Autor Cointelegraph By David Attlee

Vale Diem: How Facebook’s ambitious stablecoin project came to an end

Vale Diem: How Facebook’s ambitious stablecoin project came to an end

Uverejnil používateľ | feb 2, 2022 |

On Jan. 31, Meta, formerly known as Facebook, announced that it was pulling from its stablecoin project, Diem, formerly known as Libra. Intellectual property and other assets related to the operations of the Diem Payment Network were to be sold to Silvergate Capital Corporation, essentially meaning the end to Mark Zuckerberg and his corporations’ stablecoin aspirations, at least in their current shape. This also marks the end of a once-groundbreaking initiative that was revealed in 2019 with a promise to bring a global alternative to fiat money to Facebook’s 2-billion-strong user base. Here is how this plan went from the initial announcement to the shutdown. Phase 1: The white paperThe news of Facebook launching its own digital currency came as a boost of optimism for the social media giant, whose brand in the late 2010s came to be associated with the lack of privacy and ethics, as well as disfunctional governance.On June 18, 2019, the company released the white paper of its prospective global stablecoin under the name “Libra.” The prospective asset was to be backed by its own blockchain on the operational side and by a reserve of various assets (a basket of bank deposits and short-term government securities) on the financial level. From the very beginning, Libra didn’t try to pretend to be a decentralized cryptocurrency — its governance mechanism was designed as a consortium (the “Libra Association”) including big-name companies such as Mastercard, PayPal, Visa, Stripe, eBay, Coinbase, Andreessen Horowitz, Uber and others. Facebook itself was “expected to maintain a leadership role.” The social media giant also planned to maintain its influence by running a wallet, Calibra.The project’s original positioning was to serve not as a speculative asset but as a service payment tool. The minting of new tokens was tied to the process of buyout by “authorized resellers” from among the association’s members. Initial receptionThe white paper received mixed feedback from the crypto community. Some of the industry opinion leaders decried the compromises that Facebook’s project had made in terms of both decentralization and security. Bitcoin (BTC) advocate Andreas Antonopoulos, for example, denied Libra the status of cryptocurrency on the basis that it lacked any of crypto’s fundamental characteristics, such as being public, neutral, censorship-resistant and borderless. Others, however, preferred to focus not on the actual project’s design but on Libra’s potential effects on global crypto adoption. “Some of the biggest companies in the world are starting to recognize the promise of cryptocurrency and see its potential for changing the way consumers and businesses interact globally,” said Tron founder and CEO Justin Sun at the time.But perhaps the most important thing about the Libra project was its potential to sidestep both existing crypto and fiat currencies alike — not by the virtue of its technical or design superiority but solely due to the network effects of having over 2 billion users on board from day one.As Ross Buckley, a digital economy expert and professor at the University of New South Wales, warned in his paper, “Libra is perhaps the ultimate example of something that is highly likely to move from ‘too small to care’ to ‘too big to fail’ in a very short period of time […] This is an alternative money.” Buckley surely wasn’t alone in his fears — the obviousness of Libra’s inherent power predestined the enormous pressure it would get from the regulators. Phase 2: Regulatory pushbackIt took the United States Senate less than a month to get Libra co-creator David Marcus to testify at a special hearing, where the Facebook executive was exposed to a fervent grilling. Notably, it was not only Senator Sherrod Brown but also his perpetual opponent Senator Pat Toomey, who bombarded Marcus with hard questions (although Toomey also called not to “strangle the baby in the crib”). The news about Facebook’s private currency hadn’t gone unnoticed even by the then-President Donald Trump, who reacted in his signature expressive manner: If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National and International.The pushback was not confined to the United States. In September 2019, French Finance Minister Bruno Le Maire declared that his country and the whole of Europe wouldn’t tolerate Facebook’s new project because the “monetary sovereignty of states is at stake.” Weeks later, the Bank of England issued a warning that, for it to become legal in the United Kingdom, Libra would have to meet all the necessary standards of traditional banking compliance. What followed these statements was the first wave of backouts from some of the Libra Association’s founding members. With such companies as PayPal, Visa, Mastercard, eBay and Mercado Pago quitting the project, its image took a huge hit. But back then, Facebook speakers played down the significance of these events. “Of course, it’s not great news in the short term, but in a way it’s liberating. Stay tuned for more very soon. Change of this magnitude is hard. You know you’re on to something when so much pressure builds up,” wrote Marcus on Twitter.By October 2019, five European nations — France, Germany, Italy, Spain and the Netherlands — had created an unofficial task force to prevent Libra’s launch in Europe. The pressure rose to the point when the CEO of the Netherlands’ largest bank, Ralph Hamers, publicly commented on