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The Crypto-Dollar Surge and the American Opportunity

The U.S. has much to gain from being the steward of a politically neutral payments technology, even if it means giving up power over the financial system.

Republished by Plato

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CoinDesk columnist Nic Carter is partner at Castle Island Ventures, a public blockchain-focused venture fund based in Cambridge, Mass. He is also the cofounder of Coin Metrics, a blockchain analytics startup.

Stablecoins are a hot commodity. Over $16 billion of them circulate in the wild today, up from $4.8 billion to start the year. Mostly these are issued outside of the U.S., and so are largely unaccountable to financial regulators. If they keep growing, U.S. policymakers, in particular those in the state of New York, will have to stomach the loss of their dominance over dollar clearing. But because stablecoins represent a powerful neutral financial infrastructure, the U.S. should welcome their ascendance regardless.

It’s no secret that banking is highly politicized, often in informal or hard to apprehend ways. The overt politicization of the N.Y.-based correspondent banking system represents a tax on all users. Embedded in each transaction is a slight risk of censorship. Dependence on the system means submitting oneself to an American aegis. The harder it is to extricate yourself, the more you are subject to the demands of the administrator.

See also: Alejandro Machado – Venezuelans Look to Crypto-Dollars for Financial Security

Banks and payment processors have also become more politicized, as they have begun to “de-risk” (read: de-platform) individuals and industry sectors with whom they disagree politically, or where they consider implied compliance costs too significant to be worth the hassle.

In February, I wrote that U.S. regulators should embrace the potential of stablecoins as continued instruments of dollar dominance. I stressed the potential welfare benefits of allowing savers in countries with inflationary regimes to engage with currency substitution without relying on the bank sector. Since February, the outstanding supply of stablecoins has grown from around $5.5 billion to $16 billion and their daily settled value has grown from about $1 billion daily to $4 billion daily. This phenomenon is no longer localized to the crypto industry. It has begun to cause geopolitical reverberations.

First, stablecoins make for an excellent tool to avoid capital controls in oppressive monetary regimes. Chainalysis has reported that tether (USDT) is extremely popular in China, even recently exceeding bitcoin’s (BTC) usage in the region. It’s important to understand that the popularity of stablecoins or “crypto-dollars” is not solely due to their digital nature but because of the transactional freedom that they offer to users.

Policymakers should be thanking their lucky stars that a putative successor to the U.S.’ financial infrastructure is a largely American phenomenon.

China’s financial system is highly digitized already. Crypto-dollars like tether offer a fundamentally different value proposition from AliPay or the state digital currency, DCEP, because they are bearer assets not subject to the same level of surveillance or transactional restrictions. Their digital nature isn’t what sets them apart; it’s the fact that you can permissionlessly accept or send any quantity of crypto-dollars with nothing more than a smartphone and trade it on a vast network of exchanges and brokers worldwide.

Today, crypto-dollarization is in full swing in places like Venezuela. Recently, Venezuelan President-in-exile Juan Guaido has begun promoting the usage of AirTM, a crypto-focused remittance company, to send U.S. dollars (USD) seized from the Maduro regime by the U.S. Treasury to health-care workers in Venezuela. Startups like Valiu are offering users digital access to the USD thanks to established crypto-financial infrastructure like LocalBitcoins. Crypto-dollars make sense because U.S. banks do not service Venezuelan users, even if regular Venezuelans are not formally sanctioned.

Crypto-dollarization works because stablecoins are, for the most part, unencumbered by the shackles of the U.S. banking system. The largest issuer, Tether, relies on a network of offshore banks, and remains frustratingly outside the purview of the New York regulator, the Department of Financial Services (despite a long campaign to bring Tether to heel). Stablecoin issuers treat the IOUs as bearer instruments, and generally do not seek to police user behavior when a transaction does not involve the issuer. Users only need a relationship with the issuer if they are redeeming or creating stablecoins with bank dollars. By granting a measure of transactional privacy and not embedding political conditions into transactions, stablecoins are the closest thing to digital cash we have today. Notably, it is the private sector, not the state, that has delivered on this promise of digitally native cash.

See also: Pascal Hügli – Hyper-Stablecoinization: From Eurodollars to Crypto-Dollars

Now, U.S. policymakers reading this might feel a profound sense of unease. New York is the center of the dollar universe. SWIFT, which the U.S. effectively controls, is unambiguously an instrument of power projection abroad. And the Federal Deposit Insurance Corp. and Department of Justice have a habit of expressing political prescriptions through informal bank guidance and veiled threats. Touch a dollar anywhere – even in a transaction in which neither counterparty is American – and you’re obliged to Uncle Sam.

