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State of Stablecoins 2019 Report: ”A Giant Educational Resource”

State of Stablecoins 2019 Report: ''A Giant Educational Resource''

Published today, 20 February 2019, a new report into the state of stablecoins shows the most popular blockchains they have been built upon, their most popular use cases and how the companies behind them view regulations.

The findings of the State of Stablecoins 2019 Report have been compiled from responses to a survey that was issued to all companies that are actively working on stablecoin projects. Over 40 of these companies responded to this request, with the report notably boasting contributions from emerging thought leaders in the industry such as Nevin Freeman, CEO of Reserve, Jonas Karlberg, CEO of AmaZix, and Michel Rauchs of the University of Cambridge.

Bitcoin News also caught up with the lead author of the report, blockchain analyst George Samman , who shared just how important he believes stablecoins will be for the future of money.

Key findings

Note: These responses pertain to 38 tabulated surveys. Some participants declined to answer certain questions; these responses are not included.

  • 68.4% (26) of the stable coins were built on the Ethereum blockchain, Stellar was the second most popular choice with 7.9 % (3) choosing its native blockchain.
  • 52.6% (20) aimed to be a currency, store of value, or medium of exchange.
  • Transparency was the top factor influencing market confidence, claimed 34.2% (13) of respondents.
  • 36.8% (14) viewed the related industry regulations favorably.

While acting like a currency, store of value, or medium of exchange was the most popular target use for the surveyed stablecoin companies, other projects said they were looking to offer a variety of alternative financial services, including the provision of a credit or loan facility, trading facility wage options and facilitating gold trading.

One in three of the surveyed participants regarded regulations favorably, with some saying they believe stablecoins will likely be viewed more favorable than conventional cryptocurrencies in this regard. A number of the companies had already successfully achieved a fully compliant status, although 13.2% (5) had an unfavorable view of regulations altogether, saying self-governance and complete decentralization where crucial for the nascent industry. A common view between these groups, however, was the need for clarity in regulatory oversight

The report takes several examples of failing fiat currency, focusing on the cases of Venezuela and Angola, to highlight why stablecoins can take their place as a successful alternative to the failings of monetary policy. 5 main factors are given to illustrate the weaknesses of fiat not only in these cases but with government-issued currencies on a macro scale: 1) it is backed by nothing, 2) there is a centralized authority controlling interest rates and the money supply, 3)unsustainable global debt levels, 4) unfunded liabilities and 5) military spending.

The paper also acknowledges several of the weaknesses attributed to the different categories of stablecoins. IOU insurance, or real asset-backed stablecoins, require a third-party custodian to secure the physical reserves, also requiring strong regulatory oversight to ensure transparency. Crypto-collateralized stablecoins can have high volatility, with their longevity dependent on the performance of said cryptocurrency. They are also vulnerable to hacks as the collateral rests on the blockchain. Seigniorage shares, or non-collateralised stablecoins, remain highly controversial, with the highest vulnerability to cryptocurrency market crashes, with liquidation not possible during these periods.

Stablecoins: taking over money as it stands today

First setting up the context of the report with a brief history of money and why it has become an unstable concept for many regions, the report continues on to discuss the retaliatory rise of cryptocurrency and stablecoins, noting the different types of stablecoins and how the space is developing. Many of the projects that are building different categories of stablecoins are surmised, with much of the content collected from the surveys cited within the report.

Sammon relayed to Bitcoin News largely optimistic feedback regarding stablecoins from the contributing sources, saying many were “intrigued with the concept”.

When asked why it is so important to better understand stablecoins, the author responded:

“Money systems are broken in many parts of the world. Many governments have lost control of their monetary policy and it has destabilized countries and reduced their wealth… Inflation and hyperinflation are more common than people think and having a stable and transparent money option can solve a lot of problems for those afflicted by bad monetary policy.”

Sammon believes this failure of the state has given non-government issued currency and stablecoins the ideal opportunity to offer an alternative solution.

Although there has been a great interest in stablecoins in the past year with several dedicated reports already having been published, Sammon says the addition of a questionnaire involving 40 companies in the industry is something unique this report can claim.

“It becomes a giant educational resource for anyone interested in money and why stable coins are an evolution of money,” he told Bitcoin News.

Samman thinks that stablecoins will evolve past the asset-backed subcategory dominant today, primarily because many of these are backed by fiat which are themselves inherently unstable, with most fiat currencies failing to last beyond thirty years. Instead, crypto-collateralized and algorithmic stable coins may well prove to be the bigger innovations in the field, competing to become the decentralized banks for the internet.

“Personally, I feel these projects and the ones that aren’t tied to traditional financial institutions hold the most promise”, said Samman.

