The Chairman of the United States Federal Reserve has said that a globally adopted cryptocurrency system could conceivably remove the need for reserve currencies.
Testifying before the Senate Banking Committee on July 11, Fed Chairman Jerome Powell gave his analysis of whether a cryptocurrency system with global prevalence could diminish — or even go so far as to remove the need for — so-called anchor currencies.
With the U.S. dollar de facto the world’s dominant reserve currency, Powell acknowledged the possibility of a preeminent cryptocurrency redrawing the current financial landscape — yet noted that as of yet, this has stopped short of becoming a reality. The Fed chairman said:
“I think things like that [the obsolescence of today’s reserve currencies] are possible but we really […] haven’t seen widespread adoption. Bitcoin is a good example, almost no one uses it for payments […] it’s a speculative store of value like gold.”
Powell’s comparison is noteworthy given the Federal Reserve Bank of New York’s role as a custodian for the gold held by entities such as the U.S. and foreign governments, other central banks, and official international organizations.
Powell acknowledged that the prospect of cryptocurrencies coming to replace reserve currencies has been implied since their inception and that its realization could see the global financial system — and specifically the Federal Reserve System — profoundly transformed. He noted:
“People have been talking about this since cryptocurrencies emerged, but we haven’t seen it. That’s not to say we won’t — and if we do, then yes, you could see a return to an era in the United States where we had many different currencies, in the so-called national banking era.”
As reported, Powell had testified before the House Financial Services Committee earlier this week and acknowledged that the impact of Facebook’s forthcoming stablecoin Libra could be of a “potentially systemic scale” for the global financial and regulatory landscape.
In China, central banking veterans have characterized the widespread anticipation of Libra as being “inseparable from the global dollarization trend,” and stressed that Beijing should respond with precautions and rigorous policy research to seek to maintain a strong monetary status.
This requirement will come into effect along with other amendments to Canada’s new Anti-Money Laundering (AML) laws next year.
Crypto exchanges will also reportedly be required to observe Know Your Customer policies and report any suspicious transactions to the Canadian watchdog; this also includes keeping records of their clients and hiring a compliance officer for their platform.
A report by The Globe and Mail notes that up until now, compliance with these policies has been voluntary, but some exchanges have chosen to do so anyway.
The motivation for implementing the new policies is reportedly to get Canadian banks onboard and in cooperation with cryptocurrency exchanges.
According to Lori Stein, a partner at business law firm Osler, Hoskin & Harcourt, Canadian financial institutions have historically been concerned about the risk of money laundering and terrorist financing via crypto exchanges. Stein said:
“The hope is that now that there is going to be a requirement to register and comply, and oversight by FinTRAC, that banks and other financial entities are going to be more open to providing services to and dealing with virtual-currency businesses.”
However, Stein points out that some international exchanges may not be willing to comply with the new Canadian rules. Some other experts reportedly agree, saying that having mandatory regulation requirements could result in cryptocurrency exchanges opting to exit from the Canadian marketplace.
The CEO of blockchain startup Bitaccess, Moe Adham, told The Globe and Mail, “I expect to see a number of firms relocate outside of Canada, as well as international firms limiting access to Canadians.”
The new regulatory policies may also drive crypto exchange customers away, some say. “This has the potential to drive cryptocurrency underground again,” said Canadian crypto exchange Coinsquare’s AML officer, Charlene Cieslik. Cieslik said that customers who do not want to reveal their information to exchanges, would likely just transact with each other directly.
As previously reported by Cointelegraph, a bill was signed in 2014 that required some foreign entities to register with FinTRAC for Bitcoin (BTC) payments.
Litecoin (LTC) creator Charlie Lee has predicted that miners may shut up shop after the coin’s upcoming halving this summer.
In an interview with Australian crypto news site Mickey on July 10, Lee reflected on the possible implications for Litecoin’s mining ecosystem when the planned halving kicks in and current block rewards on the network are reduced by 50%. “It’s always kind of a shock to the system,” he said, explaining:
“When the mining rewards get cut in half, some miners will not be profitable and they will shut off their machine. If a big percentage does that, then blocks will slow down for some time. For litecoin it’s three and a half days before the next change, so possibly like seven days of slower blocks, and then after that, the difficulty will readjust and everything will be fine.”
