Huobi China has joined a state-backed blockchain alliance envisioned to be one of the most influential infrastructure services providers in the country.
The Chinese branch of Huobi Group announced its membership in the Blockchain-Based Services Network (BSN) Development Alliance at its launch on Sunday in Hangzhou of Southern China, the company told CoinDesk.
Led by State Information Center (SIC), a think tank affiliated with the National Development and Research Commision, China’s highest central planning agency, the network is planning to offer infrastructure services for any Chinese or international entity that uses blockchain.
BSN was originally created by six institutions, including SIC and state-owned tech giants China Mobile and China UnionPay, the country’s answer to VISA and Mastercard.
The network would be tested in 54 cities across the country as well as Hong Kong and Singapore for projects such as smart city management, Wenchao Shi, president of China UnionPay said in October at the test announcement.
“When developing an app, people would think about Android and IOS systems,” Shi said. “We hope BSN would be the first thing that people would think whenever they want to develop their own blockchain technologies.”
Huobi China has been trying to steer away from crypto trading in the country and establish itself as a blockchain services provider since the 2017 crackdown on crypto exchanges.
In the same year, the company kicked off its global expansion and transferred its trading businesses to Singapore, Japan and South Korea with local operations in each country, according to a timeline provided on its website.
Headquartered in Hainan province, one of the southernmost parts of China, Huobi China firmed up its relationship with the Chinese government by establishing a Communist Party of China branch in its local blockchain subsidiary Beijing Lianhuo Information Services LLC in November 2018.
Blockchain & the Changing Face of Frontier Markets
If you want to uncover hidden market gems, you need to look where others haven’t. And one of the places that my Gucci-loafer-wearing peers aren’t looking are frontier markets.
You’ve heard of emerging markets and perhaps you’ve even invested in them. But investors mostly ignore frontier markets. And boy, are they missing out!
As a cryptocurrency-savvy investor, the question isn’t why you need to know about frontier markets. Rather, it’s WHAT you need to know about them. Which is this …
Frontier markets are those countries that are less established and poorer than even emerging markets. But this could all be about to change, and soon.
That’s because widening adoption of the technology that powers the cryptocurrency universe — Distributed Ledger Technology (DLT), or blockchain — is set to bring attention to these overlooked markets because it is being used right now to include their citizens in the world’s financial system.
I’ll tell you more about this developing trend, and I’ll give you a few ways to help you get ready for it.
Frontier markets generally have small, undeveloped stock exchanges and currency markets. MSCI Inc. looks for a market to have at least a pair of companies worth $800 million each, and a willingness to consider foreign investment.
The MSCI Frontier Markets Index is composed of 29 countries: Argentina, Bahrain, Bangladesh, Burkina Faso, Benin, Croatia, Estonia, Guinea-Bissau, Ivory Coast, Jordan, Kenya, Kuwait, Lebanon, Lithuania, Kazakhstan, Mauritius, Mali, Morocco, Niger, Nigeria, Oman, Romania, Serbia, Senegal, Slovenia, Sri Lanka, Togo, Tunisia and Vietnam.
Most people probably couldn’t find half of those on a map. But with the right investments, you can tap into a world of undiscovered profits.
Frontier markets are small; real small. The market cap of all the stock of those 29 countries is only 0.3% of the global total.
For perspective, the market cap of emerging markets — such as Brazil and China — is 8.8% of the global total.
While frontier markets are small, the opportunity is not.
Just take a look at the sheer size of Africa: The U.S., China, India and several other countries would all fit neatly within the borders of the African continent.
With all that land, and all those people, there are plenty of opportunities.
Here’s why you should consider investing in frontier markets.
Natural resources. Africa is one of the richest natural resource continents on the planet. It is a leading producer of diamonds, sugar, salt, lumber, gold, iron, cocoa beans, cobalt, uranium, copper, bauxite, silver and oil.
Rapidly growing middle class. Africa, for example, has the fastest-growing middle class in the world. It has doubled to 313 million people in the last two decades. That growing middle class translates into consumers with money to spend.
- Expanding population. According to the Gates Foundation, Africa’s population is expected to double by 2050, which means a rapidly expanding workforce.
- Low correlation to developed markets. Frontier markets have a low correlation to developed markets like the U.S., Europe, Canada and Australia. The MSCI Frontier Market Index, for example, has a low 59% correlation with the S&P 500.
So, if the world’s biggest markets are going down, there’s only about a 50/50 chance that frontier markets will follow suit. This provides an extra layer of diversification and risk management for your portfolio.
Now, here’s the frontier-market/crypto connection …
Many frontier markets are associated with poverty. In some, only about 35% of households have electricity, and some 20% own a TV.
In fact, some 2 billion adults in frontier markets don’t even have a bank account. But what they do have, in increasing numbers, are smartphones and a willingness to use them as “mobile money.”
For the “unbanked,” Everex (EVX) is a blockchain startup that provides remittance services, microfinance and fiat-currency conversion.
But the beauty of blockchain is that its uses are far bigger than sending and receiving payments. The blockchain is also home to real estate documents and collectibles. Heck, it can even protect the very networks we are conducting transactions on.
