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Swiss Federal Council Begins National Blockchain Framework Changes

Swiss Federal Council Begin National Blockchain Framework Changes

The Swiss Federal Council has initiated a consultation period on the adaptation of federal law for blockchain developments.

According to the state-issued press release, the consultation will be an opportunity to improve the framework for blockchain and other decentralized technologies in Switzerland. Specifically, it will look to increase legal certainty, restrict risks associated with misuse of the technologies and remove obstacles for blockchain-backed applications, most predominantly looking at use-cases in the financial sector.

The council first published a blockchain report in December last year addressing the current circumstances, then making it clear they would be prepared to make changes to the existing framework to provide a ”leading, innovative and sustainable location for fintech and DLT companies.”

There will be a revision of the current anti-money laundering policies, with an amendment to theAnti-Money Laundering Ordinance scheduled.

Several policy adjustments have already been proposed also, including the separation of cryptocurrency assets in the event of bankruptcy, as well as establishing a digital registration of rights in the Swiss Code of Obligations.

The Federal Council’s consultation period is scheduled to last until late June 2019.

 

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Brexit Deal or No Deal: The Effect on UK’s Blockchain Industry

Brexit Deal or No Deal: The Effect on the UK Blockchain Industry

The United Kingdom’s impending exit from the European Union has the economy on edge. Parliament has yet to approve Prime Minister Theresa May’s exit agreement and a so-called “no deal Brexit” is a looking like a real possibility.

Just a few months away on 29 March, the UK is scheduled to leave, and nobody knows quite how the laws and regulations that the EU currently govern will be affected, what the situation will be for EU workers, or what trade relations will be in place for the rest of Europe.

With these instabilities in mind, here are some of the effects Brexit may impose on the UK’s leading blockchain industry.

Financial regulation

It is no secret that the City of London is Europe’s financial capital but many have questioned whether it can remain in this position when the UK leaves the Union. Many financial service providers are there, after all, to provide services to European clients from a location that adheres to all of the required regulation.

If the UK no longer follows EU finance regulations, it will likely fail to attract these international firms. Coinbase, for example, has already moved its European base from London to Ireland. Part of the blockchain industry’s success in the UK can be attributed to the existing infrastructure for firms and international talent that the City of London attracts. In this case, what is bad for mainstream finance also looks to be bad for blockchain.

However, Brexit also offers the UK a chance to create its own unique financial policies which have the potential to produce a more crypto-friendly environment than that imposed by the EU. While the Union requires firms to uphold strict know-your-customer (KYC) and anti-money laundering (AML) policies for their clients, Brexit would be the chance for the UK to create a more autonomous financial sector, although there has yet to be any indication of a move in this direction.

Another case that could work in the blockchain industry’s benefit is if the UK chose to adjust its DPA 2018 legislation (its version of Europe’s 2018 General Data Protection Regulations) which has caused much friction for operations built on immutable blockchains that do not readily allow the removal of data as the privacy regulations require. Any data regarding European citizens that is stored on a blockchain would still be subject to GDPR, although Brexit would give the UK an opportunity to create more flexible regulations compared to GDPR.

EU workers

The blockchain industry faces the same challenge as every other sector in the UK regarding migrant workers from the EU. While the government has just launched a scheme that would allow current EU residents to remain living and working in the UK after Brexit, the plan has faced scrutiny over its impracticality in registering residents. This owes to the facts that the application only works on the most recent versions of Android phones, and a fear that they are not doing enough to let people know they must register themselves.

Europeans who fail to register on the Settlement Scheme could find themselves deported from July 2021.

London, the UK blockchain hub, is compiled of 14% European workforce, with 26% of workers coming from outside of the EU.

Trade deals

As it stands, Theresa May has ruled out the chance of the UK remaining in the Single Market and the European customs union after Brexit.

This will impact both businesses that use blockchain to export or import products between the UK and Europe, as well as those that provide services of any kind within the region. Services account for 70% of economic activity in the EU and the Single Market gives companies the freedom to offer these services anywhere within the Union.

The last few years have seen cryptocurrency exchanges such as Binance expand across Europe, but leaving the Single Market means they would have to operate with the UK’s own unique regulations. To keep up interest from exchanges, the UK will have to prove its worth the extra costs required to move operations locally.

Losing its voice

The UK has one of the leading blockchain industries in Europe, but Brexit could result in a loss of political power in drafting crucial legislation for the technology. For one, with no more Members of European Parliment representing the UK after Brexit, the country will no longer be allowed any official input in creating EU policy.

Pro-crypto MEPs such as Eva Kaili have proven how effective a positive voice can be in the governing body, with her efforts resulting in the crafting of the parliamentary Blockchain Resolution.

