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Many pieces of the Diem puzzle still missing as launch gets delayed

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Back in June 2019, social media giant Facebook released the details for a much-talked-about digital currency platform dubbed “Libra.” These days, Libra is known as Diem, with the project undergoing a significant rebranding in a bid to smoothen regulatory wrinkles.

A year and a half later, the Diem Association has yet to launch a digital token with regulatory approval from Swiss authorities yet to materialize. Even if Switzerland’s Financial Market Supervisory Authority, or FINMA, does grant a payment license to the digital currency project, Diem will be debuting its offerings to a global landscape that is significantly more fractured in terms of digital currency regulations than was the case 18 months ago.

Stablecoin regulations seem to be the focus of attention for governments in major economic blocs including the United States and the eurozone. China continues to accelerate the pace of its nation digital yuan project, and despite initial assertions to the contrary, authorities in Beijing appear to have a more domestic agenda for the e-yuan.

Major crypto markets in terms of trading volume like India and Nigeria are becoming increasingly anti-privately-issued digital currencies. In effect, if Diem were to launch today, that would be four prominent digital currency transaction theatres where the legality of the project’s “coin” would be tenuous at best.

When will Diem launch?

In November 2020, the Diem Association announced plans for a limited launch of its project with a U.S.-dollar-pegged digital token. Far from the ambitious plans of a “Facebook coin” backed by a basket of fiat currencies that heralded the debut announcement back in 2019, this new USD stablecoin was a consequence of the successive rebranding attempts necessitated by the vociferous pushback among global financial regulators.

January came and went, and now February is almost over, but no sign of the Diem USD stablecoin. The Swiss FINMA has not approved Diem’s payment system license yet but recent developments in the country around crypto and blockchain regulations likely put Diem’s application in good stead.

Switzerland has established itself as a crypto-friendly nation, allowing the digital asset space to flourish within its borders. Earlier in February, Phase one of the country’s blockchain law focusing on company reforms went into effect. Meanwhile, the second part of the new legal framework, which creates regulatory clarity for trading crypto securities, will become law later in the year.

Plans for the Diem launch received another boost with the announcement of the partnership between crypto security outfit Fireblocks and First Digital Asset Group — a payment provider on the Diem platform. As part of the collaboration, both companies have created a secure wallet allowing financial institutions to process transactions on the Diem network.

Responding to Cointelegraph, a spokesperson for FINMA declined to comment on the status of Diem’s application but confirmed that the licensing process was still ongoing. The Diem Association did not immediately respond to Cointelegraph’s request for comments on the matter.

According to Jackson Mueller, head of policy and government relations at blockchain compliance and financial markets infrastructure outfit Securrency, a Diem launch in Q1 2021 appears unlikely. In a conversation with Cointelegraph, Mueller remarked:

“Several representatives of the Diem Association have made it clear that a rollout will not happen until they meet regulatory expectations and requirements, and it is unclear, at this time, whether and to what extent the Association is close to achieving this.”

Private stablecoins in the cross-hairs of regulators

The Diem announcement back in the Summer of 2019 seemed to spur financial regulators across the world to scrutinize stablecoins. The likely network effect of a digital currency enjoying such benefits of Facebook’s 2.8 billion users seemed to spur intense discussions among national and international regulatory agencies.

According to Mueller, government scrutiny surrounding privately issued stablecoins has increased: “The conclusions and follow-on outcomes from these efforts are unclear, at present, which, I imagine, adds further challenges to the rollout of Diem in the first quarter.”

Apart from the series of congressional hearings that took place in 2019 after the Diem announcement, some congresspeople are pushing for stricter stablecoin regulations. The measures, if passed, would force private stablecoin issuers to comply with banking standards.

Intergovernmental bodies, such as the G-7 and the G-20, have also expressed their concerns about stablecoins, with Diem often being singled-out. These bodies have issued numerous papers and research studies highlighting the potential for private stablecoins to disrupt legacy financial systems.

The European Central Bank recently asked European Union lawmakers for veto powers concerning stablecoins in the eurozone. If granted, the ECB would have the final say on stablecoin regulations with its pronouncement enforceable across the European Union. Indeed, the ECB laid down the crux of its reservations with stablecoins especially those not issued by recognized financial institutions, stating:

“The additional requirements laid down in the proposed regulation for significant stablecoin issuers are therefore welcome. Having said that, these additional requirements may not be sufficient to address growing risks where stablecoins become widely used as a means of payment or a store of value in multiple jurisdictions across the Union.”

Furthermore, ECB President Christine Lagarde is a noted critic of stablecoins and cryptocurrencies in general. Thus, it’s likely that the ECB having veto powers on stablecoin regulations would mean strict compliance mandates for issuers in the eurozone.

Officials in Germany are also among one of the more vocal opponents of Diem in the eurozone. While the country is by no means anti-crypto, Germany’s finance minister, Olaf Scholz, has stated on numerous occasions that the country’s government will oppose Diem’s operation in Germany.