Given that the reduction of mining rewards reduces the cryptocurrency’s supply, anticipation of the halving is generally thought to be accompanied by a corresponding price appreciation — but Lee gave a more nuanced perspective of how supply, demand and market sentiment interrelate:
“In terms of the price, the halvening should be priced in because everyone knows about it since the beginning. But the thing is people kind of expect the price to go up. So a lot of people are buying in because they expect the price to go up and that’s kind of a self-fulfilling prophecy. So, because they’re buying in, the price does actually go up.”
As Mickey notes, Litecoin’s last halving — back in August 2015 — saw the coin peaking in early July of that year, going on to lose almost 50% in value by the time of the block rewards reduction — and hitting a 75% in the halving’s aftermath.
To press time, Litecoin is reporting an almost 36% gain on its 3-month chart, but remains almost 67% down from its all-time highs in December 2017, according to Coin360 data.
Meanwhile, Anthony Pompliano — the co-founder of crypto asset management firm Morgan Creek Digital Assets — has recently predicted that one of the largest drivers of continued price appreciation for top crypto Bitcoin (BTC) will be its halving, citing classic supply-demand economics as a major contributing factor to his $100,000 forecast by the end of 2021.
Billionaire venture capitalist and former senior executive at Facebook, Chamath Palihapitiya, calls Bitcoin the “single best hedge against the traditional financial infrastructure.”
In an interview on CNBC’s Squawk Box, the CEO of Social Capital says,
“We’ve had this conversation for five or six years. I’ll say the same thing I said six years ago when it was at $80 a coin, which is it is the single best hedge against the traditional financial infrastructure. Whether you support fiscal and monetary policy or not, it doesn’t matter. This is the ‘schmuck’ insurance you have under your mattress.”
The founder of Morgan Creek Capital Management, Mark Yusko, says Bitcoin won’t hit another correction until BTC reaches $30,000.
In a new interview on CNBC’s Fast Money, Yusko says he also sees a path that pushes BTC to $100,000 by 2021.
“We’re definitely going to reclaim all-time highs. Over the past nine months since we were together on October 7th, Bitcoin is up 70%. It’s the best performing asset class this year.
And remember we were also together on December 13th on your show in the afternoon and we talked about if $3,100 is the bottom. Look, that’s a long way below here and I think we’re in the next parabolic move that will take us probably into the $30,000 level before we get another correction. I just did a webinar today talking about the path to $100,000 by 2021 is really quite easy to draw out.”
Per Bloomberg, Coeure argued on Sunday in Aix-en-Provence in southern France that allowing for the development of new financial services and asset classes in a regulatory void is irresponsible. He concluded:
“We [financial regulators] have to move more quickly than we’ve been able to do up until now.”
According to Coeure, the development of digital assets has exposed gaps in current financial regulations, and underlines banks’ slow rate of adoption of new technologies:
“All these projects are a rather useful wake-up call for regulators and public authorities, as they encourage us to raise a number of questions and might make us improve the way we do things.”
The ECB has generally approached crypto assets with caution, with one bank official predictingthat crypto will end up as a “complete load of nonsense” in January. The bank has also discussedthe possible benefits and drawbacks of central bank digital currencies.
Coeure’s reaction is in line with the predictions of Jeremy Allaire, co-founder and CEO of payments company Circle. In an interview with Bloomberg released earlier this week, Allaire noted that he hopes Libra will trigger the development of national policies concerning digital assets.
Last week, the United States House of Representatives Committee on Financial Services requested that Facebook and its partners to stop development on the Libra stablecoin. The request came on the heels of a letter from various advocacy groups, urging Congress to implement a moratorium.
On Sunday, Deutsche Bank announced that it would soon make significant cutbacks to its investment bank unit. Reportedly, about 20000 employees could lose their jobs in their process. On Friday, 5th July, the head of Investment Banking, Garth Ritchie, also announced his departure from the firm.
New York and London offices of the largest Germany’s business Bank is expected to experience the majority of the cut-backs.
The current economic situation is upsetting. Europe is facing significant scale problems. Nevertheless, a distressing economy could be a good signal for unrelated assets like Bitcoin and Gold. Anthony Pompliano, the founder of Morgan Creek Digital and a popular crypto-influencer tweeted,
Deutsche Bank plans to fire almost 20,000 employees. Bitcoin has no employees to fire. DB is built for the old world. And Bitcoin is built for the new world.
