International Banking Study Calls Centralized Crypto Inevitable

A new report issued by an international banking group analyzing the use of cryptocurrency by central banks recognizes the usefulness of digital currency while calling into question their overall safety and security.

Study Calls Centralized Crypto Inevitable

The Bank for International Settlements issued a report on Monday saying that cryptocurrency, as issued by central banks, could be beneficial to replace cash as it disappears from the marketplace but warned of problems it sees as inherent to the system.

As central banks around the world are studying the potential of issuing cryptocurrencies of their own, the consortium of banking regulators in Basel, Switzerland released their white paper saying “(Central bank cryptocurrencies or other forms of digital currencies) could bring substantial benefits,”

Cryptocurrency issued by a central bank could be a stable, robust and even safer alternative to cash said the study by the group that includes the Federal Reserve and 59 other central banks of nations that account for about 95 percent of world gross domestic product.

Warnings of Dangers Ahead

This bit of positivity though came with many caveats warning of potential dangers. The report argues that digital currencies could become a rival to cash which would lead to rising interest rates as cash would then pulled from the commercial banking system.

“A general purpose CBDC could give rise to higher instability of commercial bank deposit funding. Even if designed primarily with payment purposes in mind, in periods of stress a flight towards the central bank may occur on a fast and large-scale, challenging commercial banks and the central bank to manage such situations.”

Ensuring the security of transactions and storage of the currency was also a concern addressed in the paper; “cyber-security could be a big problem with central bank cryptocurrencies and digital currencies since they would (be) open to many participants and points of attack.”

There was even some concern in the paper about how issuing cryptocurrency could lead to runs on banks during times of financial crises; though how this would differ or be more likely than the same event involving paper or fiat currency was not expressed.

Perhaps the most important acknowledgment made is that central banks issuing some kind of digital currency is inevitable. That once international regulatory standards are established and uniform payment methods are created “the currencies would have a limited impact on monetary policy implementation.”

Many central banks around the world are already looking into establishing a crypto version of their currency.  Sweden’s Riksbank has said that it could issue a so-called e-Krona at any time while the even the Bank of England has a cryptocurrency unit despite Governor Mark Carney’s very vocal distrust of cryptocurrency.

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“The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system,” Mark Carney, the governor of the Bank of England (BOE), said today in an interview at Bloomberg’s European headquarters in London. Carney, who also heads the Financial Stability Board — an international financial regulator — joins a growing number of industry insiders calling for greater oversight of cryptocurrencies.

Carney noted that the coins have “extreme volatility,” and said it reflected a lack of any intrinsic value or external backing, saying digital currencies themselves have failed as a form of money because of this volatility. He also rejected the prospect of a central bank digital currency in the near future. Even so, he reiterated that the BOE remains open-minded about the possibility sometime in the future.

Still, the answer isn’t to isolate or outlaw digital currencies, he said. “A better path would be to regulate elements of the crypto-asset ecosystem to combat illicit activities, promote market integrity, and protect the safety and soundness of the financial system.”

“It does point the way in many respects to the future of money,” Carney said, adding that “this generation of cryptocurrency is not the answer.” 

Carney talked about how bringing crypto-assets into the regulatory tent could potentially catalyze innovations to serve the public better banking-wise. As for the crypto-industry, he asserts that regulation is necessary and will mean that the best cryptocurrencies will be drawn to properly regulated exchanges, and weaker ones will, in turn, fall to the side.

Moving forward

In the interview, Carney says that he believes the best financial institutions can see the direction payment systems are going in. He says that these banks will be making a lot less money in the future as payment systems move in the cryptocurrency direction, permitting people to instantly move money from one account to another, to another.

He uses the analogy of a pub: I pay you, you pay the pub owner, and the pub owner pays the supplier, instantaneously and cheap, through blockchain. He talked up the potential of underlying blockchain or distributed ledger technology to improve accuracy, efficiency, and security across payments, clearing, and settlement.

