South Korea’s central bank is weighing whether to bring ‘circuit breaker’ style safeguards from traditional markets into the world of crypto, as regulators grapple with how to contain risks in fast-moving digital asset trading.

The discussion is informed in part by how traditional markets manage volatility. In the U.S., the stock market relies on circuit breakers to curb panic selling and stabilize trading when sharp declines threaten to spiral. These protections are designed to halt trading once predefined thresholds are breached, giving markets time to cool and preventing disorderly sell-offs.

These circuit breakers are triggered when specific thresholds are met, and the Bank of Korea may consider similar guardrails for South Korea’s digital assets market following a disastrous incident at crypto exchange Bithumb.

In February, the exchange ran a promotion offering a small cash reward. However, a Bithumb employee selected the wrong denomination and mistakenly transferred 620,000 bitcoin (valued at roughly $43 billion at the time) instead of South Korean won. The error caused bitcoin prices on Bithumb to plummet 17%, triggering widespread losses for some users.

In a recent report, the Bank of Korea argued that this incident highlights the urgent need for guardrails in crypto markets that mirror those in traditional financial systems. This could include requiring exchanges to implement stronger early-detection mechanisms, as well as circuit breakers capable of blocking anomalies and pausing trading during periods of high volatility.

Clawing Back Funds

While Bithumb identified the error within about 20 minutes, the central bank noted that the exchange failed to prevent the mistakenly distributed bitcoin from being traded or withdrawn, exacerbating user losses.

Although Bithumb was able to claw back the lion’s share of the bitcoin, it’s still working through the courts to freeze seven bitcoin that remain unrecovered.

Tech Outpaces Regulations

The rapid pace of technological innovation has consistently outstripped regulatory frameworks. For example, the open banking zeitgeist has been fueled by partnerships between fintechs and banks. Yet the collapse of Synapse—which left $265 million in consumer funds in limbo—intensified calls for tighter oversight of such arrangements.

Another challenge is that payments are far faster. Like crypto markets, real-time payment rails eliminate the settlement buffers that institutions have historically relied on to detect fraud or operational errors. As a result, some financial institutions are now exploring ways to reintroduce friction into these processes as a form of risk control.

As seen in South Korea, these vulnerabilities are likely to prompt regulators worldwide to consider implementing stronger safeguards for increasingly powerful, and instantaneous, financial systems.

The post South Korea Considers Guardrails After Crypto Transfer Error appeared first on PaymentsJournal.

Cryptocurrency has been talked about as the future of money for more than a decade. But talk and everyday behavior are not the same thing. While headlines often focus on price swings and speculation, a quieter question matters more for payments: are consumers actually using crypto to pay for things?

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Digital Money Comes to Payments, but the Crypto Has Disappeared

Percentage of U.S. Consumers Using Cryptocurrency to Make Any Type of Purchase

• Past 7 days – 13% of consumers have used cryptocurrency to make a purchase.
• Past 30 days – 13% of consumers have used cryptocurrency to make a purchase.
• Past 90 days – 8% of consumers have used cryptocurrency to make a purchase.
• Past 12 months – 3% of consumers have used cryptocurrency to make a purchase.
• More than 12 months ago – 3% of consumers have used cryptocurrency to make a purchase.
• Never – 59% of consumers have never used cryptocurrency to make a purchase.

Source: Javelin Strategy & Research, North American PaymentsInsights

About Report

Digital money is already part of the U.S. payments landscape, but it looks very different from what early cryptocurrency advocates imagined. The focus is shifting away from the term “cryptocurrency” itself and toward practical value transfer through digital assets, especially stablecoins. Adoption is accelerating on the commercial side, and over the next three to five years, blockchain-based tools are likely to be embedded across organizations of all sizes. For most employees and customers, that technology will operate quietly in the background. Digital money won’t feel new or novel. It will simply work.

This report from Javelin Strategy & Research examines how definitions of digital money are evolving, how payment infrastructure is being built to stay largely out of sight, and what that means for organizations evaluating real-world use cases for digital assets.

The post Are Consumers Paying with Cryptocurrency? appeared first on PaymentsJournal.

Just two years ago, Reuters reported that more than 130 countries were exploring central bank digital currencies (CBDCs), and that nearly all of the G20 countries were in the advanced phases of their programs. However, only three countries—Nigeria, Jamaica, and the Bahamas—have launched CBDCs to date, and programs in many other countries have come to a standstill.

As Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research, found in CBDCs Are Dead—for Now. What Comes Next?, several factors are behind the rapid shift away from government-issued, fiat-backed tokens. More important, shelving CBDC programs could have long-ranging effects on the digital assets industry.

From the Backburner to a Ban

One of the driving factors behind the initial CBDC push was the declining usage of the original central bank currency: cash. Because of the dominance of the card networks and the emergence of crypto and digital assets, many leaders believed their countries should consider alternatives.

These initiatives were accelerated by the pandemic—when digital payments gained rapid prominence—and the global instability caused by Russia’s invasion of Ukraine.

Even though former President Joe Biden requested an assessment on the feasibility of CBDCs, the United States had no firm plans to issue a retail digital dollar. Instead, a U.S. CBDC for bank-to-bank payments was being considered.

After a change in the administration, CBDCs have moved from the backburner to an outright ban. A bill barring the U.S. Federal Reserve from issuing a CBDC without explicit congressional approval has passed the House of Representatives and awaits action in the Senate.

