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Crypto Companies Should Focus on Insurance for Value in Flight

Crypto Companies Should Focus on Insurance for Value in Flight_ Crypto Companies Should Focus on Insurance for Value in Flight

Cryptocurrency market as an emerging risk market requires insurance on multiple layers, according to a blog post by Coinbase chief information security officer Philip Martin.

As the cryptocurrency industry matures, so does the need for increased financial security. One way to achieve this is through a contingency system like an insurance program. Martin explained Coinbase’s approach in securing the confidence of its customers if exposed to loss due to the hacking of its hot wallet.

“The data is clear that today, the most likely consumer loss scenario for any cryptocurrency company is hot wallet loss due to hacking. We secured our first policy to address that risk at the end of 2013… If the worst happens and Coinbase loses customer funds, customers deserve certainty that they will be made whole.”

Coinbase insurance program covers both fiat deposits and cryptocurrency holdings in hot wallets, with the fiat deposits covered by the Federal Deposit Insurance Corporation (FDIC). Meanwhile, the cryptocurrencies in the hot wallet are insured by multiple partners. “We currently hold a hot wallet policy with a USD 255 million limit placed by Lloyd’s registered broker Aon and sourced from a global group of US and UK insurance companies, including certain Lloyd’s of London syndicates,” Martin explains.

“Significant programs like ours, especially in emerging areas of risk, are generally put together using a large number of insurance companies who each take positions of loss in a ‘tower’.”

Martin finds misinformation around insurance to be one of the hindrances to adopting insurance. Where companies are rather puzzled by the nature of insurance to adopt, bundled with how much insurance should a crypto company have, and what should it cover? Martin suggested that “companies should focus on insurance for value in flight”, which caters for crime due to hacking, insider theft, and fraudulent transfer of both cryptos and fiat.

Circle and Gemini, as well as most financial companies, use institutions like the FDIC to cover for losses exclusively resulting from insolvency. However, losses due to the hacking of hot wallets are not covered by the institutions due to the nature of cryptocurrency’s unregulated status, hence the need for multiple insurers with sufficient knowledge-base on the risk nature of cryptocurrencies. “[Coinbase has] maintained a commitment to educating and growing the cryptocurrency insurance market,” Martin clarified.

Despite the level of risk in the cryptocurrency industry, and lack of transparency of insurance protocols for most companies, it is clear that insurance companies are indeed warming up to the cryptocurrency markets, though at a very slow pace.

Last year, Bitcoin News reported a new decentralized exchange UnitedCoin’s approach to insurance, where it disclosed a USD 100 million coverage on its hot wallet containing only 2% of the exchange’s funds. Moreover, in South Korea, insurance providers are willing to offer insurance products against hacking to crypto exchanges.

The importance of insurance in the cryptocurrency exchange marketplace cannot be overemphasized, and while many exchange businesses still suffer from the lack thereof, it may, however, soon be a defining factor for customers’ preference in the near future as the industry expands beyond retail cryptocurrency investors and traders. Yusuf Hussain, Gemini’s Head of Risk puts it this way:

“Consumers are looking for the same levels of insured protection they’re used to being afforded by traditional financial institutions.”

 

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World Bank Says DLT Can Drive Cross-Border Payments

World Bank Says DLT Can Drive Cross-Border Payments

A senior financial specialist at the World Bank has released a paper which claims that distributed ledger technology could help bring down remittance costs and improve cross-border payments compliance.

The World bank blog also states the “industry is ripe for disruption“, citing DLT as being well positioned to make its mark. The post was written by World Bank senior financial sector specialist Marco Nicoli along with Rodrigo Mejia-Ricart, research and public policy analyst at the United Nations and Camilo Tellez, head of research and innovation at the Better than Cash Alliance. The post criticizes current traditional B2B cross-border payments as being too slow and points out the faults quite succinctly:

“Moving funds through the current corridors requires transferal through the relevant domestic payment systems, which often have different operating hours and are located in different time zones… For certain corridors, the funds must be routed through several banks and intermediaries before they reach their destination, leading to higher fees and slower payment settlement.”

