Category: Banking

Categories
Banking Bitcoin Crypto News

Vitalik Buterin Says El Salvador’s Bitcoin Law is ‘Opposed to Crypto’s Idea of Freedom’

Vitalik Buterin has responded to a post regarding the Salvadorean Bitcoin rollout, calling it “contrary to the ideals of freedom” that the crypto space embodies as well as highlighting some of his own issues on the rollout.

Ethereum (ETH) co-founder Buterin commented on a post in r/CryptoCurrency Reddit titled “Unpopular opinion: El Salvador President Mr Nayab [sic] Bukele should not be praised by Crypto community”. Buterin said there was “nothing unpopular about this opinion”, adding that by “making it mandatory for businesses to accept a specific cryptocurrency”, [El Salvador is] going “contrary to the ideals of freedom that are supposed to be so important to the crypto space”.

According to article 7 of El Salvador’s Bitcoin Law, “Every economic agent must accept bitcoin as payment when offered to him by whoever acquires a good or service […] Those who, by evident and notorious fact, do not have access to the technologies that allow them to carry out transactions in bitcoin are excluded from the obligation.”

As it stands there seems to be some mismatch between the text of the law and what Salvadorean president Bukele wrote in a Twitter thread about the use of bitcoin as legal tender, which was intended to be “totally optional” and that the government would not force any of the nation’s residents to receive bitcoin as a form of payment.

Buterin may also be referring to the fact that only BTC is accepted as legal tender and not a more expansive list of cryptocurrencies. As one Reddit user asked, would he say the same about Ethereum if El Salvador had selected ether (ETH) as its sole digital legal tender?

Bitcoin Maximalists Support President Bukele’s Decisions

Buterin’s post added that: “This tactic of pushing BTC to millions of people in El Salvador at the same time with almost no attempt at prior education is reckless, and risks a large number of innocent people getting hacked or scammed. Shame on everyone (OK, fine, I’ll call out the main people responsible: shame on Bitcoin maximalists) who are uncritically praising him.”

The decision to make bitcoin legal tender in El Salvador was received very well by bitcoin maximalists, individuals who believe bitcoin is the be-all and end-all of the crypto world.

He’s [Bukele] a human being like the rest of us, he just loves being praised by people he considers powerful (ie, Americans). Bitcoin maximalists are a very easy community to get to praise you: you just have to be in a position of power and do or say nice things about them and their coin.

Vitalik Buterin

One Salvadorean business owner, requesting anonymity, told Decrypt: “It crushes my soul to see Bitcoin maximalists around the world cheering this when, if they actually sat down and read the law and regulations, it is completely opposite to everything they preach.”

An Adjustment to Start Using Bitcoin

At this month’s TOKEN2049 conference in London, Blockchain.com co-founder Nicolas Cary said during a panel discussion: “I think there’s some valid criticisms of how the program [has been] rolled out in El Salvador in terms of being top down. [A] main ethos of crypto is that there’s really grassroots adoption, and people are doing it voluntarily.”

Multiple surveys in the country have found that the majority of Salvadoreans are not in favour of bitcoin as legal tender.

Other countries may yet follow El Salvador’s example. Earlier this month, Lord Fusitu’a, a member of the Tongan parliament, made a case for the Pacific island nation to accept bitcoin as legal tender in order to cut down on remittances costs.

Categories
Banking Blockchain Crypto News Payments Stablecoins Stellar

Payment Juggernaut Partners with Stellar and USDC for Blockchain-Based Payments

MoneyGram, one of the major global remittance services, has partnered with the Stellar Foundation (XLM) to provide a bridge between digital assets and local currencies for consumers, with United Texas Bank serving as the settlement bank between USDC issuer Circle and MoneyGram.

A Bridge From Traditional Finance to Digital Assets

On October 6, MoneyGram announced it would be using the Stellar blockchain to facilitate instant and cheap transactions. The bridge will allow “money transfers and enables near-instant settlement in USDC, a stablecoin pegged to the US dollar developed by Circle”.

