Category Archive : Blockchain News

tel-aviv-stock-exchange-to-launch-blockchain-securities-platform

Tel Aviv Stock Exchange to Launch Blockchain Securities Platform

Israel will have its first central securities lending platform this November, built on blockchain technology.

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Tel Aviv Stock Exchange to Launch Blockchain Securities Platform

The Tel Aviv Stock Exchange (TASE) plans to launch its blockchain-based securities lending pool in November.

In an announcement on July 28, TASE said the platform will serve an essential function in the country’s capital markets, which currently lack a central system for securities lending.

Contrary to the current set-up —— which fails to meet the needs of investors, in TASE’s view — the new blockchain-based system will concentrate all securities lending activities under one roof and enable direct borrowing among investors across a range of major financial instruments.

Tried and tested

In March of this year, TASE launched a dedicated testing environment for the platform, allowing members to execute loan transactions. Drawing on these results, the exchange is adjusting its systems in the run-up to November.

The exchange has highlighted the value offered by blockchain technologies; in particular, support for peer-to-peer transactions, smart contract functionality, and increased transaction security due to blockchain’s immutable quality.

TASE states that this lets the exchange custodians and clients operate at cheaper costs with a higher level of security.

In a statement, Orly Greenfeld — senior vice president and director of the TASE clearing department — said, “Blockchain technology will enable securities lending trading while securing information and supporting the increase in the number of transactions.”

TASE partners include Accenture and Intel

TASE first announced the development of its new platform, which is built on using Hyperledger Sawtooth, in May 2018. The exchange has collaborated on the project with partners that include Accenture, Intel and Israeli fintech The Floor.

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Decentralized Energy is Key to a DeFi Future

Decentralized finance should include decentralized energy as it uses DApps and blockchain and has the same logic, says Lition.

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Decentralized Energy is Key to a DeFi Future

Decentralized Energy (DeEn) leverage DApps and smart contracts on Ethereum to conduct transactions and trade energy assets. In a paper released July 31, Lition, a Berlin-based sustainable tech startup that has launched a blockchain-based marketplace allowing consumers to choose between multiple energy providers, DeEn has the same “structure, advantages, and logic” as DeFi, or Decentralized Finance.

DeFi should include DeEn

Similar to DeFi where trades of digital assets are peer to peer, DeEn allows consumers to know exactly where their energy is coming from, Lition said. It empowers consumers to choose where their electricity comes from and change it quickly and securely. The company used its decentralized marketplace as an example saying: 

“Lition’s very own Energy Exchange — a peer to peer (P2P) energy trading platform that is open and direct to consumers. Using smart contracts and blockchain technology, unnecessary middlemen are eliminated; this allows for affordable green energy, producers earning higher yields, and the promotion of sustainable energy.”

Lition believes energy sharing has long been overly centralized so consumers often cannot choose to leave the current energy marketplace. Although DeFi has been transforming how people trade assets in the financial market, achieving a true decentralized vision and decentralized energy should also be part of it. Lition added that: 

“As the DeFi “machine” continues to grow, the system itself requires more and more energy to run and maintain. The source of that energy is currently unclear. The DeFi space requires DeEn to detach itself from state/corporate-owned energy dependencies and become truly decentralized.”

According to the post, a new sustainable global is the future. The EU has set a carbon-neutral goal for 2050 and put solar and wind technology at the forefront of the transition.

As Cointelegraph previously reported,  with Germany shutting down all nuclear and coal-based energy production, blockchain is underpinning many renewable energy platforms.

former-china-central-bank-exec-pushes-for-digital-currencies

Former China Central Bank Exec Pushes for Digital Currencies

Former Bank of China vice president says digital currencies can be a substitute for cash on circulation.

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Former China Central Bank Exec Pushes for Digital Currencies

The former vice president of China’s central bank pushed for central bank digital currencies positioning it as a substitute for cash in circulation.

Wang Yongli, former vice president of Bank of China and a director of the Haixia Blockchain Research Institute, said digital currencies can certainly be a substitute for cash but it shouldn’t be confined to just that, according to the Global Times.

Wang said digital currencies can reshape monetary structures. These can include setting up “basic accounts” for all social entities on a central bank’s digital currency platform. This allows the bank to supervise digital currencies without much impact on the current financial system.  

He added a digital currency improves monetary policy effectiveness because the excessive issuance of physical, paper money will be prevented. 