“For now, the next three and a half years or so, nothing significant is going to come out of the U.S., and I think that this wasn’t a surprise,” Hugentobler said. “Trump was talking about it when he was doing his campaign, and I think his idea is to favor the private sector where all this stuff can flourish and where he thinks the real innovation takes place.”

A Risky Proposition

While the U.S. ban is notable, the United States was never at the forefront of CBDC innovation. Perhaps more revealing about the state of CBDCs is that many other countries are shelving their programs, too.

For example, the UK has long been an innovator in financial services, particularly in the open-banking model. However, the Bank of England is reportedly scrapping its plans for a digital pound.

Britain’s central bank cited concerns that a CBDC may not bring substantial benefits to the UK or its financial system. Instead, the regulator said it made more sense for the country’s banks to focus on payment innovations rather than on a CBDC and that there was no need to introduce a new form of money.

South Korea also recently suspended its CBDC trials after the initial phase, citing concerns that the cost of the trials outweighed the potential upsides.

Privacy is an overarching concern in these implementations. A CBDC could give government officials substantial insights into transactions and, therefore, personal data. One of the primary ways regulators would use this data is to identify money laundering or fraudulent activity.

However, many have argued that the potential for abuse makes CBDCs risky.

“That’s been one of the biggest concerns since their inception,” Hugentobler said. “Some argue that it would break the Fourth Amendment—that’s Trump’s point of view and that of his team, I think. They agree that the innovation is there, a CBDC would provide benefits, but the urge is too strong for policymakers to resist—to not overstep and take advantage of the technology.”

The Anointed Coin

As CBDC initiatives have faded, stablecoins have taken over the limelight. Although USD-backed stablecoins and CBDCs track the value of the dollar one to one, stablecoins are issued by crypto firms like Tether, Circle, and Paxos.

As CBDCs have languished in trial runs, the leading stablecoins have been circulating in what is now a $272 billion market. This dominance has left little room for CBDCs.

“We did a long report on CBDCs when things were gearing up, and the whole time I was writing it, I was thinking, ‘Everything that these can do, a stablecoin can do,’” Hugentobler said. “The difference there is that a dollar coming from the U.S. government is backed by the good faith of the government, whereas with a stablecoin issuer, as long as they have a strong balance sheet and the reserves are there, there’s no issue.”

Reserves are a concern, but the leading stablecoin issuers have been transparent in their quarterly reports about the status of the reserves that back their tokens. There is also a newly minted law passed to govern stablecoins, with U.S. lawmakers having passed the GENIUS Act just days before the anti-CBDC law passed the House.

Even though stablecoins have seemingly been anointed by lawmakers, industry players, and consumers, these tokens carry privacy concerns as well. Much like CBDCs, stablecoins allow their issuers to gain insights into transactions.

For example, Tether reported that it has frozen roughly $2.5 billion at the behest of global authorities after the funds were connected to illicit activities. While striking back against bad actors should be applauded, the crypto company’s ability to pinpoint the misused funds raised questions about its visibility into other transactional aspects.

The GENIUS Act has also received pushback. Some lawmakers have been concerned that a regulated stablecoin is no different from a CBDC in this framework and that it would give the U.S. government the power to surveil its citizens.

Not Counting It Out

These concerns will likely be amplified as the multitude of new stablecoins—including offerings from retailers, tech giants, and traditional financial institutions—flood the market. However, the substantial benefits of stablecoins, such as real-time, transparent payment settlement, mean that most concerns are likely to fade.

The onslaught of stablecoins may seem like the death knell for CBDCs, but this may not be true. Although there have been assumptions that a single payment type—whether it be stablecoins, real-time payments, or card transactions—will eventually win, the greater likelihood is that all of these payment types will coexist and find different use cases.

After all, despite all the hoopla about the demise of paper currency, recent legislation has been proposed to ensure that U.S. consumers can always use cash.

“I’m not counting CBDCs out,” Hugentobler said. “If we get a different administration in who wants to bring it back, or if there is a big liquidity event like we saw in COVID, I think they would use that as fuel to push a CBDC for quicker, faster payments directly to the people. I’m definitely not counting it out—but I’m also not counting on it.”

The post What a CBDC Ban Means for the Digital Assets Industry appeared first on PaymentsJournal.

As more crypto firms make inroads into mainstream finance, Ripple is applying for a banking license with the U.S. Office of the Comptroller of the Currency (OCC).

Although the company is best known for its XRP cryptocurrency and ledger, Ripple launched a stablecoin, RLUSD, last year. If the banking license is approved, the firm would be subject to federal and state oversight, and the New York Department of Financial Services would regulate RLUSD.

Ripple’s application comes just days after Circle submitted its own request for a bank charter. If approved, Circle would establish a new entity—the First National Digital Currency Bank, N.A. With charters in place, Circle and Ripple could potentially offer tailored services to institutional clients in the future, including tokenization of real-world assets.

Ripple’s leadership also confirmed the company has applied for a Master Account with the Federal Reserve. If granted, this would allow Ripple to hold RLUSD reserves directly with the Fed, providing its stablecoin with an added layer of security.

Moving to Capitalize

Both Circle and Ripple are moving quickly to capitalize on the recent passage of the GENIUS act, which establishes a regulatory framework for U.S. stablecoins.

The legislation has driven a surge in stablecoin interest in recent months. Major retailers like Walmart and Amazon, along with tech giant Meta, are among the many players considering the launch of their own brand-specific stablecoins.

Financial services provider Fiserv has also unveiled plans to launch a compliance-geared stablecoin designed for use by its network of financial institutions.

