In its short history DeFi – decentralised finance – has created billions of dollars of wealth, writes Maxim Bederov, serial entrepreneur, venture capitalist and blockchain technology expert. This niche portion of cryptocurrency seeks to take traditional financial products like lending and payments, and plug them into a crypto-denominated system. It used smart contracts to auto-execute most of its functions, and Ethereum is the underlying platform on which most smart contracts are based. In order for smart contracts to properly execute, Ethereum’s internal transaction pricing mechanism, called gas, must be spent. And we heard last month that Ethereum had smashed all historic transaction fee records as DeFi has ballooned. But the DeFi tide may now be turning. Read more in my recent article. Der Beitrag Is The DeFi Bubble About To Burst? erschien zuerst auf Maxim Bederov. via Maxim Bederov https://www.maximbederov.com/is-the-defi-bubble-about-to-burst/?utm_source=rss&utm_medium=rss&utm_campaign=is-the-defi-bubble-about-to-burst
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When it comes to the European Union, the demands of creating a comprehensive regulatory structure are multiplied. The EU is home to both advanced fintech nations and those lagging far behind, which makes the regulation of crypto even more difficult to negotiate and navigate. It is also one of the reasons that Parliament endeavors to make new rules at the highest level, rather than allow for piecemeal approaches. Unfortunately, there is still suspicion when it comes to potentially loosening the grip of central banks and their ability to control the flow of money, and the EU is well-recognized for its massive financial services regulation. Presently, the EUR is concerned about the relatively recent trend of stablecoins, such as Facebook’s Libra, and the potential of issuing tokens as a mean of creating a private, non-governmental currency. Blockchain transparency remains another ongoing hot topic, yet financial institutions are not prohibited from gaining exposure to crypto assets under current regulations. The EU is working on a roadmap for regulation, which will pave the way for new legislation, challenges and opportunities. Interestingly, the European Banking Authority has changed its tune on cryptocurrency in recent years. Their previous warnings about investing in digital currency are more nuanced today. While it can be challenging to wade through all of the regulations, it pays to stay apprised of the latest guidance from the EU. Read more in my recent article. Der Beitrag European regulatory spotlight –cryptoassets erschien zuerst auf Maxim Bederov. via Maxim Bederov https://www.maximbederov.com/european-regulatory-spotlight-cryptoassets/?utm_source=rss&utm_medium=rss&utm_campaign=european-regulatory-spotlight-cryptoassets Whether you know it or not, the worlds of cryptocurrency and digital banking are moving closer and closer together. And at long last, the crypto industry is coming out from under the once-large shadow of neobanking, otherwise known as challenger banks. If you haven’t yet heard of Chime, Current, Monzo, Revolut, Starling or Varo, I suspect you will soon. These digital banks are raising eyebrows based on their steep rise in the world of neobanks, with growth abetted by their ability to work outside the standard banking system. Just as neobanks have grown, so have their innovative financial cousins in the cryptocurrency and blockchain sector. They are more connected than many realize, particularly when it comes to venture capital, decentralized operations and remote teams spread across the globe. This year offers more opportunity for working together, as cryto players begin to expand further into the neobanking space. Interestingly, 2020 has not been a banner year for neobanks thus far, in part due to the global pandemic and challenging conditions in the United States. To that end, they may be better off if they pivot more services toward cryptocurrency. If traditional banks aren’t already paying attention, will likely end up paying a price for their inattention sooner than later as neobanks and cryptocurrency operations continue to blend their services and work together rather than apart. Read more. Der Beitrag How the cryptocurrency industry is coming out from under neobanking’s shadow erschien zuerst auf Maxim Bederov. via Maxim Bederov https://www.maximbederov.com/how-the-cryptocurrency-industry-is-coming-out-from-under-neobankings-shadow/?utm_source=rss&utm_medium=rss&utm_campaign=how-the-cryptocurrency-industry-is-coming-out-from-under-neobankings-shadow July ruling now allows all nationally chartered banks in U.S. to provide crypto custody services7/29/2020 July 22, 2020 was a significant day for banks in the United States. On that day, the Office of the Comptroller of the Currency (OCC) noted in a letter that any national bank chartered in the United States can provide custody services for cryptocurrencies – finally clearing the way for banks to hold client’s digital assets as well as their traditional ones. Before this time, only specialist firms could hold on to crypto keys and serve as crypto custodians for clients. Banks can now provide both fiduciary and non-fiduciary custodian services for clients. The OCC letter clarifies existing policy rather than creating brand-new policy but is nevertheless big news in the digital and crypto industry. Many U.S. banks have been hesitant to dip their toes in the bitcoin and