Značka: CBDC

U.S. Congressman calls for ‘Broad, bipartisan consensus’ on important issues of digital asset policy

In a letter to the leadership of the United States House Financial Services Committee, ranking member Patrick McHenry took a jab at “inconsistent treatment and jurisdictional uncertainty” inherent in U.S. crypto regulation and called for the Committee to take on its critical issues.McHenry, a Republican representing North Carolina, opened by mentioning that the Committee’s Democrat Chairwoman Maxine Waters is looking to schedule additional hearings addressing matters pertinent to the digital asset industry. He further stressed the need for identifying and prioritizing the key issues and achieving a “broad, bipartisan consensus” on the matters affecting the industry that holds immense promise for the financial system and broader economy.Citing the confusion that the industry faces due to the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission’s (SEC) competing claims for jurisdiction over digital assets, McHenry noted that neither of their positions is grounded in statute. Congress, he maintained, should not hand digital asset regulation over to regulatory agencies or courts, but rather step in to categorize the new asset class and lay down the rules governing it.Furthermore, Congressman McHenry suggested that the Financial Services Committee take a close look at the stablecoin report drafted by the President’s Working Group on Financial Markets (PWG) and examine the Federal Reserve’s position and future steps with regard to a U.S. central bank digital currency (CBDC).In December last year, the U.S. House Financial Services Committee hosted a crypto-focused hearing that featured a strong lineup of industry executives and was widely lauded as a massively productive exchange between policymakers and digital asset stakeholders.

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Former CFTC chair Chris Giancarlo joins Digital Asset's board

Chris Giancarlo, who served as chair for the U.S. Commodity Futures Trading Commission until 2019, will be joining the board of directors for blockchain startup Digital Asset.In a Tuesday announcement, Digital Asset said Giancarlo would be providing counsel on asset tokenization, distributed ledger technology, and the possible impact of regulatory developments on the crypto space. The former CFTC chair is currently working as senior counsel at the Willkie Farr & Gallagher law firm and co-founded the Digital Dollar Project, a non-profit organization aimed at generating data to inform U.S. lawmakers on developing a central bank digital currency, or CBDC.“We are on the precipice of a digital economic transformation that will necessitate safe and secure ways for businesses to interconnect and share assets,” said Giancarlo.I’m excited to join the board of @digitalassetcom at this critical stage in emerging #web3 evolution. https://t.co/NXJW9dtafk— Chris Giancarlo (@giancarloMKTS) January 25, 2022During his time as CFTC chair, Giancarlo also served as a member of the U.S. Financial Stability Oversight Committee, the President’s Working Group on Financial Markets and the executive board of the International Organization of Securities Commissions. Many in crypto and blockchain referred to him as “Crypto Dad” for supporting digital assets during his five years at the CFTC, including overseeing the launch of regulated Bitcoin (BTC) futures and advocating for a “do no harm” approach to blockchain regulation.Giancarlo was replaced as chair by Heath Tarbert in July 2019, for whom current CFTC commissioner Rostin Behnam took over in 2021 as acting chair before being confirmed by the Senate in December. Though no longer serving in an official capacity for any U.S. government agency, the Crypto Dad was on the board of directors at BlockFi for four months in 2021, and recently joined blockchain investment firm CoinFund as a strategic advisor.Related: Chris Giancarlo: U.S. risks becoming ‘backwater’ without central bank digital currencyDigital Asset has raised more than $300 million through funding rounds since its founding in 2014, most recently raising $120 million in a Series D financing round in April 2021. The firm has acquired firms in the crypto and blockchain space including Hyperledger, Bits of Proof, Blockstack and Elevence.

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Germany's 2021: New regulations, the digital euro and NFTs on the rise