But these tools are wearing blunt with overuse. The more the U.S. threatens sanctions, the greater the incentive for its peers – allies included – to seek out alternatives. The more risk-averse and puritanical banks become, the stronger the tailwinds for non-bank alternatives. The more dissidents are de-platformed from U.S. payment processors, the better neutral alternatives start to look.

Perhaps catalyzed by the growth of stablecoins, or more likely by the announcement of Facebook’s libra or China’s DCEP, various branches of the Federal Reserve are now industriously pursuing a “digital dollar.” But would such a project, regardless of its final form, grant transactors the autonomy that they deserve? Would a digital cash system produced by the Fed consist of an instant-settling, private bearer asset, as is the case with physical cash? Would an American central bank digital currency be able to credibly guarantee that its rich database wouldn’t be plundered in real time by Homeland Security, Immigration and Customs Enforcement or the Federal Bureau of Investigation, as Larry White has wondered?

Today, the U.S. is still the center of gravity as far as bitcoin and the crypto-dollar ecosystem are concerned. This is a significant advantage that should not be squandered. Policymakers should be thanking their lucky stars that a putative successor to the U.S’ financial infrastructure is a largely American phenomenon. The U.S. can continue to muddle down an increasingly exclusionary path and punish subscribers to its financial infrastructure by burdening them with political dictates, or it can embrace a neutral alternative. Self-disruption would be a significant bullet to bite, but it suits the U.S. Values like liberty, privacy, free enterprise and personal autonomy are embedded into our Constitution and social fabric. One can hardly think of a better nation to underwrite a shift to a truly neutral payments and settlement infrastructure.

See also: Nic Carter – Policymakers Shouldn’t Fear Digital Money: So Far It’s Maintaining the Dollar’s Status

While dollar infrastructure is likely to remain dominant far longer than some critics allege, it’s undeniable that banking and messaging have been deputized into carrying out the political objectives of their administrators. As relations with U.S. allies sour and China grows its sphere of influence in Asia, viable alternatives will be created. And if the DCEP is any guide, these alternatives will not encode strong privacy protections for end users. The U.S. is clearly suited to be the steward of a politically neutral payments technology, if our leaders can rise to the challenge.

If the U.S. chooses to marginalize crypto-dollars and punish their issuers, not only will they suppress a burgeoning American industry, they will also push users into even less accountable alternatives. While most stablecoins are backed by dollars in bank accounts – and are hence somewhat subject to governance – a subset are issued natively against crypto collateral like ether (ETH). These projects are more automated and lack the vectors of control and the linkages to the banking system that characterize convertible stablecoins. While still small, crypto-backed stablecoins like dai (current supply $455 million) take a more crypto-anarchist approach, and are harder to surveil or influence. More draconian regulation of crypto-dollars would not eliminate the category. Instead, it would push users into these slipperier alternatives.

The architects of these public digital dollar solutions should take a leaf from the private sector’s book. Users simply crave the qualities of cash, this time in a digital context. Far from being a dangerous techno-utopian fantasy, a genuine cash standard on the internet is simply a restoration of what was once ubiquitous and normal: transactional privacy and autonomy. These qualities are not for criminals but for everyone. And if policymakers dig in their heels, the private sector will only push back harder by providing the service that users demand – but this time outside policymakers’ sphere of influence.

Disclosure

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Source: https://www.coindesk.com/crypto-dollar-surge-opportunity

Blockchain

YFI and UNI are now available for trading on CoinJar!

Republished by Plato

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We’re excited to welcome the following ERC-20 tokens YFI and UNI to the CoinJar lineup!

From today, DeFi tokens: YFI and UNI are now available to buy and sell through the CoinJar platform, joining our already great line up of digital currencies that members can send, receive and store using CoinJar.

These tokens will also be automatically added to new purchases of the CoinJar ERC-20 and CoinJar Universe Bundles. Existing owners of these bundles will not be impacted.

yearn.finance (YFI)

YFI, an ERC-20 token, is the governance token of yearn.finance. Yearn.finance is a platform built to utilise other DeFi services (such as Uniswap) for the purpose of simplifying the use of yield farming and maximising its effects.

You can learn more, view live prices, and purchase YFI here.

Uniswap (UNI)

UNI is the governance token of Uniswap, introduced on Sept. 17, 2020. The Uniswap exchange takes the form of two smart contracts hosted on the Ethereum blockchain and an open source front-end client. Uniswap’s uniqueness is defined by its use of Constant Function Market Makers rather than a typical order book.

You can learn more, view live prices, and purchase UNI here.

Happy Trading!

Source: https://blog.coinjar.com/yfi-and-uni-now-available-for-trading-on-coinjar/

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Five Reasons Ethereum Has Entered a New Bull Market

Republished by Plato

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Ethereum is currently retracting sharply from its previous and 30-month peak of $620. Even with a decline of around $100 to today’s prices of $525, ETH is still up over 300% since the beginning of the year.

