🇬🇧8📰News CBDCs World, StableCoins and WEB3: PayPal Embraces CryptoCurrencies…
…in the Bahamas First CBDC Operational For Population, Malta and China Alien Worlds by Operation and Regulation…
Overview. Payments and Cryptocurrencies: News of the month, PayPal implements payments in crypto; Ethereum issues with 2.0; Q3 2020 markets. CBDC’s and Stablecoins: Bahamas, Australia and China (and Huawei Mate 40) states; Q3 2020 markets; state of affairs from BIS and BoI opinions. Bandits and Intelligence: Europol with IOCTA 2020; geo analysis KYC; the USA DoJ crypto task force and sanctions for ransomware blackmail payments; White House inserts DLT as a strategic innovation for national security; Regulators and Regulations: FSB/G20 recommendations on stablecoins; SEC/USA and internal meditations; FCA/UK as an example of stupidity; IRAN liberalizes (little); Malta on another planet. Fintech: change the business model for P2P lending; ISO20022; interface between fiat bank account and token buying platforms. Web 3.0 and DeFi: China, Macao and cross-border movements in pandemic times; sold at auction a work with NFT by Christie’s; tokens for influencers and distribution of digital video productions. Upcoming in-depth analysis: privacy and CBDCs
Payments and Cryptocurrencies
😏PayPal in the last decade, like other financial entities with global range as J.P.Morgan, has gone from an initial position of skepticism towards the crypto world to their adoption for their products.
First in and first out from the Facebook Libra project, PayPal’s position towards cryptocurrencies has been that of a slow metabolisation of technology and then, evidently, to face markets facts for the risk of being excluded.
The same path we said for J.P.Morgan: from refusal to realize that (maybe😂) Millennials and Z-Gen could reason and approach the market in a ‘slightly’ different way from previous generations.
A big credit to the process of metabolisation underway is to be attributed to those listed companies that decide, and communicate, to turn their assets into crypto-assets such as, for example, Mode, MicroStrategy, Galaxy Digital and Square, although some of them have had, in the past, the management against BTC & Co., as the case of MicroStrategy.
🤔Very laborious the passage of Ethereum to phase 2.0, from Proof of Work to Proof of Stack, which would allow for more scalability and ten times more transactions than 1.0. The road map, which foresees 3 phases with conclusion 2022, is here described in detail by Decrypt but the security issues that emerge from the audits mentioned are not irrelevant.
📈Exhaustive, as usual, Q3 2020 by Coin Gecko about the markets.
CBDC and Stablecoin
🇧🇸The ‘Sand Dollar’ is operational. The 400,000 residents of The Bahamas become the first citizens in the world to be able to use (continuously and not as a test) the national currency issued digitally, CBDC, and on wallets managed by the central bank. In addition to the primacy itself, it will be interesting to see the social implications that the new instrument will bring to an integrated community.
🇦🇺The Australia after recent hesitations announced the initialization of its CBDC project with technical partner ConsenSys.
🇨🇳Reuters and other newspapers report an article in which PBPC, the Chinese central bank, declares the issue of CBDCs a new battlefield of competition between sovereign countries: hence the competitive advantage for China in being not the first but, undoubtedly, the structural pioneer of the sector. The PBOC original text could not be found, so to analyze the context of the statement: there is no doubt that economic warfare and intelligence and asymmetric and irregular warfare will present a new instrument of theater, operational, tactical and technical not indifferent.
In Shenzen in Guangdong 50,000 residents have received a total of 10 mil CNY, about 1.5 mil USD, in digital format in their wallets donated by PBPC to promote the use/test of DCEP (promotion called ‘buy, buy, buy); action with the same purpose, and in the same territory, by Sinopec Guangdong Petroleum Company that has begun to accept PBPC for petrol pumps;
The new smartphone Huawey Mate 40 borns with the DCEP wallet inside.
When we descried the design of DCEP two technical factors were specified: it is not based on DLT blockchain and its creation/destruction (as M0) is based on collaboration with commercial banks. Both aspects are giving problems during testing: false wallets have been highlighted with reference to commercial banks and the link of the serials, between the two systems, is creating difficulties in the control of autenthood.