An interesting year has come to an end for the crypto industry in Germany. Although blockchain technology and cryptocurrencies have not yet found wide acceptance in the country, more and more domestic institutions and investors are becoming interested in the crypto world thanks to legal clarity.Here, we’ll look back at the most important developments in the German blockchain and cryptocurrency industries in 2021.Securities law reform to embrace blockchainIn terms of legal challenges, German legislators have increasingly been taking a lead role and 2021 was no exception.Since June 2021, the Electronic Securities Act (Gesetz über elektronische Wertpapiere) established digital securities and abolished previously legally mandatory documentations of securities. In December 2021, the first e-securities were already issued under the new law in the form of bearer bonds from DekaBank. The fast-growing restaurant chain Beets & Roots from Stuttgart also recently issued participation rights on the blockchain via the Invesdor platform.Another step to boosting blockchain is the introduction of crypto securities. These are issued and managed on a mostly distributed ledger technology-based securities register and now encompass shares of funds. Now existing as a draft, the new ordinance (Verordnung über Kryptofondsanteile) will come into force in 2022. The Fund Location Act (Fondsstandortgesetz) should also be mentioned as a milestone for the acceptance of digital assets. The act, passed in July 2021, enables special funds like pension and insurers, which are designed specifically for the institutional market, to invest up to 20% of their fund volume in crypto assets. Among large German fund providers, for example, Union Investment has already invested significant capital in Bitcoin (BTC).Blockchain in the finance industryAccording to a recent Bitkom survey, 59% of German companies see blockchain, in general, as an important future technology that is still greatly underestimated. Companies with more than 2,000 employees and/or in the financial sector especially are investigating the use of blockchain. More and more German financial institutions are developing products and platforms for digital assets. Bison, the crypto trading app of the Stuttgart Stock Exchange, is already enjoying notable success. Since the beginning of 2021, the number of active users of Bison has doubled to around 550,000 while the trading volume is already hitting around $6.3 billion, or 5.6 billion euro.Exchanges have been able to expand in the country. Austrian crypto exchange operator Bitpanda opened its new location in Berlin in 2021. Coinbase — which became an officially regulated crypto custodian in Germany in August — is building up its German business at full speed.Banks won’t be left behind either. Private bank Hauck & Aufhäuser expanded its range of services in the area of digital assets, while savings banks want to offer customers trading and investing in major digital currencies like Bitcoin and Ether (ETH) directly from their current accounts.Regulations get stricterWhile the blockchain adoption is increasing in Germany, regulators are responding in different ways to address the risks of an unregulated market.In July 2021, the Federal Ministry of Finance published a draft regulation that could greatly impact the industry. The document concerns the current tax exemption of crypto investments after a hold period of one year. Specifically, it says, “The divestment period is extended […] to ten years if units of a virtual currency or token are used as a source of income and income has been generated from them in at least one calendar year.”For investors with German residency, investments in tokens are generally interesting from a tax point of view because after the one-year holding period no more taxes are due on the capital gains. This will now be changed. If tokens are not only held but used for further returns, the holding period increases to 10 years. It, therefore, becomes difficult for the individual investor to use the token beyond buying and holding, as the reporting process is enormously time-consuming.With this new regulation, Germany loses a lot of competitiveness, but it has advantages too. While the investor is waiting for a tax exemption for the actual investment, they can earn additional returns. But now, the Federal Ministry of Finance is intervening and proposing a change: Anyone who wants to earn an additional return with their crypto assets through staking, for example, automatically extends the holding period from one to ten years.The federal government also wants to regulate the anonymity of cryptocurrencies. In the future, trading platforms such as crypto exchanges will be obliged to collect information from senders and recipients such as names, addresses and account data. In addition, the Money Laundering Act will also apply to cryptocurrencies in the future. Transactions with cryptocurrencies must then be disclosed from a value of $1,120, or 1,000 euro at the time of writing. Soccer opens the door for NFTsThe nonfungible tokens (NFTs) craze exploded in 2021, with museums, auction houses, individual artists and bands taking in record sums with the sale of digital art and certificates in 2021.Fanzone, a German start-up founded in October 2020 that has already been able to win Porsche as an investor, also got involved in the NFT market in 2021. As an official partner of the German Football Association, it offers trading cards of the German men’s, women’s and under21 national teams. There was also a flourishing NFT trade in the art world. Musician Fynn Kliemann published a collection of music jingles, while German telecommunications company Deutsche Telekom and Germany’s foreign broadcaster Deutsche Welle developed NFT artwork for the first time. Blockchain and NFTs have further found novel business applications in media industries. In April 2021, German stock exchange operators Deutsche Börse and Commerzbank announced a partnership with fintech 360X AG to develop digital marketplaces and ecosystems for art and real estate. Similarly, Iota launched a marketplace for NFTs based on tangle technology on DevNet in July 2021.On the way to the digital euro2021 was undoubtedly the year of the central bank digital currencies (CBDC) in Germany. The European Central Bank launched a two-year trial phase to investigate the possible introduction of a digital euro, and Germany has taken a leading role.The Deutsche Bundesbank, the country’s central bank, led a working group of German financial institutions, companies and fintechs to discuss the use of central bank digital currencies.In March 2021, the Deutsche Bundesbank, Deutsche Börse and the German Federal Finance Agency, together with several major international banks, tested a new procedure for processing digital bond purchases. The trial run showed that bridging the gap between traditional payment systems and blockchain-based transactions is possible.Blockchain industry hopes for 2022With more legal clarity and trust, we can expect blockchain innovations and use cases to continue to appear and evolve in Germany in 2022. If market participants, including the so-called Mittelstand, or small and medium-sized enterprises and family businesses — that’s more than 99% of all companies in Germany — are willing to embrace the technology, blockchain has a good chance in Germany.