Between Checking and Crypto

As more traditional players explore stablecoins, crypto companies are expanding into mainstream financial services. For example, crypto exchange Kraken announced it is launching a P2P payments app that could potentially compete with fintechs like PayPal and Venmo.

Meanwhile, new platforms are emerging to bridge the gap between checking and crypto accounts. Ripple unveiled plans to develop a cross-border payments solution in Europe through a partnership with OpenPayd, which provides the infrastructure to move certain regional fiat currencies into RLUSD—and vice versa.

Similarly, Circle plans to roll out Circle Payment Network, a cross-border system designed to facilitate bank transfers between USDC and fiat.

These launches underscore the continued push of crypto companies into the heart of traditional financial services—a trend likely to accelerate as regulatory clarity improves in the U.S.

The post Ripple Seeks U.S. Bank Charter to Expand Footprint appeared first on PaymentsJournal.

After making strides toward its stablecoin launch, Stripe will acquire crypto wallet provider Privy.

Although Privy is not yet a leading player in the crypto wallet space, it has 75 million accounts and partnerships with brands like trading platform Hyperliquid and NFT marketplace OpenSea.

Privy’s protocols allow clients to build crypto wallets embedded directly into their platforms. The Stripe acquisition—details of which have yet to be disclosed—should vastly expand Privy’s ecosystem.

Though the brand will come under Stripe’s umbrella, Privy will continue to operate as an independent product. In a social media post, Privy said that both companies share the goal of bringing crypto and fiat closer together to transform how value moves digitally.

Crypto Stops and Starts

The deal represents Stripe’s continued investment in the digital assets space following its blockbuster acquisition of stablecoin issuer Bridge. Shortly after the $1.1 billion deal, Stripe announced it was going ahead with trials of its dollar-backed stablecoin overseas.

The long-awaited launch follows a series of crypto-related stops and starts for the fintech. Stripe made an early foray into bitcoin payments years ago, but the demands of processing crypto proved too intensive. Additionally, the company has been working toward launching a stablecoin for over a decade.

Beaten to the Stablecoin Punch

Momentum has been building for Stripe in recent years, after the fintech partnered with Coinbase to allow users to receive payouts and convert fiat into stablecoins like Circle’s USDC and Pax Dollar.

The launch of its own stablecoin will place Stripe in a highly dynamic $250 billion market. Payments competitor PayPal has already taken an early lead with the launch of its PYUSD coin two years ago.

While PYUSD has yet to capture significant market share of companies like Tether and Circle yet, PayPal is betting that its well-established customer base and strong relationships with institutional investors will help its offering gain ground.

Stripe is likely aiming to leverage its customer base in a similar way. It stands apart from other crypto platforms through enterprise-grade, compliant products. The addition of an embedded crypto wallet should further solidify Stripe’s position in the digital assets space.

The post Stripe Continues Digital Assets Push with Privy Acquisition appeared first on PaymentsJournal.

As digital assets gain wider adoption, a proposed law in New York would allow state agencies to accept cryptocurrency for government-related payments.

Assembly Bill A7788 would amend state financial laws to allow agencies to accept Bitcoin, Ether, Litecoin, and Bitcoin Cash. This would enable residents to use these digital assets to pay for fines, taxes, penalties, and other obligations.

The proposal also includes a clause allowing the state to charge a service fee to offset transaction costs or fees owed to crypto issuers.

Following the Lead

This move follows the example set by several states and cities that have started accepting digital asset payments. Colorado and Utah have been accepting cryptocurrencies for tax payments for years, and Louisiana recently announced it will be the first state to accept crypto payments for all state services.

Additionally, Detroit will accept crypto for tax and fee payments, making it the largest U.S. city to accept digital asset payments. While Detroit plans to accept many of the leading cryptocurrencies, it will also accept PayPal’s PYUSD stablecoin, as PayPal is facilitating all of the city’s crypto transactions.

The Model for Digital Assets Acceptance

The model for digital asset payments in Louisiana and Detroit could serve as a guideline for crypto payments around the country. In both cases, the public entity doesn’t directly hold any digital assets; all transactions are facilitated by a third-party provider.

This system addresses the volatility that has been one a key reason crypto hasn’t achieved broader acceptance. For instance, once a payment is made in Detroit, PayPal immediately converts the crypto to USD before it reaches the city’s accounts.

These types of integrations are likely to accelerate crypto’s momentum, even after a banner year last year. The increasing incorporation of digital assets technologies into the operations of key financial services providers and essential public organizations means crypto is more stable than ever, and further adoption is likely coming down the pike.

The post New York Residents Could Pay Bills with Crypto, Should Legislation Pass appeared first on PaymentsJournal.

After its watershed collapse, failed crypto exchange FTX is set to send roughly $1.2 billion in repayments to its first group of creditors.

FTX Digital Markets, the Bahamian unit of the firm, will begin disbursing initial repayments to users owed less than $50,000. These “Convenience Class” creditors are expected to receive 100% of their claim amount, plus 9% interest per year.

The repayments are based on the value of the creditors’ holdings as of the day the cryptocurrency exchange declared bankruptcy, almost three years ago. The $9 billion collapse of FTX followed a series of misrepresentations and mismanagement by the company’s leadership, marking a significant blow to the crypto and digital assets industry.

Life-Shattering Impacts

Though the FTX bankruptcy caused widespread ramifications across the industry, it had life-altering effects on many creditors.

“Our life savings were stolen overnight,” Sunil Kavuri, an FTX creditor, told Cointelegraph. “We had earmarked (funds) for buying homes, children’s education. Many were depressed, suicidal, and had panic attacks…I heard of at least three suicides. Many FTX creditors are left in large debt, taking out loans to cover living costs.”

