Category Archives: Altcoins

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Bitcoin Re-Asserts Dominance in 2019 Amid ICO Bust

  • Bitcoin dominance percentage up 17% in 2019 as the ICO boom goes bust, paving the way for a healthier crypto space

In early 2018, the initial coin offering (ICO) boom reached the peak of its speculative frenzy, pushing the Bitcoin dominance percentage as low as 32%. Unfortunately, numerous ICOs ended up being scams or poorly planned, causing untold numbers of investors to be ruined and scared away from the crypto space. As the ICO bubble collapsed, the Bitcoin dominance percentage rose to 51.7% by the end of 2018.

In 2019, the Securities and Exchange Commission (SEC) brought legal action against numerous ICOs, making it clear that they were illegal in the United States, and that any offering that conducts business in the United States will be prosecuted to the full extent of the law. This caused the ICO sector to collapse even further, and Bitcoin’s dominance percentage rose another 17% in 2019, reaching 68.7% currently.

Now Bitcoin reigns supreme, as well as several handfuls of reputable altcoins that are well-built and have solid potential. Compare this to the crypto space in 2017 and 2018, which was filled to the brim with fraudulent ICOs.

This has set the stage for a crypto space rebound, since now only the best cryptocurrencies remain as serious investment options, and the focus has shifted towards developing better infrastructure and increasing crypto adoption, rather than the focus being on scam ICOs.

 

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Bitcoin Dominance Percentage Climbs to Highest Levels Since March 2017, What Does This Altcoin Contraction Mean for Crypto Market’s Future?

Bitcoin Dominance Percentage Climbs To Its Highest Levels Since March 2017, What Does This Altcoin Contraction Mean For The Future Of The Crypto Market?

The Bitcoin dominance percentage is now approaching 70%, its highest levels since March 2017, and up 37.5% from its all-time low of 32.5% in early January 2018. The Bitcoin dominance percentage is calculated by dividing the Bitcoin market cap by the market cap of all of the other cryptocurrencies combined and therefore is a good indicator of the strength of the Bitcoin market versus the strength of the altcoin market. The 37.5% rise in the Bitcoin dominance percentage since early 2018 indicates that altcoins have on average lost 37.5% of their value relative to Bitcoin during the past year and a half. This article explores why this increase in Bitcoin dominance percentage is happening, and what this means for the future of the cryptocurrency market.

Bitcoin dominance percentage and the dominance percentage of various altcoins courtesy of CoinMarketCap.com

A Brief History of Bitcoin’s Dominance Percentage

Before discussing why Bitcoin’s dominance percentage is rising while the altcoin market is contracting, it is important to recap the history of the Bitcoin dominance percentage. At the beginning of crypto, when Bitcoin was created by Satoshi Nakamoto in 2009, Bitcoin had a dominance percentage of 100% since it was the only cryptocurrency. By 2013, the Bitcoin dominance percentage declined to 95% as Litecoin and several other alternative cryptocurrencies entered the market. The rise of Ripple towards the end of 2014 caused the first major decline in the Bitcoin dominance percentage, to as low as 77%, while the Ripple dominance percentage peaked near 15%.

In early 2017, the Bitcoin dominance percentage was still as high as 87%, but that drastically changed due to the rise of Ethereum and the associated initial coin offering (ICO) bubble. By June 2017, the Bitcoin dominance percentage dropped as low as 37%, and the Ethereum dominance percentage hit an all-time high of 33.5%. This was the first time that Bitcoin’s dominance percentage declined below 50%, and the closest an alternative cryptocurrency came to overtaking Bitcoin’s dominance percentage.

During the major Bitcoin rally at the end of 2017, when Bitcoin hit an all-time high of USD 20,000, the Bitcoin dominance percentage rose as high as 66%. However, Bitcoin soon crashed as the bear market started, and the Bitcoin dominance percentage fell to the all-time low of 32.5%. This was partially due to the ICO bubble peaking about a month after Bitcoin began to crash, so while Bitcoin was crashing alternative cryptocurrencies were still rapidly gaining value.