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Bank of America says stablecoin adoption and CBDC is ‘inevitable’

It appears that the U.S. will finally be moving forward to create its own central bank digital currency (CBDC) according to the Bank of America.Bank of America crypto strategists Andrew Moss and Alkesh Shah wrote in a Jan. 24 note that CBDCs “are an inevitable evolution of today’s electronic currencies,” according to a Bloomberg report. The analysts wrote:“We expect stablecoin adoption and use for payments to increase significantly over the next several years as financial institutions explore digital asset custody and trading solutions and as payments companies incorporate blockchain technology into their platforms.” Meanwhile, a Jan. 20 report titled “Money and Payments: The U.S. Dollar in the Age of Digital Transformation” from the Federal Reserve Bank (FRB) weighed up the benefits and disadvantages of the U.S. potentially adopting a CBDC. It considered whether a CBDC could potentially “improve the safe and effective domestic payments system” for households and businesses as “the payments system continues to evolve,” possibly resulting in “faster payment options between countries.”In the meantime, Shah and Moss stated that the use of digital currencies issued by private companies is likely to grow. Currently, the liability for existing forms of digital currency like online bank accounts or payment apps belongs to private entities, such as commercial banks. However, a CBDC would be different in this respect because it would be the liability of a central bank such as the Federal Reserve, wrote the FRB in a statement about the report. It also pointed out potential difficulties including preserving financial stability, protecting the privacy of users, and combatting illicit transactions. The Fed has opened to the floor for public comment on these issues until May 20. Related: Solana could become the ‘Visa of crypto’: Bank of AmericaA CBDC is a digital version of a country’s fiat currency, such as the U.S. dollar. They started to step into the spotlight during 2020 when The Bahamas launched the world’s first CBDC, the “Sand Dollar.” Meanwhile, China’s central bank is in the process of developing a digital yuan wallet, as it steps up its efforts to create a digital currency. In April 2021, Sweden’s central bank completed the first phase of its “e-krona” digital currency pilot.

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Law Decoded: When central banks seek public discussion, Jan. 17–24

Last week, two central banks dropped public reports that can have a sizable impact on the crypto landscape in their respective countries and beyond. The U.S. Federal Reserve published a discussion paper entitled “Money and Payments: The U.S. Dollar in the Age of Digital Transformation,” which summarizes years of the Fed’s research on CBDCs. Meanwhile, the Central Bank of Russia released a report that called for a blanket ban on domestic cryptocurrency operations and mining. Both documents are framed as an invitation for public discussion, but the kinds of discussions that they will trigger are likely to be very different.Below is the concise version of the latest “Law Decoded” newsletter. For the full breakdown of policy developments over the last week, register for the full newsletter below.The Fed: Not advancing particular policyThe authors of the Fed’s much-anticipated report make a point to note on several occasions that the paper “is not intended to advance any specific policy outcome.” Indeed, the report gives off a vibe of open-endedness and covers both risks and benefits of a potential U.S. CBDC. Specifically, it acknowledges user privacy concerns that some crypto advocates have previously voiced in the context of the potential digital dollar’s design.On Twitter, crypto-friendly members of the U.S. Senate sounded content with the document’s findings and framing. Senator Cynthia Lummis welcomed the report’s concession that the ultimate fate of the U.S. CBDC project rests with Congress:I’m pleased the Federal Reserve released their long-awaited report on central bank digital currencies this afternoon. Here’s a quick thread of my thoughts.https://t.co/UAJFIPwiqG— Senator Cynthia Lummis (@SenLummis) January 20, 2022Senator Pat Toomey called the paper a constructive contribution to the public discussion around the issuance of a CBDC.Cryptocurrencies, digital assets, and their underlying technologies offer tremendous potential benefits. As such, I’m glad the @federalreserve has constructively contributed to the necessary ongoing public discussion regarding the issuance of a CBDC. https://t.co/10ld3lfXt6— Senator Pat Toomey (@SenToomey) January 20, 2022