His comments come as more central banks consider launching digital currencies. The Bank of China has been at the forefront of these with plans to come out with the digital Yuan. China has not released details on the digital Yuan yet but some industry insiders believe it may not become the prevailing currency due to the “China Dream.” Other central banks started exploratory commissions into digital currencies. The Bank of Japan recently appointed its head of research into its foray into digital currencies and the Philippines announced plans to look into its digital currency.

tencent-builds-blockchain-platform-for-china’s-oldest-wine-producer

Tencent Builds Blockchain Platform for China’s Oldest Wine Producer

Tencent to build a blockchain-based wine traceability platform for China’s oldest wine producer.

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Tencent Builds Blockchain Platform for China’s Oldest Wine Producer

Chinese tech giant Tencent has revealed its plan for creating a blockchain-based wine traceability platform in collaboration with Changyu, China’s biggest and oldest wine producer, according to local news on July 31. It is said to be a nationwide first for the country’s domestic wine industry.

According to Changyu, the platform is designed to trace every step of the wine-making and sales processes, including planting, brewing, distribution and management. It will issue a unique traceable certificate for each bottle of wine it produces.  

The whole process will be recorded on the blockchain network. The firm’s bottles’ scannable QR codes would allow consumers to verify the authenticity of the wine. The QR code will also present a whole set of data like plantation information of the grape types, origins, rainfall levels, temperature information among other things. 

The blockchain network will reportedly help distributors and sales outlets to catch counterfeit bottles and to identify bottles that have failed quality-control tests.

As Cointelegraph previously reported, Symbol from NEM makes blockchain solutions to solve wine tampering and counterfeiting problems to save millions for the wine industry.

how-not-to-lose-your-cryptocurrency-license-in-estonia

How Not to Lose Your Cryptocurrency License in Estonia

Recently, there have been discussions regarding Estonia’s new law on cryptocurrency, the revocation of 500 crypto licenses in Estonia, and companies exiting from Estonian regulatory jurisdiction. Let’s focus on three major recommendations.

Do your research before engaging with a legal partner in Estonia

Yes, it might sound odd, but I think one of the reasons why companies have been losing their crypto licenses is some consulting companies. I won’t mention specific firms, but I am aware that some consulting companies conduct very aggressive marketing, spamming their adverts for a single reason — to sell a “ready company” with licenses and, in some cases, with a bank account.

Why are they to blame? First, they spam and try to sell their services to everyone who is working in the cryptocurrency business, which I feel isn’t appropriate. Estonian licenses are for very specific services and may not be applicable to everyone who works in the crypto industry. I have personally met people who bought a “ready company” from one of those consulting companies. When figuring out their business model, I came to the conclusion that they did not really need them.

Second, a bank account, which was opened for a company before the sale, will most likely be suspended or blocked from operating normally when a buyer starts changing the shareholders and directors. In Estonia, banks are very conservative and they usually do not work with crypto business and non-Estonian residents, especially when the company cannot prove the direct connection to Estonian jurisdiction. Having an Estonian company is not enough.

My recommendation is to “do your own research” when selecting your legal partner in Estonia. Try to avoid consulting companies that spam you or employ aggressive marketing tactics. Usually, they do not have time to thoroughly analyze your business model to understand what you really need. Their aim is solely to sell you the licenses and other services.

There are also some consulting companies operating or located outside of Estonia — e.g., in Russia, Israel, etc. Such companies are unfamiliar with the local jurisdictions. Engaging with them, you risk receiving inaccurate information. Moreover, in some cases, they will hire an Estonian law firm to help, and your fees will be much higher since the consulting companies will charge extra on top of the fees from an Estonian law firm.

Be ready to start the business within 6 months after the issuance of the license

The second recommendation is related to a legal requirement indicated in the Money Laundering and Terrorist Financing Prevention Act of Estonia. This is easy to comply with, but quite often, it has been the reason for the revocation of licenses. If you do not want to miss a small detail that can impact your license, please, continue reading.

The widespread reason for revocation of the cryptocurrency licenses by the Estonian Financial Intelligence Unit, or FIU, is that some companies were simply not able to start operations within a specific period of time. Under Estonian law, a company has six months to start its business once the license has become valid. The important detail here is when it becomes valid.

During the application process, the applicant indicates the specific date for the license validity to start. For example, when you are applying for a cryptocurrency license, and you forecast that the start of operations won’t be within six months, there is a possibility to delay the starting date. If you think it will take your business one year to start operating, simply indicate the start date one year ahead from the time you apply for your license.

This seems simple, however, it has become the reason why some companies have lost their licenses. The FIU is responsive and can give an extension only in the event when you can prove that the delay of the launch of your business was outside of your control. If you cannot prove this, the FIU is usually strict with the deadline and exercises the right to revoke the cryptocurrency license.