the possibility to cut any operations with Facebook.Phase 3: The rebranding that didn’t help Facebook’s response to the pressure came in April 2020 in the form of “Libra 2.0.” The updated white paper introduced four key changes “to address regulatory concerns,” most notably of which was the switch from a single currency to a family of stablecoins, each backed by a single national currency (such as the U.S. dollar, euro and British pound). As Brieanna Nicker from the Brookings Institute wrote at the time, “It also could be seen as a scaling back of Facebook’s ambitions, for the proposal is now more like a PayPal with a different technological backbone than a competitor to sovereign currencies.” Among other stated changes were the enhanced compliance framework and transition from a permissioned to permissionless blockchain within five years. On Dec. 1, 2020, Facebook complemented the technical adjustments with a brand change: Libra became Diem, and Calibra became Novi. According to the company’s statement, this transition should have marked “a new day for the project.” The renaming came a week after the disclosure of a plan to launch the first USD-backed stablecoin. At that time, the second version of the project was still officially opposed by the G7. Olaf Scholz, the current federal chancellor of Germany, who then served as a finance minister, called Diem “a wolf in sheep’s clothing,” stating that the name change hadn’t convinced the regulators. Further pullbacksThe year 2021 didn’t bring good news for Diem. As the long-awaited launch has been delayed once again (by that time, Switzerland’s Financial Market Supervisory Authority still hadn’t granted grant Switzerland-based the Diem Association a payment license), on Feb. 23, the European Central Bank demanded from the European Union lawmakers a veto power to unilaterally block any private stablecoin projects when necessary. In September 2021, The Washington Post reported on the ongoing attempts of Facebook’s top management to reach some compromise with U.S. regulators. But apparently, the negotiations stalled, as Marcus’ claim that Diem “has addressed every legitimate concern” caused public blowback from lawmakers.The chairwoman of the House Financial Service Committee, Maxine Waters, retorted that rebranding had nothing to do with solving the major privacy, national security, consumer protection and monetary policy concerns. Top Republican member of the same committee, Representative Warren Davidson, sardonically mimicked Marcus’ blog post: I’m not sure how Facebook and the Diem Association could have addressed ‘every legitimate concern’ whenever there’s overarching regulatory uncertainty that permeates many facets of the crypto space.The last glimpse of hope sparked when, in a partnership with Binance, Facebook finally launched the pilot version of Novi Digital Wallet — a vital part of the planned Diem ecosystem. But it didn’t last longer than a few hours before a group of five senators wrote a joint letter to Zuckerberg with an unequivocal demand to “immediately discontinue” the project. In a casuistic response, the Diem Association tried to distance itself from Facebook. On Dec. 1, Marcus, the formal head of Novi and the face of the Meta/Diem project, announced his resignation. Marcus, who had been working at Facebook since 2014, didn’t go into detail on the reasons for his decision, joining the list of Facebook’s key crypto figures who left in 2021, including fellow Diem co-founders Morgan Beller and Kevin Weil. With Marcus’ departure, it was hard to expect anything good in the upcoming 2022. Is this the end for Diem?Speaking to Cointelegraph immediately after the news of Facebook parting with Diem, Buckley, who had foreseen the regulatory reaction to the project back in 2019, shared his conviction that this is indeed the end of the stablecoin initiative: “I would be really surprised if it survives. It is a project designed to benefit from Facebook’s scale and reach and is now quite a scarred product.”Buckley believes the company “profoundly mishandled the entire announcement” back in the day, overplaying its card as one of the biggest tech companies in the world. It surely wasn’t well-received by the wide range of regulators across the globe, as a digital currency with a user base of 2 billion was obviously far beyond the scope of a social media business: Facebook took the classic tech company approach to this of surging ahead and then seeking forgiveness rather than seeking permission upfront. This may well work with telecoms […] but financial regulators expect to be treated with respect, as do governments with respect to their monetary sovereignty. The sharp resistance was in part because financial regulators and governments first learned of this from the media, not directly and well in advance, from Facebook.Apart from Zuckerberg’s bravado that possibly played its role in Libra/Diem’s ultimate demise, this case could be seen as a hint to something more alarming. Facebook’s project of the world’s first global digital currency with an immediate mass adoption boost provoked instantaneous and concerted resistance from regulators. What that means is that we can probably expect a response no less stiff and immediate should any other digital currency rise up to Diem’s adoption potential. As Buckley puts it, “The ability to mint the currency of the realm is a core element of sovereign capacity and has been for centuries.” And there’s no reason to believe that it won’t be defended ferociously. Hopefully, Diem’s example will serve as a reminder that the importance of regulatory negotiations should not be underestimated.

