The past few weeks have been nothing but interesting, and in a way, put cryptocurrencies on the spotlight in a way never seen before. Governments and policymakers have expressed their concerns over bitcoin and Facebook’s Libra cryptocurrency.
The US President Donal Trump was the first to fire anti-bitcoin comments on July 12 via his favorite social media platform Twitter. He said cryptocurrencies are not money and their value comes from thin air. He attacked Facebook’s Libra project, stating that the social media giant should get a banking license if it wants to get into banking.
He created a conducive atmosphere for other US policymakers to come on board and criticize bitcoin, with US Treasury Secretary Steven Mnuchin calling Libra a ‘national security threat. What the US does not realize is that this has become an arms race as some countries are now working on a cryptocurrency project.
A report published by the FDD suggested that crypto rogue nations – China, Venezuela, Iran, and China – are weaponizing cryptocurrencies to evade sanctions and weaken US global financial dominance through the use of the dollar as a leading currency.
China steps up its cryptocurrency efforts in the wake of Facebook’s Libra cryptocurrency
Facebook’s plans to launch its own cryptocurrency in 2020 has pushed the People’s Republic of China to accelerate its cryptocurrency project as countries enter into a new currency race that could be shaped by how early or late major powerhouses warm up to the emerging technology.
Facebook published its long-awaited white paper about its cryptocurrency project and immediately threw governments in panic mode as they scrambled to make sense of the implications of Libra.
The People’s Bank of China, which began investigating digital currencies as early as 2014, is speeding up its cryptocurrency project as it believes that Libra is a threat to the country’s monetary policy and financial sovereignty, reported the South China Morning Post on July 8.
Speaking at a conference hosted by Perking University, PBoC director Wang Xin asked, “If [Libra] is widely used for payments, cross-border payments, in particular, would it be able to function as money and accordingly have a large influence on monetary policy, financial stability, and the international monetary system?”
Many central banks could be forced to create their own digital currencies to cope with Libra.
Japan studies Facebook’s Libra project
Facebook’s Libra cryptocurrency project has sparked panic even among crypto-friendly countries such as Japan. The Reuters reported on July 13 that the Asian country has set up a working group to study the impact of Libra on financial regulation and monetary policy.
The working group consists of the country’s bigwigs in finance – Bank of Japan, the Finance Ministry, and the Financial Services Agency. The three have already begun meeting to address the threats posed by the yet-to-be-launched cryptocurrency.
The cryptocurrency sector in Japan is regulated by the FSA ahead of the central bank as is the norm in many countries.
Japan downplays issuing a central bank cryptocurrency
The Bank of Japan – the country’s central bank – has put to rest the possibility of creating a cryptocurrency. The central bank of the pro-bitcoin country recently said that it will not issue a cryptocurrency, at least for now, because it would be forced to end the use of cash, which is not viable at the moment.
The central bank’s deputy governor Masayoshi Amamiya said doing so would require the financial institution to cut interest rates.
“To overcome the nominal zero lower bounds, central banks would need to eliminate cash. Eliminating cash would make settlement infrastructure inconvenient for the public, so no central bank would do this,” said Amamiya.
The idea of countries issuing their own cryptocurrencies has reached a new high, partly driven by Facebook’s Libra and the desire by nation-states to reduce their reliance on the US dollar as the international standard for global transactions.
Bitcoin investor Tim Draper splashes cold water on India’s move to ban bitcoin
India’s decision to ban crypto has angered local crypto traders while sparking criticism from the international community. News making rounds on social media suggest that the country wants to ban all cryptocurrencies save for a single sovereign token.
Tim Draper, one of the early bitcoin adopters and venture capitalist could not hide his dismay at the Indian government’s planned move to ban crypto. He slammed the stance, calling it a shame and labeling the nation’s leaders as pathetic.
“People behaving badly! India’s government banned Bitcoin, a currency providing great hope for prosperity in a country that desperately needs it. Shame on India leadership. Pathetic and corrupt,” he tweeted.
Draper received mixed reactions from Twitter users, some of whom said that cryptocurrencies have not been banned as there is a pending court case. The Indian government has unsuccessfully tried on numerous occasions to halt the trading of bitcoin claiming that cryptocurrencies are a threat to economic stability.
Japan’s crypto exchange BITPoint loses $32 million in a hack
In a beat that may sound like a familiar melody for crypto investors, another Japanese cryptocurrency exchange has been hacked, losing millions in the process.
Bitpoint, a subsidiary of Remixpoint, lost 3.5 billion Yen (about $32 million) – with more than 80 percent of the funds belonging to customers – through a cyberattack. The hack came to light after the exchange noticed unusual withdrawals from its hot wallets. The exchange obviously halted all activities on the exchange.
The exchange announced that it was repaying the 50,000 customers who lost their holdings in crypto on a 1:1 basis. This is some relief for the customers. In previous hacks, customers were reimbursed in fiat currency and ran the risk of not get their lost holdings in full.
Japan to possibly license more than 100 cryptocurrency exchanges
There is a strong indication that Japan will license more than 100 cryptocurrency exchanges whose applications are still pending approval from the country’s financial watchdog, the FSA.
Japan is currently ready to cement its place as one of the most crypto-friendly countries in the world and will do so by approving exchanges whose applications are under review.
The FSA has refused to issue licenses to exchanges in the wake of the January 2018 Coincheck hack in which nearly $530 million in NEM tokens was stolen from the exchange in a hack. The financial watchdog has only approved a few exchanges this year, including Coincheck after it was acquired by Monex Group in a deal worth $34 million.
Despite giving the industry the right to police itself, the FSA has ordered cryptocurrency exchanges to tighten their security against cases of fraud and hacks. The financial regulator is conducting onsite checks as well, showing its intention to create a strong crypto hub in the region.
Japan to lead in building the blockchain version of SWIFT
An unnamed source claims that the government of Japan wants to take the lead in building a blockchain network similar to SWIFT, the messaging system used by banks all over the world to send money to each other, reported Channel News Asia.
The country hopes to have the network up and running in a few years. The development of the network will be monitored by a team of experts from the Financial Action Task Force (FATF).
The plan to develop the network was given the green light by the FATF in June after it was proposed by the Ministry of Finance and the FSA.
It remains unclear how the new network will be used when it goes live given that cryptocurrencies face regulatory uncertainty from governments and have not yet reached mainstream adoption levels.