There is a multitude of options operating within the payment space, making it hard for DLT to find a position which users trust, tied for years to traditional systems, and dependent on them despite their pitfalls. The paper suggests that cost, one major burden for users of current payment systems, could be reduced if existing companies followed models such as Ripple, Circle, Swift, Visa, and JPMorgan, who are all active within the space, and currently bringing new innovations to the cross-border payment sector.

One major area of concern which was seen as a hurdle to the take up of DLT in this sector was a general distrust of such solutions due to industry concerns and misunderstanding regarding the nature of cryptocurrency, borne from the same technology.

Other concerns were raised on the subject of bringing DLT into direct competition with established CBP systems such as security, governance rules for protocols, recourse mechanisms for users, privacy, and scalability.

 

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Ethereum Futures Contract: Net Sentiment Appears Positive

Ethereum Futures Contract: Net Sentiment Appears Positive

The United States Commodity Futures Trading Commission (CFTC) is currently reviewing entries from its Request for Input on Crypto-Asset Mechanics and Markets initiative set up last year aimed at collecting information about Ethereum and the resulting impact of a futures contract based on the digital asset.

After reviewing 43 entries, of which 29 of them seem to provide credible insights into the subject matter, an overall assessment may be that of positive sentiment towards an Ethereum-based futures contract. Of the entries, industry experts such as members from the Ethereum Foundation, Coinbase, Consensys, Circle, Craig Wright, ErisX, among others had provided their opinions about the stance of Ethereum in comparison to Bitcoin – which already has an approved futures contract running.

Highlights from the entries included describing the nature of Ethereum as being essentially a smart contract decentralized application (Dapp) creator first, before being considered a store of value or as a medium of exchange.

The Ethereum Foundation clarified that the intrinsic designs of the Ethereum network are “not financial in nature but simply use the blockchain as a source of high-assurance computation and data storage”.

Circle emphasized on Ethereum’s medium of exchange value: “As with Bitcoin, Ether can be used to pay for transactions and can be used for payments. Unlike bitcoin, tokens on the Ethereum network can be generated using smart contracts and can be used in smart contracts and transfers.”

Another comparison described Bitcoin as simply a store of value and medium of exchange, while with the nature of Ethereum’s versatility, the risks scale alongside, as the Futures Industry Association (FIA) opined: “With the Ethereum Network’s architecture, risk management is potentially more complicated than for Bitcoin by orders of magnitude…”

On the other hand, when the regulator asked about the impact of an approved futures contract on the asset itself, ErisX offered its opinion, suggesting that it would have a more positive impact on the growth and maturation of the market. It believes a futures contract will provide “the potential for greater liquidity, more effective price discovery, and more efficient risk transference”.

Although other players in the industry may have had slightly more critical views about the Ethereum network, the compromise did come at a shared view from larger players on more regulatory oversight on the industry.

The first obstacle to a second official cryptocurrency futures contract in the United States may have been scaled when the Securities and Exchange Commission (SEC) said Ethereum won’t be regulated as security. The second important milestone is an approval from the CFTC, which was initiated when the regulator asked for public opinions about the Ethereum network. CBOE plans to launch an Ethereum futures contract currently awaits the regulator’s approval.

Bitcoin futures contract were launched by Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE) in late 2017, which had a compelling effect on the crypto market, taking it to new all-time highs at the time. One major sentiment in the market is that more derivative contracts would have a similar effect on the market. As such, an approved Ethereum futures contract in the US may bode well for the Ethereum support community since the asset’s market value has depreciated by as much as 94.2% at some point; and currently, its price has dropped 89.6% since it’s last all-time high.

Although cryptocurrency exchange BitMEX currently offers an Ethereum futures contract quoted in Bitcoin and has been receiving positive patronage in recent times, still, the market could be set up for an explosive uptrend should the CFTC grant its approval to the CBOE exchange.

 

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JPMorgan Strategist Predicts Impending Heightened Crypto Interest from Wall Street

JPMorgan Strategist Predicts Impending Heightened Crypto Interest from Wall Street

With much talk in 2018 regarding Wall Street’s potential cryptocurrency uptake somewhat fading towards the end of the year, JPMorgan’s Global Market Strategist Nikolaos Panigirtzoglou is reigniting the flame.

The market needs to grow first, claims Panigirtzoglou, predicting the long-awaited and much talked about rush of institutional investment, but it is not going to be an overnight sensation. He argues: “The stability that we are seeing right now in the cryptocurrency market is setting the stage for more participation by institutional investors in the future.”