 

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Turning Back the Clock: Investor Pays Almost $20,000 a Bitcoin in Trading Gaffe

Turning Back The Clock: Investor Pays Almost ,000 A Bitcoin In Trading Gaff

Due to a glitch this week, a small Brazilian cryptocurrency exchange turned back the clock selling cryptocurrency at 2017 prices which finally hit USD 19,000 by the end of the day.

The problem was down to a local exchange TemBTC selling to a trader who placed a large market order, which effectively “cleaned” the platform’s thinly-traded order book. Records indicate that Bitcoin was also bought for USD 16,000, USD 13,000, and USD 10,000 before mirroring the 2017 peak rate.

TemBTC’s founder Renato Abreu said that the order was placed by “someone with little knowledge who issued a large market order.” The episode saw the trader pay a price above that of bitcoin’s all-time high on Brazilian exchanges, which was of USD 18,900 in December of 2017.

Luckily for the trader, he was buying a small amount purchasing 0.0047 BTC for 340 Brazilian reals, which at the time was worth about USD 91 rather than its value of less than USD 15 on other local exchanges. At that price, a Bitcoin would have cost the buyer over USD 19,400.

Brazil has experienced a groundswell of interest in cryptocurrency despite the country’s new president, Jair Bolsonaro, recently shutting down an indigenous cryptocurrency project. Bolsonaro’s pledge to open the “black box” of contracts and projects by state-owned economic development bank BNDES and other institutions does not augur well for the country’s indigenous population, who stood to gain from the issue of their own regional cryptocurrency as part of an innovative project to support minorities.

TemBTC, like other exchanges, has gained much encouragement from the rising levels of cryptocurrency trading in Brazil, with their daily trading volume reportedly hitting 2,000 BTC recently. Abreu indicated that the volume increase has been due to the “registration of large players” on the exchange.

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Miners Concerned Over Russia’s Planned Internet Shutdown Test

There are growing concerns is Russia’s cryptocurrency community that the cyberwar internet shutdown tests scheduled to take place before 1 April could impact Bitcoin mining.

The Digital Economy National Program, a new law recently drafted, will require Russian ISPs to be able to operate if the country is isolated online and as such the government is planning to monitor its effectiveness through the internet shutdown. The law suggests measures including building a Russian version of the net’s address system, DNS (Domain Name System).

Leonard Levin, the chairman of a Russian government technology committee says argues, “The calls to increase pressure on our country being made in the West oblige us to think about additional ways to protect Russian sovereignty in cyberspace.”

How will the shutdown impact Bitcoin miners who are totally reliant on internet connectivity? Bitnodes figures suggest that there are 10,476 Bitcoin nodes of which 291 (2.78%) are located in Russia, compared to 271 nodes (3.02%) on the Ethereum network.

In theory, Bitcoin mining could connect to Blockstream’s satellite network and circumvent disruptions. The Blockstream satellite is a one-way network, but the user still needs a connection to the Bitcoin network to send transactions, which can include SMS gateways. The network comprises four satellites across six coverage zones including the Asia and Pacific region, allowing users to send data over its network.

The Russian government has agreed to cover any costs for the shutdown, which will be backed up by an intranet, to compensate internet provers needing to modify systems by installing servers to redirect and filter web traffic.

 

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Virginia Police Retirement Fund Sets Sights on Bitcoin with $11 Million Investment

Part of a police retirement fund in Fairfax County Virginia is to be invested in the cryptocurrency industry as part of a plan to allocate money towards safe investments.

The allocation of retirement funds will be invested through Morgan Creek who will use the fund to invest in companies such as Coinbase and Bakkt, among others. Morgan Creek, which invests in blockchain companies, is to use USD 40 million from the two Fairfax county pension plans and other institutions.

The Virginia retirement system has invested USD 21 million into the fund with USD 10 million coming from the county’s employee’s retirement fund (0.3% of total assets) and USD 11 million from a police retirement fund (0.8% of total assets). This meant just under 1% of total assets were dedicated to cryptocurrency ventures. In the opinions of Fairfax County officials though, the funds are seen as a safe bet for retirees:

“All investments involve risk and this investment is no different. However, as they would do with any investment, Fairfax’s investment team determined that the expected returns from this investment were in line with the level of risk incurred. This also played a big part in how much was invested.”

Morgan Creek has convinced Fairfax county to invest up to 15% of retirement funds into cryptocurrency projects although Fairfax County Retirement Systems Director Jeff Weiler has said that “no more than 15% of the funds will be invested in actual cryptocurrencies and, to-date, the Fund has no exposure to any cryptocurrencies”.

Morgan Creek’s Anthony Pompliano believes Bitcoin could still go below USD 3,000 although he points out that a recovery to USD 5,000 would result in a USD 5 million investment in Bitcoin returning a USD 1.9 million profit.