Another company, CrowdForce, is trying to get the blockchain revolution into motion in frontier markets.
This Nigeria-based startup is working on an app called PayForce. It incentivizes trusted local retail agents in each community to offer financial services.
Remember, in this trustless, cash-based economy, many trusted retailers already provide a similar service to their communities.
This app would then allow those previously unrecognized in the economy to participate more actively. It would act primarily as a bank account but would also offer microservices such as managing bill payments, buying and selling cryptocurrencies, and hosting crypto-fiat exchanges.
By bringing this change through trusted individuals in each community, CrowdForce believes it can bring these frontier markets into the digital age and onto the world stage.
The PayForce Mobile App could also help solve the trust issue. Not only since a trusted member of the community is recommending it, but it uses blockchain, which is decentralized. Decentralization means there is no one person or government verifying transactions. And it means that all information is completely safe from hackers and other ne’er-do-wells.
Frontier markets are not without risk. In fact, they are more volatile than developed markets, can be politicaly unstable, have poor liquidity, have questionable financial/accounting reporting and sometimes see large currency fluctuations.
However, I believe that there are huge profits to be made in frontier markets. And I believe that blockchain will be instrumental in bringing them into the world economy with a solid foundation.
It’s not possible to invest in CrowdForce because it’s not publicly traded. And Everex gets an extremely low “E+” (or, “Very Weak”) grade from the Weiss Crypto Ratings.
But there are other ways to invest in frontier markets that come with far less risk. And you can do so from the U.S. stock exchanges you are familiar with.
If you are an ETF investor and are interested in frontier markets, there are three ETFs you should look at:
- Guggenheim Frontier Markets (FRN) …
- iShares MSCI Frontier 100 (FM), and …
- Global X Next Emerging & Frontier (EMFM).
Long-term investors with a high tolerance for volatility should consider a 5% to 10% allocation to frontier markets.
U.S. Dollar Czar: “No Need” for Fed Issuing Digital Dollar in Next 5 Years
In recent weeks, there has been growing talk among influential U.S. figures concerning the prospects of “digitizing” the dollar via blockchain technology.
Yet there are two major American officials who have once again said they are decidedly skeptical of a digital dollar any time soon: Secretary of the Treasury Steven Mnuchin and Federal Reserve Chairman Jerome Powell.
That’s per comments made this week to the U.S. Congress by Sec. Mnuchin, who testified on Thursday before the House of Representative’s Financial Services Committee regarding the topic of America’s financial stability. Therein, Mnuchin — President Trump’s foremost economic adviser — said he and Chairman Powell, the current head of the U.S. central banking system, were of the same opinion that a Fed-backed blockchain dollar wasn’t near.
Don’t Expect a Government U.S. Stablecoin Soon
“[Fed Chairman] Powell and I have discussed this at length: we both agree that in the near future, in the next five years, we see no need for the Fed to issue a digital currency,” Mnuchin said.
It’s not exactly a surprising position. This year, Sec. Mnuchin has made it clear that he’s generally skeptical toward the cryptocurrency space. Back in July, Mnuchin declared “I can assure you I will personally not be loaded up on bitcoin.” Around the same time, he said U.S. regulatory agencies were coordinating on cryptocurrencies to foster a “unified approach.”
Moreover, Sec. Mnuchin’s latest digital dollar comments come on the heels of the U.S. Treasury releasing its “2019 Annual Report,” wherein his department concluded that stablecoins could have major impacts on America’s economy if they were ever to become “widely adopted as a means of payment.”
For his part, Fed Chairman Powell told Congress last month that the Fed was considering a central bank digital currency but had yet to actively start developing one:
DISCUSSION: How Can Public Blockchains Have Privacy?
The best Sundays are for long reads and deep conversations. Today we’re asking: how can public blockchains have privacy?
On today’s show:
- How can public blockchains have privacy?
- The decreasing cost of passive surveillance
- MimbleWimble research Attack, Developer Response, and Alternative Implementation Response
- Gossip protocols and the stasi model
- Skin in the game with proof of work
- The moving target and the arms race
Let’s Talk Bitcoin! is sponsored by Brave.com & eToro.com
- Obscuring origins and game theory security
- Breaking links with lightning and other layer-2s
- Adversarial relationships are economic in nature
- Attacks in theory vs. practice
- Security through obscurity?
- Researchers, cryptographers and state level actors
- and more…
Let’s Talk Bitcoin! is a long-running independent podcast on the ideas, people and projects powering the cryptocurrency narrative. On this show, we basically talk about everything other than the price.
Since we started this conversation in early 2013, a whole world of blockchains and tokens has sprung up alongside bitcoin, and we talk about those too as real-world events help us see what’s real and what’s just clever marketing.
Visit LTBShow.com for all 419 of our past episodes or to subscribe directly to the Let’s Talk Bitcoin! show.
Episode 420 (How can public blockchains have privacy) Credits:
- Adam B. Levine (http://ltbshow.com)
- Andreas M. Antonopoulos (https://aantonop.com/)
- Stephanie Murphy (https://www.stephaniemurphyvoice.com/)
- Jonathan Mohan ( https://twitter.com/JonathanMohan)