The ICO bubble popped in early 2018, and numerous ICOs turned out to be scams or poorly planned projects, bringing about heavy investor losses and government regulations. The impacts of the ICO bubble collapse continue to this day, with the dominance percentage of ICO cryptocurrencies and Ethereum declining to 15% and 7.5% respectively. Ethereum was the most popular platform for ICO cryptocurrencies, and this is probably the reason it is losing market share as the ICO bubble deflates.

Aside from ICO cryptocurrencies and Ethereum losing value relative to Bitcoin, major alternative cryptocurrencies like Litecoin, Ripple, Monero, Dash, and Bitcoin Cash are also losing value relative to Bitcoin. This trend suggests that perhaps Bitcoin may eventually go back to the old regime of having 80-90% of the dominance percentage, while altcoins only account for a small fraction of the total cryptocurrency market cap.

Dot-Com Bubble Reveals How the Cryptocurrency Market Could Evolve

During the 90s, the internet first became available to average consumers, and this quickly led to the rise of the dot-com bubble as every possible internet business was created, and as investors rushed to put their money into these businesses. This is quite similar to the ICO bubble of 2017-2018 when every possible blockchain business was created, and a frenzy ensued as investors rushed in.

In 2000, the dot-com bubble burst, causing a majority of internet companies to go out of business, and simultaneously revealing that many of these internet companies were scams or poorly planned. Just like with the ICO bubble, government regulators jumped in to stop the practices that led to the dot-com bubble, further dampening the industry.

Ultimately, major corporations like Google, Facebook, and Amazon survived the dot-com bubble and went on to become some of the most powerful companies in the world. Essentially, instead of having a massive amount of companies launching and raising money, the internet industry consolidated into the hands of a smaller amount of companies that had good business plans and were fundamentally useful.

The striking similarities between the ICO bubble and the dot-com bubble perhaps reveal the direction that the cryptocurrency market is heading. Instead of having a plethora of cryptocurrencies that are launching and raising money, the cryptocurrency market may consolidate down to a handful of reputable major cryptocurrencies that are fundamentally useful. Indeed, the dominance percentage data suggests that this is exactly what is happening.

Bitcoin is the King of Cryptocurrency

As the ICO bubble continues to deflate, the expectations that any cryptocurrency will overtake Bitcoin has diminished to nearly zero. Indeed, the mentality during the ICO bubble was to invest in the next cryptocurrency that would become like Bitcoin, but now it seems no cryptocurrency can truly compete with Bitcoin. This is because Bitcoin performs the function of a cryptocurrency perfectly; Bitcoin enables users to send money anywhere in the world instantly and securely without using identification information, and the network is decentralized so no centralized entities like governments can attack Bitcoin.

Also, Bitcoin has a worldwide network of cryptocurrency exchanges, Bitcoin ATMs, and businesses that accept Bitcoin, making it easy to exchange the cryptocurrency with fiat currency worldwide, and enabling it to be a currency that can be used in real-life. Further, Bitcoin has the longest and most reputable track record, and is considered the most valuable cryptocurrency. This is causing newbies and average users as well as retail investors and institutional investors to generally choose Bitcoin instead of alternative cryptocurrencies, now that the ICO bubble has basically ended.

Thus, it appears the cryptocurrency market is heading towards a future where Bitcoin reigns supreme as the king, and perhaps there will be several other fundamentally useful cryptocurrencies that have some value as well. However, most of the thousands of cryptocurrencies that launched during the ICO bubble may continue to lose value until they cease to exist. Overall this will lead to a healthier cryptocurrency space where there are less scams and fewer investor losses. This can be compared to how a forest fire burns away the congestion of old-growth and undergrowth, paving the way for new and stronger trees to rise out of the ashes.

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Cryptocurrencies – The Future of Money?

