Japan’s Central Bank Examines Central Bank Digital Currencies in New Report

Japan’s central bank has examined the role of central bank digital currencies (CBDCs) in the current monetary system in a report released on Feb. 19.

In the document, the bank describes the possible ways to implement a CBDC and the hypothetical consequences of different approaches. The report divides possible CBDCs in two categories, the first being those accessible to the general public in a form like banknotes, and the other as those limited for large-value settlements.

The source of this categorization is attributed to the report released by the Bank for International Settlements in March 2018, which divided CBDCs in general purpose and wholesale CBDCs.

Moreover, after explaining that CBDCs of the latter kind wouldn’t bring many new features to the monetary system, the Japanese report’s authors focused on the first kind throughout most of the document. The report also noted that distributed ledger technology and blockchain could be used for a token-based CBDC.

As Cointelegraph reported in October last year, the deputy governor of Japan’s central bank, Masayoshi Amamiya, has expressed a negative stance towards central bank-issued digital currencies.

More recently, South Korea’s central bank issued a warning over central bank digital currencies a week after saying it would not introduce one itself.

Cambridge Associates: Cryptocurrencies ‘Worthwhile’ For Long Term Investors

bitcoin piggy bank cambridge associates Bitcoin Investment

Cambridge Associates: Cryptocurrencies ‘Worthwhile’ For Long Term Investors


Leading institutional investment consulting firm Cambridge Associates holds that institutional investors should consider exploring cryptocurrencies for the long term or ‘hodl’ in Bitcoin lingo. 


Cryptocurrencies May ‘Upend the Digital World’

Cambridge Associates is a Boston-based institutional investment consulting company with more than $300 billion in assets under advisement. It holds that it’s high time for institutions to consider cryptocurrencies, Bloomberg reports.

The firm asserts that, despite the twists and turns, cryptocurrencies may ‘very well upend the digital world.’

Despite the challenges, we believe that it is worthwhile for investors to begin exploring this area today with an eye toward the long term. […] Though these investments entail a high degree of risk, some may very well upend the digital world.

However, the consulting firm also recommends spending a “considerable amount of time learning about the space,” exploring the different ways to invest.

Despite the tumbling prices across the entire cryptocurrency market over the past year, Cambridge Associates says that the industry is actually developing.

The dramatic declines that swept across the crypto space raised questions about the future of these assets and the blockchain technology that underpins them. […] Yet, in looking across the investment landscape, we see an industry that is developing, not faltering.

Institutions Dipping Their Toes

Some long-term focused institutions are already taking note and dipping their toes into the arena. According to the Q4 2018 report of digital currency asset manager Grayscale Investments, institutions and retirement accounts comprise the lion’s share in cryptocurrency investing.

wall street symbiont

Earlier this month, Bitcoinist reported that Fairfax County Employee’s and Fairfax County Police Pension Plans became the first US public pensions to invest in a $40 million cryptocurrency fund.

Former Wall Street hedge fund manager Mike Novogratz recently said that institutional money is going to start flowing into the cryptocurrency market within the next 6 to 12 months, following the roll-out of custody solutions by trusted institutions such as Fidelity.

Meanwhile, Fidelity’s Bitcoin custody service is set for launch in March.

What do you think of Cambridge Associates’ position on cryptocurrency? Don’t hesitate to let us know in the comments below!


Images courtesy of Shutterstock

Japan Could Soon Realise the Crypto-ETF Dream

Japan Could Soon Realise the Crypto-ETF Dream

Japan is reportedly gathering information about the amount of interest there is among institutional investors for a cryptocurrency ETF which has the potential to lead to the approval of cryptocurrency-based ETFs in Asia’s second-largest economy. Ths according to a report from Irish Tech News, February 18, 2019.

Do Investors Want a Bitcoin ETF?

Cryptocurrency exchange-traded funds (ETFs) may acquire a legal status soon if recent reports are to be believed. According to the report, , the Asian country is taking significant steps to provide legal standing for crypto ETFs

The Japanese Financial Services Agency (FSA), the nation’s financial regulator, has revealed that it is investigating how much public interest there is for this type of investment product. According to an unnamed source, it appears the number of institutional investors interested in a cryptocurrency ETF is significant enough to warrant a second look from the FSA.