crypto water, citing compliance and regulations as reasons for not doing so as well as general lack of legal clarity. JPMorgan Chase was the rare example – offering banking services to crypto companies such as Coinbase and Gemini earlier in 2020. This update, however, may heat up such activity in the United States. Abroad, more banks have launched crypto custody businesses based on greater regulatory clarity, and more will likely be expected to follow suit based on new activity in the United States. Interestingly, the OCC is now led by Brian Brooks, a former executive at Coinbase, who as acting comptroller has already spearheaded several updates and reforms that would help crypto companies across the globe. For instance, a new national payments charter would allow start-ups in the crypto industry that provide payment service to bypass certain state licensing. Pay attention to the fine printNaturally, chartered banks will be required to implement “sound risk management practices” for cryptocurrency and encourages secure storage services, according to the OCC letter. In addition, the letter adds that both individuals and advisors should consider the use of a regulated custodian to prevent the loss of their private keys – not to mention critical access to crypto funds. Any U.S. bank that chooses to enter into crypto custody will need to implement storage technology, which could spark smaller custodians that support the larger banks based on their customized, nimble technology. Ultimately, this could lead to more jobs and growth opportunities for banks and custodians alike – there may also be a number of mergers and acquisitions as banks purchase smaller companies based on their IT services alone. Further, banks will be required to “effectively manage the risk and comply with applicable law” when providing crypto services, as with other services, according to the OCC letter. Some questions remainIt remains to be seen how swiftly and fully change will take place. Banks will, for instance, need to determine how they will deliver crypto custodial services, as well as potential exchange transactions and execution, record keeping, tax services and more in relation to digital transactions. Risk management will certainly be a top priority. All in all, the Office of the Comptroller of the Currency is recognizing the need for new technology, new ideas and new innovation as the financial markets continue to evolve. With the crypto industry’s market cap valued at about $285 billion, it is likely more and more banks will start clamoring for these customers. Only time will tell, but a simple letter from the OCC has created a wealth of buzz already when it comes to the potential for new crypto custodians in the United States. Der Beitrag July ruling now allows all nationally chartered banks in U.S. to provide crypto custody services erschien zuerst auf Maxim Bederov. via Maxim Bederov https://www.maximbederov.com/july-ruling-now-allows-all-nationally-chartered-banks-in-u-s-to-provide-crypto-custody-services/?utm_source=rss&utm_medium=rss&utm_campaign=july-ruling-now-allows-all-nationally-chartered-banks-in-u-s-to-provide-crypto-custody-services Cryptocurrencies seem to be establishing themselves as a serious alternative to traditional currencies. Why? Because huge companies like Facebook, with their own currency, the Libra coin, are starting to offer a serious alternative to previous payment methods. No matter whether it is dollars, euros or the British pound. This situation and the increasing spread of partially established cryptocurrencies, such as Bitcoin, are calling entire countries on the plan to do likewise in this area. Different countries think about it, or are already in the process of completing their own country coins, which should be linked to the respective currency.
In this blog article, we look at the developments that are pending here in the near future. At the same time, we examine the question of whether it makes sense at all that different countries should work cooperatively to create a cryptocurrency.
Cryptocurrencies shortly before the breakthrough
It took a full ten years for Bitcoin, the mother of all cryptocurrencies, to be traded on the New York and Stuttgart stock exchanges under state control. The efforts of the respective authorities show that cryptocurrencies are increasingly losing their image of the niche phenomenon and are seen as a serious investment object. Of course, this does not apply to all coins, but almost every day there are more serious opponents on the market. However, this also heralds a new era in monetary policy. The blockchain strategy of the Federal Republic of Germany, which has already been approved by the Federal Cabinet, shows how important cryptocurrencies are already. It recently decided that the development of its own federal coin would be given top priority. The background to this strategy is certainly the burgeoning competition from Facebook and Co. With a federal coin linked to the euro, Germany would have the opportunity to offer a serious alternative in the crypto segment. This would primarily come into play in online trading. China, for example, has been creating a cryptocurrency linked to its own currency for years. Other nations in Africa also want to participate in the crypto segment, but not primarily because they want to be an alternative to Facebook, but to get a grip on corruption in their own country, which is possible thanks to the transparency of the blockchain.