India scraps its 500 and 1000 fiat currency notes to combat corruption. England bans the 500 Euro note in concerns of terrorism funding and drug trafficking. Sweden, one of the first countries to experiment fiat currency might be one of the first ones to remove it altogether. These headlines raise a significant question, where does the future of money lie once fiat currencies are out of the picture?   Putting a ban on large fiat currencies, although well intended, reduce the economic freedom of the mass population. Interest rate provided by banks reduce drastically,  in fact in some cases going into negative. Inflation rates have also seen an upsurge thereby fluctuating the value of liquid assets. 

As an alternative, the first thing that comes to the mind of many is the digital currency industry. Reports such as Barclays introducing cryptocurrency desks make it evident that there is wider adoption of digital currencies. The question is, to what extent in the long run will cryptocurrencies replace money. 

A large number of financial firms and investors have sought trading in cryptocurrency. A Reuters survey found out that one in every five firms are looking to trade in altcoin in the next year. 70% of them said that they would do so in the next three to six months. There has been a large flow of money from venture capital firms to startups in relation to blockchain technology and cryptocurrency. In the three months after January this year, the amount invested in blockchain businesses is far more than the USD 55 million average for the three year period. 

Cryptocurrencies hold the potential to change the face of finance

One of the biggest positives is to see firms’ open mindedness on regulations of cryptocurrencies. In fact, as long as they’re reasonable, regulations might even persuade investors who have currently been on the sidelines due to their skeptic nature. Moreover, a bullish sentiment was expressed in the group of 20 nations’ (G20) meeting when finance ministers made a joint request to FSB to consider multilateral response around cryptocurrencies. 

Perks of a complete transition to cryptocurrencies

There are many advantages to an all cryptocurrency future, such as the fact that cryptocurrencies cannot be easily manipulated, therefore giving a stability assurance to an individual. Fiat currencies involve intermediary cut during a typical everyday transaction, something that cryptocurrencies will eliminate. However in an all crypto scenario, the infrastructure will have to be well-developed. Cryptocurrencies are also a better medium of distributing universal basic income. This makes it interesting to see whether financial institutions would pivot to this status quo in time or just stick to the traditional fiat mode of currency. 

Cryptocurrency usage in an essence reduces the requisite to trust other actors in a system, thanks to the fact that it is a peer to peer encrypted mode of transaction that is decentralized and secure. 

Concerns pertaining to the transition to cryptocurrencies

Needless to say, a complete crypto takeover also poses many challenges. Firstly, the fact that in certain countries the infrastructure to facilitate a digital currency system is a major obstacle. Secondly, the transition process from cash to cryptocurrency creates a void in compatibility for certain people, leading to an inevitable loss of assets since the traditional currency would lose its value without any recourse. 

The government has a hold over its citizens via its ability to print fiat notes. This is primarily due to the fact that it has a centralized control over money that circulates around. With the introduction of cryptocurrencies, the government loses this influence, giving the citizens more freedom in what they buy and what they save. In addition, this also removes the government’s option to print more currencies in case of a financial turmoil, which would then become dependent on the cryptocurrency mined. 

However, there are also some ways in which it will be in the interest of the government for an all crypto world. Identification and attesting of citizens will be an easier venture to accomplish. Analysis of financial stability of an individual will also be an easier job to do. In the third world countries, identification of refugees and migrants will be an easier job which will help them get micro loans or will allow them to make purchases in case they are forced to leave the country. 

How would an all crypto world look like?

In the event that crypto completely takes over fiat currency, the distribution of wealth will be facilitated as opposed to its concentration. Cryptocurrency would help in better distribution of wealth due to its decentralized network. The increase in the number of users in an integrated technology network proportionally increases the capital investment in such a network leading to a serendipitous chain of events. Therefore introduction of cryptocurrency in developing countries will be beneficial for the upliftment of the entire system. 

The very consequence of a crypto world will make investors look towards the acquisition of digitized assets such as user data on the internet or credit system for online payment.  

A report from the second quarter of The Federal Reserve Central Bank of St. Louis stated that,

In the near future, a close cash substitute will be developed that will rapidly drive out cash as a means of payment. A contender is Bitcoin or some other cryptocurrency. While cryptocurrencies still have many drawbacks… these issues could rapidly disappear with the emergence of large-scale off-chain payment networks (e.g., Bitcoin’s lightning networks) and other scaling solutions.