The pilot project started in the fourth quarter of this year and will be rolled out slowly during early 2022. The blockchain-enabled bridge for USDC stablecoins and local currencies will connect MoneyGram’s 150 million or so consumers to the blockchain.

Denelle Dixon, CEO and executive director of the Stellar Development Foundation, stated that “we’re trying to go as big as we can”.

Working with MoneyGram allows end consumers to have on- and off-ramps everywhere that MoneyGram’s vast agent network supports it. So this is just transformational in terms of being able to exchange crypto for fiat and fiat for crypto,

Denelle Dixon, CEO and executive director, Stellar Development Foundation

This means that any digital wallet connected to the Stellar network can leverage any of MoneyGram’s 400,000 locations across the globe to send and receive remittances in various fiat currencies.

MoneyGram has joined Visa, which is also in the process of creating a blockchain-based bridge for international Central Bank Digital Currencies (CBDCs) to increase the ease, cost and speed with which people can make payments.

Ripple’s Relationship with MoneyGram Winding Down

Ripple (XRP) has had a longstanding relationship with MoneyGram that started in 2019, but it has been winding down since the US Securities and Exchange Commission filed suit against Ripple in December 2020, saying the firm had violated federal securities laws.

However, MoneyGram’s chairman and CEO Alex Holmes has stated that the partnership with Stellar is an entirely different animal from the relationship MoneyGram had with Ripple, which leveraged the crypto firm’s on-demand liquidity (ODL) to facilitate foreign exchange (FX) trading.

The relationship MoneyGram and Stellar have is based around the direct link between consumer payments. According to Holmes, the challenge is to create a foreign exchange market in a completely new and different environment.

United Texas Bank to Facilitate Crypto Settlements

Banks are quite skittish to start dealing with crypto due to the murky regulatory space in which the industry now finds itself. Holmes stated that “United Texas bank is an established bank here and very focused on the opportunities in the crypto space. Not every bank is willing to step into the crypto world, and I think it says a lot about how progressive that bank is trying to be.”

Unfortunately, a lot of regulation ends up being a look back. I think the blockchain and digital asset worlds [have] really accelerated, and now I see a lot of regulators looking to catch up.

Alex Holmes, chairman and CEO, MoneyGram
Categories
Banking Bitcoin Crypto News Mining

BTC-Backed Loans a Reality as Miner Obtains $100 Million Credit to Buy More Equipment

Marathon Digital Holdings, one of the largest publicly traded American Bitcoin mining companies, has obtained a US$100 million credit line from Silvergate Bank, secured with bitcoin and USD.

According to its press release, the mining firm secured the loan on October 1. The credit line will be available for a year, and is expected to be renewed annually by agreement between both parties. The funds will be used to expand the company’s BTC mining operations and to acquire new equipment. 

[The] revolving line of credit is secured by our bitcoin holdings and USD [and] consistent with our strategy to focus on agility as it enhances our ability to act opportunistically and in a manner that is efficient for both our business and our shareholders. By having this line of credit in place, we believe Marathon is better positioned to continue growing over the coming quarters.

Fred Thiel, CEO, Marathon Digital

Over $360 Million in BTC Holdings

The firm also revealed its quarterly BTC production and miner installation updates. By the third quarter of 2021, the company produced 1,252.4 new minted bitcoins, 340.6 minted in September alone. This represents a 91 percent production increase quarter-on-quarter and increasing total bitcoin holdings to approximately 7,035.

At press time, Bitcoin was trading at US$51,260, which gives Marathon’s bitcoin holdings an approximate fair market value of US$361.2 million.

Not the First BTC-Backed Loan

This is the first BTC-backed loan issued by an American bank, but not the first BTC-backed loan as such. Crypto News Australia reported in July how Glen Oaks Escrow, a California-based escrow company, made its first BTC-backed refinance loan for a property in San Diego.

We have seen similar moves in Australia as some people use crypto to pay off their mortgages or even put their houses up for bitcoin.