The blockchain is universal – what about supranational cooperation?
Since cryptocurrencies are an issue in many countries, one might come up with the idea of pooling forces and working together on an international project that aims to create a common cryptocurrency. But would such cooperation make any sense at all? I remain skeptical here. There are simply too many open questions that have to be answered before such cooperation can even be considered. At the beginning, the states would have to be clear about what the new currency should be like. What purpose should it primarily serve? The needs of different regions of the world come into play here.
Blockchain technology must not repeat the mistakes of the established currencies
The situation is very similar to that of the euro, where it is repeatedly pointed out that it is too “hard” for Greece or Italy. These countries simply have different requirements in terms of economic orientation than Germany or Austria and would therefore also need a differently oriented currency. A blockchain-based currency faces the same challenges. In the case of Africa and Europe, there are even bigger differences than is already the case within Europe. Europe needs a completely different monetary system than other regions of the world. It is fairly likely that no agreement can be reached in the targeting debate.
Financial experts are certain: discussion is more than overripe
The increasing penetration of our lives by cryptocurrencies makes it necessary to enter into a sound economic and monetary policy discussion. The creation of a cryptocurrency is a more than complex project in which both politicians, economists or financial experts and technicians have to pull together. To do this, there must be a basic consensus on what the future of monetary policy should look like. What are the needs of individual states and the people who live in them? This is a process that will not end overnight. It is therefore all the more important to start this discussion very quickly, because blockchain technology is a fantastic opportunity to revolutionize the economic world.
Blockchain regulation a must
The state regulation of the crypto markets is essential if they want to be taken seriously as a payment method or a store of value. Fortunately, this was exactly what was brought to life at the Intercontinental Exchange in New York in late September 2019. Bitcoin trading is now possible for the first time under state supervision. This creates security and trust in this very young currency, which appeared out of nowhere a year ago. These government regulations will not harm cryptocurrencies, on the contrary, they will even benefit from them. Digital currencies suddenly lose the smack of the criminal and are becoming increasingly accessible to the broad mass of investors – just think of the financial strength of institutional investors.
Cryptocurrencies are paving their way
In truth, no other approach is possible, on the part of the states. Because if one were to ban cryptocurrencies, this would certainly encourage many people to continue trading in this segment unregulated. Everything that is banned has a certain appeal for people. This is why government action is much wiser. State legalization – cryptocurrencies were never banned – allows states to launch their own coins as a serious alternative to Bitcoin, Libra and Co. A very smart move.
The “Libra-Coin” cryptocurrency
In the past few months, the project of Mark Zuckerberg’s own coin has been blowing extremely rough. Various investors and cooperation partners left the digital boat. Still, Facebook wants to help Libra give birth. Whatever the currency, the potential is huge when you consider the two billion Facebook users. These are dimensions that would amount to an economic superpower. Under no circumstances should this project and its effects be underestimated. This is exactly why an in-depth discussion is more than overdue. Hopefully further regulations will follow, so that any damage can be averted from the global economy.
Conclusion
As a financial expert, I primarily see the opportunities of cryptocurrencies. These seem to have outgrown their infancy and set about revolutionizing our everyday money life. Neither politics nor the economy have yet found definitive answers on how they can be meaningfully integrated into our lives. One thing is clear to me as a financial expert: State regulation is the productive ground on which these currencies grow and can provide added value for everyone involved. The trust that this creates can subsequently be used by governments in creating their own cryptocurrencies and thus ushering in a new era of monetary policy. Then we are spoiled for choice as to which forms of payment we would like to use more and which not.
Further article: Selling is easy with the right tips and attitude! Blockchain technology will change the future Investment tips: Precious metals Der Beitrag Develop cryptocurrencies on your own or together? erschien zuerst auf Maxim Bederov. via Maxim Bederov https://www.maximbederov.com/develop-cryptocurrencies-on-your-own-or-together/?utm_source=rss&utm_medium=rss&utm_campaign=develop-cryptocurrencies-on-your-own-or-together What are Neon Banks and How They Operate?Neon banks refer to digital banks. It does not have any offices or physical location where you can carry out the business. You are free to manage your bank account through computers and smart phones. With neon banks you get to open bank account for free. You receive Mastercard for making payments and cash withdrawals, and a mobile app which will allows you to transfer money to other accounts and make bill payments. With your neon banks, your funds are completely insured. In case the bank goes bankrupt, you can claim the amount.