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Fossils vs. Renewables, PoW vs. PoS: Key policy issues around crypto mining in the U.S.

Fossils vs. Renewables, PoW vs. PoS: Key policy issues around crypto mining in the U.S.

Uverejnil používateľ | jan 30, 2022 |

On Jan. 27, a group of eight U.S. lawmakers, led by Senator Elizabeth Warren, sent letters to the world’s six largest Bitcoin mining companies, demanding to reveal the detailed data on their electricity consumption. This isn’t the first time Senator Warren requested this information from a mining operation — last month a similar letter was sent to Greenidge Generation, which uses a natural gas plant to power its facility.These moves highlight the increasing regulatory pressure on crypto mining businesses in the United States. But, as last week’s Congress hearing showed, the growing scrutiny might turn out to be an opportunity to align the mining sector’s development with the broader political push for clean energy. Here are some of the key themes around crypto mining that have captured the lawmakers’ attention and that will likely inform the intensifying policy conversation. Total energy consumptionA cornerstone of any environmental critique of Bitcoin and crypto in general, the question of how much energy cryptocurrency mining consumes was expectedly prominent at the hearing. In a 2018 paper published in the prestigious journal Nature, a group of researchers predicted that Bitcoin’s growth could singlehandedly push global emissions above 2 degrees Celsius within less than three decades — not a good look given the international community’s stated mission to prevent the planet’s temperature rise of the exactly same magnitude.Cambridge University Bitcoin Electricity Consumption Index set the tone of comparing the yearly Bitcoin-driven consumption to various nation’s levels — and as for now, with its 131.1 TWh per year the most popular cryptocurrency consumes more energy than Ukraine (124.5 TWh) or Norway (124.3), according to this source. The current estimate of Ethereum’s annualized energy footprint by Digiconimist stands at around 73.19 TWh.None of the most widely cited estimates is beyond dispute, as the recent fact-check report by Bitcoin Policy Institute (BPI) suggests. It cited three separate articles from the peer-reviewed Nature Climate Change journal, one of them debunking the 2 degrees argument as “fundamentally flawed” and criticizing its methodology.Crypto proponents prefer to compare Bitcoin energy consumption not to nations, but to other industries — in that case, according to the BPI report, BTC’s 0.27% of global energy consumption is less than that of gold mining, although the Cambridge Index sets the two equal.Fossils vs renewablesIn the context of the ever-growing political pressure on energy consumption, the search for a sustainable energy framework becomes crucial for any industry that wants to flourish in the digital age.The critics of the crypto mining industry have recently highlighted several instances of mining operations relaunching the existing fossil power plants. The authors of the letter that some 70 NGOs sent to Congress ahead of the crypto mining hearing called the legislators’ attention to several such instances, like the relaunch of coal waste plants in Pennsylvania by Stronghold Digital Mining and the partnership between Marathon Digital and coal-fired plants in Montana.There is also evidence that these are not the only American companies buying up the old ‘“dirty energy” plants to feed their mining operations — the pattern is observed from Texas to Missouri. At the Congress hearing, it was Steve Wright, a former general manager of Chelan County’s in Washington public utility district, who talked at length about the problem. He explained that miners’ interst in dormant fossil facilities is driven by a simple market mechanism: As renewable energy prices (on the West Coast specifically) grow in line with increasing demand, coal prices drop due to investors’ flight ahead of the upcoming 2025 ban on any coal usage in Washington state.As Represenatives kept returning to this issue over the course of the hearing, it became clear that the tension between the use of fossil fuels for crypto mining and the industry’s potential shift to renewable energy sources is at the center of policymakers’ thinking on the issue. Witness John Belizaire, CEO of green data centers developer Soluna Computing, argued that there exist scenarios under which crypto mining can shift from a being “dirty” energy concern to a vehicle complementing and empowering the renewable energy sector.Belizaire’s core argument is that computation-intensive tasks like Bitcoin (BTC) mining can be powered by the recaptured excessive (or, in the industry terms, “curtailed”) energy otherwise wasted by clean power plants. According to him, solar and wind farms waste up to 30% of generated energy due to incompatibilities with the old energy grids. Belizaire also addressed the  problem of energy shortages allegedly driven by crypto miners, highlighting the fact that the kind of computations that miners execute can be stopped at any moment on-demand.For now, the problem of “dirty mining” is here to stay simply due to the U.S. level of electricity production from renewable sources being below 7.5%. A recent study by DEKIS Research group at the University of