Stablecoins are stable in the crypto crash; Uzbekistan shows its crypto-friendliness; Ripple and the IMF are on the same page
Here are some stories you might find interesting — and the links to find out more about them.
Stablecoins remain stable as everything else crashes.
Date: 15 November 2018
The biggest news this week must surely be the dramatic drop in the price of cryptocurrencies, including Bitcoin (BTC) and Ethereum (ETH). November 14 was the worst trading day of the year. BTC reached its lowest point since October 2017, dipping below $5,600 and losing nearly 13% on the day. ETH dropped to $175, losing nearly 16% on the day.
In 24 hours, $26 billion was wiped off the crypto market.
The following graphic provided by Bitcoin News tells the sorry tale — if it’s red it means it lost on the day!
BCH was worst-hit, losing 18% of its value just a day before its hard fork. Within the past seven days, BCH has dropped by over 50% against the USD and by nearly 40% against BTC. It remains to be seen how it will emerge after the fork.
Yet, in the midst of this graphic of doom and gloom, there are a few green spots. Perhaps not surprisingly, these greens are for stablecoins, apparently living up to their mission of being stable.
A useful definition comes from Joshua Warner, Market Analyst at IG Group:
“A stablecoin is a cryptocurrency that is pegged to an asset such as the US dollar or gold, helping to reduce the volatility in price fluctuations that are seen by some other cryptocurrencies. This makes it more suitable for people to use them for everyday transactions as it minimises the threat of sharp price movements in short periods of time.”
Some of the dollar-pegged stablecoins that fared very well on 14 November were the trueusd (TUSD), which reached $1.07 and paxos (PAX) which reached $1.05. They were up about 15% on the day. The Gemini dollar (GUSD) rose to above $1.03.
Clearly, stablecoins are not immune to the market volatility. Tether (USDT) recently slipped as low as $0.88 on suspicions that it does not actually have the fiat dollars in the bank to back it. Bitusd, which can only be traded on the Hyperledger decentralized exchange, flash-crashed to $0.83 on 14 November, before recovering to $0.97. The Dai, a decentralized cryptocurrency which uses ETH as collateral, dropped to $0.97. This relatively low drop for the Dai is perhaps thanks to the way it has been set up to deal with volatility of ETH. Those wishing to use Dai must over-collateralize, placing $500 worth of ETH as collateral for $400 worth of Dai.
While the extreme volatility in the cryptocurrency world may be the most talked-about issue this week, the behaviour of the stablecoins may be the real story to be following.
Even Vitalik Buterin, founder and creator of Ethereum, is quoted as saying:
“Are stable-value assets necessary? Given the high level of interest in ‘blockchain technology’ coupled with the disinterest in ‘bitcoin the currency’ that we see among so many in the mainstream world, perhaps the time is ripe for stable-currency or multi-currency systems to take over.”
Uzbekistan continues to develop crypto-friendly policies
Date: 11 November
Uzbekistan has recently announced that it will set up a body of arbitrators to deal with disputes in the cryptocurrency space. This will be specifically for disagreements about investments, intellectual property and crypto-related technologies. The country’s chamber of commerce has been asked to draft a law “On International Arbitration” within a month, in order to create the legal basis for this arbitration.
This move is the latest in a series of steps undertaken by the Uzbekistan government to support the digital economy and to support innovation.
In July 2018, the President of Uzbekistan issued a special decree to prepare the legal ground. The July decree pointed to the introduction and expansion of activities related to the circulation of crypto assets, mining, smart-contracts, crowdfunding and blockchain technologies that can diversify investment and entrepreneurship. It also gave assurances that there would not be taxation related to these activities.
A decree in September legalized cryptocurrency trading in Uzbekistan and introduced licensing and other requirements for crypto exchanges. Two state-owned energy companies, Uzbekenergo and Uzbekgidroenergo, have been instructed to allocate land plots for industrial-scale mining facilities. A report on mining costs around the world found that Uzbekistan has the third lowest mining cost in the world, after Venezuela and Trinidad and Tobago.
Uzbekistan’s IT and telecom ministry has been tasked to develop a draft law on “Digital economy and blockchain technologies” by January 2019. The plan is that by January 2021 government will implement blockchain in government procurements, services, registries and data bases, as well as in the corporate management of the large state-controlled enterprises, in clearing operations, payment processing, financing and fundraising.
Uzbekistan is not the only CIS country that is moving towards cryptocurrencies and blockchain technology.
Kyrgyzstan has announced intentions to introduce crypto payments in public projects, while in Kazakhstan, interest in cryptocurrencies has increasedfifteen-fold over the past year. The President, Nursultan Nazarbaev, has proposed launching a cryptocurrency called G-Global, “backed by assets not just trust”.
Crypto business was legalized in Belarus from March of this year with the presidential decree “On the Development of the Digital Economy”. Exchange services, ICOs, mining operations and smart contracts can be undertaken, generally tax-free, to anyone registering as residents of the Belarus High Technologies Park. Even foreign nationals can be included, without the need for visas and work permits.
All of these CIS countries are clearly setting themselves up to attract business — and they are wanting to make it as easy as possible.
What do Ripple and the IMF have in common?
Date: 15 November 2018
CEO of Ripple, Brad Garlinghouse, and the International Monetary Fund (IMF)’s Deputy General Counsel, Ross Leckow, took part in a “fireside chat” at the recent Singapore Fintech Festival. They have a surprising amount in common. Both believe in the future of blockchain and cryptocurrencies. And both believe in the power of regulation to make this future happen.
The IMF is devoting a lot of attention to Fintech and blockchain, and is looking to give advice to member countries on how to approach and benefit from the fintech trends, while also putting together regulations to minimise the risks. They have assembled a high-level advisory group of industry leaders to assist in this task. One of the members in this group is Chris Larsen, Executive Chairman of Ripple’s board of directors and former CEO and co-founder of Ripple.
Garlinghouse agrees that regulatory clarity is what is required to drive adoption of digital assets and blockchain. The ASEAN market (Association of Southeast Asian Nations) is an important one for Ripple, with about half of their global customers based in the region. There is generally good regulation in this region, especially in Singapore, Thailand and the Philippines. This makes it easier for blockchain and crypto assets to be used for real-world use cases such as cross border remittances (which is Ripple’s primary business).
The problem lies in banks not keeping up with the times. This would include such payment systems as PayPal and SWIFT. In fact, Garlinghouse is on recordas saying that Ripple will overtake SWIFT as the cross-border mechanism of choice. Just this week, Japan’s MUFG Bank announced the signing of a Memorandum of Understanding (MoU) with Banco Bradesco S.A., a Brazil-based banking service. The MoU discussed a partnership between the two organization to create a cross-border payment corridor that would be powered by the Ripple technology.
Ripple’s vision is to be part of an “Internet of Value”, where money can move across the world as easily as information does. This will allow the billions of “unbanked” people around the world to become part of the global economy.
Also speaking in Singapore, the Managing Director and Chairperson of the IMF, Christine Lagarde, called on central banks around the world to consider issuing digital currencies. She has previously warned that cryptocurrencies were posing a threat to the traditional financial system because they were quicker, easier and cheaper than traditional fiat currencies and banking systems. She believes that if central banks were to issue their own cryptocurrencies, this would keep the banks relevant and provide a degree of security not always possible from current “private” cryptocurrencies.
Lagarde seems to be of the same opinion as Garlinghouse of Ripple and Ross Leckow. Regulation is necessary — but within limits, and not at the expense of innovation.
It seems that blockchain and cryptocurrencies are indeed inching into the mainstream.