What Next?

Following the crypto ETF survey, the Japanese FSA, in collaboration with other local authorities, plans to further debate on the fate of such financial instruments. 

This follows the shocking CoinCheck hack where over $500 million was stolen. In response to the theft, Japanese authorities tightened the reins on digital currency-related activity. They rationalized that this was a good way to protect the general public from any unwanted outcomes.

However, only a month after the authorities voted against a law that would allow the launch of a number of derivatives based on cryptocurrencies, it appears the FSA is reconsidering its stance. The proposed law would then be subject to debate within the political apparatus of the East Asia country, prior to confirmation.

If the FSA provides positive feedback to the proposed law, then the would-be piece of legislation will depend on the Japanese Liberal Democratic Party. If the LDP presents a proposal, as is widely rumored, which includes the proposed law, then the suggested ETF legislation could achieve accepted law status as soon as 2020.

The Fate of ETFs

If Japan successfully bestows legal standing on cryptocurrency ETFs, it will be the first among the major global financial powers to do so. In the past year, the SEC has refused to approve a number of proposed bitcoin-based ETFs. The commission is currently considering the case of VanEck and SolidX for trading in Chicago. The ruling is set to be revealed before the end of February.

Additionally, if the FSA legalized cryptocurrency ETFs, it is likely to provide an air of legitimacy to the digital currency sector. Following the worrying number of security and legal concerns, a move like this would likely increase confidence and faith in the digital currency industry in Japan.

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2 Crypto Startups Unveil Security Token Issuance and Trading Service

Two crypto startups want to streamline the process of issuing and trading security tokens by providing an all-in-one solution.

Securitize, a Coinbase-backed security token startup, is partnering with OTCXN, a blockchain infrastructure company to develop and offer a digital security offering service. Under the arrangement announced Tuesday, the two companies will help other firms tokenize and sell securities by combining Securitize’s securities compliance platform with OTCXN’s custodial ledger system.

Carlos Domingo, CEO and co-founder of Securitize, told CoinDesk that his firm would create and facilitate the sale the tokens in compliance with the relevant security laws in each client’s jurisdiction.

OTCXN founder and CEO Rosario Ingargiola added that Securitize would create the security tokens on the ethereum blockchain using the ERC-20 standard and handle the initial issuance. A smart contract would be used to enforce investor compliance procedures.

Ingargiola’s company would then provide infrastructure to support secondary market trading of the token, he told CoinDesk.

However, the security tokens themselves would not be traded. Instead, another token representing the securities would be transacted.

Trading without custody

Custodians, such as Kingdom Trust or Prime Trust, would store the security tokens using their specific systems, which may include cold wallets. A digital representation would be the actual object traded on OTCXN’s system, he explained.

“Under the OTCXN model, issuers and investors are able to trade these assets with anyone on the network, no matter what blockchain they are natively issued on, what custodian they use or what exchange client orders are sitting on,” Ingargiola said, adding:

“The blockchain ledgers that are part of the solution we provide to custodians are really just another kind of ledger system which becomes, for assets digitized and being transacted on our network, the real-time golden source of truth. Transactions settle atomically in real-time, on-chain, with finality and cryptographic provability.”

While these digital representations may be what is traded on OTCXN’s system, Domingo added that “you [still] own the security.”

Echoing that point, Ingargiola said: “You don’t have to trust us since we are not the custodian of any assets, nor the counterparty to any trades.”

That being said, the companies are not quite ready to issue security tokens just yet. While OTCXN has its infrastructure solutions up and running, it has not issued any security tokens with Securitize, as the firms are still waiting on regulatory approvals in a number of jurisdictions. There was no immediate timeline on when the companies might receive these approvals.

OTCXN is simultaneously looking to partner with specific broker-dealers or companies with alternative trading system licenses, he said.

Carlos Domingo image via Securitize

Crypto Dividends: Staking Coins for Gains Potentially a Good Strategy in a Bear Market but Is Not Without Risk

Volatility coupled with one of the longest bear markets ever experienced by the cryptocurrency industry have compelled many investors to consider staking as a method of “playing it safe,” according to a Bloomberg article.