 

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Cryptopia Gets Green Light to Reopen After Hacking

Cryptopia Gets Green Light to Reopen After Hacking

New Zealand cryptocurrency exchange Cryptopia, which was hacked almost exactly a month ago, has been given the green light to reopen as local police wind up their inquiries.

Cryptopia has over 2 million global users and offers trading for one of the world’s largest range of cryptocurrencies. January’s hacking resulted in the loss of some $USD 6 million worth of cryptocurrency which warranted the company notifying its users that it had “suffered a security breach which resulted in significant losses”.

The body investigating the breach, New Zealand’s High Tech Crime Group, have indicated that although the exchange if free to open, some of its team will be remaining on site to complete their investigations. The police have not expressed any indication of laying any charges at this stage.

Experts from data company Elementus believe the stolen cryptocurrency could amount to USD 23 million dollars which comprise Ether and ERC20 tokens, and reports indicate that the attack could have even continued even after the investigators arrived on the scene in January.

Cryptopia surprised New Zealand’s crypto and banking community at the end of last year when it announced that it had plans to relaunch the New Zealand dollar stablecoin (NZDT) in Q1 2019. The NZDT was originally launched in 2017, with daily trading volume rallying to NZD 1 million per day. This spooked ASB, the bank that Cryptopia was working with, since proper know your customer (KYC) and anti-money laundering (AML) laws were not in place. Fortunately, the orderly termination of the NZDT stablecoin gave customers a month to convert their tokens back to NZD.

Despite the green light, Cryptopia founders Adam Clark and Rob Dawson have not indicated exactly when they plan to resume services for its huge customer base.

 

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Bank Outages Show System Vulnerabilities Bitcoin Users Avoid

Bank Outages Show System Vulnerabilities Bitcoin Users Avoid

As the traditional banking system continues to incorporate electronic and digital payments, the latest Wells Fargo outage illustrates that all is not well in the light of similar events this year with other major card service suppliers.

With the US’s fourth-largest bank by assets falling foul of an ATM glitch in its system last week, denying customers access to their funds, Bitcoin- and cryptocurrency-dedicated websites and blogs wasted no time in pointing the way to hassle-free access to savings. Even though Wells Fargo suggested they had fixed the issue, customers continued to be shut out of their accounts on their computers or smartphones for days.

The company really didn’t need this problem after the most ironic case for cryptocurrency investors last year when Wells Fargo was hit with a USD 575 million settlement after scamming its customers over a period of 15 years; this after they had conducted their own poll of US investors in 2018, claiming a skeptical 72% majority “have no interest in ever buying Bitcoin” and 75% who find Bitcoin to be “very risky”.

As banking institutions race to upgrade systems, some admitting that blockchain may be a bonafide solution to the problem, outages continue to plague the banks. Both Mastercard and Visa went down in the space of a few weeks in July last year, both companies receiving a deluge of customer complaints from those unable to complete payments, along with a barrage of crypto tweets advocating Bitcoin.

In Europe, Spanish-owned British bank TSB also suffered a protracted meltdown in their system locking out customers for days costing the bank some USD 425 million and alienating account holders. David Thomas of cryptocurrency brokerage GlobalBlock couldn’t resist commenting on Wells Fargo’s latest misfortune:

“All manners of sardonic posts have been seen on social media channels following the event with many finding it hard to believe that in this day and age the infrastructure could be quite so antiquated and vulnerable to a melt-down.”

 

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Exchange Listing XRP Says Ripple “Not Crypto”

Exchange Listing XRP Says Ripple

An exchange that has recently added Ripple to its trading platform is happy to proclaim that in its view, XRP is a “Centralized Virtual Currency“, not strictly a cryptocurrency.

The Finnish-based Coinmotion exchange’s definition for users could find that many enthusiastic customers may not be happy to read it:

“What one needs to know about XRP is that it is not cryptocurrency in the strict meaning of the word… What differentiates XRP from cryptocurrencies is that it is not based on blockchain, it is not mined and it is heavily centralized. Ripple network is a suite of different applications by Ripple Labs. XRP, is the currency of Ripple network, which the apps use.”

Ripple CEO Brad Garlinghouse claims that XRP is in fact “very clearly decentralized”. The company has been moving from strength to strength within the industry, particularly with its link to traditional banking. Ripple Labs announced the addition of 13 more financial institutions to its RippleNet in January, which now takes the total to over 200.

Coinmotion’s blog claims that Ripple’s network doesn’t use blockchain but relies on a Ripple Labs patented system called HashTree adding:

“In HashTree all the transactions and balances are combined to a single number, which servers compare to each other to reach consensus. This kind of system is faster than blockchain, but far more centralized.”

The Finnish exchange ends its blog with a rather curious note to users, given that it chose to list XRP, stating, “Nonetheless since You, our dear customer, have asked for it, we have offered you the possibility to buy and sell XRP on Coinmotion.”

