According to the Head of the Swedish central bank, Facebook‘s Libra project has given incentive to central banks across the world to review and investigate the development of new financial technologies. Stefan Ingves, Governor of Sveriges Riksbank, told CNBC,
“It has been an incredibly important catalytic event to sort of shake the tree when Libra showed up out of the blue, and that forced us to think hard about what we do. Part of my job is to produce a good/service called the Swedish krona which is convenient to use for Swedish citizens, and if I’m good at that in a technical sense then I don’t have a problem. But if I were to start issuing 20-kilo copper coins the way we did in 1668, then we soon would be out of business.”
As the use of cash continues to fall in Sweden, the Swedish central bank has been looking into the possibility of issuing its own digital currency. Several local business in the country no longer accept physical currency, with some even putting up signs to warn customers before they enter the store. As of now, Sveriges Riksbank is looking to investigate the plausibility of an ‘e-krona’ digital currency, which it says could be introduced if it decides to do so. However, it isn’t the only central bank looking into this.
China has already announced that it is close to launching its own digital currency while just last week, the Swiss National Bank declared that it was looking into the use of digital currencies in trading.
With Libra having lost backing from more than a few companies recently, Ingves warned that Facebook would be faced with challenges as it moves forward with the project. He said,
“In this day and age we have to twist things in our heads and do things based on the assumption that nothing is on paper, and then when we talk about money everything is going to be digital in one form or the other. But the old issues — private sector money or public sector money — they are basically identical, and if history gives us any guidance at all then almost all private sector initiatives have collapsed sooner or later.”
Just yesterday, The Libra Association announced the appointment of members to the Board of Directors, with the Board including David Marcus, former PayPal executive and Head of Facebook’s blockchain strategy. Currently, the group has 21 members, 7 fewer than its original 28 after Mastercard, PayPal, Visa and four more members backed out.
Miners and Node Operates on World’s Second-Largest Blockchain, Ethereum, Advised to Act or Risk Getting Stuck on Incompatible Chain
Ethereum’s system-wide upgrade Istanbul is set to go live.
New rules governing the world’s second-largest blockchain are expected to go into effect on Saturday, December 7, 2019, with the exact date subject to change due to variable block times and timezones.
The Istanbul upgrade will roll out backwards-incompatible code changes to the $19-billion blockchain network. Changes include price adjustments, interoperability between Ethereum and Zcash, adjusted gas prices for certain operations and allowing contracts to introduce more functions.
To account for the variable block time, nodes should be upgraded before Sunday, December 1st. As for any nodes that are not upgraded, they’ll be abandoned on the old chain where the previous rules continue to exist.
According to the announcement,
“If you are using an Ethereum client that is not updated to the latest version (listed above), your client will sync to the pre-fork blockchain once the upgrade occurs. You will be stuck on an incompatible chain following the old rules and you will be unable to send ether or operate on the post-upgrade Ethereum network.”
If you’re not a node operator but you hold the cryptocurrency or use the blockchain, you likely don’t need to do anything – unless you’re given instructions by a third party service acting on your behalf.
“If you use an exchange (such as Coinbase, Kraken, or Binance), a web wallet service (such as Metamask, MyCrypto, or MyEtherWallet), a mobile wallet service (such as Coinbase Wallet, Status.im, or Trust Wallet), or a hardware wallet (such as Ledger, Trezor, or KeepKey) you do not need to do anything unless you are informed to take additional steps by your exchange or wallet service.”
Istanbul is a step in the roadmap toward Ethereum 2.0, the major network upgrade that will shift its current proof-of-work consensus algorithm to proof-of-stake.
Ethereum co-creator Vitalik Buterin says that developers have been doing great work on phase two research and development. On Tuesday they released the latest look into the progress to date.