Blockchain and Brexit

It is not all doom and gloom for the industry, however. Blockchain has indeed been given a spotlight by the UK government for its potential in providing a solution to the customs crisis, being hailed as an opportunity to continue providing ”frictionless trade” with the EU.

Particularly valuable on the contentious issue of the Ireland border, blockchain has been hailed as a way for the government to track the movement of goods in a transparent, immutable, and non-invasive way. The UK’s finance minister Philip Hammond even called blockchain an ”obvious” solution to the problem.

An uptick in blockchain logistics solutions could well increase the levels of UK companies that adopt the technology, but financial services providers that utilize blockchain may find themselves having a more difficult time adjusting to the forthcoming new regulations.

May’s latest update in Parliment on Monday 21 January included a commitment to sticking to the 29 March Brexit date so there is not long left to see what the deal will look like, if there is one at all.

 

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Why Bitcoin Shouldn’t Focus on Succeeding as a Domestic Payment System

Why Bitcoin Shouldn't Focus on Succeeding as a Domestic Payment System

Bitcoin: the cryptocurrency that started them all.

Created as the first decentralized, peer-to-peer payment system independent of a third party mediator, the appeal to manage personal finances without requiring a traditional bank account is a concept that has appealed to many, to say the least. But as Bitcoin reaches its tenth anniversary and continues to mature as a financial instrument, the strengths and weaknesses of the cryptocurrency are becoming increasingly realized.

One recent academic study indicates that perhaps Bitcoin should move away from its goal of succeeding as a widely-used domestic payment system, and should instead focus on its strength as an international payment method.

Bitcoin’s competition

An Economic Analysis of the Bitcoin Payment Systemauthored by Gur Huberman, Jacob Leshno, and Ciamac Moallemi, compares the features of the Bitcoin payment system to that of the traditional alternatives offered by banks.

The study finds that Bitcoin payments are likely to incur higher charges compared to bank-operated, traditional domestic payment systems. The authors attribute this to the decentralized architecture of the network, with the mining structure behind the blockchain also allowing for delays on small transactions as they do not carry a great enough financial incentive to be processed quickly.

In short, the paper concludes that strictly in economic terms, Bitcoin fails to provide real competition to traditional domestic payment systems.

Where it does find strength, however, is its ability to process international money transfers far more efficiently and cheaper than its competitors at, say, Visa, Mastercard or SWIFT, particularly when it comes to larger sums of payment.

The ideological argument

Those who hold a libertarian ideology, or indeed anybody that is distrustful of central banks, can argue the benefits of Bitcoin as a domestic payment system despite these comparative downfalls.

The current monetary system has arguably been the cause of recessions, inflation, and growing wealth inequality; cryptocurrencies offer individuals the chance to operate within a new financial system that operates independently of these factors. Whether or not Bitcoin is the most practical or efficient option for spending money on a daily basis may well be overshadowed by a desire to exit the mainstream monetary system.

There is also the Lightning Network which, once launched in full, offers a potential scaling solution for the Bitcoin network with quicker and cheaper options for micropayments for when you buy a cup of coffee, for example.

And it is still early days for Bitcoin in the scheme of things; it is entirely possible that other scaling solutions will emerge for the network that will allow it to succeed domestically.

In the wake of a bad year for market performance, perhaps it would be most beneficial for developers to focus on Bitcoin’s strengths as outlined by the researchers until the cryptocurrency can find its feet again.

 

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Bitcoin 10 Years On: Its Place in Finance

Bitcoin 10 Years On: Its Place in Finance

Satoshi Nakamoto’s original vision for the use of Bitcoin has certainly evolved over the last decade, with mainstream adoption and the widely-believed “inevitable” entry of institutional investors giving it a place at the table with the likes of Goldman Sachs and Bank of America.

Once dismissed as some libertarian fantasy, Bitcoin has certainly come a long way in the last ten years, but will it truly ever manage to find a sustainable place in the mainstream financial sector?

The original use case

As Nakamoto imagined it in the white paper, Bitcoin would be ”a purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution”, citing the weaknesses of the trust-based model of which third-party mediators are required. Because of the double spending problem that arises from this model, Nakamoto recognized that merchants and banks would be required to ”hassle [clients] for more information than they would otherwise need”.

Bitcoin was created as a new electronic payment system that provided an alternative solution to the double spending problem by publishing all transactions on the blockchain publicly with a timestamp that means the first transaction that took place can always be checked. This is a way for customers to retain their personal data while giving people financial freedom to transact if they did not, for example, have the required identification to open a bank account or simply did not want to share that information. It also removes their requirement of dealing with central banks, of whom Nakamoto had expressed concerns over the way they managed peoples’ capital.