Partly, the slow uptake, according to the JPMorgan strategist, is regulators who are still a “bit slow to realize” the potential of the industry. A recent Circle report agrees, pointing out how ICO activity reduced in the second half of 2018 due to increased regulation, putting further downward pressure on the cryptocurrency market.

report points out that stablecoins, security tokens, and institutional crypto, by providing the solution of real-world problems and adding more certainty to the crypto space as a whole, are the next big thing. Last year, Cardano (ADA) co-founder Charles Hoskinson predicted that the entry of Wall Street into the sector would bring in “tens of trillions of dollars”.

Late last year, Wall Street’s previous crypto fervor cooled noticeably, with Goldman Sachs, Morgan Stanley, and Citigroup all shelving much publicized crypto-related products for a future date. Twitter CEO Jack Dorsey is biding his time and certainly holding on to his Bitcoin claiming it is “native to internet ideals”, and as such must be successful. Always resolute in his claims, Dorsey insists that:

“The world ultimately will have a single currency, the Internet will have a single currency. I personally believe that it will be Bitcoin.”

That being the case, Wall Street won’t be too far away when it happens.

 

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They’re Coming: Stablecoins, Security Tokens, Institutional Crypto

They're Coming: Stablecoins, Security Tokens, Institutional Crypto

Circle research indicates that with the hype of the ICO market becoming a distant memory and Dapps development strong, a market trend reversal is possible in 2019 with stablecoins, security tokens, and institutional crypto leading the recovery.

These findings were released in a retrospective report examining and reflecting on the major achievements, events, performance, and activities of cryptocurrency in 2018.

The report reveals that Bitcoin profited from altcoin drops in value in 2018, gaining a 50% dominance as a result. Its fees, along with those of Ethereum, dropped by 90% over the course of the year. The report also showed how ICO activity reduced in the second half of 2018 due to increased regulation, putting further downward pressure on the cryptocurrency market.

Looking ahead to 2019, the report points out that stablecoins, security tokens, and institutional crypto by providing the solution of real-world problems and adding more certainty to the crypto space as a whole. Part of the problem in 2018, according to Circle, was that the kind of projects being invested in had no real-world impact but where being invested in for short-term financial gain.

It cites this factor as leading to the market crash of 2018 which actually lead to the demise of many worthwhile projects along with solid projections with strong foundations and good teams behind them. However, it is some of these more worthwhile projects which the report sees as re-emerging in 2019.

The company backed global exchange Poloniex and USDC stablecoin, and was the first virtual currency company to be approved by the British government and the first to receive a Bitlicence from New York State in 2015.

 

 

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Mixed Bitcoin Messages From Davos World Economic Forum

Bitcoin was the talk of the town in Switzerland last year when the world’s movers and shakers assembled at Davos for the 2018 World Economic Forum, but this year the cryptocurrency demands a far less prominent position at the table.

The comparison is startlingly obvious. From getting a fair degree of attention a year ago at the 2018 Conference, albeit on the way down even then, the cryptocurrencies are less liable to attract the attention of delegates this year, particularly given the current trials of leaders from the US, UK, and France all entangled in their own domestic issues, some of them shared.

Angel Versetti, CEO of blockchain-based company Ambrosus observed: “While last year, people were talking about crypto and blockchain anywhere and everywhere, this year there is comparatively little discussion around it.”

Hardly surprising given Trump’s domestic battle and government shutdown, May’s Brexit squabbles and Macrons’ sea of yellow vests. The subject still comes up though, some fairly hopeful of a market revival, some less, like the advisor to the Bank of England, Huw van Steenis who said that cryptocurrencies weren’t on the list of priorities at this year’s summit, “I’m not so worried about cryptocurrencies,” he commented not unexpectedly, “They fail the basic tests of financial services, they’re not a great unit of exchange, they don’t hold value and they’re slower.”

Not the case at all, according to Jeremy Allaire — CEO of Circle, the Goldman Sachs-backed payments and tech company as he argues that fintech will be dependent on decentralized technology moving forward:

“Crypto is fundamental to the future, and so crypto computing, which is what these blockchain platforms really are, they’re open computing platforms — we need tamper-proof, resilient, decentralized infrastructure if we want society to survive the digital age.”