According to Ran Goldi, CEO of First Digital Assets Group, much of the negative sentiments espoused by European regulators stem from a lack of understanding of the Diem model. “I think the ECB is still looking at Diem as a new currency instead of a representation of existing money (as in, they think this is still Libra, a basket of currencies),” Goldi told Cointelegraph, adding: “They should take the time to learn more and perhaps realize there is no threat to their economy.”

CBDC: Central banks answer to Diem and private stablecoins?

Apart from the threat of decidedly onerous regulatory measures, several governments have also begun exploring the creation of their own central bank digital currencies. These sovereign digital currency projects seem to be the response of central banks to the perceived threat of privately issued stablecoins.

Seeing as digitization appears to be the next phase in the evolution of money, legacy finance figures, such as Agustín Carstens, general manager of the Bank for International Settlements, have argued for central banks playing a key role in the pivot to digital currencies.

According to a recent BIS survey, about 86% of major central banks are studying CBDCs. China’s e-yuan project is currently undergoing several testing protocols, with banks in the country helping to bootstrap adoption by creating hardware wallets for the digital currency/electronic payment.

Related: China turns up pace on CBDC release, tests infrastructure prior to adoption

There also seems to be a significant level of international collaboration surrounding CBDCs. Recently, the central banks of China, Thailand, the United Arab Emirates and the Monetary Authority of Hong Kong inked a partnership to create a cross-border CBDC. These international collaborative projects appear to be geared toward establishing protocols for interoperability among national CBDC projects.

In India, the country’s central bank has confirmed that it is actively developing a digital rupee. According to a recent statement by Shaktikanta Das, governor of the Reserve Bank of India, the RBI is “very much in the [CBDC] game” and wants to follow China’s footsteps in creating a digital companion to its national currency.

Meanwhile, India’s government is reportedly close to issuing a blanket ban on cryptocurrencies, which will include stablecoins. People with knowledge of the plan have been speculating, saying that crypto owners will be given a transition period to sell their digital currency assets.

India is Asia’s third-largest economy and a potential market base for Diem payment transactions. Already, another major arena like China with its DCEP could be a difficult proposition for Diem to achieve significant adoption.

In Europe, the ECB wants stablecoin veto power but has said that any digital euro created by the central bank will be exempted from digital currency regulations enforced on other stablecoin issuers. Nigeria — Africa’s largest economy — has banned banks from servicing crypto exchanges.

Even with a license approval by FINMA, Diem might have a few regulatory hurdles to navigate seeing as major economies are not looking to allow the disintermediation of their legacy banking systems without a fight.

Source: https://cointelegraph.com/news/many-pieces-of-the-diem-puzzle-still-missing-as-launch-gets-delayed

Blockchain

Bitcoin Bull Mike Novogratz Predicts Existential Crisis Unless the US Creates a Digital Dollar

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Mike Novogratz, a veteran investor, and a huge Bitcoin supporter noted the U.S. is currently in a good economic position. Still, the nation can face a major competitive disadvantage unless it engineers a digital dollar soon.

The Importance Of An E-Dollar

Novogratz, chief executive of digital merchant bank Galaxy Digital GLXY, underlined the value that a digital dollar could bring to the US. In a Friday interview with MarketWatch, he stated:

”To me it is an existential crisis, we need a digital dollar.”

Furthermore, the investor expressed his view over the current COVID pandemic and the negative impact on the U.S. market and the world, in general. He referred to the trillions of dollars of monetary and fiscal spending done to help eliminate the worst of the economic aftershocks the disease caused:

”If our fiscal and monetary policy starts looking like it’s from a Banana Republic…you are going to run into some Minsky moment where confidence breaks down.”

With his statement, Mike Novogratz referenced Hyman Minsky, who exposed a view in the recent past that a period of distortions in the financial system eventually ends very badly.


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The existence of a digital dollar sounds even more important after some stock-market investors have been warning about a surge in US inflation in the past weeks.

The Competition With China

During the interview, Novgorotz claimed that while in the U.S., the development of an e-dollar is still under question and researches, China has fired the first salvo on the digital currency front.

The biggest economy in Asia conveys great support to its digital yuan. According to some experts in the field, its new currency is a weapon that the country can use to compete with the U.S. and other developed economies.

As CryptoPotato recently reported, PayPal CEO Peter Thiel said that Bitcoin could be used as a Chinese financial weapon against the U.S.

In the meantime, Novogratz said that there is ”zero evidence of the Chinese government buying Bitcoin” much less weaponizing it, referring to the comments made by Peter Thiel:

”Sometimes he likes to say things that are provocative.”

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Source: https://cryptopotato.com/bitcoin-bull-mike-novogratz-predicts-existential-crisis-unless-the-us-creates-a-digital-dollar/

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Blockchain

Ripple becomes tidal wave, leads weekend pump and notches legal victories

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Amid a weekend pump carrying multiple cryptocurrencies higher, Ripple’s XRP looks to be leading the way with a push as high as 30% on the daily — carried on the back of a string of legal victories and rumors of relisting at some exchanges. 