Categories
Banking Bitcoin Crypto Hardware Wallets Crypto News

Is Remittance-Dependent Tonga the Next Nation to Adopt Bitcoin as Legal Tender?

The small Polynesian island nation of Tonga will follow the example set last month by El Salvador in making bitcoin legal tender, if at least one senior politician has his way.

Like the Central American republic, Tonga is one of the world’s most remittance-dependent economies. Tongan MP, barrister, hereditary landowner and bitcoin advocate Lord Fusitu’a believes the adoption of bitcoin as legal tender in Tonga can potentially offset the high remittance commissions charged by money transfer services such as Western Union.

Last month, Crypto News Australia reported that El Salvador’s bitcoin adoption could cost Western Union US$400 million per year.

Between 38 percent and 41.1 percent of our GDP, depending on which World Bank figures you use, is remittances. To get those remittances to Tonga, Western Union takes a 30 percent bite out of them, on average. In El Salvador, it’s closer to 50 percent.

Tongan MP Lord Fusitu’a

Fusitu’a believes bitcoin has a place in the Tongan financial ecosystem and believes it could work using digital wallets such as Strike. He also suggests that bitcoin payment apps could be adopted en masse as they would not require a parliamentary order to implement.

Bitcoin is the first truly global natively open monetary system. Blockchain is the most optimal storage medium for money if your goal is decentralisation and complete, egalitarian democratisation of money.

Tongan MP Lord Fusitu’a

Choice of Wallet Could Be a Problem

Fusitu’a cites Strike, the digital wallet of Chicago-based Zap Solutions, as a potential means of accepting bitcoin as payment in Tonga. He claims that using Strike to send money back to Tonga from countries such as New Zealand would not require an act of parliament or even an endorsement by the National Reserve Bank of Tonga.

However, earlier this year it was found that Zap Solutions lacked the licences to operate in most US states, potentially meaning most cash and crypto transfers to El Salvador using Strike are illegal. That would have obvious implications for Tonga.

Fusitu’a’s enthusiasm for bitcoin is not shared by everyone in Tonga. Sione Ngongo Kioa, governor of the Pacific island nation’s reserve bank, has already indicated the bank has no intention of accepting bitcoin as legal tender. 

“The adoption of bitcoin as an official alternative currency is definitely unlikely,” Kioa said.

Categories
Banking Bitcoin Bitcoin ATMs Crypto News

El Salvador’s Bitcoin Wallet Outperforms Banks in Opening Weeks

More than two million El Salvadoreans are already actively using the Bitcoin wallet Chivo, according to the president of the Central American republic.

In just three weeks since bitcoin (BTC) officially became legal tender in El Salvador, roughly one-third of the population is using the wallet.

On legalising BTC, President Nakib Bukele promised locals they could receive US$30 worth of the asset if they downloaded a Chivo wallet. Despite technical issues with the app’s launch, engagement levels show there are now more users than there are bank account holders in El Salvador.

It’s Been a Bumpy Roll-Out

The roll-out of El Salvador’s brave new bitcoin world has not been without its pitfalls. Just over a week after BTC was legalised, protesters set fire to a Chivo ATM machine in the Plaza Gerardo Barrios, located in the nation’s capital city centre. The September 15 pro-democracy demonstration coincided with the bicentenary of El Salvadorean independence.

Three times this month, the government has “bought the dip” as the price of bitcoin fluctuated and it now has an accumulated stash of 700 BTC. The practice has attracted its share of critics, with economist and long-term gold proponent Peter Schiff warning: “Be careful what you wish for. The dip may end up being a much larger plunge than you expect.”

Categories
Australia Banking Bitcoin Crypto Exchange Crypto News Regulation

Bitcoin Trader Faces Off With Aussie Banks Over ‘Crypto Discrimination’

Allan Flynn, a trader and owner of local exchange BitcoinCanberra, is claiming A$250,000 from two of Australia’s biggest banks after they terminated banking services with him on the basis that he operated a crypto trading platform.