The confirmed genesis of the long-awaited Beacon Chain, which is Phase 0 of the even longer awaited Serenity ETH 2.0 upgrade, has no doubt driven momentum but it is not the only strong point for Ethereum.

Over 5 Reasons to be Bullish on Ethereum

DTC Capital’s Spencer Noon has pulled out a few key charts to back up the notion that we are definitely in a bull run for Ethereum.

Active addresses on the network are the first metric as it now has just under 500,000 per day. This is almost double what it was at the same time last year.

In terms of fees paid, Ethereum dwarfs everything else in the crypto space with 80 billion gas now being used on a daily basis. The analyst exclaimed that this is;

“A clear sign that it is the most useful network in the world.”

Over $16 billion in stablecoins have now been issued on Ethereum, a figure that has gone parabolic since the start of this year which is a sign that there is a major demand for digital dollars.

The DeFi effect has been huge as, despite a number of rivals and ‘killers’ emerging this year, Ethereum remains the foundation of the entire ecosystem. Ethereum’s largest use case has gone parabolic as there are now ten times more DeFi users than there were a year ago.

Total value locked across the DeFi space has surged almost 2000% since the beginning of 2020 to reach $14 billion with five billion dollar plus protocols which is a sign that the space is maturing.

And There’s More …

The amount of Bitcoin tokenized on Ethereum is also at record highs with 152,000 BTC, or $2.7 billion worth at today’s prices wrapped on the Ethereum network.

The DEX effect cannot be overlooked either as decentralized exchanges on Ethereum have done $20 billion in volume over the last 30 days. This has brought their combined total to $86 billion this year;

“A sign that DEXs can compete with the top centralized exchanges.”

As reported by CryptoPotato, Ethereum social sentiment and searches are also at their highest levels since early 2018 as the mainstream media and the masses start paying attention.

This latest pullback may settle below $500, but there is little doubt it will provide a buying zone for ETH which still has a long way to go.

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Source: https://cryptopotato.com/five-reasons-ethereum-has-entered-a-new-bull-market/

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Coinbase CEO Fears Rumored Regulations Proposed By The Trump Administration

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Coinbase’s CEO Brian Armstrong has sent a letter to the US Treasury Secretary Steven Mnuchin regarding new rumored regulations on self-hosted cryptocurrency wallets. Armstrong believes that if implemented, the new legislation could harm users and, ultimately, the role of the US in the cryptocurrency financial field.

New Regulations On Self-Hosted Crypto Wallets?

The CEO of the largest US-based digital asset exchange took it to Twitter to outline the potential importance of these regulations if indeed implemented. The rumors indicate that the current Treasury Secretary Mnuchin plans to make them official before the end of his term.

Armstrong explained that self-hosted cryptocurrency wallets (also referred to as non-custodial or self-custody wallets) are “a type of software that lets individuals store and use their own cryptocurrency, instead of needing to rely on a third-party financial institution.”

They enable users to access basic financial services through this technology – “just like anyone can use a computer or smartphone to access the open market.”

Should the proposed regulations become official, they would require financial institutions, including Coinbase, to verify the recipient (owner) of the self-hosted wallet. Meaning, it would collect identifying information on that party before completing the transaction.

According to Armstrong, such requirements would lead to several potential issues because “it is often impractical to collect identifying information on a recipient in the crypto-economy.”

Some of those issues could affect users that send cryptocurrencies to various merchants online or to other people in emerging markets, where “it is difficult or impossible to collect meaningful know-your-customer information.”

Even simpler transactions like upvoting some content on Reddit or transferring an item in a game would also require the verification of the recipient, which makes the process prolonged and complicated.

The US Will Suffer The Most

Armstrong believes that the impact of these “barriers” would prompt US-based users to initiate fewer transactions. This would “effectively create a walled garden for crypto financial services in the US, cutting us from innovation happening in the rest of the world.”

US customers would turn to foreign cryptocurrency companies to access such services, which could put the country’s status as a financial hub at risk in the long-run.

“If this crypto regulation comes out, it would be a terrible legacy and have long-standing negative impacts for the US. In the early days of the internet, there were people who called for it to be regulated like to phone companies. Thank goodness they didn’t.” – added Armstrong.

He also asserted that Coinbase and other cryptocurrency companies have sent a letter to the Treasury last week to articulate these concerns. However, he hasn’t specified if the Treasury has responded in any way yet.

Featured Image Courtesy of Observer

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Source: https://cryptopotato.com/coinbase-ceo-fears-rumored-regulations-proposed-by-the-trump-administration/

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