Carney endorsed the push by the U.S. Securities and Exchange Commission to classify cryptocurrencies as securities, subject to laws governing how they are issued and traded. The SEC, concerned that initial coin offerings are fraught with fraud, has taken a keen interest in cryptocurrency providers. In recent weeks, the agency sent subpoenas to dozens of companies running ICOs, demanding for information related to their businesses. Across the U.S., states are making moves, too, like Texas, whose securities board has issued several emergency cease-and-desist orders this year. 

A cryptocurrency investor has sold his luxury Miami home for 455 Bitcoin making it the most expensive Bitcoin to Bitcoin real estate transaction to date.

Miami Mansion sold for Bitcoin

Michael Komaransky initially listed his seven-bedroom home in Miami’s wealthy Ponce Davis neighborhood for 6.5 million dollars payable in either cash or Bitcoin in August 2017.

He told the Miami Herald at the time that he wanted to take Bitcoin in order ‘to show people that real-world goods and services are payable in Bitcoin and Bitcoin Cash.’ The sale officially closed on February, 1 for 455 Bitcoin worth 6 million dollars at the time.

The transaction was made completely in Bitcoin, meaning there was no conversion to US dollars, making it not only the most expensive real estate transaction but also only the second pure Bitcoin real estate sale in Florida.

According to Pulse Real Estate, the buyer is also an early Bitcoin investor who like  Mr. Karmonsky wanted to demonstrate that Bitcoin is a real currency that can be used to pay for most anything.

“(Bitcoin) is digital currency that no one controls, and it’s a very, very liberating currency. And there’s not much use to a currency if you can’t spend it somewhere.”

Bitcoin trader and evangelist Ivan “Paychecks” Pacheco who co-founded the cryptocurrency website Bits to Freedom was the first to buy real estate purely with cryptocurrency.  Paying 17.741 Bitcoin ($275,000 at the time) for a condo, also in Miami. All earlier real estate transactions in the US involving Bitcoin were converted prior to the completion of the sales.

Cryptocurrency may be preferred in the future

Bitcoin for real estate seems a perfect fit as the currency is border-less and can be transferred with a minimum of third or fourth party involvement reducing middleman and processing fees.

Bitcoin-real estate is counting on that fact as a site dedicated to listing worldwide properties for sale in cryptocurrency.

Critics point out Bitcoins early reputed involvement with criminal activities and that using it to purchase real estate is an easy way for criminals to launder and move wealth across borders without detection. Which is historically how international criminals have cleaned ill-gotten fiat currency.

Komaransky who retired at 38 from his career as a trader founded a cryptocurrency trading business at DRW Holdings in 2014. He made news twice before in attempts to buy Florida real estate in Bitcoin to Bitcoin sales but had to relent to converting to Dollars in both cases.

According to a note issued by HBSC economic analyst James Pomeroy, Sweden could be the first nation to issue their own cryptocurrency. A document, which was sent to clients this week, titled “Sweden’s Big Year: Can the Economy Overcome Some Challenges?” set forth some rudimentary proposals of what an e-krona might look like.

The international bank that is HSBC calls the Swedish economy “one of the world’s most interesting”. It would be a fitting place to roll out a central-bank-issued, digital currency as they have one of the lowest actual cash usage rates on the planet. According to Business Insider, the use of cash is actively discouraged by shops and other businesses offering various goods and services. The business-focused news source also highlights anecdotal stories of beggars and buskers having their own card terminals to take electronic payments out in the street.

The HSBC-issued note states that the launch of a so-called “e-krona” might not happen this year but is something that may occur within the next few years.

Sweden’s Riksbank have identified two possible ways that a centrally issued digital currency could work. One is based on value, the other is on a register system. HSBC claim that the first option “would be more like cash is at present, with value stored on an app or a card rather than in a central database”. Meanwhile, the second option would use a register-based system. This would mean that e-krona would be stored on centrally registered accounts themselves. According to Pomeroy, the second option is:

“… more complex, but may make the framework easier to expand and develop over time, and would likely require the use of blockchain technology.”

