On Friday, April 24, I led a continuing legal education program along with my colleague Emilio Cazares of Sheppard Mullin in San Diego and co-founder of the San Diego Blockchain Forum. Invited by Fred Rocafort of Harris Bricken and Leonid Kisselev of the International Practice Section of the Washington State Bar Association, we attempted to explain the advent of blockchain technology, the game-changing dynamics of cryptocurrency and their geopolitical underpinnings. We endeavored to undertake this in less than 90 minutes, over an online distance learning platform, and while we are all stuck at home.
Such are some of the conditions brought about by the coronavirus. The non-health-related conditions that is. It is no secret that the United States has not effectively tested, nor quarantined those with suspected coronavirus infection and their contacts fast enough, well-established policies for preventing viral pandemics. Now the numbers of those afflicted have mounted exponentially; last week the number of deaths stateside surpassed the number of those killed in the war in Vietnam. They are now edging towards 80,000 at this writing. A newly released estimate based on the relaxation of stay at home orders in many U.S. states predicts that the number of dead from COVID-19 will surpass 134,000 in this country.
The People’s Republic of China, apparently, did not come even close to those numbers. And while Wuhan and other major cities were under various forms of COVID-19 lockdown, the testing for China’s new national digital currency, the Digital Currency/Electronic Payment (DC/EP), has continued, almost unabated. This epic project that is backed by the Renminbi, China’s national currency, is the future of payments in Asia, if not the rest of the world. There is no need for actual (potentially virus-infected) cash as all transactions are completed with our smart phones. This is Financial Technology (FinTech) which can remove the need for costly intermediaries and glacial transaction times. With China’s major banks and leading telecommunications, banks, insurance and social media companies onboard, the DC/EP is a seismic attempt at decentralizing payments, all run through the data industrial complex in the world’s second largest economy. And with China’s economic reach expanding exponentially through its Made in China 2025 policy (leading advances in artificial intelligence, robotics, gene therapy, and 5G among other industries) and its hyper trade and infrastructure investment scheme, the Belt and Road Initiative, continuing unabated, there is much growth to come. Efficiency through big data mining, resource allocation, and social engineering are all in the offing.
Stateside, President Trump, at his daily coronavirus task force briefings, has touted that his administration is removing regulations to, among other things, speed along approval of medicine to treat COVID-19, to re-credential retired doctors and nurses, and to allow telemedicine services be practiced across state lines. The administration has also injected trillions of dollars into the sagging economy through bailouts and stimulus packages. But in terms of using this pandemic to test a digital dollar, incentivize digitation of major industries, and kickstart new financial technologies, there is not much meaningful movement. Early versions of the bill that would become the Paycheck Protection Program – both in the House of Representatives and the Senate – provided for a digital dollar payment to the estimated 17 million unbanked in the United States so that money could quickly get into the hands of those
who needed it the most. Those initial proposals never made it into the final legislation, leaving the U.S. to kick the FinTech can down the road a while longer.
Meanwhile, while China returns to its version of normalcy and continues to deploy its DC/EP and the commercial Blockchain-based Services Network across the country, the new technologies for finance are being road tested and leveraged. So much for the innovation economy staying in the United States. China banned cryptocurrencies and then banned them again and again since 2014, taking its time to study how they work. Chinese leader Xi Jinping championed blockchain technology all the while, reading his country’s economic for the leadership of the coming Internet 3.0 by making smart investments and incentivizing partnerships among academia, the financial sector and technologists. And then Mark Zuckerberg and David Marcus of Facebook spent some of last summer defending their company’s Libra project before lawmakers in Washington D.C. Zuckerberg threw China under the bus telling a skeptical Congressional committee that the U.S. government had better allow Libra to go forward with its proposed cryptocurrency, lest Beijing and its state-owned enterprises and affiliates take over the future of finance, and well, the new infrastructure for innovation.
The Chinese watched the hearings and its blockchain/cryptocurrency leaders and government authorities moved into high gear. By October 24, 2019 (now known as “Blockchain Day” in the PRC), the project was ready for testing in Suzhou and Shenzhen. Now, just over half a year later, the project continues its momentum. The U.S. authorities are still trying to determine whether digital tokens are securities, utilities, commodities, or currencies and which agency, if any, is tasked with their regulation. As the U.S. ponders these important issues for fear of being a first mover, it leaves the future of FinTech to others. This is the time for leadership and innovation from U.S. legislators and regulators. Besides, what else do we have to do while we are all still at home?