The purpose of neon banking is to provide digital and free banking to the public, finance professionals and others. They do not own big offices and many employees. Thus, they do not have expenses like office rent, big bonuses for employees, and other bills. This way they can afford to offer very good interest rates and prices to their clients, which is not the case with many big and renowned banks. Opening an account in neon bank does have some limitations. It is not for people who do not pay taxes or are under the age of 16 years.
Maxim Bederov talks highly about digitalization and neon bank is a free digital bank, which allows clients to enjoy banking services through their smartphone. It is time saving and cost effective solution even for finance professionals and others. The most important benefit of neon bank is that they do not have to worry about their employees, offices, etc. All their focus is directed on their mobile application and their digital products. They do not even need a banking license because they are not a bank. The money is managed by the official bank, which is affiliated with the neon bank.
The services of Neon bank are entirely free for its users. Opening a bank account is free, downloading the mobile app is also free, and availing all the banking services is also absolutely free, which I believe is a great thing. The credit issued by neon bank is also free. It does not have any annual fee, which is most important because credit card has to be free of cost.
Future Banking System
As per Maxim Bederov, Neon banks are the future of banking system. People do not have the time to stand in long lines at banks to get their transactions done. Everything is digitalizing and banks are also adapting this technological innovation. They are moving towards mobile apps so people can do business transactions, payments and transfers at any time. Regular banks have many bugs in their mobile apps but that is not the case with neon banks. They put all their effort and focus in providing smooth customer experience through their mobile apps. You just need to have a good internet connection and a smartphone.
Neon banks are not only good for finance professionals but also great for general public. These days people seek ease and convenience. They want to view their bank account whenever they want to and want transactions just a click way. The banking industry has no option but to move towards digitalization because some bank transactions require paper work like making pay order or bank draft and it is becoming hectic for finance professionals and others to go to banks and do the paper work. Everyone seeks simple solution. The neon bank apps are also very easy to use. You do not need to have advanced knowledge about technology in order to use neon bank apps. Most millennials are attracted by neon banking system because it syncs with their current lifestyle, everything on smartphone and just a click away.
Neon banks are reshaping the banking experience and improving customer experience. With the mobile apps installed in phones, neon banks are embedding themselves into the daily lives of their clients and this is where the banking system is headed. When people have access to their bank accounts through their mobile phones, they feel more connected to their banks. Furthermore, customers also feel more secure when they decide a password for their bank accounts on their mobiles. This way they feel in control of their bank accounts as well.
Future of Banking System
Millennials want everything on their smartphones nowadays, so they have everything within their reach. The future of banking system seems to be digitalizing, which is only possible through neon banks. regular banks cannot handle mobile apps and bank offices at the same time. It is about time banks divert their focus on improving customer experience through digitalization.
Read more Articles from Maxim Bederov: Why You Should Definitely Invest in FINTECH Customer Service – The Basis Of The Bank Of The Future! The 3 Biggest Mistakes You Can Make When Investing Part 2 Der Beitrag Neon Banks and What the Banking System of the Future Could Look Like? erschien zuerst auf Maxim Bederov. via Maxim Bederov https://www.maximbederov.com/neon-banks-what-the-banking-system-of-the-future-could-look-like/?utm_source=rss&utm_medium=rss&utm_campaign=neon-banks-what-the-banking-system-of-the-future-could-look-like The secret to becoming a successful investor is to avoid simple mistakes. The first thing to remember is that most investors never make it big in the stock market. If you are lucky, you won’t lose too much, but realistically, the best you can do is stay even. I study all the research papers, case studies and blog posts I can find and in my opinion, there are three major mistakes the average investor will find expensive in the long run.
