Last week Reuters reported that several of the world’s biggest banks have invested $50 million to “create a digital cash system to settle financial transactions”. It’s an on-going project, according to the report, involving the likes UBS, Credit Suisse, Barclays, and Deutsche Bank.
Banks are being tight-lipped on the project, and it should be noted that Reuters’ reportinvolved an unnamed source, but there was a confirmation from a Barclays’ spokeswoman that the bank is involved in the USC [utility settlement coin] project and that the research and development stage had come to an end.
Any mainstream interest in cryptocurrency and blockchain is always significant, of course. But should it determine whether we buy Bitcoin or other digital currencies? That is to say, should backers of crypto be worried that banks creating their own digital currency be worried that the likes of Bitcoin, Ripple and more. will be shunted aside?
Investors buoyed by Bitcoin’s streak in 2019
In truth, investors in cryptocurrencies shouldn’t worry too much, certainly in the short term. Financial institutions have been notoriously slow in not only embracing the possibilities of blockchain technology but in addressing the problems that they are trying to solve.
The new entity banks are reported to be creating to run the project, Finality, is aimed at making clearing and settlement in financial markets more efficient. This is not a new issue, but something that has made financial transactions cumbersome for decades.
The point is, one could argue, that while financial institutions are addressing issues that have been around since the 1970s, those developing cryptocurrencies could be stealing a march on financial solutions for the 2020s. Banks will be looking for solutions to long-standing problems, whereas developers will be looking for solutions to problems that have not yet been pinpointed.
Yes, some investors will welcome mainstream embracing of crypto – in any form – as a positive sign, but it is the sense of ‘rule-breaking’ at the development level that has always made cryptocurrency an existing investment.
Facebook also interested in crypto
Banks, of course, are not alone in making a foray into the world of cryptocurrency. Facebook has also been upping its plans to create a digital currency. The so-called ‘Facecoin’ or, as has been reported, Project Libra, is creating quite the stir, albeit it is still shrouded in secrecy. Most observers believe it will be used to facilitate payments, and that it will be a stablecoin.
The speculation around Facebook’s digital coin has ramped up in recent weeks. And, as so often the case with anything to do with Mark Zuckerberg, a bit of hyperbole has infused the reporting. It’s been suggested that Facebook “has lit a fire’ under Bitcoin and crypto”, and that “it’s a catalyst for mainstream Bitcoin and cryptocurrency adoption” around the world.
Take all of this with a pinch of salt. At the same time as being told Facebook is creating a “rival to Bitcoin”, we are also told it’s a catalyst for Bitcoin adoption. The truth is that we do not know exactly what banks or Facebook or planning, nor what that impact will be further down the line.
Yet, through all of this increased speculation in the first half of 2019 of mainstream financial and tech giants exploring crypto, that has coincided with Bitcoin going on a tear throughout the year so far. For most investors, that’s the important thing, not the speculation on other projects.
Facebook to Face Global Regulators about its Libra Cryptocurrency Project
According to recent news, Global regulators will interrogate Facebook shortly regarding its Libra cryptocurrency, even though the EU governments expressed concerns that the digital currency poses a danger to financial stability. As per the Financial Times, Facebook needs to face 26 national banks, inclusive of the US Federal Reserve and the Bank of England, will meet with delegates of Libra in Basel shortly, the FT stated, referring to authorities.
Moreover, Facebook has pitched Libra as an approach to democratize money, providing banking for first-timers, and making a format that is independent of any one nation. However, it is the last part that has worried the authorities. Facebook opined that it invites open exchange with controllers. In a recent discussion, Libra told Financial Times –
“In the nearly three months since the intent to launch the Libra network was announced, we have prioritized engagement with regulators and policymakers around the world, we welcome this engagement and have deliberately designed a long launch runway to have these conversations, educate stakeholders and incorporate their feedback in our design.”
Besides, the meeting will reportedly happen among Libra and the Committee on Payments and the Bank of International Settlement’s forum, Market Infrastructure. Facebook authorities will be questioned about the design and scope of the cryptocurrency, and a report will be filed for G7 finance minister in October.
Regardless, Libra‘s founders have additionally been asked to respond critical questions regarding the currency, Financial Times said. Further, Nations inclusive of France and Germany have publicly condemned the social media giant’s Libra venture, saying it presented dangers to EU states Sovereignty.