Allaire went on to argue that Circle was also a huge supporter of central-bank digital currencies, suggesting that the private sector will be the leader in setting the pace for the creation of these centralized crypto assets. However, Jeff Schumacher, founder of BCG Digital Ventures was less optimistic during a CNBC panel discussion as he mentioned, “I do believe it [cryptocurrency] will go to zero,” adding, “I think it’s a great technology, but I don’t believe it’s a currency. It’s not based on anything.”

Next year could be an embarrassment for some of these commentators if Bitcoin hits its expected heights this year as Wall Street comes on board.

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Coinbase Lists USDC Stablecoin

Coinbase, the largest crypto exchange headquartered in the United States, announced today that they have listed USD Coin (USDC), a stablecoin originally launched by Circle, but now Coinbase is listed as a Co-Founder. This is the first time a stablecoin has been listed on Coinbase, and only the 7th cryptocurrency to ever be listed on the platform, others being Bitcoin, Ethereum, Bitcoin Cash, Ethereum Classic, Litecoin, and 0x.

Notably, USDC is an Ethereum ERC-20 token, making it the 2nd ERC-20 token to be added to Coinbase, with the first one being 0x, which was listed less than 2 weeks ago on 12 October 2018. When 0x was listed on Coinbase it was speculated that it would be easy for Coinbase to list other ERC-20 tokens since they use the same backbone technology, and this has already come to fruition with the listing of USDC. There are numerous other ERC-20 tokens among the top cryptos, and in the coming weeks and months, it is likely that Coinbase will keep listing ERC-20 tokens and other cryptos, as per their announcement about listing all possible major cryptocurrencies.

Generally when a crypto is listed on Coinbase they experience the Coinbase Effect, which is a rally resulting from Coinbase users buying the crypto as soon as it is listed. This is because Coinbase is perhaps the most well-known crypto exchange in the United States, and due to the lack of cryptos listed, there is a strong thirst for any new cryptos that get listed.

Since USDC is a stablecoin and pegged approximately to the value of a single USD, its price will not rally due to being added to Coinbase. The way to measure a stablecoin rally or crash is with its market cap since the market cap indicates how much of the stablecoin has been purchased. USDC launched in late September, so the market cap was technically zero up to that point. The market cap grew to USD 10-15 million, until the middle of October 2018 when Tether (USDT), the #1 stablecoin with a market cap in excess of USD 2 billion, had problems and become unpegged from the USD. By 19 October the USDC market cap was in excess of USD 30 million. Following the listing on Coinbase today, the USDC market cap has already more than doubled to USD 62 million.

Since USDT continues to be volatile and is worth less than USD 1, this will give USDC the opportunity to rapidly increase its market cap and perhaps compete with USDT, especially now that Coinbase has listed USDC.

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Stablecoin Race Is On: This Time It’s the UK’s Cryptopound

It’s a frenetic month for stablecoins, and the trend is further accentuated by another development as a London-based startup announces its own plans to develop a cryptopound.

In the US, a stablecoin is a cryptocurrency pegged against the USD, giving it stable-price characteristics, seen by some as a safe hedge against the volatility of conventional cryptocurrencies such as Bitcoin or Ethereum. Currently, they are underutilized apart from when traders use them to guard their positions during bear markets.

Last month, announcements of stablecoin launches appeared to have been coming from east to west, beginning with news of Gemini and Paxos being given the go-ahead to launch their own stablecoins by the New York State regulator. This was followed by Hong Kong-based Grandshores Technology Group announcing a funding round for a Japanese Yen-based stablecoin.

With the proposed launch of an Australian stablecoin last week by crypto exchange Bit Trade and the Emparta infrastructure, followed by the Goldman Sachs/Circle announcement of a US Dollar coin to end the week, this latest move from the UK was almost unsurprising.

After yesterday’s development in the UK, there seems to be no stopping the charge as the London Block Exchange (LBX) announced its plans to launch the LBXPeg, a stablecoin backed by the UK pound. LBX hasn’t named its banking partner yet but has suggested that one-for-one reserves will be held by a third party bank. LBX CEO Benjamin Dives claims this crypto pound is to be the first of its kind to be launched in the UK and is optimistic about the speed of development of the new coin:

“The primary use case will be settlement for OTC trades in the London market, then commonwealth exchanges where they don’t have fiat banking, and then securities tokens who want to pay dividends in a cryptopound… We would be ready for the first cryptopound to be minted in the next 10 days.”