🚀Q3 2020 analysis for the Stable sector by Chiper: Thether lion’s share 6x from the second (USDC), with a currency offer of 15.9 billion USD; global offer 22 billion USD with volumes almost tripled between Q2 and Q3.
📕BSI (Bank for International Settlements) in collaboration with 7 central banks has published a white paper about ‘what-how-why’ and the state of the affairs with regard to CBCD: a good starting point for those who want to deepen the topic.
🇪🇺🇮🇹In following last month’s report on the digital Euro, ECB is proceeding with the task force dedicated to the topic and, with this in mind, has launched the public consultation to gather the opinions of experts and ordinary people. After the publication the Bank of Italy agitated to outline, mediatically, what is being talked about and the role of the institute in the context (for all, Deputy Director Mario Cipollone in 10/19, Corriere della Sera).
What can we say: slow and meditated going, in the best traditions of an Europe that is struggling to grasp, or simply observe/copy/integrate, the opportunities and how they present themselves globally. It’s reinforced the impression, already expressed, that, in the midst of meditation, some countries (not Italy) will move in advance and autonomously and then integrate their projects with the laggards and the overall project.
Bandits and Intelligence
🇪🇺Europol has published the IOCTA 2020 report (Internet Organized Crime Threat Assessment, video presentation below): coinjoins, mixers, hardware wallets and decentralized marketplaces are indicated as the main illicit vectors,
🌍Chipertrace published the annual geo-risk study, by jurisdiction, with reference to KYC in the AML area: the objects of analysis are the VASP, the service providers of virtual assets. The headlines are that the countries where the perpetrators are more likely to be undetected, as KYC processes by intermediaries, are the USA, UK and Singapore; the geographical areas instead in the graph below:
Note that 90% of DEX/DeFi, a market (bubble) that grew exponentially in 2020 at the level of 16 billion USD, is positioned for 90% in countries with KYC shortage.
This is confirmed by the number of mixing companies, and people to whom they belong, who have started to be penalized for their activity in the USA.
🇺🇸The DoJ, forward-looking, in 2018 set up a multidisciplinary task force to bring the criminal potential of cryptocurrency under the radar: the focus was on work-in-progress, i.e. dealing with an embryonic technology to produce proactive reports as it takes shape in the various new tools. The second report is very useful for structured crypto-intelligence purposes.
Very interesting the concept, recently expressed both by OFAC (Office of Foreign Assets Control) and FinCEN (Financial Crimes Enforcement Network), for which those who decide to pay the ransom (victim or delegate, for example, insurances or forensics) following a ransomware attack must be authorized to do it by the competent authorities otherwise it can be sanctioned. The reasoning is based on the fact that the authorization allows the investigation and, in some cases, the prosecution of criminals in the medium term; in ex-novo cases it allows the isolation of strains and the structuring of new investigations. The argument always the same, we repeat it in what we write since 2015 about crypto-intelligence: cryptocurrencies sooner or later must emerge somewhere in fiat money and, progressively, the tools to identify the places of immersion have been refined, not only concerning the crypto-world.
The White House published the National Strategy for Critical and Emerging Technologies (bipartizan 😀) at the end of October. Two pillars of the mission: promoting the fundamentals of innovation in national security and protecting technological competitiveness. DLT is a target technology.
Regulators and Regulations
🌍FSB (Financial Stability Board) of the G20 published the final 10 point recommendation to regulators on global stablecoin and monetary stability risk. It is to be revised by 2023 in line with changes in the markets.
🇺🇸In the USA the SEC uses the Howey Test, which dates back to the second half of the years (19)’40, to decide whether a contract is a security: it is therefore somewhat dated, in general, to assess how (and if) the financial return from a smart-contract (think about DeFi) may depend on the work of an algorithm, rather than on the work of physical counterparties or organizations who are interested parties in its computation. This makes someone in the SEC, at the top level, doubts about the usefulness of continuing to proceed with this assumption, in the criteria of market compliance, against the risk of being excluded from the development of cryptofinance
🇬🇧FCA banned the sale of crypto-derivatives to the consumer market for companies (from any jurisdiction) since January 6. The reasons are listed here and some of them are really embarrassing: among them the monthly ‘idiocy award’ goes to those who believe, for prejudice, that customers are stupid. Unbelievable😡.