CBR: Ban domestic operationsIn contrast to their U.S. counterparts, Russian central bankers are very much advocating for a particular policy. They’ve suggested that investor safety and financial stability risks that cryptocurrencies pose warrant a complete ban of domestic crypto operations and mining activity, as well as introducing punishments for individuals breaching these rules. Notably, the proposed ban specifically concerns the usage of domestic financial infrastructure for crypto transactions, and during a press conference that followed the report’s publication, a Central Bank of Russia official suggested that Russian citizens would still be allowed to engage with crypto using overseas rails.The report is remarkable for making some candid points as to why the ban is needed. For one, the authors recognize that emerging economies, including Russia’s, are more susceptible to the adverse effects of crypto compared to those of developed nations. Furthermore, it states that wide adoption of crypto could undermine Russia’s monetary sovereignty and be at odds with a potential sovereign CBDC that the report passingly praises.Crypto ads: Second phase of regulation?In a series of moves that almost looked coordinated, regulators in the United Kingdom, Spain and Singapore took on cryptocurrency promotions and ads last week. While the first two mainly focused on ensuring appropriate risk disclosures, Singapore opted for a stricter stance of outlawing any and all crypto-related advertisements in public spaces. Binance CEO Changpeng Zhao questioned the capacity of these measures to limit crypto demand because of the prevalence of word-of-mouth marketing in the digital asset space.Such a shift of focus could mark the next step in the evolution of crypto regulation. Jurisdictions that have put comprehensive AML and CFT rules in place are now turning to consumer protection measures as the rapid mainstreaming of digital assets gives rise to marketing strategies that target mass audiences far beyond the tech-savvy core of early crypto adopters.

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Bank of Korea completes first phase of digital currency pilot

The Bank of Korea has successfully completed the first phase of its central bank digital currency mock testing started in August 2021. The South Korean central bank said that the first phase of its CBDC mock testing was completed in December while the second phase is currently underway, reported YNA news. The first phase of the mock test involved some of the basic functions of the sovereign digital currency such as distribution and issuance.The second phase of the central bank digital currency (CBDC) pilot would test real-world functionalities such as cross-border remittance, retail payments and offline payments. The bank stated:”We will confirm the possibility of operating various functions, such as offline settlements, and the application of new technologies, such as one intended to strengthen privacy protection during the second phase of the test.”Bank of Korea (BOK) is also looking to onboard financial institutions for the second phase, quite similar to what China is currently doing with its digital yuan. However, unlike China, BOK-issued digital currency would also focus on user privacy.The second phase is expected to complete by June 2022, after which the central bank plans to chalk out an official launch and commercialization plans. Related: Does a Fed digital dollar leave any room for crypto stablecoins?South Korea has thus joined the select group of nations that have either started or completed the pilot phase of their CBDC testing. As per data from the Atlantic Council, currently, 91 nations are working on their sovereign digital currency and only 14 nations have reached the pilot phase. World CBDC Development Tracker Source: Atlantic CouncilSouth Korea has become one of the leading crypto-compliant nations over the past few years and recently revealed its plans to become a world leader in the metaverse as well.  While China is currently at the forefront of the CBDC game, many European and Asian counterparts have accelerated their development plans to catch up with its pace.

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

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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Decentralized and traditional finance tried to destroy each other but failed