Avila ranks the United States as the 25th country in the world in terms of its sustainable mining potential, with Denmark (65% of energy generated from renewables) and Germany (26%) leading the chart.Nevertheless, America remains a safe zone for mining, while many other nations’ electrical grids are less suited to handle additional load. With a reasonable regulatory framework in place, this could be a massive competitive advantage, laying the groundwork for the U.S. to become a global mining haven. Speaking to Cointelegraph, Belizaire explained that there are certain policy steps that can nudge crypto miners to “go green.” He listed a number of specific measures: “Extended tax credits and special investment tax credits for miners that use green energy and serve as flexible load, along with DOE loan guarantee that is extended to encourage the development of green crypto mining.” PoW vs. PoS Any discussion of a possible alliance between crypto mining and green energy tends to bump into a Proof of Work (PoW) versus Proof of Stake (PoS) debate, and the recent hearing was not an exception. It was Cornell professor Ari Juels who repeatedly stated that “Bitcoin does not equal blockchain,” in the sense that the energy-intensive PoW consensus mechanism is not the only way to enjoy the decentralization advantages of crypto.And, of course, the number one alternative on the table is PoS consensus mechanism that will possibly be adopted by the Ethereum ecosystem and is currently used in a large number of new blockchain projects. It is also central to the development of smart contract-based technologies such as decentralized finance (DeFi) and non-fungible tokens (NFTs). Juels’ statements reflect the general pressure that is building up on PoW. Earlier this month, Erik Thedéen, vice chair of the European Securities and Markets Authority (ESMA), proposed an outright ban on PoW mining in the EU and called for transitioning to PoS due to its lower energy profile. In the U.S., dominating the global Bitcoin mining market with the 35% share, the issue is way more pressing than in Thedeen’s native Sweden, where only about 1.16% of BTC is mined. However, the real problem lies in the Asia-Pacific region, where, according to the The Global Cryptoasset Benchmarking Study, almost 50% of electricity to Proof-of-Work miners comes from coal.None of the three experts who spoke with Cointelegraph on the matter see the the juxtaposition of the two consensus protocols as productive. John Warren, CEO of crypto mining firm GEM Mining, noted that there are “slim to none” chances of Bitcoin transitioning to PoS. With that fact in mind, and given Bitcoin’s status as the biggest cryptocurrency, ‘the industry should focus its attention on increased adoption of carbon-neutral energy sources versus trying to alter the Bitcoin verification process.”John Belizaire rejected the idea that the government should support any of the bulletins over another:Congress does not have enough knowledge to make a call on the technical architecture of a global platform that powers billions of dollars in assets […] The technology community should be the final arbiter of innovation […] The POW camp will innovate to solve its problems itself.Mason Jappa, co-founder and CEO of mining company Blockware Solutions, remarked that both Proofs have their comparative advantages, but, in echoing Belzaire’s testimony, underscored the compatibility potential PoW networks possess towards renewable energy. In that sense, Jappa sees PoW mining as a “net positive for society”: Mining is a perfect complement to the energy grid and is repurposing infrastructure that was otherwise not being utilized, along with providing a use case for building out our energy grid.What’s next? As Jappa noted, “It is bullish for the ecosystem that this hearing took place”, as once again the lawmakers expressed their understanding that cryptocurrencies are here to stay. Warren specifically appreciated the part of the discussion that “underscored the ability for the mining industry to innovate more eco-friendly solutions.” We still witnessed plenty of 101 explanations of blockchain technology that reminded of the long way lawmakers should go in terms of their understanding of crypto economy, but, as Warren poined out: It’s important to acknowledge that there were a number of positive remarks that stemmed from the discussion, showcasing to the nation that mining has created many new jobs and that Bitcoin introduced valuable blockchain technology to the world. That perspective has been largely missing from some of the recent public discourse around crypto mining. Besides the obvious need for both the general public and legislators to get better educated on the issue, there are some clear focal points around which the digital mining industry could rally, Belizaire believes. For example, laws or governmental programs that encourage the use of renewable energy over legacy fossil fuels to power the industry, like “Incentives for job-creating in rural parts of the country where mining operations are set up – at both the state and federal level.”Thus, it appears that the green mining card is the one that can present a straightforward economic and environmental argument in favor of the crypto industry, while the PoW/PoS debate is something that should be reserved for the crypto community rather than regulators.