Allan Flynn. Source: AFR

Banking a Human Right? Perhaps …

According to the Sydney Morning Herald, Flynn will now have his day in court so to speak. His matter has been scheduled for next month before the ACT Civil and Administration Tribunal’s Discrimination Tribunal where he will argue that both ANZ and Westpac breached his human rights and discriminated against him on the basis that he was a crypto trader and offered trading services to his clients.

Flynn, as the applicant, seeks compensation from the respondent (the banks) for discrimination by reason of his occupation or profession, contrary to the Act, and claims that the respondent(s) refused to provide banking services to him because he is a cryptocurrency dealer or exchanger, in direct violation of his human rights

The applicant holds a ‘protected attribute’ within the meaning of …the Act because he is a cryptocurrency trader; and cryptocurrency trading is a ‘profession, trade, occupation or calling’.

Richard McGilvray, Flynn’s solicitor, from law firm Lexmerca

A successful claim is likely to have implications not only for the crypto sector, but also those that have routinely suffered debanking, specifically those in the adult entertainment industry.

Regulatory Clarity Needed

The timing of Flynn’s case is opportune, considering the recent hearings before the Select Committee on Australia as a Technology and Financial Centre where it was revealed that Australian crypto businesses were being ‘debanked’ by written notice without the ability to appeal.

As Australia increasingly moves towards becoming a cashless society, there may be growing arguments in favour of including banking as a human right. While this may appear counter-intuitive at face value, how does one expect citizens to operate within an economy if they are denied access to banking or cash?

Some would say crypto is the solution. However, as long as digital assets are considered by the ATO as property (and not cash), the punitive tax consequences, accounting administration and inconvenience of using crypto far outweigh any potential transactional benefits.

Australia cash payments. Source: RBA

Much like the experiences of crypto brokerage businesses such as Bitcoin Babe, Flynn says he has been debanked more than 60 times. Remarkably, the banks have gone as far as terminating financial services of his relatives:

Another bank closed my brother’s term deposit account without warning only for the fact that I was a signatory, for family oversight purposes.

Allan Flynn

While banks have a legitimate interest in complying with their statutory anti-money laundering (AML) and counter-terrorism financing (CTF) obligations, there is a growing sense that alternative forces such as hindering competition may be in play.

Flynn’s case is scheduled to be heard in late October. The Senate Committee’s final report is also due around that time. Hopefully, by the end of 2021, we’ll have a coherent and sensible regulatory framework.

Categories
Australia Banking CBDCs Crypto News

RBA Looking to Hire CBDC Experts to Contribute Towards ‘Future of Money in Australia’

It’s official, according to a recent Linkedin job listing – the Reserve Bank of Australia (RBA) is currently hiring for its “Central Bank Digital Currency Research Team”.

RBA job listing. Source: Linkedin

RBA Making Moves

In October last year, Crypto News Australia reported that the RBA was continuing its research into CBDCs despite its reservations. In the following month, we also reported that Commonwealth Bank, National Australia Bank, Perpetual, and ConsenSys Software had joined forces with the RBA to conduct further research into the use of a wholesale CBDC.

Just recently, the RBA reiterated its position that it does not yet see a policy case for issuing a retail central bank digital currency (CBDC), however it was “researching tokenised CBDCs and financial assets”, as per an announcement last month.

Quite clearly, the RBA is focused for the time being (at least publicly) on wholesale, as opposed to retail, CBDCs. For a short overview on each, be sure to check out our article outlining the differences.

What is a CBDC? Source: Daml.com

With that said, the latest news of the RBA looking to hire ought to come as no surprise to those who have been closely following the matter.

Insights from the Job Listing

According to the job listing, the role’s primary focus will be to “contribute to research on the future of money in Australia” and engage in “impactful work that helps make a difference to the Australian people”. If it sounds like fluffy stuff, you aren’t alone. According to the listing:

The Reserve Bank of Australia has been researching central bank digital currency (CBDC) for the past few years … We are researching whether there is a case for a CBDC in Australia, and if so, how it might be designed and what benefits and other implications it would have. This work is contributing to one of the RBA’s strategic focus areas on supporting the evolution of payments in Australia.

