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China’s CBDC is about domestic dominance, not beating the dollar

Republished by Plato

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For the past several years, the trade war between China and the U.S. has been at the center of international relations, with technology playing an outsized role.

Within crypto, advancing interest in central bank digital currencies has become part of that narrative of geopolitical competition. Many have framed the development of CBDCs in China and the U.S. as a race — in which case, China is clearly closer to launch and, hence, the “winner.” 

But a race to the finish is a flawed paradigm, and one to which Cointelegraph has contributed its fair share. For the moment, China is actively working to get its digital payments infrastructure out from under the overwhelming dominance of Ant Group’s Alipay and Tencent’s WeChat Pay. Longstanding designs upon the U.S. dollar have faltered. The narrative of the digital yuan taking aim at the dollar has most prominently come from U.S. firms who were trying to redirect scrutiny from U.S. regulators onto a foreign threat.

The digital currency race that wasn’t

Though it dragged Alipay and WeChat Pay into the geopolitical arena, a midnight executive order from Trump banning use of all Tencent, Alibaba and Alipay apps in the U.S. was more a symbolic attack on China’s malfeasance in international trade that would also complicate Biden’s early diplomacy. Claude Barfield, who studies China trade policy for the American Enterprise Institute, said of Trump’s last-minute move: “That is not rooted in economics, that is just rooted in the last gasp of this administration to set down a record and to in some ways tie Biden’s hands.”

There is also certainly a major competition in tech between the U.S. and China. Martin Chorzempa of the Peterson Institute for International Economics told Cointelegaph:

“I’m under no illusions that the Biden administration is going to let go of the tech competition. The tariff stuff is going to phase out eventually, but my bet is that the tech competition is only going to heat up.”

For all of this hubbub, China’s payments industry has not seen the international penetration necessary to constitute the clear and present danger — which is distinct from other tech firms like Huawei. As far as payments, the firms running them are almost entirely within China’s walled garden. Despite user bases that dwarf U.S. payments apps like Apple Pay or Google Pay, both Alipay and WeChat Pay almost exclusively depend upon Chinese bank account holders for those numbers.

While a digital yuan is obviously a major priority for China, the country’s work against its domestic payments industry proves that it is looking first at home. International usage of the traditional yuan has stalled, despite a slight uptick in the composition of foreign reserve currencies, and clamping down on its internal private payments industry does not help a Chinese CBDC go international..

“Renminbi internationalization has been on the backburner for years now. It continues to be talked about but very few actual decisions have been made to make it usable,” said Chorzempa. “I’m not convinced that the PNC is going to let people use the digital renminbi outside of China.”

The tech monopolies that were

The current anti-monopoly push indeed seems pretty straightforward. Alipay and WeChat Pay control 95% of the digital payments market between the two of them. Adding to the problem is that digital payments have become the standard in China, with many merchants refusing to accept government-issued currency. It’s a problem widespread enough that the People’s Bank of China warned in December that “Renminbi (yuan) cash is the most basic means of payment. Entities or individuals cannot refuse to accept it.”

Keep in mind that plenty of countries would look askance at private hands with such a chokehold on the national payments system. 95% between two private companies is unheard of in any major global economy, and it’s a 95% that is part of two massive conglomerates that independently serve as e-merchants, social networks and messengers. Whatever problems the U.S. faces with its own tech giants are even more heavily concentrated in the Chinese market.

“The Chinese financial regulators reacted just as American, Japanese or European regulators would react,” Barfield noted, referring to a similar antitrust battle in the U.S. “You have this irony where in an authoritarian regime you’re getting echoes of what you’re getting in market economies.”

The IPO offering that almost was

While 2020 saw a number of signals that the Chinese government was going to rein in monopolies that Xi Jinping had allowed to flourish for so long, it was the crackdown on Ant Group’s initial public offering that got everyone’s attention.

Scheduled for November 5, the IPO for Ant Group was supposed to issue $37 billion in equity based on a $300 billion valuation — a world record. At the time, many attributed its last-minute cancellation to Jack Ma’s criticism of China’s financial regulation at the end of October.

