Last Week Today – Bitcoin and Cryptocurrency Weekly Digest Sept 12-19

  • Facebook desperately defends Libra amidst diminishing support
  • Cuba and North Korea turn to cryptocurrency to dodge sanctions
  • Study finds growing interest in cryptocurrencies among millennials
  • New FATF regulations could be a fatal blow to privacy coins

David Marcus takes to Twitter to allay fears of Libra sovereign threat

In July, Calibra CEO David Marcus appeared before US lawmakers to field questions on Facebook’s contentious cryptocurrency project, Libra. It wouldn’t be a stretch to suggest he was more forthcoming this past Monday on Twitter than he was during the congress and senate hearings.

There’s good reason for Marcus’s new-found verbosity. When he appeared at those hearings a couple of months ago, he could not have anticipated that regulators outside the US would be even less receptive of Libra.

Libra has already been pre-emptively banned in China, Russia and India. Last week, both France and Germany, two of EU’s mightiest members, pledged to block Libra from launching in Europe.

Speaking at an OECD conference, France’s Finance Minister, Bruno Le Maire said the country would strive to block the deployment of Libra in Europe to protect “monetary sovereignty” and urged the EU to introduce a common set of rules to govern virtual currencies, “I want to be absolutely clear. In these conditions, we cannot authorise the development of Libra on European soil.”

On Wednesday, Germany published a comprehensive set of strategies, titled “Blockchain strategy of the Federal government”, to foster the development of blockchain technology to support a digital transformation of the economy and mitigate the risks of its implementation across various sectors. According to the strategy, passed by Chancellor Angela Merkel’s cabinet, the German government vows to prevent private stablecoins from becoming alternative currencies.

Germany’s Finance Minister Olaf Scholz championed blockchain technology as a building block of the future internet, but warned of the risks arising from private cryptocurrencies, “We want to be at the forefront and further strengthen Germany as a leading technology location. At the same time, we must protect consumers and state sovereignty. A core element of state sovereignty is the issuing of a currency, we will not leave this task to private companies.”

The country’s financial watchdog, BaFin, has been contact with Libra, according to BaFin president Felix Hufeld, “We are in intensive discussions with Libra. We have asked questions, we have received responses. Very specific questions, less detailed answers.” Hufeld added that the lack of adequate answers shows that many questions of high economic relevance had not been thought through completely by Libra as yet.

Faced with such implacable opposition from all corners, even some of the founding members of the so-called Libra Association have recently sought to distance themselves from the project.

In what seemed like a desperate rallying cry to salvage the project, Marcus took to Twitter to parrot that Libra will not create any new money and that it was simply a payment system running on top of existing sovereign currencies. Hang on, pal. Don’t we already have a PayPal?

He further added that Libra will continue to engage with banks and lawmakers around the world to address their concerns. The problem might be that lawmakers have already made up their minds.

It’s really not saying much but who would have thought Libra would be faced with a tougher crowd in the EU than the US? When the consequences of Libra’s failure are fully realised, Facebook may come to seriously regret the idea.

North Korea is building its own cryptocurrency while Cubans adopt Bitcoin

For all the rhetoric on consumer and data security concerns, the only reason governments are flapping over Libra is because it threatens to destabilize their own version of money, not necessarily by replacing it but by manipulating the demand for it, which the Libra reserve would have the leverage to do.

So it’s not surprising, given the perceived inevitability of cryptocurrency adoption, that many large nation states, the likes of China and India, are now scampering to issue their own digital currencies. North Korea and Cuba have very different reasons – to circumvent trade and economic sanctions.

Both countries have been subject to crippling sanctions to varying degrees for over 50 years – with Cuba facing a trade embargo and economic sanctions from the US and North Korea effectively being ostracized from the rest of the world by UN sanctions for persisting with its nuclear weapons program.

On Wednesday, it was reported that North Korea was in the early stages of developing its own cryptocurrency in a bid to circumvent the existing financial system after hosting its first blockchain conference in April. According to the official in charge of the conference, Alejandro Cao de Benos, the currency will be “more like bitcoin or other cryptocurrencies.”

As governments are trying to figure out ways to keep track of transactions on the Bitcoin blockchain, North Korea has begun working on its backup plan – a digital currency which would allow the country to determine how it works and who has access to it.

Cuba, likewise, is also turning to cryptocurrency but has no plans of building its own just yet. Beset with US trade embargo, which denies access to international payment systems, Cubans have turned to Bitcoin to access the digital world. Since mobile internet access was established in the caribbean country last year, Bitcoin is said to have opened new doors for the people of Cuba.

With economically embattled nations like Iran, Venezuela and Cuba now taking refuge in Bitcoin, for good or bad, minor economies are no longer in thrall to overbearing first-world nations as this new untameable money allows them to regain their economic sovereignty.

One in five affluent millennials have invested in cryptocurrencies

An oft-cited hurdle for cryptocurrency adoption is that it’s too complicated for the average Joe. But the average Joe ten years from now may not see it that way for having grown up with a natural propensity for an entirely digital world.

UK law firm, Michelmores surveyed 500 millennials with investable assets worth more than £25,000 on their source of wealth, investment considerations and their portfolio. Although traditional forms of investment such as shares, stocks, annuities and life insurance remain most popular, the law firm was surprised to find that 20% of those surveyed had invested in cryptocurrencies.