LBX has stated the current stablecoin market needs disruption due to many firms’ lack of transparency, commenting that “many available stablecoin offerings are inadequate for the needs of businesses, traders and consumers” citing  “opaque management structures, distribution schedules, and auditing processes.”

Professor of Economics at UC Berkeley, Barry Eichengreen, suggests that stablecoins, seen by some as highly attractive for investment due to them being pegged to one fiat currency aren’t as stable as the name suggests. He argues that stablecoins contain certain “weaknesses”, and are not only expensive but require a reserve that is equal to or more than the coins in circulation to ensure market stability, making government regulation complex.

 

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Poll Reveals Millennial’s Rush to Crypto Still Male Dominated

The latest cryptocurrency poll has indicated that millennial women are still lagging behind in adoption of cryptocurrency.

A new survey conducted in the US with 3000 millennials, was published on September 12, 2018, by crypto finance company Circle. It revealed that currently, men invest in cryptocurrency at twice the rate of women within the millennial age bracket.

In terms of investment, 71 percent of millennials say that they have kept their investment in crypto below $1000, of which 42 percent invested under $500 and 29 percent invested between $500–$1,000. The bigger spenders or at least those investing more than $1000 represented 29 percent of the poll. 17 percent of men are planning to purchase crypto against 8 percent of women.

The gender gap which has always existed in terms of crypto investments appears not to have narrowed greatly in the US if the results of this survey give a fair indication of who’s investing between the sexes. In the UK, which has become a major crypto hub, particularly for millennials, things have improved significantly over the past year according to a recent London Blockchange poll.

Their poll conducted earlier this year showed that the number of women showing interest in investing in cryptocurrencies has gone from 6 percent to 13 percent over the last six months; almost twice the amount revealed in the US poll. A significant result of that survey revealed that women were far less likely to stress over cryptocurrency, keeping a cool head when making their crypto investments. This inference was drawn from the new Circle poll which suggested that 42 percent of millennial men were “aggressive investors” as opposed to 27 percent of women.

The figures from the Blockchange poll suggested that women in the millennials group are responsible for the increased percentage of women participants in the space, as millennials remain the dominant group worldwide in cryptocurrency investment. Another survey revealed that this group viewed Bitcoin as more trustworthy than big banks.

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Crypto Gains Valuable Voice in Washington with New Lobby Group

A new lobby group has been formed in Washington DC with the express purpose of representing crypto entrepreneurs and investors.

The group, the Blockchain Association, helps to put some further impetus behind the industry in the way it is represented to legislators and lawmakers in the nation’s capital.

Comprised of leaders in the sector, currently made up from  Circle, Coinbase, Protocol Labs and other crypto investment firms, like Polychain Capital and Digital Currency Group, the new lobby group has become the first of its kind, specifically aimed at improving conditions within the cryptocurrency space in the US.

Based in Washington, the group intends to assist crypto and blockchain companies through the law as it relates to the industry, and work with legislators on issues such as tax-law, KYC and AML policy. For industry players, many will be encouraged that the industry now has a voice in the capital, particularly those who welcome prudent voices in the push for regulation.

Detractors of cryptocurrency’s growing corporatization and privatization, however, won’t be convinced even if Coinbase’s chief legal and risk officer Mike Lempres, assured that they weren’t “looking to game the system”.

Recently, Coinbase established its own political action committee (PAC) for the crypto industry, becoming the first of its kind to do so. The role of PACs in the US is that of a fundraiser for candidates running for public office. At the US federal level, an organization becomes a PAC when it receives or spends more than USD 1,000 for the purpose of influencing a federal election and registers with the Federal Election Commission, according to the Federal Election Campaign Act.

Coin Center’s executive director Jerry Brito agreed with Lempres, claiming that it gives their company another outlet for responding to difficult issues:

“We’re happy to see this organization stand up. It’s good to have more voices advocating for things we agree about. But probably more importantly for us, a lot of folks project ‘trade association’ onto Coin Center, and we’re decidedly not that. When we get questions about the industry, we can send them to these folks.”

 

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