Where Bitcoin and Ethereum are up merely 2.7% and 3.4% respectively on the day, XRP climbed to $1.36 before retreating to $1.32, where it sits at the time of publication. The digital currency is now up 111% on a 7 day basis, and a staggering 544% on the year. The recent push has also buoyed XRP back into the top 10 cryptocurrencies by marketcap, behind only BTC, ETH, and BNB at #4.

The rally flies in the face of a lawsuit from the Securities and Exchange Commission, which charges that XRP’s $1.3 billion ICO was an “unregistered securities offering.” The news led multiple exchanges to delist the currency, and XRP lost its place as the 3rd largest currency by marketcap, at time looking as if it would even fall out of the top ten. 

The bad news for XRP didn’t stop with the SEC, either. In March Ripple CEO Brad Garlinghouse announced that the company would be “winding down” its relationship with Moneygram — a once highly-touted partnership that investors often pointed to as proof of the digital currency being on a path towards becoming “the standard” for payments and settlement.

Despite the deluge of negative headlines, it appears all buyers needed was a small ray of hope to jump back in — and they’ve gotten exactly that. Ripple lawyers have notched two victories in their legal battle against the SEC, including winning access to internal SEC discussion history regarding cryptocurrencies, and a court denied the SEC the ability to disclose the financial records of two Ripple execs, including Garlinghouse.

Ripple executives themselves seem heartened by the news, with CTO David Schwartz saying the US isn’t “prepared” to regulate cryptocurrencies (a possible dig at the ongoing legal proceedings).

All in all, it’s just another week for one of the most controversial cryptocurrencies in the space.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cointelegraph.com/news/ripple-becomes-tidal-wave-leads-weekend-pump-and-notches-legal-victories

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Blockchain

Why this OlympusDAO’s product could be amongst DeFi most lucrative

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Taking the market by storm, OlympusDAO’s native OHM is up 95.8% this week alone and 31.1% in the past two weeks. At the time of writing, OHM is trading at $812,76 with 7.3% profits in the 24-hour chart.

With a market cap of just $68 million, OlympusDAO might have gone unnoticed by many investors. However, it has a mechanism called Bonds which promises to be one most important and lucrative in the DeFi sector.

According to research firm Messari, this protocol is attempting to create a stable currency backing every OHM with DAI and OHM-DAI. The objective is to maintain a “fundamental check on inflation” and a currency with an undiluted purchasing power.

Unlike Tether and other stablecoins, OHM is not pegged to any other asset. Its stability is achieved via the DAO (Decentralized Autonomous Organization) when it alters variables to obtain more profitability for stakers.

This is done via the sales contract connected to the protocol’s treasury and a liquidity pool (OMH-DAI) on decentralized exchange Sushiswap, as shown below. Messari explains:

When OHM trades above 1 DAI, the protocol mints and sells new OHM. When OHM trades below 1 DAI, the protocol buys back and burns OHM. In each case the protocol makes a profit. Olympus DAO distributes these profits 90% to OHM stakers pro rata and 10% to a DAO.

OlympusDAO OHM
Source: Messari

How OlympusDAO’s bonds operate

The Bonds are a treasury component to get liquidity with it users can trade Stake Liquidity Provider tokens to get OHM directly with the protocol, as an OlympusDAO developer explained.

Once the trade is completed there is a vesting schedule of 5 days. During this time, the user can redeem the tokens but has incentives to get them at a discount. The latter is determined by the number of bonds in the protocol, more bonds are equal to a lower discount.

Via this mechanism, as the developer said, OlympusDAO restrains its own growth, to have become “steadier”.

The liquidity from a bond is locked in the treasury and used to back new $OHM. That liquidity now belongs to the market and, by extension, the token holders. The more liquidity the protocol builds up, the more confident holders can feel.

The users are basically contributing to OlympusDAO by adding liquidity. In retribution, the user gets a reward in OHM at a much cheaper price during a specific period. That way, both the user and the protocol can benefit.

OlympusDAO offers LP a variety of strategies around OHM which they can leverage to obtain a bigger profit than on the spot market. The developer claims:

All of this serves to create a long-term, sustainable bootstrapping mechanism for the protocol, with participants as the main beneficiaries. A good system shouldn’t offer one opportunity to “make it”; it should offer them in perpetuity with diminishing returns. This is how you produce wealth; slowly, through compounding gains.

Ethereum is trading at $2096,58 with a 1.2% profit in the 24-hour chart, after dropping from its ATH at $2,198.

OlympusDAO OHM Ethereum ETHUSD
ETH with small profits in the 24-hour chart. Source: ETHUSD Tradingview

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://www.newsbtc.com/news/why-this-olympusdaos-product-could-be-amongst-defi-most-lucrative/

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