A Wall Street Journal investigation published last week suggests otherwise. The results claim that Ant Group had been under investigation prior to Ma’s speech for its opaque ownership. Per that report, the investment vehicles that held private equity in Ant Group stood to gain a fortune when it went public — a fortune that they would then pipeline back into the hands of the richest people in China.

Publicizing underlying beneficial ownership is a very reasonable expectation for a firm about to be let loose upon the public, even when you aren’t already concerned about its stranglehold over financial services in the world’s most populous country.

The crypto outcry that shouldn’t have been

All of which are concerns fairly localized to China. For the foreseeable future, a digital yuan is, likewise, a domestic rather than international tool. In this, the crypto community’s response to its continued development has been interesting.

Many have commented, with more or less skepticism, on a digital cold war. The race to be first simile has also gained enough traction that Fed Chairman Jerome Powell himself took time to dismiss it.

But cycle back through those who have most zealously pushed that narrative. It’s largely composed of people trying to get the U.S. government to look anywhere else. It includes the usual cast of permabulls like Anthony Pompliano, but it’s also heavy on parties facing intensive scrutiny from U.S. regulators.

Mark Zuckerberg threatened Chinese dominance of international payments if Congress continued to stonewall his Libra (now Diem) stablecoin. Incidentally, Tencent said much the same thing about Libra to Chinese authorities. But the biggest culprit has been Ripple.

Almost the entire cast of Ripple’s executive board made effectively the same threat about the U.S. losing the tech cold war to China. Which, in retrospect, seems like a distraction from a firm that was pulling out all the stops to divert the attention of U.S. regulators. And hey, nationalism is a classic card to play. A trump, you might say.

The CBDC that may one day be

None of this is to say that a digital dollar or renminbi doesn’t matter. The point is that framing the competition as a race to be first is risky practice, precisely because it shuts down critical thinking about an important area and also assumes that everyone in the world is chomping at the bit to entrust all of their money to a brand-new technology.

In a January paper, Chorzempa pointed out that China’s private payments giants, which hit the market long after Apple and Google Pay, actually benefited from a second-mover advantage. They could learn from the mistakes of the original American firms. The race paradigm is just inappropriate for money, which people are most conservative about implementing changes to. Less obviously, it’s not even the main consideration when it comes to technology. Think of Skype vs. Zoom, or BlackBerry vs. IPhone.

Congressman Bill Foster spoke to Cointelegraph way back, following the Zuckerberg hearing, about the China argument, when the idea of a race was really taking hold. He said: “When you start to move into financial instruments you have to be very careful that you are not reinventing a lot of the problems that we’ve learned the hard way creep up again and again in financial services.”

Money has a weird set of priorities. Continuing to explain the pros of a digitized dollar, Foster said:

“I think that will be a competitive advantage for the United States and the free Western world, is that we have a transparent court system where you know the rules you’re playing with and you won’t have the party leaders come in and say, ‘ok, I want all your information.’”

Alongside unconsidered advantages like court transparency, it takes much more than a new technology to overthrow the leading global currency. In the U.S.’s case, it took two world wars, economic ascendancy and fears of a global takeover by Communism. As appealing as the idea of digitized bearer instruments that could even skip the hassle of international banking and settlement may be, it’s not going to happen all of a sudden.

China and the U.S. are going to continue to duke it out in the tech arena. But there is a reason people like Chairman Powell or digital dollar advocate J. Christopher Giancarlo had to decry the haste to launch. Money is not something that a government can afford to get wrong.

Source: https://cointelegraph.com/news/china-s-cbdc-is-about-domestic-dominance-not-beating-the-dollar

Blockchain

Mike Novogratz’s Galaxy Digital Filed for Bitcoin ETF With the SEC

Republished by Plato

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The number of companies filing to receive approval to launch a Bitcoin ETF in the US continues to increase with the addition of Mike Novogratz’s Galaxy Digital. If approved, the Galaxy Bitcoin ETF will trade on the NYSE Arca exchange. 