Meanwhile, Sweden’s central bank has stated that it would consider using a combination of both options. The HSBC analyst added:

“A Central Bank Cryptocurrency (CBCC) would use blockchain technology, whereas a non-blockchain solution would make the e-Krona a ‘deposited currency account’.”

In addition to the fact that Sweden are already moving quickly towards a cashless society, the history of financial innovation within the State makes their efforts to be the first to launch a national digital currency fitting. Over 350 years ago, it was in Sweden that the first modern banknote was created. It’s therefore appropriate that things have moved full-circle and it is in the Scandinavian nation that cash itself might finally cease to exist.

Sweden are by no means the only country to consider launching their own digital currency though. Over the Christmas break, the Bank of England made headlines after speculation increased over them launching their own virtual currency later this year. There has also been talk of a CryptoRuble from Russia, and recently Ukraine have hinted towards similar via their own Facebook page.


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A prominent Iranian banker has come out in support of digital currencies. Masoud Khatouni, a senior member at Iran’s largest bank, has called for Bitcoin and other cryptos to be recognised and accepted into the nation’s banking system. According to Bank Meli Iran’s deputy for information technology and communications:

“Iran must formally recognise activities using digital currencies as they are currently shaping the future of banking. Banks themselves must also enter this field to use them.”

Khatouni’s stance is markedly different from other prominent bankers in Iran, however. The governor of the Central Bank of Iran (CBI) and their head of innovative technologies have both recently urged citizens to exercise great caution when dealing with digital currencies.

However, Khatouni believes that his nation could benefit from digital currency, particularly as they have a history of dealing with the burden of economic sanctions. He told prominent Iranian financial news source IBENA:

“The future of banking throughout the world is intertwined with digital currencies, which are entering the banks silently as most banks remain oblivious to their presence.”

The BMI official went on to state that there should be “no limitations” on the use of digital currencies. This, he believes, will allow companies to reap the benefits of cryptos with greater confidence and transparency. He proposed that the CBI should create a group entirely focused on integrating digital currencies into their banking practices. Such a department should then be used to determine regulations going forward.

“I ask central bank officials to refrain from creating restrictions for digital currencies by way of laws and regulations, because based on the current realities of the world, they have taken form and the Iranian people have also moved toward them.”

Despite the mixed signals coming from Iran’s banking sector, it appears that the nation is generally supportive of cryptocurrencies. In October last year, we reported on the Iranian central bank’s desire to see a cryptocurrency infrastructure developed for the nation. Nima Amirshekari, head of Electronic Banking at the Monetary and Banking Institute, said:

“CBI views it [Bitcoin] as something that can be controlled and does not see it as multi-level marketing or a pyramid scheme.” 

It’s believed that the Middle Eastern State are aiming to have a regulatory frame work for digital currencies setup by September of this year. How this will sit with the religious elements of the nation’s leadership remains to be seen, however. Member of parliament Mohammad Reza Pour-Ebrahimi believes that digital currency is against Islam. This sentiment was echoed as recently as last week in Egypt too. Counsellor of the Republican’s Mufti, Dr. Magdy Ashour told a local news source that Bitcoin was “not an Islamic concept”.


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Cryptocurrency markets are still a problem for most regulators and governments. It is evident this new form of money becomes a very real threat to any financial institution on the market. Reserve Bank of Australia governor Philip Lowe is concerned over this speculative mania surrounding Bitcoin and other cryptocurrencies. Such comments often fall on deaf ears, though, as everyone wants to strike it rich overnight.

Central banks all over the world would rather not see people invest in cryptocurrencies. These digital assets are too fickle and volatile. Moreover, they can’t be controlled or supported by banks and governments in an official capacity. This situation has not caused too much friction until the year 2017 came around. The soaring value of all cryptocurrencies resembles a mass hysteria attack of sorts. Everyone is speculating on cryptocurrencies, as there’s lots of money to be made. However, said money can be lost equally as quick, which is a far less favorable outcome.