The year 2022 is here, and banks and the traditional banking system remain alive despite decades of threatening predictions made by crypto enthusiasts. The only endgame that happened— a new Ethereum 2.0 roadmap that Vitalik Buterin posted at the end of last year. Even though with this roadmap the crypto industry would change for the better, 2021 showed us that crypto didn’t destroy or damage the central banks just like traditional banking didn’t kill crypto. Why? To be fair, the fight between the two was equivalently brutal on both sides. Many crypto enthusiasts were screaming about the coming apocalypse of the world’s financial systems and described a bright crypto future ahead where every item could be bought with Bitcoin (BTC). On the other hand, bankers rushed to defend the traditional role of the banking system, accusing the blockchain technology of low performance and lack of compliance. Both of the parties were wrong in their predictions.Equal gameLuckily, neither crypto nor traditional banking was destroyed, although they wished to. On the one hand, none of the major crypto projects has stayed away from the tightest integration with banks. The United States-based crypto exchange Kraken received a banking license and the Coinbase IPO process speaks for itself as it’s a 100% game, according to the banking/financial system rules. Most of the top projects use the services of only a few banks: Signature, SilverGate, Bank Frick — concentrating settlement and imposing banking principles of working with crypto.On the other hand, the banking community created in-house ecosystems for crypto projects. Visa introduces crypto advisory services to help partners navigate through the crypto world. Amazon Web Services (AWS) wants “to be the AWS of crypto.” Switzerland proposes banking services for working with the crypto. SolarisBank even offers an API for crypto projects. The largest American banks and exchanges are launching services related to cryptocurrencies. In El Salvador, Bitcoin is recognized as a means of payment, which (theoretically) implies the need for international financial organizations to be ready for settlements in Bitcoin with El Salvador. Related: What is really behind El Salvador’s ‘Bitcoin Law’? Experts answerWhat prevented crypto from destroying banks? Humankind. Throughout the entire history of humans, plenty of new techs couldn’t have immunity from being controlled by the state authorities directly or indirectly through corporations. Radio, TV, internet, social networks — all started with the idea of free dissemination of information and eventually came up against the fact of total control. The same story is happening now with blockchain, and there is no chance that it will change in the future. For the most part, people try to exaggerate the risks and reduce the likelihood of a good outcome. In my opinion, that is the reason that has severely limited and continues to limit people from accepting cryptocurrencies. But, as I said, this way of thinking is part of human nature. Still, why does centralization defeat decentralization? It took some time for the world government to understand that blockchain technology could be not only a problem but a powerful tool for accomplishing political interests. So the blockchain, originally designed as a powerful freedom tool, received an utterly reverse implementation, turning into a tool for money control to a previously unthinkable extent. Like nuclear technology, humans use it both for peaceful and military purposes; the blockchain holds two sides of good and evil. Related: Decentralization vs. centralization: Where does the future lie? Experts answerNot a loss, thoughAt first glance, the crypto had to take a step back from the initial positions of the “hawks.” In exchange, it received widespread recognition, distribution and a considerable number of users around the world — it seems to be a fair reward and a victory over those who predicted an imminent demise. I believe that the significant growth of related Regtech technologies, designed to speed up compliance processes and all possible checks, has led to crypto acceptance by traditional finance. These projects with the solutions for conducting Know Your Customer (KYC) / Anti-Money Laundering (AML) showed a crypto response to the banks: companies like Chainalysis, Onfido can build KYC operations more efficiently while maintaining the full legality of the processes. Related: The battle of banks vs. DeFi is a win for individual crypto investorsThe newly-established startups could not follow the path of low-efficiency compliance in banks, which is a break in almost any process. Still, to conduct business in a legitimate field, they made compliance on their own, but more efficiently.But will CBDCs destroy crypto? We should stop talking about the destruction of anything but instead think about future potentials. Central bank digital currencies (CBDCs) have problems to be solved, particularly issues of interoperability. With the incompatibility of CBDC issued in different countries, the ability to convert them mutually and the slowness of many processes related to the government, we won’t be able to talk about a quick solution. This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.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.Alex Axelrod is the founder and CEO of Aximetria and Pay Reverse. He is also a serial entrepreneur with over a decade of experience in leading technological roles. He was the director of big data at the research and development center of JSFC AFK Systems. Prior to this role, Alex worked for Mobile TeleSystems, the largest telecom provider in Russia, where he headed the antifraud and cybersecurity systems development.