  • Based in New York, Galaxy Digital is a diversified financial services firm dedicated to the cryptocurrency and blockchain industry. The company has made another pro-crypto step by filing with the US Securities and Exchange Commission to launch its own Bitcoin exchange-traded fund. 
  • The document reads that if the Commission approves the application, the Galaxy Bitcoin ETF will issue common shares of beneficial interest that trade on NYSE Arca.  
  • The value of the shares will follow the performance of the Bloomberg Galaxy Bitcoin index, which includes multiple pricing sources. 
  • “In seeking to achieve its investment objective, the Trust will hold bitcoin and will value its Shares daily based on the value of the Index, which is calculated based on data from bitcoin pricing sources selected by Bloomberg Index Services Limited.” 

  • With Galaxy Digital’s application, the number of US-based companies striving to launch a Bitcoin ETF continues growing. However, the SEC has yet to approve the first such product. VanEck’s filing seems to be a step ahead as the Commission put its Bitcoin ETF proposal for discussion in March. 
  • At the same time, Canada has led the way with several operational BTC ETFs. In fact, Galaxy Digital already has a functioning one in North America. Novogratz’s firm partnered with CI Global Asset Management, and the CI Galaxy Bitcoin ETF launched on the Toronto Stock Exchange (TSX) on March 9th.  
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Source: https://cryptopotato.com/mike-novogratzs-galaxy-digital-filed-for-bitcoin-etf-with-the-sec/

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Blockchain

Where fiat holders lose out, Bitcoiners can gain from inflation

Republished by Plato

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Currency instability and hyperinflation seemed unreal until a global pandemic struck, sending many nations into economic turmoil. Most economists began to wonder if the end of the pandemic would mean the birth of another Venezuela, which faced a 438% (hyper) inflation rate. However, like several other Bitcoin enthusiasts like Max Keiser thinks that inflation and the price of Bitcoin are correlated.

The aforementioned data is the long-term compounding of past, present, & possibly future base money, since 1970.

In a recent interview Matthew Mežinskis spoke about the inflation rate of the global monetary base, weighted averaged by each base money’s equivalent in USD. What’s important to note here is, it matched the overall 12.8% CAGR (6-year doubling time) we already saw above.

Source: https://platoblockchain.net/wp-content/uploads/2021/04/where-fiat-holders-lose-out-bitcoiners-can-gain-from-inflation.jpg

For all of 2019, central banks were actually on track to deflate their currencies. This would have been a first in the modern fiat era. So interestingly, no matter what one argues for money printing, 2019  ended with positive inflation, weighted at 1.5%.

Furthermore, he touched upon the role of monetary metals like gold. Gold’s rate of growth had, in fact, been around 1.8% per annum for the last 170 years.

Source: https://platoblockchain.net/wp-content/uploads/2021/04/where-fiat-holders-lose-out-bitcoiners-can-gain-from-inflation.png

Almost similar with silver – it’s almost as politicized as its “bigger brother of gold”. Lastly, he shed some light on Bitcoin. He added:

“Remember why the overall compound growth, thus far, is so high, and why it will never be that high again. And now is about the time for a clarification note on the Bitcoin system’s compound annual growth rate, specifically.”

Bitcoin’s finite supply, which may overcome inflation risks is what comforts many. However, this narrative keeps evolving as well.

Source: https://platoblockchain.net/wp-content/uploads/2021/04/where-fiat-holders-lose-out-bitcoiners-can-gain-from-inflation-1.jpg

What’s interesting to note here is, the phrase “supply issuance” for Bitcoin’s chart titles, and not “inflation.” Bitcoin’s “inflation,” economically, was already baked in. As already demonstrated, its growth rate is known until 2141, per the protocol. So when it comes to bitcoins, “inflation” is not the best term.