Conclusion 

BitcoinNews.com has already shed light on how 65% of the world’s central banks are dipping into blockchain, the underlying technology of cryptocurrencies. Moreover, several countries such as Venezuela, The Marshall Islands, Senegal and Tunisia have either already released government-backed cryptocurrencies or have it in the pipeline. This has proven to decrease dependency on fiat currencies while preventing counterfeits.  

Regardless of an individual’s perspective of a complete crypto transition, the future is unknown. On one hand many speculate that a crypto takeover is inevitable, while on the other, many believe that a crypto dominated economy is a dream too far fetched. Although there have been tendencies in the economical world which suggest our transition toward a crypto led economy, the traditional skeptical mindset of the people will serve to be a big obstacle to tackle. But one thing is for sure, an all crypto society has the potential to change the way people save and sell. 

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Stablecoins Used by Nearly All Market Participants

Stablecoins Are Used by Nearly All Market Participant

Even though cryptocurrency is touted to be more efficient than legacy currency systems, it appears most cryptocurrency traders can’t help but peg their trust to fiat or its digital look-alike. This assumption holds true as a report by Binance Research indicated nearly all market participants use stablecoins.

Stablecoins are best known for their hedge against volatility in the cryptocurrency markets and though in a few cases are used as a medium of exchange, their most widely adopted use case is in a crypto-to-stablecoin trade environment. The level of adoption, however, especially the most used types – stablecoins backed by fiat – do reveal the strong industry ties to fiat systems.

According to Binance Research, while sampling its institutional and VIP clients, it observed that “90% of the clients use USD as the benchmark currency”, which further supports their initial theory on the adoption potential of stablecoins backed by USD. The report further suggested “USD stablecoins and USD-denominated platforms are the leading forces of the cryptocurrency and digital asset industry”.

As a correlation between the level of adoption of stablecoins and fiat-dependence, a subtle observation pointed out in the research indicated a large number of the respondents had prior experience in the financial industry exclusive of the digital asset industry. At the time of the study, more than half of the market participants sampled, either had one foot in the equity market or the foreign exchange market, which evidently supports the gravitation towards fiat-dependency.

Comparatively, the traditional financial market has well-established hedging strategies in the form of offsetting stock positions, options, futures, and bonds, to reduce exposure to market risks. On the other hand, while the cryptocurrency industry may have mirrored a few of these market derivatives – which for the most part are largely accessible by large investors and those rather conversant with the financial market principles, adoption of fiat-backed stablecoins by all class of investors has been somewhat sporadic with USDT taking the lead.

Circulating Supply of stablecoins since June 8th:

GUSD: -16 million
PAX: -36 million
TUSD: -42 million
USDC: +20 million
Tether: +280 million

🤔

— Giancarlo The Tether Whisperer (@CasPiancey) June 27, 2019

With respect to the recent bull-run which dazed many in the industry, as flagship cryptocurrency Bitcoin touched new highs in over 16 months, some have opined that the mysterious uptrend may not have been without the help and from an uptick in the recent interest stablecoins.

The renewed interest in the bull-market of crypto may seem a mystery to some, but perhaps it had to do with the catalyst brought by Libra, Paxos, and other stablecoins in the market!

— Paxos (@PaxosGlobal) July 2, 2019

Adoption of other types of stablecoins – those backed by commodities and by other forms of cryptocurrencies, don’t seem like the go-to-choice for investors in times of strong market movements. As a matter of fact, a recent report indicated only 30% of all stablecoins are currently operational, with the demise of a majority resembling cryptocurrency pegged to physical commodities such as gold and other precious metals.

 

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Ethereum Co-Founder Criticizes Libra Token’s Centralization

Ethereum Co-Founder Criticizes Libra Token's Centralization

The war drums are out, as Ethereum’s co-founder Joseph Lubin has written a scathing critique of Facebook’s Libra crypto, calling it “a centralized wolf in a decentralized sheep’s clothing”.