Staking, which is similar to earning dividends or interest on your investment, is not a new concept. However, in a long bear market, it does become more prevalent among cryptocurrency investors, as possible gains from regular trading are not as fruitful. As Kyle Samani, managing partner at Multicoin Capital Management, stated to Bloomberg:

“Regardless of market conditions, staking provides returns denominated in the asset being staked. If you’re going to be long, you might as well stake.”

Staking rewards are a byproduct of the proof-of-stake (PoS) consensus algorithm, first introduced by Sunny King and Scott Nadal in a white paper in 2012 for peer-to-peer cryptocurrency Peercoin (PPC).

Since then, hundreds of cryptocurrencies have adopted a PoS consensus algorithm as a method to verify transactions.

Proof-of-stake, explained

The majority of cryptocurrencies use either proof-of-work (PoW) or PoS — or some iteration of it.

PoW relies on the proof that a certain amount of work has been done to verify transactions. Both Bitcoin and Ethereum use PoW to validate transactions, although Ethereum has been making it clear that they will be moving to a PoS system, called Casper, as part of the Serenity network update expected for later in 2019.

At an August 2018 Blockchain at Berkeley event, hosted by the student-run organization Origin, Vitalik Buterin, co-founder of Ethereum, stated he can’t wait for all crypto networks to move away from PoW:

“I am seriously looking forward to when the cryptocurrency community basically passes away with proof-of-work.”

With PoW, nodes (or miners) compete to verify blocks of transactions by running highly specialized and expensive processing equipment (such as Application Specific Integrated Circuits, or ASICs) to solve complex mathematical equations. The first node to solve the equation can add the next block of transactions and collect the reward, which could either be a set amount or percentage of the transaction fee. The process, also called mining, has a number of drawbacks:

  • It is highly energy intensive (the Bitcoin network consumes almost the same amount of energy as the entire country of Singapore).
  • The high energy dependence is not only expensive but also bad for the environment in countries where nonrenewable fossil fuels (such as coal) is burned to generate electricity.
  • Specialized mining equipment requires a significant upfront investment, which can be risky, considering that rewards are not guaranteed.
  • With the advent of large centralized mining pools, the risk of a 51 percent attack on PoW networks is a very real threat.

PoS, on the other hand, only requires network participants to hold a certain amount of the native cryptocurrency in a specific wallet for a certain period of time. This is called staking and doesn’t call for any expensive computer equipment or massive amounts of processing power to solve complex mathematical equations.

Key differences from POW are:

  • Nodes are often called “validators” rather than “miners.”
  • There’s no specialized computer hardware requirement to become a node, which means the burden on power resources is drastically reduced. This is not only cheaper but also more eco-friendly.
  • With PoS, there’s no threat of centralized mining pools.
  • A 51 percent attack would be much more expensive to carry out. In order to take control of a PoS network, an individual or entity would have to purchase 51 percent of the available tokens. Not only that but, if you owned 51 percent of the tokens, you would want to do everything in your power to see the network succeed and continue to turn a profit. That means you are less likely to do anything to defraud the blockchain.

PoW & PoS

Different levels of PoS staking for different levels of rewards

It is common in PoS cryptocurrencies to award those with a bigger vested interest in the network with bigger benefits. This is both in network authority (such as voting weight) and rewards.

As such, cryptocurrency networks will often offer different levels of staking — i.e., the more coins you lock away for staking, the bigger the network will reward you.

This gives rise to two distinguishable types of staking: masternode staking and non-node staking.

Masternode staking to validate transactions

Masternodes are network participants that are tasked with validating and authenticating transactions on a PoS blockchain.

To apply for a masternode, participants will generally have to comply with some minimum requirements. This will be different from network to network but may include locking away a set number of tokens (typically a large minimum), being a network participant and holding tokens for a certain period of time, and being an active community member with a good reputation. The number of masternode positions will generally also be limited.

Rewards are distributed as part of the network fees (transaction fees) and tend to be big, as the vested interest in the network needs to be big. But the barrier to entry is also quite high — i.e., you would need a large initial investment to become a masternode.