The idea of Bitcoin was revolutionary (a description its creators never used yet one hundreds of cryptocurrencies claimed), rebellious and, given that it meant anonymity of transactions, not something that central banks or governments looked upon favorably in the early days.

However, money talks, and after the Bitcoin bull run of 2017, the financial sector was forced to legitimize it at the very least as a potentially profitable investment option.

The move into the mainstream

CNBC, Forbes and Bloomberg have all featured positive reports on Bitcoin as an investment tool in 2018, with Henrik Andersson, chief investment officer of Apollo Capital Fund claiming, ”the coming year we will see a gradual adoption from institutions.” Andersson sees the growing number of US university endowments investing in funds as one major indicator of his claim. Goldman Sachs’ awaited cryptocurrency trading desk should also launch this year, while Nasdaq already supports cryptocurrency exchanges.

All of these factors indicate a real move of Bitcoin into mainstream finance, and into the highly-regulated world of identity checks and third-party mediators that it was created to avoid.

2018 closed with the banking sector in a bear market and the worst annual performance of the stock market in the last decade, with reports attributing this to the slowdown of the Chinese economy and concerns in the European market over the economic impact of the UK leaving the European Union.

While the cryptocurrency market did not perform well itself and Bitcoin indeed finished the year with its worst annual performance to date, there are still many questions over what impact the mainstream financial sector has, and will have in the future, on the performance of cryptocurrency.

As more institutional investors enter the market and an increasing number of established banks offer digital asset investment options, will more money be moved into cryptocurrency when stocks fall and traditional investment choices become less attractive? Or will Bitcoin’s move into the mainstream mean it is negatively impacted by poor performance in mainstream finance?

It is still early days to know for sure, but one study conducted by Yale University in August 2018 claims that the price of Bitcoin is not affected by macroeconomic factors or familiar stock market factors. Rather, they say, the drivers of cryptocurrency prices are unique to the market itself, with they two key predictors being market sentiment, investor attention and a ‘momentum effect’ that see patterns in price fluctuations.

Although, if predictions are correct in estimating an influx of institutional investors in 2019, how their influence will play out in Bitcoin’s market performance may change the conclusions of the Yale study.

Can Bitcoin succeed if it is primarily viewed as a tool for investment?

Bitcoin benefits from its resource scarcity as commodities such as oil and gold do, but nowhere in its white paper does it promise “high returns, no risk” as you can find in many initial coin offering white papers in circulation.

Major centralized cryptocurrency exchanges such as Coinbase that require identity authentification surely go against what Nakamoto originally envisioned for Bitcoin. With global regulators focused cracking down on the industry, can Bitcoin survive without exchanges complying with know-your-customer regulations?

2019 should be a year to set the pace for understanding where Bitcoin will find itself in the foreseeable future of finance.

 

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Cloud Mining Firm Argo London Stock Exchange’s First Crypto Listing

Earlier this week, cloud-based cryptocurrency mining firm Argo was announced as the first of its kind to be listed on the London Stock Exchange. This is a significant step in the acceptance of cryptocurrency by the mainstream financial sector.

Leading the way

With the blockchain industry in a period of massive expansion, Argo’s approval for listing paves the way for more blockchain-based firms to follow suit. This move is indeed a testament to the cryptocurrency sector shedding its reputation of exclusivity.

London’s role on the international stage as a global hub for financial technology is what attracted Argo to pursue a place on the city’s stock exchange in particular. “A London stock market listing will provide Argo with the profile, credibility, and access to global capital to drive our growth and help us establish a leadership position in the long term,” co-founder of Argo Jonathan Bixby said.

The firm is looking to raise USD 20 million, with a valuation target of USD 40 million.

Argo

London-headquartered firm Argo works on a subscription-based model, with its cryptocurrency mining operations based in Quebec, Canada, active since last year. This has become a popular location for mining farms due to optimal climate and energy cost conditions. Argo has plans to expand operations to Iceland and China, both of which benefit from cheap electricity costs and a cold climate.

The firm provides clients with the ability to mine Bitcoin Gold, Ethereum, Ethereum Classic, and Zcash remotely via its own mining rigs. Argo plans to charge customers USD 25 a month for access to the mining facilities. No separate mining pools are planned for development, nor will Argo act as an online wallet to store any of the cryptocurrencies mined. Customers are limited to one contract each.

Speaking to Business Insider, Mike Edwards, co-founder of Argo, noted: “Setting up a computer rig to mine cryptocurrency is challenging, inefficient and expensive. I knew that we had to change the game and democratize the process so that crypto-mining could become a mainstream consumer activity.”

 

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