After the release of Facebook’s own cryptocurrency Libra, the reaction from all stakeholders and industry experts has been somewhat mixed. While some have welcomed the move with relish and excitement, others like Lubin don’t seem to share their enthusiasm. 

In the article, he pointed out the redundancy of Libra’s mission statement as stated in their white paper, which says that “sending money across the globe should be as simple and inexpensive as sending a message on your phone”, and “financial infrastructure should be globally inclusive and governed as a public good”. According to him, that has already been covered by all cryptocurrencies and doesn’t justify the creation of Libra.

Furthermore, Lubin also pointed out Libra’s vision of centralized infrastructure, stating:

“Perhaps most importantly, it requires our trust that Libra will eventually transition to a more ‘permissionless’, decentralized system, whereby anyone can validate the network, rather than the restrictive member evaluation criteria keeping control in the hands of the initial 28 firms.”

Despite all the concerns, Lubin did appreciate some parts of the project as well. He projected that there could be about two billion Libra users within a few years, that would revolutionize the use of cryptocurrency while improving the user experience (UX). He said:

“In one fell swoop, talented UX designers could reduce the current friction of using cryptocurrency. Managing private keys, understanding ‘gas payments’, and installing crypto browser plugins could be as simple as pressing ‘send’ in WhatsApp, another Facebook-owned entity.”

Lubin also claimed that after code analysis of Libra by developers at Ethereum’s development company ConsenSys, they noticed a lot of similarities from Ethereum and conceded that Libra has the potential to be a very well-executed project.

 

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FATF to Enforce Time Restriction on Exchanges’ Customer Information

FATF To Enforce Time Restriction on Exchanges' Customer Information

The Financial Action Task Force (FATF), who met last week for another round of talks to decide on new AML steps, is to bring in a time restriction for crypto exchanges on data sharing.

The FATF has set a time limit of 12 months during which time exchanges must share user and sender information with “beneficiary institutions”.

The new data sharing guidelines, which are not actually set in law as yet, have further angered those in the industry who already feel that the rights and anonymity of both crypto senders and recipients are being eradicated by over-regulation. crypto exchanges Countries that do not comply with the FATF’s latest rules could face being blacklisted. Exchanges under the ATM guidelines must now:

“… obtain and hold required and accurate originator [sender] information and required beneficiary [recipient] information and submit the information to beneficiary institutions … if any. Further, countries should ensure that beneficiary institutions … obtain and hold required (not necessarily accurate) originator information and required and accurate beneficiary information …”

As one London-based digital finance group explained in a letter to the FATF most codes sent along with transactions already contains much of the information that the new rules require despite the fact that cryptocurrency transactions were originally intended to carry a high degree of anonymity for all participants.

This was pointed out to FATF by another company Chainalysis earlier this year who commented that “Virtual Assets are designed to provide a way to move value without the need to identify the participants in a transaction”. The fear is now that this requirement may drive some exchanges and wallet provider to the wall if it is enforced, a point clearly of little concern to U.S. Secretary of the Treasury Steven Mnuchin who commented:

“By adopting the standards and guidelines agreed to this week, the FATF will make sure that virtual asset service providers do not operate in the dark shadows.”

 

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Kaspersky Report: 19% of Global Population Bought Crypto Pre-2019

kaspersky

The Kaspersky Cryptocurrency Report 2019 released this month claims that 19% of people globally have purchased cryptocurrency.

The claim is based on a survey conducted in October and November last year in which the results from 13,434 respondents in 22 countries were analyzed. Although these results are no way a reflection of the global population, they do indicate that more people have considered investing in a digital currency than commonly assumed.

The Moscow-based cybersecurity firm claim that based on the responses received 81% of the global population remains in crypto darkness and only 10% of respondents said they “fully understand how cryptocurrencies work.”