For example, to become a Neo masternode (also called bookkeepers or consensus nodes), a participant will need to stake 1,000 GAS ($2,150) — the fuel token on the Neo network that represents the right to use the Neo blockchain and is used to pay the network fees for issuing new assets, running smart contracts and storage — to nominate themselves as a bookkeeper and also obtain a consensus authority certificate before Neo community members can vote for them. The Neo mainnet is limited to seven consensus nodes

According to Neo’s economic model, the maintainer of a Neo consensus node will be rewarded with network fees.

Similarly, to apply for masternode status (also called Authority Masternode) on VeChain (VET), a participant will have to stake 25 million VET ($97,500) to be considered and will have to complete Know Your Customer (KYC) verification in the VeChain portal. Its masternode positions are limited to 101 members.

VeChain masternodes are compensated in part by transaction fees and part from a predetermined foundation reward pool.

Non-node staking to earn interest or dividends

Non-node staking is less complicated, and users are not involved in validating transactions. There is no minimum staking amount and often no minimum holding period, meaning the barrier of entry is much lower.

All a network participant has to do is hold the specific cryptocurrency in the network’s dedicated wallet to start earning interest or dividend payouts.

Both the Neo and VeChain examples above have calculators to show you how much you can earn per amount of tokens staked.

NEO Calculator / VeChain Calculator

Other popular PoS cryptocurrencies for staking include Ontology (ONT), Tezos (XTZ), Waves (WAVES), EOS (EOS), Cardano (ADA), Pivx (PIVX), Dash (DASH), Decred (DCR), Livepeer (LPT) and Factom (FCT).

Potential gains and risks of PoS staking

According to POS List and masternodes.online, rewards and earnings for both masternode staking and non-node staking vary significantly between cryptocurrencies, anything from 0.7 percent to well over 1,000 percent.

The possibility of long-term gains has also given birth to a number of startups that focus specifically on providing staking services to investors, including Anchorage, Eon Staking Inc., Figment and Staked.

Perhaps as an indication of the strong market interest in the possibilities of cryptocurrency staking, on Jan. 31, 2019, Staked announced that they raised $4.5 million in seed investment from a number of institutional investors that included Pantera Capital, Coinbase Ventures and Winklevoss Capital, while Anchorage launched on Jan. 23, 2019 after a $17 million funding round led by venture fund Andreessen Horowitz.

PoS staking is not without risk, though. It’s not just a bear market game, it’s a long game. So, a significant level of trust has to be put in the cryptocurrency network — trust that they will make it through the bear market and still be operational on the other side, and trust that they will consistently payout earnings and rewards in the long run.

Another risk is monopolization of a network, where a few large token holders end up getting the lion’s share of the rewards. Linked to the risk of monopolization is the possibility of a 51 percent attack. Although it would be much more expensive and counterintuitive, it is still possible for such an attack to be orchestrated and to devalue the network.

Crypto Trader Cumberland Upgrades from Skype to Wall Street Interface

Cryptocurrency market maker Cumberland is modernizing the way it handles over-the-counter (OTC) trades with clients.

Announced Tuesday, the unit of financial trading giant DRW has unveiled a so-called single-dealer platform called Marea, allowing institutional investors to interact with Cumberland through a screen-based interface, rather than negotiating trades by phone or Skype

As such, the new portal brings Cumberland in line with the way OTC trading has been conducted on Wall Street for more than a decade in traditional asset classes like stocks.

“This is a single-dealer platform and a way for our counterparties to interact with our markets, execute, trade and also view their trading history via a platform,” Bobby Cho, Cumberland’s global head of trading, told CoinDesk, adding:

“We looked at what other asset classes have done in the past, and that was an evolution from voice to chat to kind of on screens.”

To start, the new OTC platform will handle trading of 10 popular cryptocurrencies and also interacts with back-office reporting, ably handled via a tie-up with trade reporting specialists MG Stover.

The initial 10 market pairs include zcash, Sterllar lumens and the U.S. dollar-linked stablecoin TrueUSD, and then the plan is to offer the other coins Cumberland trades, said Cho.