In most cases, correlation does not mean causation. Nevertheless, the declining currencies of China, the US, the UK, and high inflation characteristics in countries like Turkey, Brazil, and Venezuela is perceived to have a positive effect on Bitcoin.
Moreover, the economic meltdown which could be dubbed as heresy spread by Bitcoin investors, even critics of Bitcoin like Nouriel Roubini has indicated about the adverse financial condition of the world. Mati Greenspan, Senior Market Analyst at eToro also tweeted about the Deutsche bank cutbacks,
The old financial system is dying a slow death. ☠️⚰️ Let’s hope the new one is brighter. 🌞🌈
The low-interest rates from the Central Banks are causing the investment banks reduced profitability. Mati cited that the return at investments is currently <2%. Moreover, while this hardy has a direct correlation with Bitcoin’s positive growth directly, the failure of this economic system could lead to a possibility where Bitcoin’s protocol and limited supply will limit the role of the banks.
Leading Bitcoin proponents, VanEck CEO, Gabour Gurbacs and Whalepanda also commented on the news.
Furthermore, Christine Lagarde, the former IMF chief who has now been appointed as the leader of the European Central Bank (ECB) had also suggested how cryptocurrency is shaking the world economy. She emphasized that the cryptocurrency is attempting to transform the digital the global banking system and not in an adverse way.
In an experimental move this week, Blockstream has created a tool for atomic swaps which is labeled as Liquid Swap Tool. This tool is believed to enable users to trade “trustlessly” easily between tokens launched on its Liquid sidechain. Blockstream plans to use “atomic swaps,” that will serve as the backbone for its newer decentralized exchanges which is currently in development. This specific atomic swap tool is specifically geared for tokens launched on Liquid, a sidechain that’s pegged to bitcoin.
Dogecoin jumps on Binance Listing
Coin listings on prominent exchanges are events that have a positive impact on a coin’s price. That what happened to Dogecoin this week when Binance announced listing of this altcoin. This lead an outstanding 37% price surge. Binance stated in a support notice and via GIF on Twitter that it would commence trading of DOGE at 12:00 GMT on Friday 5 July.At launch, Binance will offer five trading pairs for DOGE including Binance Coin (DOGE/BNB), Bitcoin (BTC), Tether (USDT), Paxos Standard (DOGE/PAX) and USD Coin (DOGE/USDC).
Cuba looks at cryptos to tackle the USA
This week, geo political crises did force a country to turn to cryptos. According to Reuters, Cuba is exploring to use cryptocurrency to avoid U.S.-imposed sanctions. In a public address, Cuba’s President Miguel Diaz-Candel said the plan will raise capital for about a fourth of the population and help pay for reforms. Cuba has felt the waves of financial dismay from Venezuela, which prior to its own economic calamity, was a major source of aid.
eToro add ERC-20 tokens to the wallet
eToro, the social trading and investment platform, has taken another step in its crypto offerings. Its crypto company eToroX announced that it had added 5 Ethereum tokens to the eToro wallet. It is just the first series out of the total 120 Ethereum standard tokens that the firm plans to add to their wallet. The first 5 tokens which have been launched are BAT (Basic Attention Token), MKR (Maker), OMG (OmiseGO), eToro USDX (US DollarX), and eToro EURX (EuroX). The last two tokens of the five listed are stablecoins of eToro.
This week, another wallet added support to Bitcoin’s Lightning Network and its Electrum. According to the latest news, the popular wallet service Electrum has decided to soon to add support for bitcoin’s lightning network. Electrum’s founder Thomas Voegtlin who was speaking BIP001 blockchain event in Odessa, Ukraine, announced that work on the solution for sending lightning transactions with the Electrum wallet is now close to its official release.
Record June for CME BTC Futures
The rise in the crypto market also showed its impact on CME Bitcoin Futures. This week, the CME Group has seen a record massive surge in open interest for Bitcoin Futures contracts. While this surge is considered healthy, many on the street are connecting this towards rising institutional participation. With the growing institutional demand, the open interest for Bitcoin Futures has reached a record of 6069 contracts in June. Moreover, as on June 26, the notional value of Bitcoin Futures traded has hit a record $1.7 billion.