James Cooper is a professor at California Western School of Law, San Diego.
Author: By Prof. James Cooper on May 16, 2020
Posted in Coronavirus, Internet
Covid-19 Will Likely Accelerate Adoption of Cryptocurrencies And Blockchain Technology
More and more savers now turning to the world of “decentralized finance”
Libra 2.0, to focus significant attention on India
Next-generation central bank digital currencies will be launched in countries like China
Prior to Covid-19 the world was already facing a record level of global debt and concerns that this could lead to the next global financial crisis. This unprecedented debt burden is now further ballooning as governments and central banks race to support economies reeling from a massive pandemic-driven plunge in demand and forecasted Great Depression-levels of unemployment.
While governments and central banks understandably work to “do whatever it takes” to soften the pandemic’s economic blow, concern over the unprecedented monetary and fiscal response to Covid-19 is already driving more people to seek financial shelter in traditional hard assets such as gold, and cryptocurrencies like bitcoin. Since the beginning of April, the price of bitcoin has steadily climbed 33%, and over the past twelve months, it has approximately doubled in value.
As the cracks in the banking systems are now being pulled further into view, it has reinforced the benefits of decentralized networks, like the Internet, as resilient and reliable during times of uncertainty.
The growing use of cryptocurrency demonstrates the need for our financial systems to be as robust as the Internet.
As central banks cut interest rates to near zero, or even into negative territory, savers in many countries are having difficulty earning meaningful interest on their deposits. We see more and more savers now turning to the world of “decentralized finance” (or DeFI) interest-earning platforms, a number of which have been started by Indian entrepreneurs. Over the last year the value in DeFi platforms has more than doubled to over $855 Mn, and these platforms offer significantly greater interest rates (6% annual savings rates or more) on cryptocurrency deposits compared to what is available with traditional fiat bank deposits.
Utilizing stablecoins to earn meaningful interest, transact digitally, or store value can be particularly attractive for those concerned about the outsized volatility of cryptocurrencies like bitcoin. US dollar-backed stablecoins, like USD PAX, can also provide a safe haven for those concerned with local currency instability, a growing problem in countries like Lebanon.
The prospect for cryptocurrency adoption in India also recently received a big boost with greater regulatory clarity provided by the Indian Supreme Court, which opened the door for cryptocurrency companies to work with Indian banks.
We can also expect the Facebook-driven Libra project, which recently unveiled a redesigned (and more regulator-friendly) “Libra 2.0”, to focus significant attention on India. Facebook has more users in India than any other country, and a successful launch of Libra in India could introduce hundreds of millions of people to the many benefits of digital currencies instantly.
There are a number of non-currency uses of blockchain technology that may also receive a significant push in the wake of Covid-19. Ehealth passports and digital identity, food supply chain tracking, and electronic voting are just some of the broader uses of blockchain technology that are being proposed to help with the Covid-19 response and to mitigate the effects of future pandemics.
Next-generation central bank digital currencies that may soon launch in countries like China are expected to leverage blockchain technology. The lack of a widely accessible “US digital dollar” means Covid-19 stimulus payments to Americans needing financial support will take months, rather than seconds, to be delivered.
Other ways central bank digital currency can help with providing government financial assistance compared to traditional paper checks and prepaid debit cards include:
- Efficiency: reducing the cost of payment delivery, which may run into the tens of millions with postal costs, etc. for checks and prepaid debit cards.
- Financial inclusion: facilitate payment to individuals lacking access to bank accounts or low-cost check-cashing services.
- Support the most vulnerable: help ensure payment to some of those most in need who lack a physical mailing address, or those who have relocated recently (eg students).
- Hygiene: encouraging digital forms of payment may help reduce the rate of virus transmission as compared to debit card and check use.
- Efficacy: the receipt and use of digital payments can be more easily tracked to ensure individuals have received financial support and solve the significant “lost check” problem.