“We are hoping to expand that into all the coins that we trade here, so upwards of about 40 coins, and then expand across the different settlement fiat currencies we also settle in – dollars, Swiss francs, euros, GBP and other currencies like that,” he said.

“So it’s a little bit different from exchanges where you are set to what the exchange offers you from just an order book perspective. In the future, we hope this opens up our counterparties to trade any asset that we allow against either any fiat currency or any other crypto that we offer.”

Research and back office

Also to be added to the portal is the research Cumberland began producing in-house last year, Cho said.

Meanwhile, Marea integrates with back-office trade reporting and reconciliation of positions at the end of the day, said Cho, “whether that’s through a spreadsheet that’s downloadable or through the user interface.”

His team wasn’t going to attempt to build a “full-stack solution for front and back office in a silo,” noted Cho.

To help with the process, third party fund administrators were brought on board, such as MG Stover, which currently services over 80 crypto-dedicated hedge funds.

Matt Stover, CEO of MG Stover, said this involves simple concepts like getting a trade confirmation that is time-stamped with the right quantity and making sure funds have proper books and record.

“We take best practices from the private fund administration space and apply these to digital assets,” he said. “We are really trying to institutionalize the digital asset space.”

Bobby Cho image via CoinDesk Consensus archives

Bitcoin Price Crosses $4,000 for First Time in Six Weeks

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Bitcoin Price Crosses $4,000 for First Time in Six Weeks

bitcoin-price-crosses-4000-for-first-time-in-six-weeks

Bitcoin (BTC) today extended its mini-bull run, crossing the significant $4,000 mark for the first time since January 9, according to data from CryptoCompare.

bitcoin price

Beginning on Sunday evening (February 17th), there has been a market-wide rally, with top altcoins including ETH, XRP and EOS experiencing significant price surges.

With over $15bn added to the total crypto market cap since Sunday, this latest milestone comes amid expectations that bitcoin could record its first monthly green candle for over 6 months.

Cryptocurrency trader Josh Rager argued recently that if BTC manages to stay above $3,413 for the rest of the month, we would see a green candle for February.

 

Coinbase Acquires Blockchain Analytics Startup Neutrino

United States cryptocurrency exchange and wallet Coinbase has acquired blockchain intelligence startup Neutrino, according to a post published in the company’s blog on Tuesday, Feb. 19.

Coinbase reveals that the company will continue to operate as a standalone business in its London office. The amount of the contract has not been disclosed.

The U.S. exchange believes that blockchain intelligence will contribute to creating an open and protected financial system. The company expects Neutrino to help Coinbase prevent theft of funds, investigate hacks and ransomware attacks, and identify suspicious transactions.

Moreover, the exchange hints that the acquisition will help to add more cryptocurrencies and features to its services, assisting Coinbase in complying with current laws and regulations.

Earlier this year, Coinbase announced that it had acquired Andreessen Horowitz-backed tech startup Blockspring. The startup produces tools that enable developers to automatically gather and process information from application programming interfaces.

In January, the exchange added resources for customers in the U.S. to claim crypto trades on their taxes, integrating its systems with popular tax software TurboTax.

Later in February, Coinbase launched support for European Union residents to make fiat currency withdrawals to online payment system PayPal — a feature that was previously released for U.S. users only.

Moreover, Coinbase added Bitcoin (BTC) support to its Coinbase Wallet app, where the users can store their own crypto protected by their unique private keys.

Bitcoin Again Tests $4K Amidst Anticipation of US and China Trade Deal Finalization

Tuesday, Feb. 19: crypto markets have continued gaining momentum, with all of the top 20 coins by market cap seeing green and Bitcoin (BTC) testing $4,000 again, according to CoinMarketCap.

Market visualization from Coin360

Market visualization from Coin360

Following a slight decline to as low as $3,908 yesterday, Bitcoin has continued growing towards the new price point, currently trading at $3,941 and up 4.4 percent over the past 24 hours. The biggest cryptocurrency saw a sharp bullish move on Feb. 17 and approached $4,000 yesterday by touching $3,973, the highest price point since Jan. 10. Bitcoin is up around 9.3 percent over the past 7 days.