The FTX collapse was one of the key catalysts behind the subsequent “crypto winter,” during which bitcoin plummeted to around $16,000. The highly publicized bankruptcy was also considered an impetus behind a series of enforcement actions that the U.S. Securities and Exchange Commission imposed on crypto exchanges in recent years.

Strengthening Sentiment

The crypto industry has bounced back, and it had a banner year last year on the strength of new crypto ETFs, more institutional backing, and tech innovations. While sentiment around the crypto industry is stronger, there are still lingering concerns about the volatility and security of exchanges that are not fully regulated in the U.S.

The FTX repayments are a step towards allaying these concerns, but there has been criticism of the payment model. One of the main points of contention is that crypto prices have skyrocketed in the past year, bitcoin has reached an all-time high, and these gains aren’t accounted for in the repayments.

Still, there are some experts who believe that FTX creditors may be confident enough to reinvest some of their repaid funds back into the crypto market.

The post FTX to Repay Creditors in a Significant Step for the Crypto Industry appeared first on PaymentsJournal.

Tether will launch its flagship stablecoin, USDT, on the Bitcoin blockchain and the Lightning Network, making it available on the infrastructure that powers the world’s largest cryptocurrency. This move expands the reach of the world’s most dominant stablecoin, which holds nearly $140 billion in market share.

Tether processed $10 trillion worth of transactions last year, while the Bitcoin network processed over $19 billion. For Tether’s part, the crypto firm manages USDT across more than 10 blockchains, including Ethereum, Tron, Solana, and Avalanche. Most stablecoins are built on these blockchains, which primarily operate on a smart contract infrastructure.

A Formidable Base

Tether’s integration with the Bitcoin Network was made possible by the Taproot Assets protocol, which was launched by Lightning Labs. This platform allows digital assets to be issued on the Bitcoin base layer and transferred over the Lightning Network.

The integration with the Bitcoin and Lightning networks represents a significant step that will expand Tether’s already formidable user base by millions. According to Cointelegraph, merchants accepting Bitcoin over Lightning will be able to add USDT as a payment option using the same infrastructure.

Lightning Labs CEO Elizabeth Stark told Cointelegraph that, “this integration also brings Bitcoin to the many users in emerging markets who rely on stablecoins regularly as a hedge against the devaluation of their local currencies and savings.”

Cementing Its Status

The use cases for stablecoins continue to expand, driving the rapid worldwide adoption of tokens. While new stablecoins are issued every day, Tether’s market capitalization is nearly three times that of its closest rival, Circle. The integration with the Bitcoin network should solidify USDT’s status as the forerunner in the segment.

In addition to stablecoins, the Taproom Assets protocol supports the transfer of tokenized assets. Tokenization has been another rapidly growing segment in the digital assets industry, fueled by the strong interest of many of the world’s largest institutions.

Tether launched its own long-awaited tokenization platform, Hadron, last year. Hadron currently supports the Ethereum, Avalanche, and Liquid by Blockstream blockchains, but the company said it plans to expand the platform’s reach.

The post Tether to Bring the World’s Largest Stablecoin to Bitcoin, Lightning Network appeared first on PaymentsJournal.

Asia has become the top region for crypto and digital assets developers after increasing its share to 32%, up from 13% in less than a decade.

At the same time, the number of North American developers was cut in half, according to an X post by Maria Shen, a general partner at Electric Capita. Though more blockchain developers are moving beyond America’s borders, the U.S. still has the highest number of developers of any country.

The news comes amid increasing concerns about the lack of a crypto and digital asset framework in the United States. Without a consistent set of rules to follow, U.S. regulators like the Securities and Exchange Commission have taken an enforcement-first approach to the crypto industry.

“The only thing that is clear is that nothing is clear,” said James Wester, Director of Cryptocurrency at Javelin Strategy & Research, in a conversation with PaymentsJournal. “It’s becoming tough for companies to build products in this space, because they don’t know they’re doing anything wrong until they get an enforcement notice. Imagine not knowing the speed limit until you get pulled over for a ticket. That’s the way things are shaping up right now.”

An Exodus of Crypto Talent

The U.S. regulatory uncertainty has led to concerns that there could be an exodus of crypto talent to other regions of the world. The European Union will roll out its comprehensive crypto framework, Markets in Crypto-Assets (MiCA), later this year, which will make the EU an attractive alternative for crypto talent.

There have also been a variety of crypto efforts in Asia, where innovations like instant payments, digital wallets, and contactless payments have quickly gained traction. China has long pushed for its central bank digital currency, commonly called the digital yuan, to gain more precedence in a culture dominated by mobile payments.

India has been a powerful player in instant payments with its UPI system, which has quickly become the predominant method of payment in the country. Now India is making headway with crypto—according to Shen, though 18.8% of all crypto developers are based in the United States, India is next with 11.8%.

The post Asia Overtakes North America as Leading Crypto Development Hub appeared first on PaymentsJournal.

The Pennsylvania House of Representatives has passed a bill designed to establish a framework for transactions involving crypto and digital assets.

The crypto bill received overwhelming support from both parties in Pennsylvania, one of the battleground states likely to decide the upcoming U.S. presidential election. House Bill 2481, which has also been called the Bitcoin Rights bill, received only 26 votes against among the 202 members of the House. It is estimated that roughly 12% of the 13 million Pennsylvanians are crypto holders.