🇮🇷The IRAN relationship with crypto is a bit complex. On the one hand, having energy at practically zero cost, the country has been attractive for BTC and ETH miners for a time. On the other hand, being tracking uncontrollable, the authorities last year crackdown the mining by making it subject to authorization and not allowing internal payments in BTC. The context is however the heavy international embargo (also on crypto-tracking technologies) for which now the regulation has been modified. It is now allowed to import goods from foreign countries, and pay them in cryptocurrency, but only through the central bank and for a limit subject to authorization.
🇲🇹The financial authorities in Crypto-Island, Malta, authorized the first IFVAO, a regulated ICO. Like Switzerland light years ahead of the rest of Europe and much of the world
Fintech
📈1 — a16z, a venture in the forefront for several years on frontier innovation, especially financial innovation, makes an interesting analysis on the transformation of the business model of P2P loans. Taking as an example the evolution of the pioneer LendigClub, since 2006, a16z distinguishes 3 phases of market progression: the first, the original P2P one, a platform for meeting supply and demand; the second, the Wall Street one, for which many players appeared on the market by lending money that came from investment funds; the third, the today one called the banking era, for which, given the low rates of remuneration of deposits to companies in the sector, it is worthwhile to make provisions by collecting deposits.
📈2 — J.P.Koning rightly points out how, in the face of the advantages of DLT on blockchain in several respects, the centralized world does not stand still ad wait. Proof of this is the ISO20022 which aims to standardize, among other things, the 24/7 monetary messaging with real-time execution: the model is being progressively developed since 2000, the Chinese have moved in full in 2013, other pioneer countries have followed suit and SWIFT and ECB will begin the transition in 2022.
🇺🇸Dharma, US, allows the API interface between your bank account and DeFi assets, allowing the purchase of tokens directly in USD, in 13 USA states, through ACH. Operational bridge between cryptoeconomy and fiat economy.
Web 3.0 and DeFi
🇨🇳🇲🇴🇭🇰The cross-border movements, for tourism and business between mainland China (Guangdong) and Macao, had interruptions since the beginning of the pandemic for obvious reasons. Meanwhile, the two border jurisdictions devised a blockchain-based clinical data exchange system, which went online on September 23. In one month 17 million people entered Macao and use the platform, with an entry integrity code processing time of 100 seconds and a return time (from Macao to China) of 3 seconds.
In May, Serviços de Saúde de Macau (SSM) and Macao Science and Technology Development Fund (FDCT) implemented a blockchain-based health code system to combat the epidemic; subsequently, mutual recognition was implemented with mainland China’s Guangdong health code system by FISCO BCOS (China’s Open Consortium Chain) and WeIdentity.
The system is replicating with Hong Kong.
🌏Christie’s, the auction house, beated the 21st component of a work, ‘Portrait of Mind’ by the artist Robert Alice, composed of a total of 40 elements. There are two singular factors. The first, each of the components is connected to blockchain through an identification code that cannot be modified on the physical: through it you can know the geo-positioning (historical and current) of each componente on a map and, if the collector allows it, also see it exhibited; here is the overall work becomes decentralized even in its spatial alternations, regardless of its physicality. The second, the 21st element has been sold including NFT, a non-fungible token connected to the identifier, which attests its ownership. So The WEB 3 begins to metabolize the art to its own purposes.
IOTA Foundation has released the pre-alpha for smart-contract integration in its platform, relevant news about the IOT world.
The Social tokens origin from platforms, the most famous of which are Rally and Roll, where influencers with different origins (e-sport, fashion, athletes, etc.) sell themselves to end users eliminating intermediaries. They issue their own crypto on ETH and can use the incoming to interact with the community and/or interact with the outside world to increase the value of their brand.
Filmchain, an English start-up, instead allocates revenues from the distribution of digital products (film, TV…) through functional smart-contract, precisely, to all specific aspects for the sector.
😲
The Financial Times has a blog, Alphaville, dedicated to markets and finance. The blog’s position towards the blockchain is totally questioned with regard to its actual usefulness. Curious.
Jerry Brito and Peter Van Valkenburgh, management of Coin Center, wrote in August as they believe the ideal regulatory environment for BTC &C.. Considering the roles, and what they deal with, they could squeeze a little more.
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Upcoming in-depth analysis: privacy and CBDCs
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