The Libra Association, an alliance of 28 members set up together by Facebook to help the cryptocurrency to realization, includes Uber, Visa, Mastercard, Spotify, and the subsidiary Calibra, among few. Moreover, the members all made a non-restricting guarantee to invest at a minimum of 10 million dollars.
The forthcoming meeting came later when French Finance Minister Bruno Le Maire cautioned that France would not approve the development of cryptocurrency Libra on European soil. He opined that the digital currency poses a risk to the fiscal power of governments and causes issues on illegal tax avoidance, terrorism financing, and market strength. Further, He additionally voiced concerns that Libra can help individuals to abandon national currencies during an emergency, even more complicating the efforts of the government to deal with the economy.
Nevertheless, the governments have voiced strong concerns over Libra and other digital currencies that are seen fit for destabilizing the financial system and lessen the power of governments and central banks. Even though it faces issues, the head of the Libra Association stated that Libra cryptocurrency would be released at the end of 2020.
Facebook’s David Marcus Responds to Critics Over Libra ‘Threat’
The head of Facebook’s Calibra – the entity created by Facebook to provide financial services including a digital wallet for the planned Libra cryptocurrency – has spoken out in response to claims from authorities that the project poses a threat to nations’ “monetary sovereignty.”
In a Twitter thread on Monday, David Marcus, who co-created Libra, said he wanted to “debunk” that notion – one most notably promoted by France’s Economy and Finance Minister, Bruno Le Maire.
Le Maire said last Thursday that, with Libra, “The monetary sovereignty of states is under states is under threat,” and further threatened to block the project’s development in the EU.
Marcus said that Libra will be “backed 1:1 by a basket of strong currencies. This means that for any unit of Libra to exist, there must be the equivalent value in its reserve.” As such, Libra will not be creating new money. That function will “strictly remain the province of sovereign nations,” he said.
The Calibra chief further clarified that Libra is being built to be a “better” payment network utilizing national currencies, and “delivering meaningful value to consumers all around the world.”
Marcus welcomed the attention from regulators, however, saying:
“We believe strong regulatory oversight preventing the Libra Association from deviating from its full 1:1 backing commitment is desirable.“
His comments come as a group of 26 central banks – including the European Central Bank, the U.S. Federal Reserve and the Bank of England – meets in Switzerland to grill the Libra Association over the scope and design of the project.
In the thread, Marcus also pledged to continue working with “central banks, regulators, and lawmakers to ensure we address their concerns through Libra’s design and operations.”
OKEX Korea Drops 5 Privacy Coins Citing FATF Rules
Regulatory pressure on cryptocurrency exchanges to stop providing users with access to so-called privacy coins is growing.
The South Korean arm of the Malta-based OKEX exchange announced early on Monday that it is to delist five cryptocurrencies that provide extra privacy features for users. From Oct. 10, the exchange will no longer support trading in Monero (XMR), dash, zcash (ZEC), horizen (ZEN) and super bitcoin (SBTC).
In its notice, OKEX Korea said it will delist cryptocurrencies that “violate laws or regulations [and] policies of government agencies and major agencies.”
Specifically, in this case, it cited the “travel rule” recommendation to national regulators from the Financial Action Task Force (FATF) as the reason for pulling the five coins.
The exchange said that as per FATF’s rule, “it is recommended that exchanges be able to collect relevant information such as the name and address of the sender and recipient of the virtual asset.”
As such, it had decided to delist the cryptocurrencies that did not allow that data to be obtained.
The U.K. arm of Coinbase also dropped support for zcash in August, likely due to the need to identify users when required by authorities.
This summer, FATF finalized its recommendations to its 37 member nations, including a controversial requirement that “virtual asset service providers” (VASPs), including cryptocurrency exchanges, pass information about their customers to one another when transferring funds between firms.
The so-called travel rule has been a requirement for international banks when sending each other money on customers’ behalf for some time, but has been described as onerous for blockchain firms and harmful to user privacy.
The global anti-money laundering body gave members 12 months to implement the new recommendations that, while not mandatory, could see nations not complying put on a finance blacklist.
Since June, compliance solutions providers in the crypto space have been moving to launch systems aimed to help exchanges pass each other the required data.
OKEX Korea said that customers have until Dec. 10 to withdraw any of the five delisted coins from the platform.