Crypto, stablecoins, and non-fungible tokens would fall under the proposed law’s purview, but the bill excludes any government-controlled digital assets like CBDCs. If the bill is passed, state and local governments in Pennsylvania won’t be able to restrict consumers or businesses from accepting digital assets as payment. In addition, any crypto transactions in the state will be taxed like fiat transactions, and additional taxes or fees on crypto payments would be prohibited.

Establishing a Framework

The Pennsylvania bill was developed in conjunction with the Satoshi Action Fund (SAF), a bitcoin advocacy group. Bill 2481 will now move to the Pennsylvania Senate, though it won’t receive a vote until after the election.

Lawmakers in 20 other states are considering crypto and digital assets regulations, and many of those efforts have been led by the SAF. Crypto regulations have already been enacted in Oklahoma, Louisiana, Montana, and Arkansas. Louisiana also recently became the first state to accept crypto payments for all state services.

Crypto Innovators

Crypto has become an important topic for regulators that has factored into the U.S. elections more significantly than ever before. The United States has fallen behind other regions like the EU, which launches its Markets in Crypto Assets (MiCA) regulations later this year.

Though there are no federal crypto laws on the books, the U.S. Securities and Exchange Commission has made it clear through a series of enforcement actions that it considers crypto a security and crypto exchanges as unregistered securities brokers.

Because of such actions, there have been concerns that digital assets trailblazers will move elsewhere and the United States could lag behind the world in financial innovation.

The post Pennsylvania Passes Bipartisan Bill to Establish Crypto Framework appeared first on PaymentsJournal.

Stripe initiated its long-awaited support for stablecoin transactions, and the payments company reported facilitating transactions in 70 countries on its first day of operations.

The company didn’t disclose the number of stablecoin transactions or the amounts transferred. Stripe now supports Circle’s USDC on the Ethereum, Solana and Polygon blockchains and Pax Dollar on Ethereum and Solana. Any stablecoin payment made on Stripe’s platform will be converted to U.S. dollars upon receipt and stored in a user’s Stripe wallet, minus a 1.5% transaction fee.

“The integration of multiple blockchains is key here,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “Polygon and especially Solana have much faster and cheaper transactions than Ethereum based products that don’t leverage a Layer 2. The 1.5% fee is rather steep in my opinion, but I’d imagine as more payment providers enter the stablecoin space Stripe might get more competitive.”

Centering Around Stablecoins

Stripe has been advocating for crypto adoption since it added bitcoin as a payment option a decade ago. However, the company had to reverse its stance a few years later, citing high costs and difficulties in processing bitcoin transactions.

Earlier this year, Stripe announced it was working with Coinbase to bring crypto back to its platform, this time focusing on stablecoins, with a particular emphasis on USDC in its digital assets strategy.

Uniquely Suited

Stripe’s clientele, which is dominated by businesses in the e-commerce space, are constantly looking for ways to reach more customers at lower costs. The company believes stablecoins are uniquely suited to fit that need.

“This news is another piece of evidence that substantiates our thesis at Javelin, and that thesis, simply put, is the use of stablecoins will proliferate in the months and years ahead, particularly for cross-border payments such as remittances,” Hugentobler said. “It is telling that participants from 70 countries used this new payment solution.”

“The U.S. economy is stable, relatively speaking, but many other countries have much higher rates of inflation and/or debasement of fiat currencies, limited access to dollars or more stable currencies, or even limited access to viable savings instruments,” he said. “These issues point to a dollar-pegged stablecoin, such as USDC, as a legitimate solution—it’s a faster and more cost-effective way of making payments.”

The post Stripe’s Stablecoin Integration Sees Blockbuster First Day appeared first on PaymentsJournal.

Institutional investors have played a key role in driving global crypto adoption, pushing digital assets into the mainstream.

Roughly 7.5% of the world’s population has used digital assets, with that number expected to reach 8% by next year, according to a report from MatrixPort. The launch of bitcoin and ether ETFs earlier this year drew billions in investments from major financial institutions like BlackRock, Fidelity, and Franklin Templeton.

Bitcoin has maintained its position as the flagship cryptocurrency, hitting an all-time high earlier this year. Aside from institutional investing, another factor driving its rise is its value as a hedge against the stock market during uncertain economic times.

“According to BlackRock’s research, Bitcoin has a low long-term correlation with stocks and bonds—with periods of dislocation—so it can serve as a great portfolio balancer,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “Bitcoin also acts as a hedge to fiscal, monetary, and geopolitical risks.”

“During the U.S./Iran escalation a few years ago, COVID-19, the previous U.S. election cycle, Russia’s invasion of Ukraine, and last year’s U.S. regional banking crisis, bitcoin returned an average of nearly 44% on a 60-day return basis,” he said.

Here to Stay

Although crypto is increasingly seen as a hedge against market volatility, digital assets have faced their share of uncertainty, especially in the U.S. Because digital assets are traded on decentralized exchanges, criminals have used crypto platforms for fraud and other illegal activities.

The potential for criminal activity has led many U.S. regulators to crack down on crypto and hold digital assets firms accountable to the same laws as brokerage firms. Instead of taking action against crypto companies, the UK and EU have instead worked to create a better regulatory framework to guide investors and the crypto industry.

The backing of investors, governments, and the growing crypto community means digital assets are here to stay.

“Bitcoin’s price has a strong correlation to global money supply, and some refer to bitcoin as the global liquidity index,” said Hugentobler. “Bitcoin therefore is a solid hedge to fiat currency debasement, also known as inflation.”

The post Mainstream Crypto Adoption Expected to Accelerate Next Year appeared first on PaymentsJournal.

