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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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Circle Attempting US Banking License

Cryptocurrency exchange Circle is seeking a banking license from the federal government of the United States. If successful, this would be the first cryptocurrency exchange that becomes an official bank in the United States, which would be a major milestone for the cryptocurrency world.

Becoming a bank would give Circle some important benefits, such as being able to access the central banking system without intermediaries which would allow Circle to settle with other banks in different markets around the world. Also, Circle would be able to store money in the Federal Reserve, as well as take loans at the extremely low inter-bank federal funds rate of 1.75%, freeing Circle from dealing with higher-cost lenders. These benefits would improve the efficiency and reduce the cost of Circle’s services.

Becoming an official bank would also simplify Circle’s regulation process. Cryptocurrency exchanges are regulated differently in each state, but if Circle would become an official federally-recognized bank, it would only have to answer to the federal government. As Circle’s chief compliance officer Robert Bench says, instead of “50 conversations”, Circle would only have to be involved in one conversation.

Additionally, Circle is trying to register itself as a brokerage and trading venue with the Securities and Exchange Commission (SEC). This would give Circle the proper licensing to facilitate trading of digital assets considered to be securities. This is crucial since Circle acquired Poloniex for USD 400 million in February 2018, where there are dozens of cryptocurrencies being traded, some of which could be considered securities. Already, many cryptocurrencies have been delisted from Poloniex following Circle’s acquisition to avoid SEC backlash.

Circle has an OTC trading service that transacts USD 2 billion of cryptocurrency every month, as well as an investing platform where users can put money into various cryptocurrencies but not withdraw the cryptocurrency. Circle also has a pay service where users can send money instantly to people in 29 countries with USD, GBP, and EUR. Deposits held with this service are FDIC ensured up to USD 250,000, like all banks in the United States.

It is only natural that a service like Circle which deals with so many financial transactions and deposits would consider becoming a bank. Only time will tell if the US government will let a firm so heavily involved with cryptocurrency to achieve this.

 

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Digital US Dollar Launched by Goldman Sachs-Backed Startup

A new cryptocurrency by fintech startup Circle, a company backed by Wall Street giant Goldman Sachs, is aiming to be a digital version of the US dollar, writes the Independent.

Circle has announced that the new USD Coin will be free from volatility issues due to it being pegged to US dollar, offering it a stable value in order for it to be used as a working currency, rather than just an investment tool, the company says. Circle also claim it will be a faster and more secure version of the US dollar.

The underlying technology behind the proposed USD Coin will not be decentralized peer to peer, as it’s backed by fiat currency and released by a major financial institution, although it will be an electronic cash system, according to the company.  People will also not be able to mine the USD Coin in the same way other cryptocurrencies can be generated, as the only way to acquire them is to buy them.

It is the second cryptocurrency-related announcement from Goldman Sachs in the space of a month, following news that the bank had plans to open its own crypto trading desk on behalf of its clients. The startup clearly views the backing of Sachs as a huge driver of the project, commenting on its blog post:

“Existing fiat-backed approaches have lacked financial and operational transparency, have operated in unregulated jurisdictions with unknown banking and audit partners, and have been built as closed-loop ecosystems and closed proprietary technologies.”

Matthew Newton, analyst at crypto retailer eToro, sees the move as inevitable, suggesting that this has been coming:

“This shouldn’t come as a huge surprise to anyone who has been paying attention to cryptocurrencies over the last 18 months. Any forward-looking financial institution needs to understand this technology and accept its enormous potential.”

Newton goes on to argue that big banks have been investing in research and development of blockchain and cryptocurrency for some time. The trading platform will be the first of any major Wall Street institution and is expected to add further legitimacy, particularly following so close after Goldman Sach’s Bitcoin futures announcement last month.

There is a suggestion that the company may announce cryptocurrencies tied to other traditional currencies in the future, such as the pound and the euro.

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Circle Invest Adds Monero Functionality

Investing app Circle Invest has announced that it is adding Monero (XMR) to its list of supported cryptocurrencies. Currently, it includes functionality for Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), Ethereum Classic (ETC), Litecoin (LTC), and Zcash (ZEC). Circle allows for instant buying and selling directly connected to user bank accounts.

Monero has a market cap of USD 3.75 billion as of this writing, and is unique from Bitcoin in that it uses the CryptoNote protocol, which obfuscates sender, recipient, and transaction amounts. This makes Monero virtually untraceable, and is a preferred cryptocurrency when anonymity is the priority.

Circle was founded in 2013 and since that time has become one of the most popular places to buy and sell cryptocurrency. The company trades over USD 2 billion of cryptocurrency per month, providing excellent liquidity for traders and investors. Circle Invest doesn’t charge any commissions on investments, making it much more attractive than investing in stocks which almost always requires paying a broker commission. There is a 1.5-2% spread between buy and sell prices on Circle Invest, which is how it makes money, but such a spread is completely normal for a cryptocurrency exchange.

A caveat of Circle Invest is that users can’t withdraw their coins into personal wallets. Instead, they must keep coins in the Circle Invest wallet, and as cryptocurrency prices fluctuate their USD equivalent balance changes. The user can sell their coins at any time for USD which is directly deposited into their bank.

Generally, it is best to move coins into a personal wallet when investing in cryptocurrency, to ensure that coins are fully in possession and secure. However, this makes selling much slower than when using Circle Invest as it takes times to send cryptocurrency from its wallet to an exchange. Also, when buying cryptocurrency from an exchange that allows users to withdraw coins, it generally costs at least 5% of fees, on top of the spread between buy and sell prices, resulting in significantly more costs than when using Circle Invest.

Circle Invest is expected to add even more cryptocurrencies and digital assets in the future in its quest to become the top cryptocurrency investment platform.

 

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