The report also indicated that many potential users had fallen short of actually taking the plunge due to what they see as digital money’s volatility on the markets. This element of 31% of respondents included some who felt that the bear market now meant that cryptocurrency wasn’t “profitable anymore.”  The markets have clearly moved into a bull pattern since the survey was conducted, with Bitcoin trading at USD 10729 at the time of writing.

Other results indicated that 22% of respondents claimed that they stopped using cryptos because they are not backed with real assets. Hacks and frauds stopped 19% and 15%  users from taking the digital investment route according to the survey figures.

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IEOs, ICOs, Whatever the Name, Regulation is the Issue

IEOs, ICOs, Whatever the Name, Regulation is the Issue (1)

With Initial Exchange Offerings (IEOs) gaining in popularity, industry experts have been suggesting that their uncertain regulatory status doesn’t necessarily mark an improvement as a way of generating new capital.

An IEO is conducted via a cryptocurrency exchange. Unlike Initial Coin Offerings (ICOs), an IEO is administered by a crypto exchange on behalf of the startup that seeks to raise funds with its newly issued tokens. ICOs raised nearly USD 30 billion over a period of three years until hitting a wall in 2018/2019 as the SEC cracked down on fraudulent activity and illegal offerings blighting the market.

Many analysts see IEOs as a way of sidestepping strict market regulation, but Peter Van Valkenburgh, director of research at advocacy group Coin Center in Washington, begs to disagree that there is any mileage in this argument. He suggests:

“I don’t expect IEOs to result in better outcomes… From a regulatory and legal standpoint, there’s not going to be much difference here… Calling it now an IEO is not going to change your obligation to the potential issuer of that token if the token fits the test for a security, which I think in many cases it will.”

Crypto advisory firm TokenMarket’s CEO Ransu Salovaara claims that whatever the method of raising capital, tokens still need to work as utility tokens in the long run. Cryptocurrency research firm InWara claimed that only 30% of IEOs launched this year had what it calls a “minimum viable product” at the sale with most offering simply a website and a white paper.

A recent InWara research report into IEOs found that many exchanges don’t screen new products launched on their platforms, often offering subjective evaluation:

“That’s the problem here: there is no standardized vetting process… And as long as exchanges have the freedom to decide where to draw the line, bad actors, and fraud crypto projects will always creep into the limelight.”

 

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Washington Lawmakers Call to Spoil Party on Facebook’s Crypto Aspirations

Washington Lawmakers Call to Spoil Party on Facebook's Crypto Aspirations

New plans from Facebook to enter crypto space appear to be infuriating a group of Washington lawmakers who fear the media giant is cutting loose without regards to regulation.

The comments floating around Capitol Hill seem to be led by House Financial Services Committee Chairwoman Maxine Waters who just wants to put the skids on the development of Facebook’s Libra coin so it can be examined by US regulators. California Democrat Waters, clearly not a fan of the media giant, feels that Facebook has gone too far already down the road to, as she put it, “unchecked expansion”. She commented this week:

Facebook has data on billions of people and has repeatedly shown a disregard for the protection and careful use of this data… With the announcement that it plans to create a cryptocurrency, Facebook is … extending its reach into the lives of its users.”

Of course, using Facebook is a choice, and there are other mediums out there allowing users many of the functions that Facebook offers, so Waters point of it “extending its reach of the lives of its users” seems to indicate that users lack the ability to select what is best suited to their particular lifestyle. Users will always have a choice.

Senator Sherrod Brown, a Senate Banking Committee Democrat, also called for Facebook users to be protected but could provide no input into how this should be carried out, or by whom. Patrick McHenry, the top Republican on the Financial Services Panel has called for a hearing, suggesting that Congress should go, “beyond the rumors and speculations and provide a forum to assess this project and its potential unprecedented impact on the global financial system”.

Other views out of Washington have been similar. Virginia Democrat, Senator Mark Warner saw Facebook as simply attempting to dominate new industries.

 

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Dysfunctional States And State Crypto

Dysfunctional States And State Crypto (1)

French Finance Minister Bruno Le Maire has said that cryptocurrency will never replace a government’s sovereign currency.