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Central bank overkill: Russia’s proposed crypto ban and why everyone’s against it

Central bank overkill: Russia’s proposed crypto ban and why everyone’s against it

Uverejnil používateľ | jan 27, 2022 |

On Jan. 20, the Central Bank of Russia (CBR) issued a report summarizing its position on digital assets and proposing a ban on any crypto trading and mining operations in the country. Although the CBR’s strict position on the matter was never a secret, such a bold statement triggered waves of fear, uncertainty, and doubt — otherwise known as FUD — across the board, given Russians’ high rates of involvement in the global digital assets market. Yet, there are reasons to doubt the ultimate effectiveness of the CBR’s hardline bidding, both in terms of its enforceability and its acceptance by other power centers, including legislators and siloviki (securocrats). The picture gets even more complicated for the central bank, as a high-ranking official within another major center of economic policy, the Ministry of Finance, spoke in favor of regulating, rather than banning, crypto earlier this week. What are the chances that the hardline approach will prevail?What does the CBR intend to ban?Using an assortment of standard crypto-phobic arguments, such as comparing digital assets to a Ponzi scheme, the central bank’s “Cryptocurrencies: Trends, risks, measures” report calls for a complete domestic ban on over-the-counter trading desks and crypto exchanges alongside mining. Notably, the emphasis is on using the legacy financial infrastructure: The CBR addresses its document to private banks and institutional investors, discouraging them from any involvement in digital assets.In its current version, the proposed ban would not outlaw the possession of digital assets by individual investors, nor would it ban exchanging them using international rails. Still, the regulator wants to introduce some fiscal transparency and make sure that private investors won’t escape their tax burden. Nonfungible tokens (NFTs) would also likely remain outside of the scope of the ban.Possible effects on crypto operations Many domestic stakeholders don’t believe in the effectiveness of the proposed restrictions. Speaking to local media, Maksim Malysh, CEO of mining platform Kryptex, explained that it is unlikely that the mining ban would result in a market breakdown, as the largest Russian-owned mining pools operate outside of Russia’s borders and are registered as foreign companies. Exchanges, he maintained, would not find it difficult to create new mirror sites in the event domains are blocked. In Malysh’s opinion, “Any blockings would lead only to the rise of VPN services’ popularity.”Andrey Mihaylishin, co-founder of crypto payments system Joys, doubts that the measures proposed by the CBR would stop larger investors either — they could simply open accounts with Belorussian or Kazakh banks where crypto investments are legal.Since the report invites public input, there is hope that industry participants will be able to articulate compelling arguments against the ban. The biggest Russian mining pool, EMCD, plans to send its comments on the report to the central bank, sharing with the regulator its thoughts on the taxation, risk management and further institutionalization of mining. Among EMCD’s ideas are special energy tariffs for mining companies and tax deductions for those that operate in Russia’s economically depressed regions. At any rate, the report is not a legally binding document, unlike the federal law “On digital financial assets and digital currency” that was passed in 2020. The language of the law is vague and, for example, does not mention mining at all, though it still allows for “the issuance of digital financial assets.” The unlikely allies It came as no surprise that the vocally pro-liberty founder of Telegram, Pavel Durov, bashed the proposed ban, warning of its destructive potential for “the development of blockchain technologies in general” and “a number of sectors of a high-tech economy.” Much more unexpected, however, is the backlash against the CBR report among other government bodies and officials, which contradicts the simplified image of a monolithic Russian state machine.Andrey Lugovoy, deputy chairman of the Committee on National Security and Anti-Corruption of the State Duma — the lower chamber of the Russian parliament — publicly noted that it would be more reasonable to continue working on legalizing the industry rather than outlawing it. Lugovoy, who also was one of the initiators of a working group on the legalization of crypto mining, said:“When you make statements like this — ‘We strictly prohibit’ — you should ground your position in concrete, clear, apprehensible numbers and explain what you’re going to do with the people who already own cryptocurrency. […] Nobody knows why the CBR holds such a radical view. There is a single explanation — high volatility and ‘It’s a Ponzi scheme.’ But so what? We can name many examples of something risky that still plays a role in our daily lives.”In fact, the Duma has had a tense relationship with the central bank for quite some time. The legislature has been working on a crypto regulatory framework for several years, but these attempts have foundered due to the banking regulator’s unyielding position. A bill that would have clarified the taxation procedures around digital assets was reportedly blocked due to the CBR’s objections. Even the Federal Taxation Service, which is highly interested in citizens’ crypto yields, couldn’t change the situation. Related: Ban less likely? Putin says crypto mining has advantages in RussiaIn its report on the proposed ban, Bloomberg — citing anonymous sources — pointed to the lobbying influence of the Federal Security Service (FSB) as one of the factors driving the CBR’s initiative. Allegedly, the FSB is worried about crypto being used as a tool to finance the country’s opposition. Leonid Volkov, chief of staff for opposition leader Alexei Navalny, confirmed that this use case is accurate, also voicing his disbelief in the policy’s ultimate success.Bloomberg’s narrative, however, did not go uncontested. Lugovoy called it “a well-crafted fake with someone’s interest behind it,” claiming that he has never heard FSB representatives offering any position on crypto during parliamentary working groups’ meetings. According to Russian business publication The Bell, the CBR has been the only entity in the interagency working group on crypto to promote a “Chinese scenario” for digital asset regulation, with the FSB casting its voice against it. At this point, the working group has unanimously declined only two regulatory frameworks: the full legalization of crypto and the current one of non-intrusion.The Finance Ministry chimes in The story got a new twist on Jan. 25 when Ivan Chebeskov, head of the Department of Financial Policy within the Finance Ministry, stated that the Finance Ministry’s position is one of regulation, not prohibition, of digital assets. Moreover, he mentioned that the agency had already prepared its own regulatory framework and is currently waiting for the government’s feedback. As per Chebeskov’s statement:“The world has virtualized to a high degree, the technologies are advancing swiftly, and, I think, we can’t just take one of the high-tech industries and ban it in our country, letting it develop in some other place.”This wasn’t the first time the Ministry of Finance let the CBR know that it holds a different opinion on the matter. At a Duma meeting in December 2021, Deputy Minister of Finance Aleksey Moiseev proposed only limiting cryptocurrency purchases for unqualified investors. He added further that it was “too late” to ban cryptocurrencies, given that more than 10 million Russian citizens collectively hold around 5 trillion rubles ($63 billion) in crypto.This difference in opinion could weaken the central bank’s position even further, possibly granting some relief to the industry. With a wide range of opponents in both the legislative and executive branches of government and without outright support from security agencies, the CBR’s report looks like overkill.Historically, the CBR has enjoyed broad autonomy in economic-decision making under President Vladimir Putin’s rule, but it has been constrained by its specific mission: maintaining the economy by taming inflation, imposing austerity measures when needed and ensuring the stability of the national currency.The prerogative to issue prohibitions has always resided with other entities, be it the parliament or government. Thus, if the entire case for the ban is based solely on the CBR’s distrust of a volatile asset class and its unwillingness to craft complex regulation, chances are that last week’s report will remain no more than just one governmental body’s position paper on a hot issue.