1. Buying Only The Companies They Know
It’s natural for investors to be drawn towards companies that they are already familiar with. However, there are more than 6,000 stocks available for purchase on the U.S. market. By, focusing only on big names, you risk missing out on a hidden gem. Such tunnel vision limits your pool of investment opportunities from thousands of stock options to just a few dozen, or less. This approach is destined to hurt your profits in the long run. It is a proven fact that many of the highest returns are earned on companies most people don’t even know exist. I always ask myself if the stocks I currently hold in my portfolio are the best choice for my money or am I just holding on to them because I’ve seen the company’s name in the paper or in ads so often? Am I giving them unfair preference? It’s easy to follow the crowd and jump right in with the big boys everybody knows. But, in many cases it’s the unknown or less-exciting companies that turn out to have stocks fly through the roof. Try to keep an open mind when considering which stocks to buy.
2. Buying Buzzworthy Companies You Like
Just like buying familiar stocks, many investors opt for stocks in companies they like or can brag about. These buzzworthy companies might be tempting, but they are not always a wise choice. For example, just because you like a certain product doesn’t mean the company is necessarily a good investment. There are many more things to consider. It’s true that great products does usually mean the company stands to prosper, but not always. Do your homework. Choose an investment strategy based on research and not the latest fad.
3. Not Owning Enough Stocks
Research suggests it’s wise to own stocks in about 10–30 different companies. However, some investors buy just a few, seriously concentrating their risk. It’s like putting all their eggs in one basket. Even the hottest investors only pick winners about fifty to seventy percent of the time, so spreading out your investment dollars over more stocks greatly improves your odds of hitting a winner.
A final word from Maxim Bederov
Every investor makes mistakes. Remain open to new ideas and investment opportunities and always keep learning how to improve your investment strategy.
Read more articles from Maxim Bederov: Investment tips: Industrial metals Character Skills of a Successful Leader Der Beitrag The 3 Biggest Mistakes You Can Make When Investing Part 2 erschien zuerst auf Maxim Bederov. via Maxim Bederov https://www.maximbederov.com/the-3-biggest-mistakes-you-can-make-when-investing-part-2/ In many ways, the digitalization of our world has made life so much simpler than it used to be, yet we are now dealing with high levels of complexity on a scale like never before. As a finance professional and IT specialist, I am often asked about the role that technology and specifically digitalization has on our world.
IT Specialist, Maxim Bederov, examines the role that digitalization plays in our life
The fact of the matter is that technology is now everywhere and change is happening daily. As an entrepreneur, I rely a lot on digitalized records to keep track of my day. Whereas in the past I would probably have relied on an address book, notepad or Filofax, nowadays life is a lot simpler because I can simply access everything in one place.
There are downsides to this, however. While having access to all our information stored digitally on a single device or in the Cloud is great, everything soon grinds to a halt if we run out of power, we lose our device or it breaks. Not only that but there are a number of security issues that are raised by having sensitive information available on a single device. To counter this Cloud storage facilities are on the increase and are a great way of ameliorating this well-known downside of digitalization.
The digital world has expanded and because it makes access to information so much easier it has worked well to make us more productive. Like most professional people I travel a lot and rely on the digitalization of my professional and personal information to make sure I have access to everything when I need it. However, the ability to access huge amounts of data at all times can become a source of stress and if it all goes wrong we can end up feeling extremely frustrated and end up with additional expenses to try to put things right.
Even the process of getting from one place to another is facilitated by the digital world. Like many others, I no longer use paper maps but instead rely on the digital information presented to me using GPS devices to move from place to place. The ability to book travel, make reservations and get everything established and paid for before I leave, is something that certainly makes my life a lot easier. Having everything on my device can mean that I move through the airport more efficiently, check in to my hotel and arrive at my destination ready to start work. Again, this can become more complicated if your device breaks or you find you are in a location without internet access.
Maxim Bederov on digital solutions
The best digital solutions are those that have a proven track record when it comes to user experience, user interface and reliability and it is always better to choose function over design. If something looks good but does not do what you want it to, it can add a layer of complexity that no one needs. A cumbersome app or a hard-to-access cloud storage facility can lead to a great deal of frustration and wasted time.
Most entrepreneurs leverage digital solutions to make life easier and to conduct business more smoothly. As with many things if often pays to keep things simple and stick with tried and tested brands.