It is just a small yet crucial detail in the application to mark the start date for the validity of the license. Therefore, pay attention and discuss it in detail with your legal partner.

AML/KYC compliance is the core focus if you want to keep your license

The third recommendation is related to compliance, which is usually the core focus of the Estonian Financial Intelligence Unit.

I’ve seen many companies that have been granted licenses with the help of consulting companies and did not understand the importance of Anti-Money Laundering compliance. They were thinking, once they have a license, they could request something from the customer and do their business. However, this is not the case.

Cryptocurrency exchanges in Estonia are required to adhere to strong KYC/AML measures from the outset with customer onboarding and finishing with transaction monitoring. To comply with AML/KYC requirements, a lot of human resources, money and legal expertise are required. Sometimes the requirements are a bit confusing in the Estonian AML framework, creating additional risks for the crypto business.

Cryptocurrency exchanges registered in Estonia are required to have an AML officer who is the resident of the country and has specific experience in AML. To find such a person is a real challenge in a small country like Estonia with lots of registered cryptocurrency businesses.

This requirement for a local AML officer has impacted the business of some of the consulting firms in Estonia, as it has become a market practice for them to provide the services of an AML officer. Imagine if one consulting firm is the registered AML officer for 20 or more companies. What kind of quality can their services offer when servicing so many companies?

This is the risk in deploying a firm to be an AML officer for a cryptocurrency exchange, as the FIU might have some questions for an individual who is an AML officer for more than two companies. Usually, the AML officer has a lot of requirements and is usually under time constraints. An individual can be the AML officer for more than one company, however, this is not a good standard to follow.

My recommendation is to take AML/KYC compliance seriously. One should try to find an AML officer dedicated to one company only. Additionally, you should do your research about what can be outsourced — e.g., KYC or AML cryptocurrency screening services.

Currently, the FIU is a unit of the Estonian Police and Board Guard. However, there is ongoing discussion to make the FIU a separate agency and to grant it more power and resources. Consequently, they will have more expertise to supervise companies that comply with the relevant AML regulations.

This is not legal advice and this recommendation is for informational purposes only. It is your own responsibility if you choose to rely on it when doing business in Estonia.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Mykola Demchuk is a fintech lawyer based in Estonia who has been working with blockchain clients since 2016. He has assisted companies in applying for cryptocurrency licenses and complying with the law.

blockchain-based-ip-protection-application-gets-investment

Blockchain-based IP Protection Application Gets Investment

A blockchain startup is leveraging the technology to protect content creators and maintain copyright over their works.

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Blockchain-based IP Protection Application Gets Investment

Blockchain venture capital fund NEM Ventures has reportedly invested in SharpShark, a Chilean startup leveraging the Symbol blockchain platform to offer timestamping solutions for content creators to protect their intellectual properties. It will also allow them to tokenize or transfer their creations. 

Content creators and blockchain digital protection 

According to the report, SharpShark is designed for creators ranging from writers, academics and journalists to photographers, artists and designers. The platform will create a digital signature that will be issued to text and images to the Symbol blockchain. The data is stored in immutable form and is compliant with privacy policies. 

SharpShark’s main use cases span media, academia and user-generated content platforms. The company said writers and journalists can use SharpShark to detect plagiarism, prevent copyright infringements and create a portfolio from their intellectual properties. Kailin O’Donnell, Co-Founder and General Partner at NEM Ventures added that: 

“Existing timestamping solutions have fallen short and copyright deposits are extremely costly. SharpShark’s digital timestamping service records artwork, aiming to protect creators’ moral rights to their work by detecting plagiarism and copyright infringement.”

As Cointelegraph previously reported, blockchain technology can greatly help one of the greatest challenges for digital content creators: maintaining copyright over their work.

with-bitcoin-gaining-ground,-is-the-altcoin-season-coming-to-an-end?

With Bitcoin Gaining Ground, Is the Altcoin Season Coming to an End?

Bitcoin has finally woken from its two-month slumber, as well as interest in the number-one cryptocurrency along with it. Bitcoin futures trading is bustling again, with both volume and aggregated interest at their highest since the March market crash. So, with all the action going on in Bitcoin (BTC), does this mean that the altcoin season is coming to an end? Maybe not.

Bitcoin surges as altcoins correct 

During a long period of inaction in Bitcoin, which saw traders growing bored and spot and derivatives trading on the decline, there was plenty of action going on in altcoins. Decentralized finance, in particular, is an area that has shown astonishing growth in 2020. In February, DeFi hit an important milestone by surpassing $1 billion in total locked value in its protocols. Today, despite the savage market conditions particularly in the first quarter, that figure has almost quadrupled. Total locked value in DeFi now stands at over $3.8 billion.