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Vibe killers: Here are the countries that moved to outlaw crypto in the past year

Vibe killers: Here are the countries that moved to outlaw crypto in the past year

Uverejnil používateľ | jan 23, 2022 |

Last week, Pakistan’s Sindh High Court held a hearing on the legal status of digital currencies that might lead an outright ban of cryptocurrency trading combined with penalties against crypto exchanges. Several days later, the Central Bank of Russia called for a ban on both crypto trading and mining operations. Both countries could join the growing ranks of nations that moved to outlaw digital assets, which already include China, Turkey, Iran and several other jurisdictions.According to a report by the Library of Congress (LOC), there are currently nine jurisdictions that have applied an absolute ban on crypto and 42 with an implicit ban. The authors of the report highlight a worrisome trend: the number of countries banning crypto has more than doubled since 2018. Here are the countries that banned certain cryptocurrency-related activities or announced their intention to do so in 2021 and early 2022.BoliviaThe Bolivian Central Bank (BCB) issued its first crypto prohibition resolution in late 2020, but it was not until Jan. 13, 2022 that the ban was formally ratified. The language of the most recent ban specifically targets “private initiatives related to the use and commercialization of […] cryptoassets.” The regulator justified the move by investor protection considerations. It warned of “potential risks of generating economic losses to the […] holders” and emphasized the need to protect Bolivians from fraud and scams. China Cryptocurrency transactions have been formally banned in the People’s Republic of China since 2019, but it was last year when the government took steps to clamp down on crypto activity in earnest. Several official warnings of the risks associated with crypto investment were followed by a ban on cryptocurrency mining and forbade the nation’s banks to facilitate any operations with digital assets. But the crucial statement came out on Sept. 24, when a concert of the major state regulators vowed to jointly enforce a ban on all crypto transactions and mining. Apart from the common notions of money laundering and investor protection, Chinese officials played the environmental card in their fight with mining, which is a bold move for a country that contributes up to 26% of global carbon dioxide emissions, of which crypto mining represents a marginal share.Indonesia On Nov. 11, 2021, The National Ulema Council of Indonesia (MUI), the nation’s top Islamic scholarly body, proclaimed cryptocurrencies to be haram, or forbidden on religious grounds. MUI’s directions are not legally binding and as such it will not necessarily halt all cryptocurrency trading. However, it could deal a significant blow to the crypto scene of the world’s largest Muslim country and affect future governmental policies. MUI’s determination mirrors a common interpretation that has been shaping up across jurisdictions influenced by the Islamic legal tradition. It views crypto activity as wagering — a concept that arguably could be used to define almost any capitalist activity.On Jan. 20, the religious anti-crypto push was furthered by several other non-governmental Islamic organizations in Indonesia, The Tarjih Council and the Central Executive Tajdid of Muhammadiyah. They confirmed the haram status of cryptocurrencies by issuing a fatwa (a ruling under Islamic law) that focuses on the speculative nature of cryptocurrencies and their lack of capacity to serve as a medium of exchange by Islamic legal standards. Nepal On Sept. 9, 2021, the Nepal Central Bank (Nepal Rastra Bank, NRB) issued a notice with a headline “Cryptocurrency transactions are illegal.” The regulator, referencing the national Foreign Exchange Act of 2019, declared cryptocurrency trading, mining and “encouraging the illegal activities” as punishable by law. NRB separately underlined that the individual users are also to be held responsible for violations related to crypto trading.A statement from Ramu Paudel, the executive director of the Foreign Exchange Management Department of the NRB, emphasized the threat of “swindling” to the general population. Nigeria A U-turn in Nigeria’s national policy on digital assets was cemented on February 12, 2021, when the Nigerian Securities and Exchange Commission announced suspending all plans for crypto regulation, following a ban by the central bank introduced a week earlier. The nation’s central cank ordered commercial banks to shut down all crypto-related accounts and warned of penalties for non-compliance. CBN’s explanation for such a crackdown lists a number of familiar concerns such as price volatility and potential for money laundering and financing of terrorism. At the same time, CBN governor Godwin Emefiele stated that the central bank was still interested in digital currencies, and that the government was exploring various policy scenarios.Turkey On Apr. 20, 2021, the price of Bitcoin (BTC) tumbled 5% after Turkey’s central bank declared that “cryptocurrencies and other such digital assets” could not be legally used to pay for goods and services. As the explanation went, the use of cryptocurrencies could ‘cause non-recoverable losses for the parties to the transactions […] and include elements that may undermine the confidence in methods and instruments used currently in payments’. But that was just the beginning — what followed was a series of arrests of crypto fraud suspects, as well as Turkish president Recep Tayyip Erdoğan personally declaring a war on crypto.Related: Turkish and Salvadoran presidents meet, Bitcoiners left disappointedIn Dec. 2021, Erdoğan announced that the national cryptocurrency regulation had already been drafted and would soon be introduced to the parliament. In a thriller twist, the president remarked that the legislation was designed with the participation of cryptocurrency industry stakeholders. The exact nature of the regulatory framework remains unknown. Russia In a Jan. 20, 2022, report intended for public discussion, the Central Bank of Russia proposed a complete ban on over-the-counter (OTC) cryptocurrency trading, centralized and peer-to-peer crypto exchanges, as well as a ban on crypto mining. The regulator also advanced the idea of imposing punishments for violating these rules. In the justification part of the report, CBR compared crypto assets to Ponzi schemes and listed concerns such as volatility and illegal activity financing, as well as undermining “the environmental agenda of the Russian Federation.” But perhaps the most relevant of the justifications was the concern over the potential threat to Russia’s “financial sovereignty.” How bad is all this?It is hard not to notice that many of the countries on this list represent some of the most vibrant crypto markets: China does not need an introduction; Nigeria was the biggest source of Bitcoin trading volume in Africa; Indonesia was on Binance’s radar as an expansion target; and Turkey saw a rising interest in Bitcoin amidst the lira’s freefall. When crypto awareness and adoption reaches such levels, it is hardly possible to outlaw the technology whose advantages have already become known to the general public. It is also worth a mention that in many cases the authorities’ messaging around crypto has been ambiguous, with officials publicly voicing their interest in digital assets’ potential before and even in the wake of the ban. Caroline Malcolm, head of international policy at blockchain data firm Chainalysis, noted to Cointelegraph that it is important to be clear that “only a very few cases is there in fact a full ban.” Malcolm added that in many casesgovernment authorities have limited the use of crypto for payments, but they are allowed for trading or investment purposes.Why do governments seek crypto bans?Regulators’ motivations to outlaw some or all types of crypto operations can be driven by a variety of considerations, yet some recurring patterns are visible.Kay Khemani, managing director at trading platfrom Spectre.ai, emphasized the degree of political control within the countries that seek to establish crypto bans. Khemani commented: Nations that do engage in outright bans are generally those where the state holds a tighter grip on society and economy. If larger, prominent economies start to embrace and weave decentralized assets within their financial framework, more likely than not, nations who erstwhile banned cryptos may take a second look.States’ major anxiety, often concealed behind the stated concerns for the general population’s financial safety, is the pressure that digital currencies put on sovereign fiat and prospective central bank digital currencies (CBDCs), especially in the shaky economies. As Sebastian Markowsky, chief strategy officer at Bitcoin ATM provider Coinsource, told Cointelegraph:A general pattern suggests that countries with a less stable fiat currency tend to have high crypto adoption rates, and thus end up with bans on crypto, as governments want to keep people invested in fiat […] In China, the wide rollout of the digital yuan CBDC is rumored to be the real reason for the crypto ban. Caroline Malcolm added that drivers behind governments’ crypto policies can shift over time, and therefore it is important not to assume that the positions that these countries take today are going to remain unchanged forever.The hope is that at least in some of the cases reviewed above, strict limiting measures against digital assets will eventually turn out to be a pause that regulators will have taken to create a framework for nuanced, thoughtful regulation.