Le Maire’s comments were made in the light of growing concerns by regulators over Facebook’s intended launch of its own cryptocurrency in 2020. Mark Carney, Governor, Bank of England also said that the new digital currency will be under scrutiny to ensure it is not used for illegal purposes. Le Maire argued that financial sovereignty must come from government, commenting, “The aspect of sovereignty must stay in the hands of states and not private companies which respond to private interests.”

Looking at the three rogue states which have considered doing just that, he may well have a point. Venezuela remains the most prominent example of a misguided attempt by those in power to support the economy using a government-initiated cryptocurrency or state crypto. Russia and Iran have also dabbled in state crypto in attempts to overcome sanctions.

Both Venezuela’s Petro and Petro Gold, based on the South American country’s oil and gold reserves, have done little to stem the tide of hyperinflation which currently is running at a staggering 99,900% although down from 224,900% at the end of last year. Launched in February 2018, the Petro was supposed to be backed by the country’s oil and mineral reserves and was intended to supplement Venezuela’s plummeting bolívar fuerte currency (VEF), as a means of circumventing US sanctions and accessing international financing.

To illustrate the level of the country’s economic woes, Venezuela’s highest denomination, VEF 500, when initially issued in August 2018, was equal in value to USD 8.30. Today it is worth no more than seven cents. This week new 50,000 bolivar Soberano (VES) banknotes have been released (equal to USD 8.09 at time of writing) along with two other notes, in an attempt to stem the tide for at least the next few months.

The latest plan is to use the Petro, currently equal in value to VES 80,000, to prop up the currency. Venezuelan President Madura claims that linked to the Petro the new notes will hold their value, but among the population, such claims fall on deaf ears, with the average monthly income for most Venezuelan households now VES 40,000 (USD 6.55). To date, the Petro has been largely invisible.

It remains a disappointment to genuine cryptocurrency enthusiasts that rogue states use cryptocurrency as a go-to solution to tackle economic mismanagement or punitive sanctions. Both Russia and Iran are currently movers and shakers on the world stage for all the wrong reasons, both accused of government-sponsored acts of terrorism in the last 12 months. Both countries have strict laws prohibiting the use of cryptocurrencies but flirt with the technology at the state level.

Russia’s latest flirt with crypto is current research being undertaken by the Central Bank of Russia (CBR) to develop a gold backed cryptocurrency, an idea clearly finding its origins in Iran’s own proposed gold-backed cryptocurrency known as ‘PayMon’. Reports claim that four Iranian banks including Bank Melli, Parsian Bank, Bank Mellat and Bank Pasargad have joined hands with blockchain startup Kuknos for PayMon. Previously, in July 2018, reports came out claiming that Iran was looking to launch its own national cryptocurrency.

Iran sees cryptocurrencies as a mean to bypass new economic sanctions imposed on it by the US government. The new cryptocurrency is expected to back and tokenize Iran’s national fiat currency, the rial. Thereby, cross-border and domestic transactions will be facilitated.

Vladimir Gutenev, a member of the Russian State Duma, submitted plans for its own gold-backed cryptocurrency in August 2018; a plan which was subsequently shelved. Russia’s former Minister of Economics and Trade, Herman Gref, also spoke out last year in favor of cryptocurrencies and their transformational nature as a future threat to the financial sector’s status quo. It now appears Gutenev’s plan is back on the table. The Central Bank of Russia (CBR) is now looking at the proposal for a gold-backed stablecoin but makes it clear that it has no plans in the future to replace the rouble with an alternative state-run cryptocurrency.

To date, without any proven successes in state-run cryptocurrency, Le Maire’s suggestion that cryptocurrency will never replace government sovereign currencies seems to ring true, at least in the near future. The current example of Venezuela’s Petro adventure is not one to encourage finance ministers around the globe to anticipate any changes to the status quo, nor is the track record on the international stage of those that propose to do so. At least not yet, for now. It remains to be seen how well cryptocurrency fares in the hands of private companies who maintain that they are responding to private interests, and to that end, all eyes are on Facebook.

 

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