DeFi tokens haven’t been the only ones seeing major price surges either, although they led the charge. Popular altcoin Dogecoin (DOGE) also saw massive gains on the back of the infamous viral TikTok video, and projects like Filecoin and Polkadot also caused a stir (and parabolic gains). All this happened while Bitcoin was languishing in the $9,000–$10,000 range, which resembled a stablecoin at times. The alt season had begun in earnest… but is it about to stop?

Bitcoin made its biggest move this year when it pierced the resistance level of $10,500 and briefly shot past $11,400 on Monday. This was indeed accompanied by a price correction in most major altcoins, including some of the high-performance DeFi tokens like LINK, Maker (MKR), Compound Coin (COMP) and Aave (LEND) at the beginning of this week.

The temporary retractions, as BTC made an epic breakout, seemed to suggest that traders may have been taking the gains made in these alts and placing them into Bitcoin and Ether (ETH). Let’s not forget, after all, that Ether, despite stalling a little in the last couple of days, has still posted gains of more than 40% this month.

On Thursday, however, as BTC hovered around the $11,000 mark, indecisive of which way it wants to go next, many of the DeFi tokens made up for lost ground. Notably, Aave and Synthetix Network Token (SNX) registered 24-hour gains of 18.8% and 6.5%, respectively.

Top decentralized finance coins by market capitalization

The end of the altcoin season? Not so fast

While we can perhaps conclude that the altcoin season may have temporarily pressed pause while Bitcoin stole the limelight, let’s remember that most altcoins follow Bitcoin’s pattern and rise in price shortly after as well. BTC’s gains are good for altcoins, and the buzz surrounding DeFi cannot be ignored. Just as we’re seeing more and more locked value every day, we are also seeing major institutional investment in the DeFi space.

Giant players like TD Ameritrade, CMT Digital and Arca Labs have all been investing in DeFi’s development and calling for regulatory clarification. We’ve even seen the United States Securities and Exchange Commission approve an Ethereum-based fund by Arca Labs earlier this month. Bitcoin’s dominance may still remain high at 61.4%, but the promise of DeFi, the expectations surrounding Ethereum 2.0 and its major gains this year all show more promise for alts.

Moreover, with U.S. banks now being allowed to custody Bitcoin, a nod from the SEC at Ethereum, and no investor able to ignore the potential of DeFi, the signs look bullish for the space in general. And unlike the wild bull run of 2017, this time around, the industry is infinitely better prepared. The run won’t be simply retail-driven or fueled by fear of missing out, and the high-quality projects leading the charge have shown real progress and promise, as well as real products to back up their white papers.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Jay Hao is a tech veteran and seasoned industry leader. Prior to OKEx, he focused on blockchain-driven applications for live video streaming and mobile gaming. Before tapping into the blockchain industry, he already had 21 years of solid experience in the semiconductor industry. He is also a recognized leader with successful experiences in product management. As the CEO of OKEx and a firm believer in blockchain technology, Jay foresees that the technology will eliminate transaction barriers, elevate efficiency and eventually make a substantial impact on the global economy.

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Blood on the Blockchain: Tokenizing Can Make Donations More Effective

A system in which health officials would be able to track blood donations from vein-to-vein in real-time, given the complexities of the blood supply chain, may sound impossible. However, using blockchain technology to track and trace blood supply chains may turn this idea closer to reality. 

The American Red Cross estimates that someone in the United States needs blood every two seconds. The organization further announced that it’s facing a severe shortage of blood, particularly that of convalescent plasma — a type of blood donation that contains antibodies collected from individuals who have recently recovered from COVID-19. It’s clear that the blood supply chain is of vital importance, yet there are a number of challenges hampering the effectiveness of these systems. 

Warren Tomlin, the digital and innovation leader for Ernst & Young Canada, told Cointelegraph that the firm has been working with the nonprofit organization Canadian Blood Services on a proof-of-concept to address traceability challenges by putting blood records on a blockchain network:

“We realized how incredibly complex the blood supply chain was when we started working with Canadian Blood Services. Most people think about getting blood from donors, but what they often don’t consider is the data associated with each donation.”

According to Tomlin, numerous amounts of data is generated when blood donations are taken from donor centers and sent out to hospitals for transfusions. For instance, data from the donor is collected, along with data on the lab worker taking the blood. Equipment data and temperature data are also taken once blood samples are transferred to hospitals. Additional information is generated when blood is split into subproducts for plasma or antibody purposes. “All of this data has to be tracked accordingly to ensure that waste, shortages and other inefficiencies don’t occur,” said Tomlin. 