Read more articles:
Der Beitrag Digitalization – How our world has become both: more complex and more simple! erschien zuerst auf Maxim Bederov. via Maxim Bederov https://www.maximbederov.com/digitalization-how-our-world-has-become-both-more-complex-and-more-simple/ Maxim Bederov explains the difference between risks and risky behavior and how he applies his thinking in his investments and business life!I’m often asked, ‘as an entrepreneur, should I be cautious or confident, do I take risks, or should I avoid them?’ Being an entrepreneur is going to require that you travel in directions that others haven’t. There is no guarantee that every investment will pay dividends, and not all of your business ventures are going to be a success. That’s what being an entrepreneur is all about! You have to be comfortable enough with your business skills to understand when something is a risk, or it’s just risky behaviour. There are a lot of moving parts in any business or investment venture. Taken as a whole, you’re trying to get from point a to point b, but there are many small steps that you need to take to complete the journey.
Is It Risk or Risky Behavior?Every business involves a certain amount of risk. You don’t become a finance professional without having taken some risks during your career. It’s how you manage those risks, which define the difference between risks and risky behaviour. Starting a new business venture or making an investment involves risks. Even the safest investment could end with losing all of your money; however, if you take the time to plan your business or research that investment, you’ll be minimizing the risks, but you can´t fully avoid them. The longer you spend researching and planning different contingencies, the less risk there will be. Rushing into an investment or business venture as an entrepreneur would be considered risky behaviour. Just because you consider yourself an entrepreneur, it doesn’t mean that you have to take unnecessary risks or practice risky behaviour.
Risk And Risky Behaviour with Maxim Bederov ConclusionWhen we build our investment portfolio or we start a new business venture, there are factors that we are taking a risk on. It’s how reasonable or unreasonable are those risks. Could the risk ultimately end in your financial ruin or destroy your reputation? Sometimes it’s possible to rebuild a fortune, but once you destroy your reputation through risky behaviour it’s hard to recover. Many people consider that reputation is the new currency. It’s something that you can’t buy, only earn. Are you practicing taking risks, or is it just risky behaviour? Analyze someone of the business decisions which you have made and identify whether you were taking calculated and educated risks based on your planning and information, or was it just risky behaviour on your part? Der Beitrag What Is The Difference Between Risk And Risky Behaviour? erschien zuerst auf Maxim Bederov. via Maxim Bederov https://www.maximbederov.com/what-is-the-difference-between-risk-and-risky-behaviour/ The influential policy committee of the Bank of England has put forward concrete proposals for how regulators could deal with Facebook’s controversial Libra project.
A 9 October document released by the central bank’s Financial Policy Committee states that while the payment stablecoin “has the potential to be…systemically important”, bankers will need “access to be able to monitor payment chain information”. Crucially, it emphasises that the “terms of engagement for innovations such as Libra must be adopted in advance of any launch”.
Since June’s launch of the Libra white paper, we have seen a torrent of complaints, recriminations and barely-concealed alarm from legislators. Rumours began circulating last year that Facebook was developing its own cryptocurrency in secret, referred to internally as ‘GlobalCoin’. By December 2018, reporters had noticed Facebook’s blockchain division was hiring like crazy, poaching talent from other promising crypto start-ups.
In response to a Bloomberg article that followed, claiming Facebook was developing a stablecoin to roll out cryptopayments on WhatsApp, a spokesperson would only say: “Like many other companies, Facebook is seeking to leverage the power of blockchain technology. This new small team is exploring many different applications. We don’t have anything further to share.”
Almost a year later, we now know Facebook was working on the most contentious project in its history. Libra is “a new decentralized blockchain, a low volatility cryptocurrency, and a smart contract platform” all rolled in to one.
Facebook framed the development as a uniquely democratic form of progress: providing financial services for the unbanked and the poor. Anyone with a $40 smartphone could use the new currency, they argued. But Libra put Facebook squarely in the crosshairs of financial regulators.
Storm brewing
Adding an entirely new privately-issued currency onto Facebook’s bad habits — famously scraping data on its vast audience, then allowing third parties to access that data for political or monetary gain — has officials seriously concerned.
Within hours of the white paper landing, European Data Protection Supervisor Giovanni Buttarelli outlined concerns over Facebook’s push into cryptocurrency, flagging “any further concentration of personal data” as posing “additional risks to the rights and freedoms of individuals.”
The director of the People’s Bank of China (PBOC) research bureau told a fintech conference in Peking that Libra was nothing less than a threat to China’s monetary stability. Wang Xin warned that Libra would function like money, be widely used for cross-border payments and so have a huge influence.
