptocurrency to travelers whose flights are delayed for at least an hour. In South Korea, a million drivers have already swapped a physical license for a blockchain-backed version used with a smartphone app. The program only launched in May.
Senegal, though, might make South Korea look small. Akon, the Senegalese-American star and philanthropist, says his $6 billion Akon City will run on the Stellar-based Akoin cryptocurrency. His real-life Wakanda is already 85 percent complete, he says. Ripple is aiming even bigger. Under new CEO Brad Garlinhouse, the company is trying to become the Amazon of the cryptocurrency world. It’s looking to move beyond cross-border payments and promote the creation of new applications on the Ripple network.
Both of those projects lie in the future but at least some of the much-hyped blockchain-based smartphones and smartwatches are already out. Samsung’s Galaxy S10 has support for more than 30 cryptocurrencies in its wallet and the company’s KlaytnPhone rewards users with 2,000 Klay tokens. Blockchain company Sirin Labs’s Finney has built-in cold storage, as well as a DApp ecosystem. Cold storage is also a feature of watchmaker Franck Muller’s Encrypto watch. The dial also has a QR code for receiving Bitcoin payments. And in the world of social media, Ignite, a blockchain-based microblogging platform is trying to offer an alternative to state-censored social media platforms.
The development of blockchain usage isn’t all super-cities, smartwatches, and social media though. Asia is looking to the blockchain for protection against online crime during the pandemic. It looks like they’re on the right track. Binance has recently helped Ukraine’s cyber police to identify and arrest criminals involved in a $42 million ransomware and money laundering operation.
And finally, while the cryptoworld is generally full of smart people with big brains, someone just paid 40 ETH, around $17,000, for a digital picture of a cat drawn by Paris Hilton. The money will go to charity, so maybe we can just say that the cryptoworld is full of people with big hearts.
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Joel Comm is an internet pioneer, New York Times best-selling author, futurist speaker and co-host of The Bad Crypto Podcast. That’s a fancy way of saying he writes words, says things and loves to play with cryptos.
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.
S&P 500 broke records, what’s next for BTC?
In the past six months, the pandemic has gripped the world economy. Companies are going out of business, governments and banks have bleak projections for 2020-21 and are comparing the current financial meltdown to the great depression. Despite this, it has played out counterintuitively for the global financial markets. S&P 500 broke records hitting an ATH of 3399 on August 21, 2020.
This price rally in the S&P 500 has made investors examine the market for its increasing correlation with alternative investment, like Bitcoin and Gold.
In February, correlation between S&P 500 and Bitcoin was negative and it decreased further in the following months until mid-April 2020 when it started increasing and hit an ATH of 78.8 percent on July 8, 2020. Correlation now stands at 41.4 percent, closer to the one-year correlation of 42.3 percent. This correlation increased in July 2020; this overlaps with the time when the Bitcoin rally started. Both assets have yielded positive RoI in the last 3 quarters.
It is important to deduce the reasons for the increasing correlation and price rally. One of the prominent reasons is that investors look at the future and not past performance while making decisions in derivatives/ spot trading. They are looking at projections 6,12, or 18 months down the line.
Traders are farsighted when making strategic decisions and acknowledge that financial markets may not necessarily reflect what’s going on in the world, they reflect expectations and RoI potential for the future. A lion’s share of the current gains in S&P 500 belongs to Tech giants like Facebook and Apple. Irrespective, traders are positive that the bear market is well behind us now.
Michael A Gayed, who warned the market of the stock market crash and melt-up bubble, confirmed that we are past the shortest bear market.
Another reason for the positive sentiment among stock and derivatives traders is that the USD has dropped 3% compared to the high in February.
Due to growing interest in Bitcoin, it has been dubbed ‘digital gold’ and this narrative is in line with rising interest from day traders and new buyers on fiat-crypto exchanges.
Investor interest has boosted the S&P 500 however, for Bitcoin to hit previously touched ATH or hit a new high, a steady rise in demand from institutional investors and steady retail investors are needed.
Author: by admin