There have been numerous innovations and breakthroughs in the crypto industry this year. Institutional investors have made significant investments in bitcoin and Ether ETFs, and the price of bitcoin hit an all-time high. The vast potential of tokenization, stablecoins, blockchain, and other digital asset technologies has captured the attention of financial companies worldwide.

Yet, in the U.S., the absence of a clear regulatory framework continues to hinder crypto innovation. In his latest report, Crypto Gets Political, James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research, examines how regulatory uncertainty is affecting the U.S. crypto industry, and the impact crypto can have on upcoming elections.

Enforcement First

There is little argument that existing U.S. digital asset laws are inadequate to govern the crypto industry. Without a framework in place, U.S. regulators have taken  an enforcement-first approach to crypto oversight.

“The only thing that is clear is that nothing is clear,” Wester said. “It’s becoming tough for companies to build products in this space, because they don’t know they’re doing anything wrong until they get an enforcement notice. Imagine not knowing the speed limit until you get pulled over for a ticket. That’s the way things are shaping up right now.”

Meanwhile, the European Union is developing a regulatory framework for crypto and digital assets through its Markets in Crypto Assets (MiCA) rules. Set to take effect later this year, MiCA aims to provide  an all-encompassing set of regulations governing the issuance, purchase, and trading of crypto and digital assets within the EU.

A transparent legal structure will make the EU an attractive alternative for crypto companies. As marketplaces become increasingly global, countries will continue to compete for technology investment and development.

The lack of regulatory clarity in the U.S. raises the real possibility  that the country could lose digital asset technology to regions with more established legal frameworks. This might not concern those  who believe that crypto and digital assets are nothing more than the domain of criminals and scammers.

“The problem with that approach is that financial institutions, capital markets, and infrastructure players like the DTCC, Swift, and the Bank of International Settlements don’t agree with that assessment,” Wester said. “All those entities believe this technology is more efficient and less expensive than conventional means, and in fact they are betting on it.”

“Considering how important capital markets, financial institutions, and financial infrastructure are to the U.S. economy, the belief that crypto and digital assets are just a haven for scams and Ponzi schemes is clearly inaccurate,” he said.

Building the Engine

However, crypto fraud continues to occur and was a key point of discussion at a recent U.S. House Financial Services Subcommittee meeting on decentralized finance. The main question raised was: if a criminal commits a rug pull or a Ponzi scheme on a decentralized protocol, does the platform bear any responsibility?

“There’s a famous letter where bank robber Clyde Barrow, of Bonnie and Clyde fame, praised Henry Ford for creating the V-8 engine because it was fast enough to help him get away from the police,” Wester said. “Was Henry Ford responsible for Clyde Barrow? Ford built the engine, but Barrow was the bad guy. Right now, in the crypto industry, it seems like if a company builds an engine and someone misuses it, the company is being held responsible.”

An Electoral Issue

Despite looming regulatory hurdles, the most important takeaway is that crypto and digital assets have become a significant topic in an election year. While it might not be the number one issue on voters’ minds, it is on their lists, and that is a dramatic shift from years past.

“Could crypto make an impact in a very close election?” Wester said. “It might. That’s likely not because of the million or so voters who work in the crypto industry. Could the election turn on the approximately 20% to 25% of voters who own crypto? Possibly. The difference in the 2020 election was roughly 50,000 votes across six states, which is quite narrow.”

Regardless, digital asset technology has become a meaningful topic that has risen to such prominence that it is an electoral issue.

“Just the fact that there was a presidential nominee for a major party who appeared at arguably the largest bitcoin conference in the U.S., if not the world, is a big deal,” Wester said. “This is not some local race; we have presidential politicians who are actively discussing crypto and digital assets technology. If you told me that a few years ago, I would not have believed it.”

The post Crypto Is on Voters’ Minds More Than Ever appeared first on PaymentsJournal.

A citizen of Louisiana recently paid a fine to the state’s Department of Wildlife and Fisheries. While that’s not necessarily news, the fact that the fine was paid using Bitcoin’s Lightning Network is.

Louisiana has become the first state to accept crypto payments for all of its state services. The state has been positioning itself as crypto-friendly, including the passage of a “Bitcoin Rights” bill earlier this summer. This bill affirmed citizens’ rights to use bitcoin as a means of payment, banned the creation of central bank digital currencies, and provided legal protections for home digital asset miners.

“By introducing cryptocurrency as a payment option, we’re not just innovating,” said Louisiana State Treasurer John Fleming in a statement. “We’re providing our citizens with flexibility and freedom in interacting with state services. This unique innovation protects our state from any volatility associated with cryptocurrency.”

The state’s treasury is protected from crypto volatility because payments are converted into dollars before being deposited into government accounts. Even if the citizen pays in cryptocurrency, the state doesn’t directly handle the crypto. The process is facilitated by Bead Pay, which allows third parties to integrate cryptocurrency payments into e-commerce payment platforms without having to adapt to new collection methods.

Testing the Crypto Waters

Other states have attempted to incorporate crypto into their payment processes, and the Louisiana example may spur further innovation.

“I think other states will definitely follow Louisiana,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “Payments leveraging an open-source public ledger are more transparent and less susceptible to fraud. Fleming is exactly right that government systems must evolve and embrace new technologies. Those that don’t will be left behind.”

In 2018, Ohio began accepting crypto for tax payments through its platform OhioCrypto.com. But the attorney general declared that the state treasurer lacked the authority to operate the program and had not followed required bidding processes for payment processors, leading to the program’s shutdown.