Bitcoin 7-day price chart

Bitcoin 7-day price chart. Source: CoinMarketCap

Ethereum (ETH), the second-largest cryptocurrency by market cap, is up about 3.5 percent, approaching $150. Ethereum is seeing large growth over the week, up more than 22 percent since Feb. 12, when the altcoin was trading at around $121.

Ethereum 7-days price chart

Ethereum 7-days price chart. Source: CoinMarketCap

Ripple (XRP), the second-top altcoin by market cap, is up about 8.3 percent and is trading at $0.338, which constitutes around 12 percent growth over the past 7 days. Recently, BankDhofar, the second-largest bank by market value in Oman, has started using RippleNet tech for cross-border payments to India.

Ripple 7-day price chart

Ripple 7-day price chart. Source: CoinMarketCap

The fourth-top cryptocurrency by market cap, EOS (EOS), is seeing the biggest growth both over the past 24 hours and 7 days, up more than 15.7 percent over the day and about 30.5 percent over the week.

EOS 7-day price chart

EOS 7-day price chart. Source: CoinMarketCap

 

Total market capitalization has surged to $135 billion after having been stuck around $120 billion since Feb. 8. Daily trade volume has continued gaining momentum, currently seeing a slight decline from $36 billion to $35 billion.

Weekly total market capitalization chart

Weekly total market capitalization chart. Source: CoinMarketCap

Yesterday, Indonesia’s commodity futures regulator adopted a legal framework for operating crypto and digital assets futures markets, officially requiring multiple entities on the market to seek regulatory approval and apply for registration before legally launching businesses in Indonesia.

Also on Feb. 18, prominent Bitcoin bull and venture capital investor Tim Draper declared that in five years, only criminals will use fiat as crypto becomes universally widespread. Draper also argued that Bitcoin is more secure than the U.S. dollar, and compared cashing out from BTC with exchanging gold into shells.

Following the long President’s Day weekend in the United States, stock futures were flat to lower on Tuesday as traders waited for new data from the latest round of the U.S.-China trade negotiations, CNBC reports. According to data acquired by CNBC, the Dow Jones Industrial Average dropped about 20 points at the open, while NASDAQ and S&P 500 remained flat.

Meanwhile, oil stayed within sight of its 2019 high of almost $67 a barrel on Tuesday, supported by OPEC-led supply cuts although concern about slowing economic growth is expected to curb the demand.

As the U.S. dollar reportedly weakened on anticipation of the U.S. and China trade deal, gold prices increased to the highest level in more than two weeks on Monday, while palladium hit a record high of $1,449. U.S. gold futures increased by 0.3 percent to $1,326.1 an ounce.

South Korean Capital to Invest Over $1 Billion in Fintech and Blockchain Startups by 2022

The Seoul Metropolitan Government has announced plans to invest more than $1 billion in blockchain and fintech startups by 2022, according to the official announcement published on Feb. 18.

According to the release, the South Korean capital’s government plans to use the “Seoul Innovation Growth Fund” for startups that have various investments problems with Series A funding rounds. The fund, launched last year, will primarily focus on startups related to blockchain and fintech industries.

The Seoul Metropolitan Government announcement underlines that the average investment per company in London and Silicon Valley is approximately $6-7 million, while in Korea it is only about $1.1 million. Jo In-dong, the head of the economic policy department at the Seoul Metropolitan Government, said:

“Innovative startup investments will be the cornerstone of corporate growth that creates innovation in our society and will be a critical [drive] for the growth of innovative venture companies. We will expand our investment to […] stimulate the startup investment market and create a [competitive] startup ecosystem.”

Last month, the capital city’s government announced the launch of the Seoul Blockchain Governance Team, which consists of 100 employees, with the goal to examine the potential and benefits of blockchain applications in various government services, as Cointelegraph wrote on Jan. 31.

As Cointelegraph reported on Oct. 4, the mayor of Seoul, Park Won-soon, revealed a five-year plan, dubbed “Blockchain City of Seoul,” for promoting the development of blockchain-related initiatives in South Korea’s capital city.