Based on this, a supply chain management solution capable of transparently tracing blood across its entire journey could greatly benefit the million-dollar blood market. Blockchain technology may provide an ideal solution for capturing data at its source and recording it securely. Paul Brody, the global blockchain innovation leader at EY, told Cointelegraph that a challenge currently faced by many enterprises is keeping track of inputs and outputs as they move across organizational boundaries:

“Blockchain is well suited for this, as it creates digital, standardized tokens that can be treated the same across different organizations. Most enterprise systems are not good at management of assets or products. Blockchain not only standardizes a way of keeping track of things across network boundaries, but it also applies discipline and trust within a decentralized system.”

Brody noted that by leveraging the private Ethereum blockchain network supported by the EY OpsChain platform, EY has tracked donation data coming from CBS across seven key points, creating an improved audit trail for blood products. While this project is still in its very early stages, Rick Prinzen, the chief supply chain officer and vice president of donor relations of CBS, told Cointelegraph that this already represents an important advancement in healthcare:

“Connecting donor center donations with in-hospital transfusions and enabling hospitals to have real-time access to the whole blood component product flow and product status represents a significant advancement in driving supply chain value and improved health outcomes.”

The case for tokenization

It’s also important to note that in order for blood to be recorded and tracked across a blockchain network, it must first be tokenized. In the case of EY Canada and CBS, Tomlin explained that each time someone gives blood, a barcode is placed on the unit containing the sample. This barcode is then scanned, and its data is recorded on the private Ethereum blockchain. The tokenized unit of blood can be tracked across each point in its journey.

Although tokenization may not yet be a familiar concept in the healthcare industry, Brody explained that tokenization simply means taking anything that exists, whether real or virtual, and representing that as a digital token. “Once blood comes in from a known donor, that could be represented as a token of a single donation,” he said. 

Brody elaborated that tokenization is useful for blood donations because once blood samples get processed, they may be combined with other products to create things like plasma. The goal is to keep track of the token’s origin in a standard and repeatable fashion. If done correctly, tokenizing blood could have tremendous benefits, especially when blood donations are in demand. 

Related: UNICEF Crypto Fund to Invest $100K in Humanitarian Blockchain Projects

According to Tomlin, one benefit that may come out of the proof-of-concept is ensuring that hospitals don’t face blood shortages. For instance, tokenized blood recorded on the blockchain could help determine the inventory of blood donations in hospitals. Tomlin explained that EY Canada hopes to work with a major blood operator moving forward to apply artificial intelligence to the inventory of blood that has been processed through the blockchain: “In many countries, blood ordering still happens by fax machines. We hope that by collecting the pedigree of blood through our blockchain, hospitals can automate ordering.”

Tomlin also mentioned that the COVID-19 pandemic has created a great opportunity for this use case, as it would add another layer to the equation by ensuring that hospitals have enough blood with the antibodies required to combat the virus. “This could be especially useful for tracking antibodies for COVID,” he said.

Not alone in the quest

United Kingdom-based company BloodChain aims to do something similar. Sebastian Zaremba, the project founder and leader of BloodChain, told Cointelegraph that the company is essentially an “open social blood bank,” meaning anyone is allowed to join the BloodChain network to donate blood. 

According to Zaremba, BloodChain allows individuals to securely register their blood types into a distributed blood bank capable of meeting supply and demand in real-time. AI-based applications would then be leveraged on top of the data collected on the blockchain to determine the demand for blood from certain hospitals. In turn, blood would immediately be delivered to those hospitals.

In addition to combating blood shortages through automation, tokenization could provide an incentive mechanism for blood donors. For example, enterprise blockchain startup EOS Costa Rica has built an incentive-based healthcare solution on the EOS network. Known as Lifebank, the open-source protocol aims to help solve global blood shortages by increasing supply chain efficiency and automating rewards for donors. Edgar Fernandez, a co-founder of EOS Costa Rica, told Cointelegraph:

“Donation centers that are experiencing blood shortages can use Lifebank to create incentives for blood donors. By connecting community members to local businesses, donors can sign up to give blood and then receive a token in exchange. These tokens are similar to coupons, as they can be redeemed at participating local organizations.”

Although these tokens are not based on a donor’s data, they contain units of value that can be used by the donors. “We’ve been able to program these tokens in a way where donation centers can only mint one token for each donor,” explained Fernandez. 

Is the healthcare industry ready to adopt blockchain technology?