RBA job listing, LinkedIn

The RBA is said to be creating a new new cross-disciplinary team responsible for “designing, executing and communicating the results from a series of research projects aimed at improving our understanding of the case for, and implications of, issuing a CBDC as well as exploring different technical solutions”. It is expected that the team will work with stakeholders within the RBA as well as external partners on “collaborative projects”.

Time will tell which direction the RBA ultimately takes. In the interim, it’s worth focusing more on what it does rather than what it says.

Categories
Banking Bitcoin Cryptocurrency Tax Investing

El Salvador to Exempt Foreign Investors from Tax on Bitcoin Profits

The government of El Salvador announced on September 13 that the country will exempt foreign investors from taxes on their bitcoin (BTC) profits to stimulate and hopefully increase foreign investment.

According to Javier Argueta, legal adviser to President Nayib Bukele, “there will be no taxes to pay on either the capital increase or the income” of bitcoin. After El Salvador became the world’s first country to make Bitcoin (BTC) legal tender earlier this month, policymakers made their move. For the bitcoin enthusiast, however, not paying taxes on capital gains might sound too good to be true.

In cooperation with global companies such as Bitso crypto exchange and Silvergate Bank, El Salvador has launched the official BTC wallet known as Chivo, which allows users to convert bitcoin transactions into USD or withdraw without incurring transaction fees by using a specific ATM. The wallet also aims to facilitate remittances for Salvadoreans working overseas.

Using Bitcoin Safely

Experts and regulators have highlighted concerns about the cryptocurrency’s volatility and its potential to impact inflation in a country with already high poverty and unemployment. That transactions are not reversible and lack protection for users is a potential weak point.

However, according to Argueta, transactions would be halted temporarily if bitcoin’s value were to collapse, in order to minimise the impact of extreme currency fluctuations. And even as the BTC price saw heavy fluctuation last week, El Salvador bought the dip.

The government says its experiment will give many Salvadoreans access to bank services for the first time, and hopes it will shave millions of dollars off commissions on remittances sent home from abroad, mainly from the US.

Remittances account for more than a fifth of the country’s GDP.  The introduction of bitcoin as legal tender will cut the fees of those remittances significantly and remove commissions entirely. The technology used for bitcoin is another step toward banking El Salvador’s unbanked.

What About Fraud and Money Laundering?

There are concerns about the anonymous nature of bitcoin and its role in money laundering and other financial crimes. But since Salvadoreans use a specific app, and not unregistered exchanges and the like, some of those problems are eliminated.

Argueta said that the Chivo wallet has traceability measures to alleviate popular misunderstandings and outright false narratives that bitcoin is used primarily for money laundering or anonymous criminal activity.

“We are implementing a series of recommendations from international institutions against money laundering,” Argueta specified.

Categories
Australia Banking Crypto News Regulation

Aussie Crypto Businesses Are Being Debanked On Short Notice

At hearings before the Australian Senate Committee on September 8, several domestic crypto-related businesses shared their experience of financial institutions denying or terminating banking services without notice, or offering up any reason for doing so.

Debanking Explained

‘Debanking’ is a relatively new phenomenon that is not well known among the broader population. Quite simply, it’s the process whereby financial institutions, usually retail banks, decide for whatever reason to terminate services to a particular customer.

As Australia moves towards becoming a cashless society, the negative consequences for those debanked is self-evident.

Banks tend to be risk-averse and often claim they are merely complying with their statutory anti-money laundering (AML) and counter-terrorism financing (CTF) obligations. In Australia, under the Anti-Money Laundering and Counter-Terrorism Financing Act, 2006, failing to do so carries a maximum penalty of up to A$22.5 million per breach.

Transparency and Communication Lacking

The common denominator underlying many of the complaints was a lack of transparency and communication.