Reserve Bank of Australia Sees Little Merit in Bitcoin

According to Reserve Bank of Australia governor Philip Lowe, these cryptocurrencies will not replace conventional money. It is highly doubtful anyone expected a different response at this time. Bitcoin has become a store of value rather than a currency these days. Its fees are too high and transaction delays are far too common. That said, the general public is still attracted to the allure of this virtual gold rush. It is a grave concern for the Reserve Bank of Australia.

How all of this will play out in Australia, remains to be seen. The local government recently amended its taxation guidelines regarding Bitcoin. By removing the double taxation, the ecosystem has been given a second chance to thrive. This was all before the current price hype became visible, mind you. No one can stop people from buying and using cryptocurrencies. Not even the Reserve Bank of Australia can do something like that. Nor is that in their best interest whatsoever.

Surprisingly, the Reserve Bank of Australia has no plans of issuing its own digital currency. Whereas other institutions are leaning toward this option, that’s not the case in Australia. Or at least not for now, as things are always subject to change. For now, there is no case for issuing “digital banknotes” whatsoever. An interesting future lies ahead for all cryptocurrencies, especially in Australia.

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Central banks all over the world are legitimately worried about cryptocurrencies. This new form of money can’t be regulated nor controlled. Countering this new hype will be difficult unless banks get on board with the program. Bank of Canada thinks now is a good time to research their own digital currency. Although the name remains unknown, they are not the first financial institution to contemplate such an approach.

Central bank digital currencies are a very unusual development in the financial sector. More specifically, these currencies will not replace cash. Instead, they are complementary coins for the digital age and a cashless society. So far, no major bank has made any significant progress in developing such a currency. Bank of Canada may be the first to achieve some breakthrough in this regard. A paper has been circulating which focuses on creating a native digital currency.

Bank of Canada Keeps all Options Open

Most people don’t associate Canada with cryptocurrency. Ever since some of the big exchanges shut down, things have become pretty quiet on that front. However, there is still an active Bitcoin community. Bank of Canada has taken notice of this growing interest in cryptocurrency and devised its own countermeasures. It remains unclear if and when the central bank will issue a digital currency, though. For now, this option is merely being explored. Nothing has been it in stone just yet, and it may never even happen in the end

It goes without saying this concept has received some criticism as well. Any government intervention is often scrutinized, which is only to be expected. When it comes to new forms of money, anything issued by a government or central bank is greeted with skepticism. This situation will be no different for the bank of Canada, which is only to be expected. After all, it remains to be seen how this digital currency is backed by real value. Cash isn’t, and it is doubtful a digital currency will fare any better.

It remains to be seen if the Bank of Canada decides to explore this option further Putting together a thorough document is rather commendable, to say the least. Just because it exists as a piece of paper doesn’t mean any piece of code will ever be written. Rest assured we will see more banks explore this option in the future, though. Cryptocurrencies are here to stay, and financial institutions need to come up with a solution. Whether or not they can, remains to be determined.

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Governments are attempting to recreate the success of bitcoin and decentralized cryptocurrencies like Ethereum with the development of permissioned ledgers and state-owned digital currencies.

Unfortunately, for governments, centralized cryptocurrencies and permissioned blockchain networks will not succeed and ever secure a fraction of bitcoin’s user base for a simple reason: the lack of decentralization and a peer-to-peer protocol.

Myth of Blockchain

Over the past 12 months, blockchain technology has been marketed as a magical technology behind bitcoin that allows any banking system or financial network to achieve the same level of immutability of bitcoin. However, that has evidently been falsified in the past year, given the lack of success by the blockchain industry in commercializing the so-called “permissioned ledgers.”

Like engineers cannot attach the identical engines used to build high performance aircraft to automobiles because of the incompatibility between the two technologies, blockchain technology behind bitcoin and other public cryptocurrencies like Ethereum cannot be integrated into centralized banking systems.

