Analysis, forecasts and the last two months of Libra and cryptocurrencies stories
Telegram’s Libra and Gram project
After the slaps in the previous post Libra has made neither forward nor backward steps. On the external side, the most important interest was aroused by the recent externalisation of the Swiss President (and Finance Minister) Ueli Maurer, for whom the project is currently a failure. The explanation is in the composition of the cryptocurrencies basket, so that the central banks whose currencies are contained in it will never allow its birth, given its destabilizing potential towards the national currencies themselves. On the soft-power side, and therefore the path chosen so far by Facebook to interface with the institutions, this may be a possible scenario also depending on what the company expressed in the last balance sheet report. If the theatre changes to hard-power, the clash or the imposition, we do not see institutional instruments such as to prevent the immediate putting on line. The EU has distinguished itself with an aberrant document (also in podcasts and YouTube!!!) drawn up by STOA (Scientific Foresight Unit of the European Parliament). The extravagance (about elusive scientists and scientific method) is expressed in a series of tout-court statements about the possible destruction of the current financial system by Libra without any scientific and/or verifiable support. Unbelievable.
On the internal side Facebook has purchased servicefriend, an Israeli chatbot platform to support customer services: acuired sources have specified the destination of the know-how to Calibra. In mid November an update of the project describes the progress of the ‘beta-test’; in December the white-paper was revised with the elimination of the possibility of distribution of residual dividends to the first investors. Finally, Facebook Pay started, practically a PayPal in fiat currency among users of the group’s platforms. Nothing therefore suggests that the project will be abandoned.
With regard to Gram and TON we are in the midst of the legal diatribe between the SEC and Telegram about the ICO, which has already been mentioned in this blog, and which should have a boost towards February in terms of hearings. Also here a few new ones: investors in the ICO have refused the early repayment proposed by Telegram (cause postponement exit in the market) and the company has issued an open-source test-wallet to try.
The scenario is that both Libra and Gram will see the light by 2020 and that they will prosper at least for the next five years: as the first is expected to have a slower genesis than the plans initially expressed, while the second (which is not a stablecoin) does not see any obstacles to development.
Stablecoin and National Cryptocurrencies (CBDC)
Libra has had the merit, as pointed out in recent months, of opening the debate in 2019 on cryptocurrencies of different kinds and their potential. The institutions are reacting in two distinct ways: first, they realize that the level of the potential clash is no longer the insignificant (in quantitative terms) niche of floating cryptocurrencies (Bitcoin & C.). The stablecoins (call them Libra or something still to be invented), eliminating the uncertainty component of the price, can undermine the current financial status-quo through the formation of parallel and more efficient systems. Big-Ones able to implement them beyond Facebook there are enough: they not only have individual economic and technical power to do so but, above all, any alliances could not be stopped. So the first reaction is to demonize the stablecoins. In this perspective the expressions of fear about monetary stability expressed by the FSOC (Financial Stability Oversight Council of the USA DOT) and ECOFIN of early December (in the part dealing with stablecoins) should be read.
With the same line of reading, based on the threat to the existing one, should be approached the analyses that institutions such as the FSB (Financial Stability Board) and the media expression of the financial establishment make about the danger of Big-Ones come on finance scene, especially on the retail segment.
The second line of institutional reaction is to face with a more efficient technology than the present one which, if adopted indiscriminately, would have serious repercussions on the existence of those financial intermediaries which are reason for life for the institutions themselves. Therefore, the road of non-reviable metabolisation follows two courses: short to medium-term feasibility analyses and a front for adoption in the near future. The first group includes, for example, the ECB with the PEPSI project, which involves 20 European banks, and the P27 Nordic Payment project, between Swedish, Finnish and Danish banks with the blessing of their respective central authorities.
The second trend includes a fairly large and growing number of countries that will enter the market with a CBDC by 2021. The most representative, driven by reasons ranging from the need for control to embargo problems, passing through the actual awareness about the potential of the instrument, are China, Iran, Ghana, Turkey, and, within the EU, Sweden and France.
The scenario is that within the middle of the next decade many CBDC will be on the market, going to change the current balances governing the intermediaries. With the exception of happy islands such as the North European countries, and under current conditions, it is expected that the EU and the US will be destined to chase the technology and experience gap that currently sees Eastern, Arab and even African countries significantly ahead. In this perspective, Big-One’s entry into finance loses significance in terms of parallel financial markets (i.e. proprietary stablecoins and cryptocurrencies) to buy in in terms of alternative services offered to banks.
For those who want to approach the stablecoins here an excellent reference.
Bandits and regulation
CipherTrace in its report does not highlight, qualitatively and quantitatively, particular crimes perpetrated through or against the cryptocurrencies universe. The quarterly analysis does not go beyond the ordinary administration. Instead, attention is focused on the ‘rules of travel’, TRISA (Travel Rule Information Sharing Architecture)
At the beginning of the year, the FATF recommended extending the rules on cross-border transfers to Virtual Asset Service Providers (VASPs). This results in reports that have to emerge when the transaction exceeds certain levels, like cash or bank movements. If VASP is a crypto exchange in theory, at least for the larger ones, there should be no problem. However, CipherTrace highlights the widespread shortcoming of the category in KYC procedures. If you use cryptocurrencies devoted to privacy and/or own wallets (with proprietary hardware, not third-party managed platforms) the issue becomes complicated.
First of all there is the problem of currencies such as Monero or Zcash born for the protection of privacy, according to ChiperTrace however residual in the exchanges aimed at the illicit. The exchangers, or the authorities in their absence, should be able to detect independently the different parameters of the exchanges but for obvious technical reasons this is not possible. During the Crypto Compliance Symposium and the Travel Rule Compliance Conference and Hackaton, both held in San Francisco in June and November of this year, all the privacy-coins representatives expressed the view that it is possible with certain options on transactions to trace the identification parameters. This logic applies when the author of the transaction is charged with an illicit, in his defence, and not for the purposes of preventive control. From another point of view, if the transaction in any cryptocurrencies takes place between autonomous wallets, control is impossible.
The medium-term scenario envisages a tightening of compliance for authorised intermediaries so that they themselves act as a filter for situations such as privacy-coins-like situations. The measures will serve little purpose because if the purpose is illicit, or simply to protect one’s privacy, the use of intermediaries based in Virgin Island type jurisdictions or their own wallets is a solution that greatly circumvents the obstacle. Therefore, to effectively combat the problem, it is necessary to resort to intelligence solutions that in advance damage the digital rights of everyone: ChiperTrace and others in the sector, with their products and solutions, are the concrete case.
Analysis of fintech in the Italian financial landscape by UIF (any comment is superfluous).
Excellent analysis on mass non-adoption after 10 years of cryptocurrencies.
SAGA, a stablecoin model not linked to a particular currency, nor to a basket but to an IMF asset: very good idea.
From Praxxis a possible solution to the upcoming problem of quantum processors and new threats to cryptocurrencies integrity.
The umpteenth story, but very well argued, on the origins of Satoshi Nakamoto.
This is an English adaptation of a neuronal Italian/English AI translation by DeepL