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Early birds: U.S. legislators invested in crypto and their digital asset politics

Early birds: U.S. legislators invested in crypto and their digital asset politics

Uverejnil používateľ | jan 18, 2022 |

According to some estimates, as many as 20% of Americans were invested in cryptocurrencies as of August 2021. While the exact number can vary significantly from one poll to another, it is clear that cryptocurrencies are no longer just a niche passion project for tech enthusiasts or a tool for financial speculation. Rather, digital assets have become a widespread investment vehicle with the prospect of becoming mainstream. Optimistic as that is, this level of mass adoption still does not enjoy a commensurate political representation, with senior United States politicians largely lagging behind the curve of crypto adoption. This makes the very narrow group of congresspeople who are also hodlers particularly interesting. As a lawmaker, does owning crypto, or at least having some crypto exposure, mean that you also vocally support the digital asset industry?According to “Bitcoin Politicians” — a crowdsourced data project aimed at tracking U.S. political figures’ crypto holdings using public financial disclosures — there are currently seven known crypto investors across both chambers of Congress. Here’s a closer look at the way their personal financial strategies are reflected, if at all, in their public political stances.Michael McCaulMichael McCaul, a 59-year-old Republican representative from Texas, holds the position of ranking member of the House Foreign Affairs Committee. He was also the fifth-wealthiest member of Congress in 2018. McCaul is known for his hawkish foreign affairs positions — vocally opposing the U.S. withdrawal from the Yemeni Civil War and supporting President Joe Biden’s airstrikes on Iranian-backed targets in Syria.In 2016, McCaul co-sponsored a bipartisan bill proposing a commission to study the debate over the use of encryption, including its potential economic effects. In recent years, the Texas lawmaker hasn’t been seen making any public crypto-related statements.Barry MooreA newcomer to the House of Representatives, Barry Moore is a staunch Republican from Alabama. In January 2021, he objected to the certification of the results of the presidential election and even got his Twitter account temporarily suspended for posts that echoed the claims of a “stolen election.” According to a public disclosure, Moore purchased between $1,000 and $15,000 worth of Dogecoin (DOGE) in June 2021 — an investment whose value has since dropped nearly 50%. The legislator also invested in Ether (ETH) (up to $15,000) and Cardano’s ADA (up to $45,000). Still, Moore hasn’t publicly expressed his opinions toward crypto. Marie Newman57-year-old Marie Newman, another new addition to the House of Representatives, is a Democrat from Illinois who is aligned with the progressive wing of the party. She is a proponent of abortion rights, gun control, a $15 minimum wage and the Green New Deal.Newman holds Coinbase shares as of December 2021, having purchased between $30,000 and $100,000 worth. She also registered the acquisition of more than $15,000 in Grayscale Bitcoin Trust shares. Newman hasn’t made any public statements about the crypto-related assets, but she is a member of the Congressional Blockchain Caucus, a bipartisan group working to promote a more relaxed regulatory approach to crypto that would allow the technology to flourish.Jefferson Van DrewA retired dentist with almost three decades of experience as a New Jersey legislator, Van Drew was elected to the House in 2018 as a Democrat but changed his colors in 2020, becoming a Republican. This comes as no surprise, as Van Drew was one of just two members of the Democratic party to vote against former President Donald Trump’s impeachment inquiry in December 2019. Still, he voted in line with Democrats 89.7% of the time during his tenure in the party. In a 2020 disclosure, Van Drew accounted for up to $250,000 in an investment trust operated by Grayscale, one of the larger digital-asset management firms on the market. At the time, the representative’s office declined to give the press any details about the exact nature of the investment, and Van Drew himself has remained silent with regard to digital asset-related policy issues.Michael WaltzYet another recent House electee, Michael Waltz — a retired army colonel and former Pentagon adviser — is the first ever Green Beret to serve in Congress. A Republican from Florida, Waltz maintains a warrior ethos with a pinch of Florida spice, having called for a full U.S. boycott of the 2022 Winter Olympics over the Chinese Communist Party’s treatment of the nation’s Uyghur population. Waltz also voted against President Biden’s $1.9-trillion economic stimulus bill and opposed the establishment of a commission to investigate the Jan. 6, 