“The survey result that 20 percent of those interviewed have invested in cryptocurrencies contrasts with a recent survey by the [Financial Conduct Authority] FCA which suggested a figure of 3 percent across the general population”, said Michelmores’ Andrew Oldland, opining that this deviation among millennials from the larger population evinces a willingness to embrace new technologies.

A similar survey by peer-to-peer Bitcoin marketplace, Paxful, found that 44% of US adults between ages 18 and 42 believe cryptocurrencies are valid as money now and 26% believe that they will become a valid alternative form of money in the future.

A less focused annual survey by Dutch banking firm, ING, which interviewed nearly 15,000 individuals across all age groups in Europe, found that 73% of respondents were unaware that cryptocurrencies were not controlled by a central body. The study also found that those with limited knowledge of cryptocurrencies held the most positive attitude about their future use.

Only 32% of those polled view cryptocurrencies as the future of spending money online and only 28% see them as the future of investment, while a mere 22% say that they would prefer cryptocurrencies if cash no longer existed. Turkey was found to be the most receptive towards cryptocurrencies, whereas Austria, Germany and Luxembourg saw the least favourable responses.

The findings of these surveys are hardly surprising. We should come to expect tech-savvy millennials holding a more receptive attitude towards cryptocurrencies. It’s also not discouraging to learn that the general population does not foresee cryptocurrencies replacing fiat money in the immediate future. Most of them probably don’t foresee a recession in the near future either. For what it’s worth, in matters of money, the crowd has always been wrong.

Privacy coins effectively blackballed by new FATF guidelines

Back in June, the intergovernmental anti-money laundering body, Financial Action Task Force(FATF) adopted a new set of rules for virtual assets and virtual asset service providers, which required cryptocurrency service providers to adhere to the same standards and requirements as traditional financial service providers.

The new guidelines require service providers like cryptocurrency exchanges to “identify who they are sending funds on behalf of, and who is the recipient of those funds and develop processes where they are required to share that information with other providers of virtual assets, and law enforcement.” Furthermore, exchanges are required to “know their customers and conduct proper due diligence to ensure they are not engaging in illicit activity.”

Too lazy to understand the intricacies of cryptocurrencies and draft a specific set of rules, FATF did a quick and easy copy paste job of their existing mandate for businesses providing financial services, stating that it “expects all countries to take prompt action to implement the FATF Recommendations in the context of virtual asset activities and service providers.”

FATF will monitor implementation of the new requirements by countries and service providers and will carry out a review in June 2020. Countries which fall foul of the new guidelines may incur trade sanctions.

A particular sticking point for cryptocurrency exchanges would be the “travel rule”, first implemented for legacy financial services providers in 1996. It requires all financial institutions to share information about their customers between one another when transferring funds. Under the current infrastructure of cryptocurrency exchanges, this would be a complicated measure to implement for most currencies, and outright impossible for privacy coins.

Within a month, Coinbase delisted Zcash in the UK. This past week, South Korean exchange Upbit and OKEX Korea have both announced imminent delisting of a slew of privacy-centric coins – including Monero, Dash, Zcash and PIVX, after reviewing whether these privacy coins comply with the requirements of the FATF guidance.

OKEX Korea said in a blog post that these currencies “violate laws or regulations [and] policies of government agencies and major agencies” by not allowing relevant information such as the name and address of the sender and recipient of the currencies to be obtained.

Of course, nobody can stop two individuals from transferring privacy coins peer-to-peer, as they were supposed to be transferred, but we’re still seemingly unable to get over the centralization crutch.

Now that puts me in mind of this aphorism…

Trading Insights

In a week which saw altcoins teasing a long-awaited comeback, there wasn’t a lot to write home about for Bitcoin as BTCUSD continued to trade sideways around 10k, closing last week’s trading session at 10305.

The daily chart is taking shape with a few bullish pointers while the descending triangle pattern is still very much in play. After briefly wicking below bull-cycle bottom of 40, daily RSI registered a bullish failure swing, with the next corrective wave stopping short.

There was also a bullish RSI divergence from the price curve last week, with RSI marking higher high for a lower price high.

The weekly chart isn’t quite as promising. The bullish engulfing pattern failed to complete with last week’s closing in red with corresponding bearish MACD divergence, bearish DI convergence and falling ADX.

The playing field still remains 9300 to 10800 and with increasingly narrower swings, something inevitably has to give and the week of Bakkt launch could see a decisive break one way or the other.

Now I don’t post altcoin charts unless the indicators are compelling.

In the last edition of the digest, I highlighted Ethereum’s falling wedge breakout and bullish RSI divergence as clear signs of an imminent rally. As expected, ETHBTC saw a 30% surge this past week, with 7 consecutive green candles on the daily.

Those who’re in profit, kudos! It may be time to book your profits and wait for a re-entry if ADX goes horizontal.

Other leading altcoins also posted gains, as they often do when Ethereum does, with Ripple and Stellar having… ahem… a stellar week. Bitcoin’s market dominance has reduced by 3%, sitting not too shabby at just over two-thirds of the total market cap, at 67%.

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Lamps Toujours
Lamps is a British economist and Bitcoin evangelist with an elusive ken for all things blockchain. A writer by avocation, Lamps' suasive opinions and analyses evince a quenchless passion to promote the integration of blockchain as the new economic and commercial infrastructure on a global scale.

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