“Sovereign currencies would coexist with US dollar-centric digital currencies [and] there would be in essence one boss, that is the US dollar and the United States [bringing] a series of economic, financial and even international political consequences,” he said. The PBOC was one of the first central banks to study cryptocurrencies, beginning research in 2014 and launching a dedicated institute in 2017.
Indeed, the latest reports via Der Spiegel and Reuters suggest Libra will be backed by five currencies, chiefly the US dollar, and crucially, not involving the Chinese yuan.
US lawmakers did not gloat over Libra’s US dollar-centricity, though. Almost immediately, the head of the US financial services committee Maxine Waters urged Facebook to halt all development on Libra until regulators had had a chance to consider the ramifications of a private currency controlled by an entity “already in the hands of a quarter of the world’s population”.
Senators pulled David Marcus in front of their Banking Committee in July 2019. Marcus is a former PayPal exec who took over Facebook Messenger in 2014 and is now the head of Calibra. Calibra is Facebook’s digital wallet, which will hold and store Libra coins and process payments. Facebook say Calibra will be available across Messenger and WhatsApp and will launch in 2020.
The Committee was not impressed by Marcus’ performance, even as he took pains to ask for help and support from regulators.
Senator Sherrod Brown established the mood in the room by stating: “Facebook is dangerous. It doesn’t intend to be dangerous but it doesn’t respect the power of the technologies…they are playing like a toddler who’s gotten his hands on a book of matches, burned down the house over and over, and called every arson a learning experience.”
The financial watchdogs began to circle. Across the EU, antitrust regulators are now probing Libra to see if it poses a risk to competition. The FATF, a powerful intergovernmental organization that proposed the cryptocurrency ‘travel rule’ to combat money laundering and terrorist financing, said it was “closely monitoring” Libra too.
And governments have fired warning shots across Facebook’s bow. France’s Minister of Economy and Finance Bruno Le Maire said told an OECD blockchain conference in Paris in September the “privatization of money contains risk of abuse of dominant position, risks to sovereignty and risks for consumers and for companies.”
“I want to be absolutely clear. In these conditions, we cannot authorise the development of Libra on European soil,” he said.
Germany then added its voice to the chorus of disapproval. MEP Markus Ferber warned that Libra could turn Facebook into a “shadow bank” operating outside sovereign systems.
Devs rush ahead
Headquartered in Switzerland, the Libra Association developing Facebook’s stablecoin is insulated from the political firestorm its management now faces. Developers posted in a 2 October update that they are making “good progress” on building the Libra blockchain.
Libra’s ‘Pre-Mainnet’ is now up and running, as per the diagram below, but it is still in its private phase.
“A handful of partners has already deployed their nodes and have them communicating with each other,” the team reports, with “the end goal for all partners to have nodes deployed on the network.
The next phase of development will see Libra issue a testnet to take them from private to public, as per the image below. This main net could be just months away from launch, based on current calculations.
More than just Libra
The issue of very rich, resource-heavy private companies issuing their own currencies is one world economies will face more and more in the next five years.
Whether all of them are intending to become “shadow banks” is a moot point.
The idea was popularized 40 years ago by Nobel prizewinner Freidrich Hayek of the Austrian School of economics. His 1976 book ‘Denationalisation of Money’ proposed that there could be many competing currencies not issued by centralized banks. Government-issued currency “has the defects of all monopolies,” he wrote. “One must use their product even if it is unsatisfactory.”
In August Walmart — itself a $338bn company — filed its own patent for a cryptocurrency-like stablecoin. This dollar-backed effort apes Libra in many ways.
As Senator Mike Rounds told David Marcus in the Senate committee hearing: “I think you’re going to have a lot of competition. I think there’s going to be a lot of different organizations that understand that this is the wave of the future.”
Der Beitrag Libra heralds Brave New World: if it can stand up to regulation erschien zuerst auf Maxim Bederov. via Maxim Bederov https://www.maximbederov.com/libra-heralds-brave-new-world-regulation/ |
AboutMaxim Bederov is a fiscal entrepreneur, IT specialist and investor from Europe. With more than two years of many years of experience in IT digitisation and blockchain technology and expertise in financial services, he founded one of the earliest mutual funds. ArchivesNo Archives Categories |