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Fed issues discussion paper on benefits and risks of a digital dollar

The U.S. Federal Reserve is opening comments to the public after releasing a discussion paper on the pros and cons of a potential central bank digital currency.In a publication released Thursday titled “​​Money and Payments: The U.S. Dollar in the Age of Digital Transformation”, the Fed said it would likely not be authorized to issue digital wallets or accounts capable of holding a U.S. central bank digital currency, or CBDC, but rather leave such matters to the private sector. In addition, the government body said it would be considering privacy concerns, whether a CBDC could be “readily transferable between customers of different intermediaries,” and identity verification to combat money laundering and the financing of terrorism.The paper added that the U.S. rolling out a CBDC could mitigate the risks of “proliferation of private digital money” while still encouraging innovation in the private sector, leveling the playing field between large and small firms for whom some of the costs of issuing their own digital currency may be prohibitive. Cross border payments, the speed and efficiency of digital payments, and additional financial inclusion are all among the potential benefits of a digital dollar. “A CBDC could fundamentally change the structure of the U.S. financial system, altering the roles and responsibilities of the private sector and the central bank,” said the Fed paper. “Some have suggested that, if these new CBDCs were more attractive than existing forms of the U.S. dollar, global use of the dollar could decrease — and a U.S. CBDC might help preserve the international role of the dollar.”Regarding the risks in introducing a digital dollar to the U.S. and world economies, the Fed said that a CBDC could effectively replace commercial bank money, raising prices for retail customers and driving interest away from investments in “mutual funds, Treasury bills, and other short-term instruments.” The paper also repeated some of the concerns previously raised by officials on the stability of the current financial system, such as how the Fed might need to increase its reserves based on demand for a digital currency, and striking t balance between user privacy and transparency needed to prevent fraud.To that end, the Fed is opening up comments to the public for 120 days — until May 20 — asking concerned citizens to address 22 questions related to the possible rollout of a digital dollar’s benefits, risks, design and policy considerations: “The Federal Reserve will only take further steps toward developing a CBDC if research points to benefits for households, businesses, and the economy overall that exceed the downside risks, and indicates that CBDC is superior to alternative methods. Furthermore, the Federal Reserve would only pursue a CBDC in the context of broad public and cross-governmental support.”First announced by Fed chair Jerome Powell in May 2021 to be released last summer, the publication of the CBDC discussion paper has been delayed several times. On Jan. 11 during his testimony to members of the Senate Banking Committee, Powell said that the paper would be coming in a matter of weeks following delays due to “changes in monetary policy.”Related: Digital dollar needs broad consensus among authorities, says US Treasury SecretaryThough a notice from the Fed stated the discussion paper “does not favor any policy outcome,” Powell has previously suggested there was no rush in the U.S. releasing a digital dollar despite other countries, including China, moving ahead with trials in different cities. Athletes are expected to travel to China for the 2022 Winter Olympics in a few weeks when competitors and visitors will have the opportunity to use the country’s digital yuan.

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BIS general manager: Central banks generate trust, not big techs or “anonymous ledgers”

In a speech entitled “Digital currencies and the soul of money,” Agustín Carstens, the general manager of the Bank of International Settlements, criticized private stablecoins and decentralized finance (DeFi), touting central bank-led financial innovation as the best possible path to the future of money.Carstens, who served as governor of the Bank of Mexico between 2010 and 2017, delivered his remarks at the conference on “Data, Digitalization, the New Finance and Central Bank Digital Currencies: The Future of Banking and Money” at the Goethe University in Frankfurt.The economist’s argument revolved around the institutional foundations of money and how, even in the digital age, central banks remain in a position to provide trust in money and ensure “an efficient and inclusive financial system to the benefit of all.” Alternative designs of monetary systems that emerged throughout history, according to the BIS’ top official, “have often ended badly.”To advance his point, Carstens discussed three plausible scenarios of financial innovation. In addition to the global monetary system led by central banks, he envisioned a world where big tech-powered stablecoins are the dominant form of money, and another where the bulk of financial activity is decentralized and runs on distributed ledgers.The stablecoin scenario, Carstens maintained, is fraught with market power and data concentration at the hands of a few dominant private money issuers. National and global monetary systems would become fragmented, while the disintermediation of incumbent banks would threaten financial stability.Speaking of DeFi, the BIS boss claimed that the reality that DeFi applications are delivering is at odds with their proclaimed foundational principles of disintermediation. Carstens said:”To date, the DeFi space has been used primarily for speculative activities. Users invest, borrow and trade crypto assets in a largely unregulated environment. The absence of controls such as Know Your Customer (KYC) and Anti-Money Laundering rules, might well be one important factor in DeFi’s growth.”Furthermore, echoing BIS researchers’ recent claims, Carstens stated that “there is a lot of centralization in DeFi.” He also cited scalability issues and liquidity mismatches as problematic aspects of decentralized finance.In the vision of the monetary future that the economist extolled, central banks are at the core of the financial system, facilitating innovation such as building a global network of CBDCs. Because they are not profit-driven, central banks would act to advance the interests of the public, according to Carstens.These statements come as no surprise when voiced by a chief officer of an institution that is often called a bank for central banks. As Cointelegraph reported earlier, the BIS’ innovation arm is actively engaged in several CBDC trials, including the cross-border settlement initiative ran jointly by central banks of France and Switzerland.