In 2022, Colorado and Utah announced they would accept cryptocurrency for tax payments. State legislatures in Arizona, California, Hawaii, Illinois, New York, Oklahoma, and Wyoming have also introduced similar proposals, though none have passed in those states yet.

The post Will Louisiana’s Crypto Initiative Be a Model for Other States? appeared first on PaymentsJournal.

The rationale behind cryptocurrencies is that they are created and distributed outside the control of national governments. However, this doesn’t mean the industry wouldn’t benefit from some regulation. The upcoming European Union’s Markets in Crypto Assets (MiCA) regulation, set to take effect in December, will establish a comprehensive legal framework for the issuance, investment, and trading of crypto assets across the EU.

A study from Javelin Strategy & Research, European MiCA Regulation: The Industry’s Benchmark, examines the potential impact of MiCA on crypto in the EU and globally. MiCA represents a significant step forward in creating a uniform regulatory environment within the EU and could set a global standard for crypto regulation.

“What MiCA has done is to put forward some relatively commonsense rules around handling digital assets and crypto currency,” said James Wester, Director of Cryptocurrency at Javelin Strategy & Research and a co-author of the report. “It’s the kind of thing that a company that’s trying to build in the space can look at and say, ‘OK, there’s a target I can hit. I know what I am supposed to be doing.’”

Setting Clear Standards

The impact of MiCA will be felt not just in Europe but worldwide. In the United States, the discussion around crypto has become highly political, largely because of the uncertainty surrounding its regulation. It remains unclear whether new enforcement measures or entirely new regulations are needed.

In contrast, Europe has established a clear path for compliance.

“It’s a positive move,” said Wester. “It’s not 100%. No regulation is ever going to be 100% with those in the industry want. But given that clarity was the biggest issue in the United States, it’s a good step forward.”

Regulations like MiCA have, somewhat paradoxically, made Europe a welcoming haven for crypto businesses. Over the past several years, the EU has seen a large influx of crypto companies establishing their headquarters or major operations there.

The EU has notably taken a regulatory-first approach toward technology in general, and several countries had adopted a pro-crypto stance even before the MiCA regulation was formulated. This regulatory certainty allows companies to build confidence in their operations, knowing they have a clear framework to operate within.

In addition to the rules already established, MiCA will introduce a roadmap for crafting regulations that foster an environment conducive to crypto development. It will also set a global benchmark, providing a framework for regulators worldwide to assess and adapt, learning from what works and what doesn’t.

An EU Approach

The EU has generally taken a regulatory-first approach to financial technology. Regulators outline clear guidelines: “These are the things we want you to do, and these are the things you can’t do,” leaving companies to operate within those boundaries. In contrast, the U.S. has taken a market-first approach, assuming that the market will drive innovation, with regulation catching up to technological advancements.

As Wester points out, regulators often don’t fully understand what technology can or can’t do until it has developed further. By taking a regulatory-first approach, MiCA and the EU are encouraging development in the crypto space. The regulatory vacuum in the U.S. has made it challenging for companies to navigate.

Ultimately, the benefit of MiCA lies not in any single rule but in the fact that these rules exist in the first place,

“I can’t see anything in there that I look at and say this is going to make it better for anyone,” said Wester. “Just the fact that they’ve said we are going to set some rules and this is what you must comply with.”

Crypto Now Has a Choice

The formalization of these rules also provides developing crypto companies the opportunity to consider what MiCA is proposing and saying: “Do we want to develop in Europe, or is that environment too stringent? Maybe we want to take our chances somewhere else. Possibly the United States, where the rules are a little bit less clear-cut.”

Wester believes that instead of allowing the U.S. to remain a  Wild West for crypto, the political establishment might start recognizing the need for some regulatory guardrails.

“It’s an opportunity for U.S. regulators and legislators to say, ‘OK, we’re falling behind in what we should be doing,’” Wester said. “If something isn’t done relatively quickly, we are going to start seeing a brain drain to places like Europe, where companies know they can at least build products.”

The post In Europe, a New Regulatory Framework for Crypto Emerges appeared first on PaymentsJournal.

UK regulators have proposed a bill that would categorize crypto and digital assets as personal property.

The current lack of regulation around crypto has made it difficult for legal professionals to determine digital asset ownership during divorces and other disputes. Gaining further regulatory clarity should also make it easier to safeguard consumers and businesses from crypto fraud.

“It’s probable that the UK will implement provisions for the different types of crypto, as well as NFTs and tokenized real-world assets,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “It’s a step in the right direction, particularly after the FTX, 3AC, and Celsius debacles, which have clouded crypto ownership.”

Leading Financial Innovation

Previously, UK personal property law included physical possessions like automobiles and jewelry and intangible assets such as stocks and intellectual property. The new bill aims to establish a category that will include crypto and digital assets, giving owners the same rights as those afforded to other types of personal property.

The UK has been a leader in financial innovation—the country has been an early adopter of open banking concepts like instant payments. The UK has also highlighted digital assets, including tokenization, stablecoins, and blockchain as key breakthroughs that will revolutionize finance.

U.S. Uncertainty

The same regulatory uncertainty surrounding crypto and digital assets exists in the U.S., but American legislators have been less amenable to crypto regulation. The U.S. Securities and Exchange Commission has classified crypto and digital assets as securities rather than commodities and has taken action against multiple crypto exchanges, alleging they are operating as unregistered securities brokers.

However, there have been positive moves by U.S. lawmakers, including the recent approval of bitcoin and ether ETFs. The launch of these ETFs has attracted significant inflows from some of the largest institutional investors in the world.