2021 attack on the U.S. Capitol.According to disclosures, Waltz bought up to $100,000 in Bitcoin (BTC) in June 2021, which makes him one of the few lawmakers to publicly own the original cryptocurrency, specifically. Nevertheless, on social media, the representative prefers to speak on foreign policy issues, and when he was asked about his crypto investment, he compared Bitcoin to gold in terms of serving as an inflation hedge. Waltz is also a member of the Congressional Blockchain Caucus.Cynthia LummisIn the case of Cynthia Lummis, a Republican senator representing Wyoming, her fame as a major crypto proponent probably comes before her credentials as a digital asset investor. A hardline Republican, Lummis was at one point the only female member of the conservative Freedom Caucus. In her January 2021 disclosure, Lummis — a member of the Senate Banking, Housing and Urban Affairs Committee — registered the purchase of between $50,000 and $100,000 in Bitcoin. The Senator revealed that her overall holdings amounted to some 5 BTC.Lummis certainly puts her mouth where her money is. For one, she famously compared the U.S. to Venezuela in terms of inflation, and she has stated she wants to launch a financial innovation caucus that would aim to “educate members of the U.S. Senate and their staffs about Bitcoin, its advantages, and why it is just such a fabulous asset to dovetail with the U.S. dollar.” Around Christmas 2021, Lummis revealed she was drafting a comprehensive bill that she plans to introduce sometime in 2022. In a tweet, Lummis asked voters to contact their senators to support the bill, stating that she was seeking bipartisan cosponsors. Pat ToomeyRepublican Senator Pat Toomey of Pennsylvania can be called the arch enemy of government spending (with a peculiar exception for charter school funding), having once proposed a budget plan with a $2.2 trillion tax cut. He also happens to be a strong supporter of banking deregulation. During the past year, Toomey emerged as one of the main public supporters of crypto in Washington. He criticized Senator Sherrod Brown’s plan to give up crypto regulation to executive agencies and urged Treasury Secretary Janet Yellen to clarify the language in the infrastructure bill around the tax reporting requirements for crypto. In December 2021, Toomey came up with his own set of regulatory principles, released ahead of a congressional hearing on stablecoins. In June 2021, he bought between $2,000 and $30,000 in shares of Grayscale’s Bitcoin and Ethereum trusts.Will the trend continue in 2022?The list of publicly crypto-friendly lawmakers grew significantly last year, and although not every hodler on the Hill dared to reinforce their investment with symmetric political statements, it is an important trend for the industry. As Chris Kline, co-founder and chief operating officer of cryptocurrency retirement investment provider Bitcoin IRA, told Cointelegraph:As more representatives invest in cryptocurrencies, I think lawmakers will begin to understand digital assets on a deeper level, leading to a more informed and detailed crypto policy that will benefit investors on every level.Eric Bleeker, analyst and general manager at investment firm The Motley Fool, also stressed the importance of the knowledge-enhancement side of lawmakers’ crypto exposure:You definitely have to view those investments as beneficial for the industry. Did Visa receive worse legislation after Nancy Pelosi invested in its IPO? At the end of the day, crypto can be seen as a ‘threat’ by governments — we’ve already seen it outlawed in China. Having legislators own it adds to knowledge of the industry.Kline also believes that the growing number of politicians invested in crypto will inevitably convert to active support, both verbal and legislative. With new concepts like the Metaverse, nonfungible tokens (NFTs) and digital banking steadily conquering the attention of society, there is no reason for society’s representatives to not follow these trends.In Kline’s opinion, this will require legislators’ understanding of the deep complexities and nuances of cryptocurrencies and blockchain: “I see 2022 as the year legislators consider the potential of digital assets and another step in their widespread adoption.”Bleeker expects more U.S. legislators to get into the crypto game in 2022 for a simple reason: “Right now, they’re tremendously underinvested.” Bleeker noted that as of 2018, the median net worth of congresspeople was $1 million, with 10 senators having a net worth of over $30 million. It’s true that some legislators may avoid crypto for political reasons, but just by looking at the numbers, more crypto ownership from lawmakers can be expected from a pure portfolio diversification standpoint.The hope is that more investment in crypto by lawmakers will come with better understanding of this asset class and more political support.

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