 

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Israeli Civil Rights NGO Wants Coinbase to Close Hamas Account

Israeli Civil Rights NGO Wants Coinbase to Close Hamas Account

An Israeli civil rights NGO has threated to take Coinbase to court over a Hamas cryptocurrency account.

The official Telegram channel of Abu Obeida, a spokesman for Hamas’ Izz ad-Din al-Qassam Brigades, made the appeal for Bitcoin asking all the “supporters of our righteous cause to support the resistance financially using Bitcoin”.

Shurat Hadin-Israel Law Center is suggesting that Hamas has set up a Coinbase account for this purpose and as such, donations to Hamas would be a violation of US federal law under the 1995 Counter-Terrorism Act. They stated in a letter to the US exchange giant:

“It has recently come to our attention that the notorious Palestinian terrorist group Hamas currently maintains an account with Coinbase, Inc. (“Coinbase”), through which it is accepting donations.”

It added that Coinbase should immediately terminate all Hamas accounts.

Bitcoin users would be quick to point out that Hamas would be free to use its own open source Bitcoin client as a wallet, should its Coinbase account be closed. As a decentralized and censorship-resistant currency, efforts to block or sanction it would be quite futile, as proven by the much-mocked attempts by the US government last November to sanction Bitcoin addresses.

The territories of Gaza and the West Bank are separated from each other by Israeli territory. Both fell under the jurisdiction of the Palestinian Authority but Gaza has since June 2007 been governed by Hamas since 2006.

There are reportedly now 20 unaccredited exchanges helping local cryptocurrency users to get their money abroad to make investments that otherwise they would have no chance of making in the region. In Gaza, a provider of Bitcoin to Palestinians recently maintained that his clients view Bitcoin as “cheaper, safer, and quicker”, maintaining that “nothing works with Palestinian banks” and that “Bitcoin wallets are alternative banks”.

Late last year the US online payment service PayPal closed the account of the Germany-based NGO International Alliance – an organization that sympathizes with the Popular Front for the Liberation of Palestine terrorist organization and supports boycotting Israel, with PayPal simply stating that “This recipient is currently unable to receive money”.

 

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Blockchain Could Be Set for $462 Billion Finance Industry Stake by 2030

Blockchain Could Be Set for 2 Billion Finance Industry Stake by 2030

London-based global information provider IHS Markit have estimated that the finance industry blockchain market is set to reach USD 462 billion by 2030.

The value of blockchain in the financial sector reached USD 1.9 billion in 2017, according to IHS Markit’s figures but this total is set to swell significantly given the expected launch of numerous projects over the next few years. The London info provider’s chief analyst Don Tait sees his 2030 projections as entirely feasible, adding, that a positive international regulatory stance will impact the industry over time:

“The Securities and Exchange Commission in the United States, the Financial Conduct Authority in the UK, the Hong Kong Monetary Authority and other regulatory bodies are reacting positively towards blockchain technology within the financial sector.”

IHS Markit indicated many ways in which the blockchain industry will be called upon in the years ahead, including cross-border payments, share trading, and syndicated lending. Tait sees the global financial market as becoming the technology’s most prominent user, including insurance and fintech. He cites the derivatives market, currently worth around USD 544 trillion a year, as having huge blockchain potential, commenting:

“By applying blockchain to the clearing and settlement of cash securities – specifically, equities – investment companies could save up to USD 12 billion in fees.”

The possible applications for blockchain technology have not gone unnoticed by stock exchanges either, with recent with Switzerland’s SIX exchange and Germany’s Deutsche Börse either actively, or at the stage of, integrating blockchain technology into current systems.

 

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IBM Launches Australian Blockchain Cloud Service, Second to Follow

IBM Launches Australian Blockchain Cloud Service, Second to Follow

IBM’s platform built on Hyperledger Fabric has launched its blockchain main net at its Melbourne-based data center in Australia.

Hyperledger is an umbrella project of open source blockchains and related tools, started in December 2015 by the Linux Foundation and supported by big industry players like IBM, Intel, and SAP to support the collaborative development of blockchain-based distributed ledgers.

The launch allows IBM customers to run their applications on the company’s cloud. A second Australian center is also planned for the end of March in Sydney. IBM Australia’s Head of Blockchain, Rupert Colchester, said that a second center would make the technology more widely available, adding, “Customers who are deploying blockchain applications have reached a maturity of projects that requires the data to be stored in Australia.”

Colchester highlighted the degree to which blockchain technology was now being used across all industries in Australia with many IBM clients now “trying to understand how best they can apply it to the business problems they have”.

An example of the growing use of blockchain at the corporate level in the country saw Australian real estate company Vicinity adding blockchain to its business operation in tandem with Australian energy tech company Power Ledger as part of a USD 75 million solar program, late last year.

 

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