Although applying blockchain could result in a more efficient and safer blood donation process, the healthcare industry may be hesitant to adopt this emerging technology. While it’s notable that the blockchain market in healthcare is expected to have reached $3.4 billion by 2025, one of the biggest challenges facing the industry is a lack of understanding of the technology. 

Tomlin pointed out that education and sponsorship were the two main challenges initially facing CBS: “The technology was so new that it was hard to find sponsorship. We ended up seeing sponsorship from the CEO who wanted to embrace blockchain.” He added that the healthcare industry needs to realize the value of blockchain technology rather than focusing so much on how it works. 

Brody explained that simplification and connecting that to value proposition is essential for the healthcare industry. He noted that while the era of private blockchains may have created a scenario where participants involved on a network might not have been comfortable with the amount of control from others, the barrier of entry has become much lower today:

“We need to get people comfortable enough to participate on blockchain networks. Public blockchains are appealing because they are like the internet. The Ethereum network has over 50 million users because it’s simple and there are low barriers to entry. We need to keep making it easy and cost-effective for more people to get on board in order to drive mass adoption at a network level.”

Brody further pointed out that although CBS is currently leveraging the private Ethereum network, the plan is to eventually move all its clients onto a public network: “Until recently, all the tooling for full privacy on public networks didn’t exist, which is why a lot of our implementations have been on OpsChain software running on private blockchains.”

today’s-cryptocurrency-trusts-and-hedge-funds-amid-financial-crisis

Today’s Cryptocurrency Trusts and Hedge Funds Amid Financial Crisis

On July 22, 2020, the United States Office of the Comptroller of the Currency published a letter clarifying that national banks and federal savings associations can indeed take custody of cryptocurrency assets. In the letter, Bitcoin was also acknowledged as “the first widely-adopted cryptocurrency.” On the same date, VISA, one of the largest payment companies with access to over 61 million merchants globally, revealed plans to offer Bitcoin (BTC), Ether (ETH) and XRP payments.

These steps toward mainstream acceptance come at a fortuitous yet harrowing time for world economics. Unprecedented quantitative easing, a fiscal stimulus and private bailouts have all returned in a much larger form than they existed in 2008. This time, however, it has all come in response to the COVID-19 pandemic crisis. The Federal Reserve along with central banks around the world are responding to the current financial crisis with trillions of new monetary units, leading to trillions more in existing state debt. A sudden and exponential increase in a nation’s monetary supply usually leads to high levels of inflation and, eventually, a mass devaluation of the currency. And in these situations, a cryptocurrency such as BTC, which has a fixed number of units, mathematically guaranteed, holds a unique inflation-proof value for investors.

One such investor, Paul Tudor Jones, a revered hedge fund manager, holds approximately 2% of his assets in BTC. He sees Bitcoin as a hedge against inflation and rampant central bank currency creation, comparing the digital asset to gold in the financially troubled 1970s.

Mike Novogratz, the chairman and CEO of Galaxy Digital — a diversified financial services firm focused on the digital asset, cryptocurrency and blockchain technology industry — also sees the current financial crisis as an “amazing environment” for Bitcoin. On April 2, Novogratz told CNBC that he had seen hedge funds and high-net-worth investors buying Bitcoin for the first time. Positive sentiment was already on the rise in 2019 as Bitcoin’s price nearly doubled, outperforming traditional investments including gold and the S&P 500. The current crisis has increased this trend.

Amid this economic downturn, Grayscale Investments has announced the strongest quarter in its history. Investments, 88% from institutional investors, hit a record high for Grayscale’s digital investment products, including Grayscale Bitcoin Trust, in the first quarter of 2020. The company has $2.2 billion in assets under management. Total investments into Grayscale crypto products in Q1 2020 amounted to $503.7 million, compared to about $1.07 billion per month over the last 12 months.

Cryptocurrency hedge funds’ assets under management more than doubled in 2019, rising to more than $2 billion at the end of last year, according to a survey published on May 11 by Big Four audit firm PricewaterhouseCoopers and Elwood Asset Management Services published. Based on data from the largest global crypto hedge funds by assets under management, including crypto index funds and crypto venture capital funds, the crypto hedge fund industry is expected to grow significantly with the price of Bitcoin. According to the report: 

“Our Q1 2020 research shows that there are around 150 active crypto hedge funds. Almost two thirds of these (63%) were launched in 2018 or 2019. The average AUM increased from US$21.9 million to US$44 million.”

Cryptocurrencies traded by crypto  hedge funds

Of the hedge funds surveyed, 97% traded BTC, Ether at 67%, XRP at 38%, Litecoin (LTC) at 38%, Bitcoin Cash (BCH) at 31%, and EOS at 25%. The substantial increase in AUM may be attributed to the increase in the prices of cryptocurrencies.