Prior to our current crisis bitcoin use was already growing faster from inception than both the personal computer and internet adoption. Crises tend to accelerate historical processes, and the Covid-19 pandemic will likely hasten our transition to a more efficient and transparent blockchain-powered financial infrastructure.
Author: Garrick Hileman
How to raise money for your Startup through Cryptocurrency
The first in the series of online seminars organised by Kingston University’s Business School is presented by Dr Yannis Pierrakis – Associate Professor of Entrepreneurship and Innovation at Kingston University. He will be sharing his wealth of knowledge on Startups, ICOs (Initial Coin Offerings), Crytocurrency and how to combine these to fund your emerging business ventures.
Join us to learn more about how the emerging field of Cryptocurrency can work for you, and help boost your Startup. This seminar will be online, and you will be able to join via Microsoft Teams (you do not need to download Microsoft Teams to join – you will be able to access via your Internet browser).
Booking is essential to attend this event.
For further information about this event:
How Centralized Crypto Can Improve Blockchain Reporting • Blockcast.cc- Blockchain, DLT, Crypto News
Centralized crypto options may be the key ingredient needed for better blockchain reporting.
Cryptocurrencies may have started off as an outgrowth of the cypherpunk movement, and that was reflected in how the cryptocurrency space initially developed. It is easy now to lose sight of the initial goal of cryptocurrencies; to develop an alternative financial system not beholden to any centralized or governmental agency. No matter what side of this conversation you find yourself on, centralized versus decentralized, the sheer ambition of such an idea was something to admire.
Reality, as is often the case, is more complicated and nuanced than just a big idea.
Decentralized cryptocurrencies may have initially been designed to be used as a medium to pay for goods and services, but the issues with that have been well documented over the past several years. Technical complexity, a lingering feeling by some that cryptocurrencies are associated with criminal activities, tax treatment that does not encourage usage as a fiat alternative, and a murky regulatory picture have proven substantial headwinds to broader adoption. Cryptocurrencies with more oversight, or even those issued by a government, are emerging as a potential next step for crypto and blockchain.
The promise of cryptocurrency was to break free of the incumbent financial institutions and regulatory structure, but those incumbents and regulatory structures are in place for a reason. Without regulators and oversight bodies, the metrics and types of information reported lack the consistency and regularity that businesspeople rely on. How much information should be reported? What types of data should be disclosed? And, what happens if there is a blockchain-specific event, like a hard fork?
Cryptocurrencies of all kinds run on, and are dependent on, underlying blockchains; investors, regulators, and merchants need greater transparency and consistency to accelerate the move of blockchain from a crypto-only tool to a business tool in general. As blockchain adoption continues to accelerate and move far beyond just cryptocurrencies, the need for increased clarity and standardization around how to report blockchain data will only increase.
Semi-centralized or centralized cryptocurrencies may not represent the ideal version of crypto that some proponents desire, but let’s look at a few of the ways that these versions of cryptocurrencies can help improve blockchain reporting.
First, having more centralized cryptocurrency options, especially if these are issued by a central government, will give many increased confidence in the validity and integrity of these cryptocurrencies. Personal opinion aside, having an implicit government backstop or approval will probably help spur wider usage and adoption, due to the lower implied risk of using these cryptocurrencies.
Second, the increased confidence in, and more widespread usage of, these centralized cryptocurrencies will, in turn, help push regulators and accounting organizations like the Financial Accounting Standards Board (FASB) to codify reporting practices and standards. Reporting crypto and blockchain information may not be the most exciting part of the conversation (for some), but getting these processes standardized for blockchain information is critically important.
Lastly, and a trend that is illustrated in the form of recent announcements related to Service Organization Control (SOC) engagements, is the clear expectation that blockchain data will be examined with the same rigor as non-blockchain information. Imperfect as they are, financial and control audits play an important role in the functioning of the financial reporting system. If more merchants and individuals are using cryptocurrencies, as a result of them being semi-centralized, the rigor and testing of this information will inevitably have to increase.
The secret to greater crypto adoption might be the development of better reporting and disclosure standards. Investors and business owners need information that is comparable, consistent, and available on a recurring basis to make effective business decisions.
Semi-centralized cryptocurrencies, anathema to some, might just be the key ingredient to better blockchain reporting and continued adoption.
Cryptocurrency definition and meaning | Collins English Dictionary
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