There exists a myth within the global financial sector that blockchain technology powers the bitcoin network, when in fact blockchain technology merely operates as a database within the bitcoin protocol to store and record transactions. As bitcoin and security expert Andreas Antonopoulos previously explained, blockchain is not the technology behind bitcoin, but one of the four fundamental technologies of bitcoin that needs to synergize with three key technologies to function.

“Blockchain is the technology behind bitcoin. Which is incorrect. Blockchain is one of the four foundational technologies behind bitcoin and it can’t stand alone. But that hasn’t stopped people from trying to sell it. Blockchain is bitcoin with a haircut and a suit you parade in front of your board. It is the ability to deliver sanitized clean comfortable version of blockchain of bitcoin to people who are too terrified of actually disruptive technology,” said Antonopoulos.

Citigroup CEO Falsely Believes Governments Can Restrict Bitcoin

At Bloomberg’s Year Ahead summit in New York, Citigroup CEO Michael Corbat stated that governments will introduce digital currencies to compete with bitcoin.

“I don’t think governments are going to take lightly other people coming in and potentially disrupting their abilities around data, around tax collection, around money laundering, around know-your-customer. It’s likely that we’re going to see governments introduce, not cryptocurrencies — I think cryptocurrency is a bad moniker for that — but a digital currency,” said Corbat.

It has been obvious over the past two years that governments are limited in what they can restrict with bitcoin and cryptocurrencies. If governments intend to regulate bitcoin, traders and users will simply migrate to over-the-counter markets, which are significantly harder to regulate. Hence, governments have opted to regulate the space instead, with major markets like Japan and South Korea legalizing bitcoin as a currency and providing necessary regulatory frameworks to deal with the cryptocurrency.

As bitcoin continues to be adopted by the mainstream as a robust store of value and a safe haven asset, fallacious statements intentionally provided by executives and public figures within the traditional financial industry will be rejected by general consumers.

With the digital spotlight being focused on Bitcoin in recent weeks, its smaller sibling Litecoin has fallen by the wayside. Trading has been flat and it has failed to gain traction in either direction, currently sitting around $55 where it has been languishing for the past fortnight.

The world’s fifth largest cryptocurrency may be in store for a well-needed lift after a major South Korean exchange enabled direct LTC trading. Since the doors in China were unceremoniously slammed shut on crypto trading last month South Korea has taken up the lion’s share of that trade, surpassing China to become the third largest Bitcoin market.

South Korea’s second-largest exchange, Coinone, recently added Litecoin to its platform, processing $3.2 million dollars in trade during the first 24 hours. The country is big on Litecoin, with the top exchange Bithumb accounting for over a quarter of global LTC trades. In fact, Bithumb is even bigger than Bittrex in terms of 24 hour USD volume with over $580 million traded according to Crypto Coin Charts. Bithumb settles $38.5 million in LTC to KRW trades per day, a trading volume that is over twice as a large as that of GDAX, Coinbase’s flagship digital currency exchange. Bithumb is also largely responsible for the rapid growth of Bitcoin Cash and was hugely influential on the adoption of other altcoins such as Qtum.

Coinone, though not as big, offers something slightly different, an offline trading exchange that appeals to traditional investors and retail traders. A direct customer service is available from headquarters in Seoul, this would be heaven for anyone that has tried and failed to get anywhere near customer service from other exchanges such as Coinbase.

This is all good news for Litecoin though it has yet to be reflected in the price, higher trading volumes do not guarantee higher prices. The trend is the key factor here and with Litecoin being the silver to Bitcoin’s gold, processing four times faster, it should start to make gains soon. In addition to its liquidity, the integration of LTC will be a long-awaited boost in the mid to long-term future for the altcoin. The coin has integrated the Bitcoin core development team’s scaling solutions (SegWit) and is exploring further technology to improve security and increase efficiency for its users. Bitcoin maybe be the current King of coins but there is light at the end of the tunnel for Litecoin

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