PwC partner and global crypto leader Henri Arslanian was quoted by Bloomberg: 

“I expect the crypto hedge fund industry to grow significantly over the coming years as investing in a crypto fund may be the easiest and most familiar entry point for many institutional investors looking at entering this space.”

Hester Peirce, a commissioner with the U.S. Securities and Exchange Commission, also sees institutional demand rising. She confidently stated that she has been “seeing more interest coming from institutional quarters than we have in the past. I think that will continue … as people are looking to diversify their portfolios, I think people are also likely to look more to the crypto space.”

In conclusion, the crypto hedge fund space has proven via its growth, resilience and performance to be a significant investment opportunity. The PwC report, along with the concurrent opinions of several well-known figures in finance, is more evidence of that. Set alongside today’s backdrop of economic uncertainty, crypto hedge funds allow for an easy access point to this safe haven for institutional investors. What is most exciting, however, is that this is only the beginning.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Elvina Kamalova is a director of investments at Aludra Capital — a digital assets investment management firm based in San Francisco. Aludra Capital is a digital assets platform of private equity firm Industry Capital. Elvina has a background in digital assets investments, portfolio management and fintech product development. She is the recipient of the President’s Volunteer Service Award presented by former President Barack Obama.

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After the US Senate Pros and Cons on Digital Money — What Do We Do With It?

The COVID-19 pandemic has certainly accelerated the digitalization of economies across the globe, opening up discussions on the future of digital financial services and whether our economy should advocate for the financial inclusion of Bitcoin (BTC) and other digital assets.

Yet, despite the horror we have been seeing as our industries continue to suffer, the digital payments industry is expected to thrive, based upon recently reported data from the Consumer Confidence Index. Reaching a three-month high last month, consumer confidence data revealed a 12.1 jump from 85.9 in May to 98.1 in June.

Last month when the United States Senate Committee on Banking, Housing, and Urban Affairs held its virtual meeting, dubbed “The Digitization of Money and Payments,” the conversation primarily revolved around stablecoins and whether our economy is ready for a U.S. central bank digital currency.

In case you missed it, it all came down to these two points, with committee chairman Senator Mike Crapo, a Republican from Idaho, explaining that our financial sector needs “rules of the road,” while Senator Sherrod Brown, a Democrat from Ohio, presented the question of: “Why on earth we would trust big tech with our banking system?”

The “rules of the road”

When it comes down to whether we need a digital dollar or not, I examined some of the discussion points throughout the hearing while diving into my continued belief that decentralized finance only emphasizes a need for a CBDC. 

Digital dollar, for the uninitiated, is an electronic credit that would only exist on computers, but like a traditional, physical fiat dollar, consumers and businesses could use it to pay one another.

The opening statements of June’s hearing kicked off with Senator Crapo inviting witnesses to discuss why a CBDC is necessary now more than ever.

In short, he wanted answers to:

  1. Efforts being undertaken by different groups in the development of digital money and payments.
  2. Design, operational and risk considerations in their development.
  3. What specific problems a CBDC should resolve that are not currently being or cannot be addressed by the litany of payments innovation already completed or underway.
  4. What the rules of the road should be.

However, Senator Brown followed up with skepticism on entrusting big technology companies with managing our financial system, even in a digital world. Recognizing digital advancement, Senator Brown identified his concerns surrounding consumer protection and providing equal access to financial services, bolstering support for his own proposed legislation alternative: Banking for All Act

This alternative, according to Senator Brown, would allow all Americans to open zero-fee bank accounts at U.S. post offices, banks or online and connected directly to the Federal Reserve’s system. He said:

“Banking for All means no more check-cashing fees, no more paying to use the money you already earned, [and] no more waiting until Wednesday to use money you were paid on Friday.”

Brown added that friendlier technologies like a digital dollar would be a valuable tool as well.

What we can learn from international markets

While the country’s economy has one of the highest penetrations of digital payment systems when compared to other economies, China, for example, seems to be taking the lead in legitimizing digital money and cryptocurrency in its economy. 

You can’t question its latest law after the Thirteenth National People’s Congress and Chinese People’s Political Consultative Conference passed a new civil code designed to protect the civil rights of inheritance, marriage, property, personality, contract and infringement.

Going into effect on Jan. 1, 2021, the new inheritance law not only identifies Bitcoin as one asset that could be inherited but it also allows China’s citizens to pass on their cryptocurrency and other digital assets to their heirs.

The government has also rolled out a digital coin that looks to challenge the digital offerings of Alibaba Group and Tencent Holdings. The reason is that it would enable better control of financial systems that are currently not possible with the yuan. Large-scale implementation of the coin would go live in 2022.