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Iran to reportedly pilot central bank digital currency soon

The Central Bank of Iran (CBI) is reportedly planning to launch a central bank digital currency (CBDC) pilot soon.According to a report by the Iranian Labour News Agency, the CBI vice governor said that CBDCs could help the country resolv financial inconsistencies. The development of a sovereign digital currency in Iran began in 2018 at the Informatics Services Corporation — the executive arm of the CBI. The development phase has been completed and a pilot will be launched soon. However, CBI didn’t reveal many details about the time frame.The Iranian CBDC was reportedly developed using the Hyperledger Fabric platform hosted by the Linux Foundation. Cointelegraph reached out to Hyperledger for a comment but didn’t get a response at the publishing time.Iran has experienced significant financial and economic difficulties as a result of heavy economic sanctions levied on it by the United States. Amid these problems, Iran has turned to crypto and was among the first countries to legalize Bitcoin (BTC) mining in hopes of reviving the economy, however, it had to temporarily shut mining operations on numerous occasions due to acute power shortages and blackouts. Iran is also looking to use cryptocurrencies for international trade, in hopes of bypassing the trade sanctions. As reported by Cointelegraph, CBI, and the Ministry of Trade reached an agreement to link the CBI’s payment platform to a trading system allowing businesses to settle payments using cryptocurrencies. At present, nearly 100 nations are working on a sovereign digital currency, while only a handful of them have reached the pilot phase. China is currently at the forefront: it completed its CBDC development in 2019 and is currently mass testing it across various provinces and retail sectors. Related: Iran halts authorized crypto mining to save energy for winterFrance and Switzerland have carried out multiple cross-border pilots. South Korea, Japan, and Russia are expected to carry out trials in 2022, while the U.S. is still in the discussion phase. According to the Atlantic CBDC tracker, nine nations have already launched their CBDC, 14 are in the pilot phase, 16 are in the development phase, 41 nations are still researching and two nations have canceled their CBDC plans.CBDC development tracker Source: Atlantic Council

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'The risks outweigh the benefits' of a Swiss CBDC, says SNB governing board member

Andréa Maechler, a member of the governing board for the Swiss National Bank, or SNB, has reportedly altered her position on the central bank issuing a digital franc. According to a Tuesday report from Reuters journalist John Revill, Maechler said officials at the country’s central bank “believe the risks outweigh the benefits” when it comes to CBDCs. The governing board member said having the general public use a digital franc in day-to-day transactions would likely not help promote financial inclusion in Switzerland, where almost all the working population already have access to bank accounts.”This does not mean the SNB is not interested in CBDC, but our focus is to look at the role that wholesale CBDCs could play,” said Maechler, adding the central bank needed to consider privacy concerns and the potential for the digital currency to be used for illicit transactions.The governing board member’s statement comes following the SNB announcing it had integrated a wholesale CBDC into the banking systems of five commercial banks in Switzerland. At the time, Maechler seemed to encourage the rollout, saying “central banks need to stay on top of technological change“ in an effort to ensure monetary and financial stability.Testing the introduction of a wholesale CBDC was part of the second phase of Project Helvetia, an initiative aimed at preparing central banks for distributed ledger technology-based tokenized financial assets. During the fourth quarter of 2021, the SNB integrated the wholesale CBDC into the existing systems and processes of Citi, Credit Suisse, Goldman Sachs, Hypothekarbank Lenzburg and UBS.Related: Bitcoin briefly flippens Swiss franc after rally to new ATHSwitzerland was also a testing ground for many crypto projects and products in 2021. In September, the Swiss Financial Market Supervisory Authority approved one of the first crypto funds to operate in the country, the Crypto Market Index Fund. The SIX Swiss Exchange currently lists several crypto exchanged-traded products in addition to its own plans to launch a digital asset marketplace and central securities depository.

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