Even though the price of Bitcoin may indeed surge, its path to the target could be volatile. In the past, the asset’s price has appreciated and even collapsed several times. But some stated that even as Bitcoin increased in price, the rate of inflation, and forecasts for inflation, “remained stable.” Some provide a contrary opinion that economies need a bit more inflation, not less. At the same time, they do not expect hyperinflation to occur again, after the last great recession.


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Source: https://ambcrypto.com/where-fiat-holders-lose-out-bitcoiners-can-gain-from-inflation

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Holdefi: A Unique Decentralized Lending Platform Shaping the Future of DeFi

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The DeFi industry offering an alternative to traditional financial services is evolving at a rapid pace. There are few platforms that are using the latest advances in the blockchain space to create DeFi solutions that could not only outperform their peers but also capable of adapting to new developments in the blockchain technology itself.

Holdefi is one such open-source, non-custodial decentralized lending platform that offers an attractive passive income stream to investors while enabling the masses to borrow at attractive interest rates. Like its counterparts, Holdefi allows users to instantly secure credit against crypto collateral. The platform does not require the borrowers to provide their KYC or prove their creditworthiness before borrowing. All they have to do is to deposit their crypto assets as collateral to secure a loan in any of the supported cryptocurrencies including stablecoins like USDC, DAI, USDT and BUSD. Users can deposit collateral in one or more types of crypto assets. Similarly, they can borrow different cryptocurrencies using single collateral as long as the value meets the platform requirements.

Attractive Interest Rates and Better ROI

Holdefi uses a mechanism that calculates interest rates for borrowing based on the market and competitive conditions. By doing so, it will balance the demand and liquidity to provide an attractive interest rate to borrowers. Meanwhile, lenders providing liquidity to the supply pool will receive a portion of the interest payments in proportion to the invested amount.

Lenders on Holdefi will get a bigger share of interest payouts in comparison to those on other DeFi platforms as borrowers do not receive any reward or interest on their collateral deposits. So, the lenders end up receiving a proportional share from the overall interest received by the platform from its borrowers.

What Makes Holdefi Stand Apart from the Rest?

Holdefi is an advanced DeFi solution based on the Ethereum protocol. Powered by a native ERC20 standard HLD token, the project is designed to work flawlessly on Ethereum’s existing PoW protocol while being future-ready to operate on ETH’s upcoming PoS upgrade.

The platform witnesses significant upgrades that impart certain qualities of CeFi platforms without affecting decentralization. One such sought-after feature of CeFi is the availability of collateral insurance. While such an option is not available with other DeFi projects, Holdefi solves the issue by separating the collateral deposits from borrowers and liquidity provided by investors into different pools. That way, the collateral won’t be utilized, and borrowers can withdraw it at any time, thus eliminating the need for insurance.

The separation of liquidity and collateral pool will also have a positive effect on Holdefi when ETH 2.0 is implemented as it will speed up the process while keeping transaction costs at a minimum.

Using HLD

HLD is a native ERC20 utility token of the Holdefi ecosystem. Apart from being a mode of value exchange within the ecosystem, it also acts as a governance token imparting voting rights to tokenholders. It can also be used for liquidity mining, staking, and revenue sharing between the participants.

The project has set the maximum supply cap for HLD at 100 million of which 13 million was offered to investors through private and public sales. Recently, Holdefi successfully concluded its private and public sale.

The public sale, a 2-day event starting March 31 was completely sold out within hours of launch. Meanwhile, those who didn’t participate in the token sale can purchase HLD on Uniswap and PancakeSwap

Buy HLD and HODL?

Holdefi is one of the few platforms that has made significant improvements to DeFi lending. It offers a lot of flexibility to users while maintaining strong security features. The future-proof design of Holdefi ecosystem is an added advantage that will make it popular with the crypto community.

While there is no definitive forecast on whether HLD will be an asset due to the volatile nature of crypto markets, Holdefi is an innovative project that is playing a major role in shaping DeFi platforms of the future.

Learn more about Holdefi at – https://holdefi.com/

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Source: https://www.newsbtc.com/news/company/holdefi-a-unique-decentralized-lending-platform-shaping-the-future-of-defi/

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