“[The] proposal makes ETH more enshrined. It provides an ‘operating system’ which gives the protocol the ability for shards, execution environments, validator accounts, and block producers to pass ETH between each other across shards with a one block latency. This results in a simpler fee market or gas market and removes some of the centralization concerns around the older fee market proposals.”
You can check out the full announcement on the Istanbul upgrade here and the update on Ethereum 2.0 here.
China’s idea of blockchain may oppose the idea of decentralization
Over the past few weeks, China has been grabbing more and more attention from the crypto-community, especially since Xi Jinping, President of the People’s Republic of China, openly embraced blockchain technology. Dovey Wan, Founding Partner at Primitive Ventures, recently featured on an edition of the Unchained podcast to discuss the same, and answer why China is pushing the adoption of digital Yuan and taking steps to replace fiat currency.
China has been at the forefront of innovations for quite a while now. On being asked about the reason behind China wanting to set global standards for blockchain, Wan answered,
“In order to enhance China’s leadership position, Xi Jinping wanted to make the global standards for blockchain. Yet this idea is opposite to the idea of blockchain, of being decentralized.”
Many have speculated that China is taking these steps to position itself as the new world leader. With respect to this speculation, Wan added,
“China’s government needs to further figure out what must be the next big thing like infrastructural level thing to further invest upon[…] to get China onto a leadership position before other countries.”
On the topic of blockchain moving up on the priority list of China’s expansion plans, Wan responded,
“500 different enterprise blockchain projects are taking shape in China. China wanted the central bank to manage the currency, along with offering complete anonymity to the consumers that will be similar to service offered by private firms.”
Wan also claimed that following the launch of the digital yuan, users will get to directly interact with commercial banks. However, China isn’t the only country to accelerate its efforts in the field of blockchain. In fact, the United Kingdom, Singapore, and Switzerland have already joined the blockchain space.
Sberbank Patents Blockchain Repo Solution in a Purported First for Russia Banks
Russia’s largest bank, the state-owned Sberbank, has pioneered a blockchain solution for repurchase agreements — also known as repo.
According to a Sberbank announcement on Nov. 19, the bank has been awarded a patent for the solution, which uses smart contract technology to automate repo transactions between parties.
Repurchase agreements are widely used in wholesale funding markets and serve as a vehicle for banks and non-banks to access liquidity via short-term funding agreements that are collateralized by underlying securities.
In a repo transaction, a bank (or other entity) buys a security and pays for the purchase by immediately reselling it for a period — from just one night to as long as three months — with a commitment to repurchase it at an agreed price.
Repos are thus highly elastic instruments to meet the funding and liquidity needs of different financial institutions and play a central role in the global banking system.
Reducing counterparty risk
According to Sberbank’s announcement, the bank is ostensibly the first in Russia to have patented a repo deals solution with a blockchain-based execution system.
Using the solution, the counterparties in a repo deal sign a smart contract using e-signatures via a distributed ledger; the contract is initially used to automate the transfer of funds and securities between parties.
Sberbank’s solution includes a mechanism to monitor the market price of the collateralized security in question throughout the course of the repo’s term (or maturity). Based on this data, the contract then makes mutual payments to the parties to settle the deal automatically.
Sberbank notes that its solution covers the repo lifecycle end-to-end, which it claims eliminates counterparty risk and, in doing so, could translate into more affordable financing.
A blockchain-not-Bitcoin institution
Sberbank has actively pursued blockchain development in various aspects of its business but has stopped short of offering cryptocurrency-related services.
In May 2019, Cointelegraph reported that the bank had halted its potential cryptocurrency trading plans because the Central Bank of Russia is still largely opposed to the adoption of the crypto space. At the time, Sberbank vice president Andrey Shemetov said that the bank is waiting for decisive cryptocurrency legislation to be adopted before moving ahead with more serious plans.
In June, Sberbank CEO Herman Gref confirmed the bank’s choice not to develop cryptocurrency-related offerings, noting the institution was focused on developing blockchain solutions for financial services.