If to compare, the complexity of the European Union’s economy and its legislation process tend to hamper the rolling-out of any common law, putting China ahead of the game. Attempting to address and minimize the chances of missing out on potential opportunities, many member states have already started to develop CBDCs separately.

Back in June, the Italian Banking Association revealed, or ABI, it would be willing to support and pilot the implementation of a digital currency from the European Central Bank. On June 18, the ABI website shared that it had approved guidelines governing its position on digital currency and CBDCs.

As for member nations such as Germany, Spain and France, which are also members of the Financial Stability Board, have appointed regulators to oversee the cryptocurrency market in their respective regions. The board is an international body comprising financial institutions, such as central banks and regulators that issues regulation recommendations.

There is still a gap that can be filled here, however. If the EU can follow in China’s footsteps, there can still be room for a coherent law governing the region that would help reduce this regulatory uncertainty. The United Kingdom seems to have a measured approach when compared to its peers in the region. While there is no law governing cryptocurrencies, Her Majesty’s Revenue and Customs has published guidelines on the tax treatment for cryptocurrencies.

In a recent development, Valdis Dombrovskis, a member of the European Commission, advocated the use of digital finance by European countries.

What’s our next move? The DeFi bubble is certainly growing

Currently, the state of our financial industries seems to remain in this “hesitancy” in realizing the “first-mover” advantage by regulators. Nobody wants to be the first to launch a CBDC and face the mistakes; it’s no different than our legal court system wanting to rule on a particular case in fear of being judged for botching what could be a landmark decision.

But it is due to our regulators’ own fear that has prevented our financial sector and digital money’s landscape to realize its true potential. I’ve said it before and will continue to say that the digital money and blockchain space will continue to remain highly fragmented unless there are definite guidelines and educational resources made available so authorities of different economies can make the most appropriate decisions ahead of 2021.

Recent developments seem to favor the acceptance of digital assets, and big players like Facebook have shown significant interest in entering the market with its Libra project. And, yes, Libra still has a long way to go before it can be considered a digital currency. Nonetheless, it is heartening to see the likes of China and the U.S. making headwinds that would prompt other countries to follow suit.

But what has me most excited about the DeFi space? In my opinion, the growing acceptance has been bolstered by the fact that DeFi interfaces remained robust during March and did not require intervention by federal authorities to remain solvent.

Remarkably, this financial landscape has thrived ever since the momentary crash recorded at the peak of the COVID-19 pandemic. A new report by Dune Analytics revealed that the total number of users engaging with some form of a DeFi protocol has increased by 140% since the start of the year. Fortunately, the spike in usage has also translated to a rise in worth.

The total value of capital locked in the DeFi landscape has doubled to $2 billion in under three weeks. This growth pattern is even more impressive if we consider that fewer than five DeFi platforms account for a large chunk of the market share.

Until recently, MakerDAO was the poster child of the DeFi landscape — only to be leap-frogged by Compound thanks to the unprecedented impact of the launch of its governance token.

Both DeFi ecosystems are currently the main drivers of the DeFi narrative as they account for over 60% of the value of assets locked in the DeFi market. Kava, a cross-chain DeFi platform, was launched to challenge the likes of Compound and Maker. Its recently proposed Uber-like blockchain model is one I highly suggest familiarizing yourself with.

Without a doubt, the concentration of market shares to a handful of platforms highlights the nascency of the landscape and the sort of growth potential that could thrust more projects and tokens into the limelight.

Another token-based DeFi ecosystem positioned to capitalize on this growth trend is Level01. Although the lending niche remains the most attractive use case of DeFi technology, Level01 has introduced its token as a viable decentralized financial tool poised for mainstream success.

The peer-to-peer derivative trading platform exposes traders to a wide array of markets, including forex, gold, oil, stocks, cryptocurrencies and so on, by providing a transparent trading infrastructure with advanced risk/reward functionalities.

However, regardless of the DeFi hype and the promising stints of selected tokens, the biggest obstacles for players taking the sideline continue to be price volatility, concerns around market manipulation and lack of fundamentals to gauge appropriate value. These concerns could be mitigated if larger institutions started showing interest and considered it as a regular form of investment.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Andrew Rossow is a millennial attorney, law professor, entrepreneur, writer and speaker on privacy, cybersecurity, AI, AR/VR, blockchain and digital currencies. He has written for many outlets and contributed to cybersecurity and technology publications. Utilizing his millennial background to its fullest potential, Rossow provides a well-rounded perspective on social media crime, technology and privacy implications.