Rebecca Schot-Guppy, CEO of Fintech Australia, told the Senate Committee that around 150 of her organisation’s members were debanked without reason or the ability to appeal. A local remittance business, Nium, described its position:

Nium has bank relationships in 40 countries around the world and yet Australia is the only market where we’ve been debanked.

Michael Minassian, VP, regional head of consumer business, Australia & Oceania, Nium

Bitcoin Babe founder Michaela Juric told the committee her banking services had been terminated 91 times since founding her crypto brokerage business seven years ago. Remarkably, even some of her family members were affected, making it difficult to access everyday utilities such as internet, electricity, water and insurance.

Local brokerage Aus Merchant was debanked four times over the past year, leading managing director Mitchell Travers to conclude that anti-competitive practices might indeed have been the real reason for the banks’ actions.

With the sort of anti-competitive nature of the banks, it’s somewhat buying them time…It could be considered a stopgap for them as they sort of educate and find a way to enter the space in a more profound manner.

Mitchell Travers, managing director, Aus Merchant

Senator Andrew Bragg, chair of the Senate Committee, acknowledged the issues raised but was quick to distinguish debanking within crypto from the remittance industry in general.

There are a range of reasons, including a lack of regulation, driving debanking in crypto, which is something this committee can help solve. In relation to remittance, I suspect there are anti-competitive drivers behind that, as banks have had a monopoly on ripping people off for remittances forever. Both of these issues are solvable, but they will require different tools.

Senator Andrew Bragg, Senate Committee chair

Hearings continue in the hope of gaining further insight into this matter. On the plus side, it appears as if the Senate Committee is committed to providing clarity on how crypto and other fintech businesses can work with traditional financial institutions going forward.

Categories
Banking CBDCs Crypto News

ANZ Bank Shortlisted for Singapore’s Retail CBDC Project

One of Australia’s ‘Big Four’ banks, ANZ is one of 15 finalists in a global competition to develop a Central Bank Digital Currency (CBDC) solution. 

The Monetary Authority of Singapore (MAS) announced the shortlist for its Global CBDC Challenge on August 30 after considering more than 300 submissions from over 50 countries.

Entrants were asked to propose solutions, using any technology, to develop a retail CBDC that would be cost-effective to implement, accessible, and contribute to financial system resilience and integrity. 

ANZ is the only Australian organisation to be shortlisted. Other finalists include six companies from Singapore and four US-based companies, including IBM.

ANZ’s proposed solution will leverage existing e-governance and ‘smart nation’ initiatives, drawing on known services like national ‘digital identity’ management.

CBDC Innovations to be Revealed at Global FinTech Event

Chief FinTech Officer for MAS, Sopnendu Mohanty, said:

The Global CBDC Challenge aims to discover and develop retail CBDC solutions that will benefit the global community. We are encouraged by the strong interest from established financial institutions and emerging FinTechs alike. The quality of proposals received from the global innovation community was impressive. 

Sopnendu Mohanty, MAS

The competition to encourage innovative retail CBDC solutions to enhance payment efficiencies and promote financial inclusion was run in partnership with the International Monetary Fund, World Bank, Asian Development Bank, United Nations Capital Development Fund, United Nations High Commission for Refugees, United Nations Development Program, and the Organisation for Economic Co-operation and Development.

Finalists will progress to an eight-week ‘Acceleration Phase’ to develop and prototype their solutions ahead of a demonstration during the Singapore FinTech Festival 2021, a global event held in November. Three winners will be selected and each will receive S$50,000 (A$50,100) in prizemoney.  

What are CBDCs and is Australia Developing One?

Central banks around the world have recognised that digital currencies are here to stay and are developing digital forms of fiat currency – known as CBDCs – which can be classified as retail (for everyone) or wholesale (for use by permitted institutions).

In February this year, the Reserve Bank of Australia (RBA) indicated it was focused on the potential launch of a wholesale CBDC but did not see a strong case for a retail CBDC.