Still, the regulatory uncertainty has continued to weigh on the U.S. crypto industry, which still awaits the sort of framework that has been proposed in the UK.

“The UK bill is great news, and it brings it all back to ‘not your keys, not your crypto,’” Hugentobler said. “This should keep things moving in the right direction for crypto and digital assets personal property rights.”

The post UK Lawmakers Introduce Bill to Bring Regulatory Clarity on Crypto appeared first on PaymentsJournal.

In 2022, Midwest convenience store chain Kwik Trip partnered with Coinsource to begin installing automatic teller machines that dispense bitcoin. Before long, shoppers at any of their 800 locations could pocket a little crypto after gassing up their cars. This move followed similar initiatives by other middle American retailers like Circle K and Walmart to offer bitcoin to their customers.

However, recent news reveals that these ATMs are highly susceptible to fraud, especially among older Americans. A report from the U.S. Federal Trade Commission (FTC) found that Americans lost $65 million in the first half of 2024 to scams involving bitcoin ATMs. Consumers ages 60 and older were more than three times as likely as younger adults to report losses. The median loss reported across all age groups was $10,000.

Bitcoin ATMs have been around for more than a decade. They are typically located in convenience stores, gas stations, and other busy areas. But instead of dispensing cash like traditional ATMs, they allow consumers to buy and sell cryptocurrency.

The crimes exploit the fact that cryptocurrency is hard to trace and even harder to recover once it falls into the hands of scammers. In a typical theft, someone impersonating a government agent or other type of authority figure creates an urgent scenario designed to persuade victims to withdraw cash from their bank accounts.

Depositing the cash into a bitcoin ATM is supposed to fix the problem. Bitcoin is purported tp ne a secure way to protect the money, so much so that criminals refer to the machines as “safety lockers.”

The victim is instructed to deposit a sizable amount of cash at a specific ATM location. The criminal then texts a QR code that the victim can scan at the machine. Once the code is scanned, the cash goes straight into the criminal’s wallet.

Protecting Yourself

The FTC’s recommendations on protecting yourself from these scams rely on tried-and-true methods. The organization emphasizes that cash should never be withdrawn in response to an unexpected call or message. Legitimate authorities would never make such a request.

While bitcoin adds a modern twist to these scams, the FTC warns consumers not to trust anyone who claims they need a bitcoin ATM to transfer money. Legitimate businesses and government agencies will never ask for this, so anyone who does is almost certainly a criminal.

The post Bitcoin ATMs, a Convenience Store Staple, Are Ripe for Scams appeared first on PaymentsJournal.

The Federal Reserve has no immediate plans to launch a central bank digital currency (CBDC) to digitize the dollar, so Wyoming is pioneering its own stablecoin.

The Wyoming state token could be launched as soon as Q1 25, according to CNBC. While the stablecoin will utilize the Solana network, Wyoming  has yet to select the partners that will provide the exchange and wallet services.

Once the framework is established, Wyoming consumers will be able to use the tokens to pay for everyday purchases. The state also plans to invest the stablecoins’ reserves in instruments like treasury bonds, with any returns being used to fund the state’s public schools.

“It’s no surprise that Wyoming is looking to leverage the Solana blockchain for their stablecoin, as it’s currently the fastest blockchain,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research “Once the Firedancer upgrade happens on the Solana blockchain, there will likely be a significant shift of development with payment providers and other financial institutions. After Custodia Bank was denied from the highest level, Wyoming isn’t giving up, and it’s very encouraging to see innovation thrive in this state.” 

Nimble and Entrepreneurial

Wyoming-based Custodia Bank, which provides custody services for crypto and digital assets, sued the Federal Reserve of Kansas City in an attempt to gain access to a master account and membership with the Fed. Although the lawsuit was dismissed in March, the bank said it would continue to resist the Federal Reserve’s “strong-arm tactics.”

While the stablecoin launch is not in opposition to the Federal Reserve, the Fed has delayed the introduction of a CBDC due to concerns about consumer privacy and security. According to Wyoming Governor Mark, the Wyoming state token could serve as a model for the Fed’s digital dollar.

“It is clear to me is that digital assets are going to have a future,” Gordon told CNBC. “The United States has to address this issue. Washington’s being a little bit stodgy, which is why Wyoming, being a nimble and entrepreneurial state, can make a difference.”

Akin to Switzerland

Amid the uncertainty surrounding the crypto industry, many regulators have shown greater support for stablecoins, which are less volatile than many cryptocurrencies. A successful launch of the Wyoming state token could have widespread ramifications.

“Wyoming has been the leading state in crypto acceptance, and it is attempting to maintain that lead,” Hugentobler said. “Their stance on crypto is akin to that of Switzerland—they fully support it and they have passed roughly 30 laws to help push innovation while still protecting consumers.”

The post Wyoming Plans to Launch Stablecoin Next Year appeared first on PaymentsJournal.

Ripple unveiled its website for the highly anticipated launch of its Ripple USD (RLUSD) stablecoin.

The stablecoin, first announced in April, offers potential for instant payouts, simple fiat-to-stablecoin conversions, and cross-border applications. RLUSD is designed to track the U.S. dollar one-to-one and will be issued on the XRP Ledger and Ethereum blockchains.

RLUSD will compete in a market dominated by Tether’s USDT, which has a market capitalization of over $114 billion, and Circle’s USD Coin, which has nearly a $34 billion market cap. The increasingly crowded stablecoin market even includes a stablecoin from payments giant PayPal.

“Stablecoins have proved to have a solid product market fit,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “XRP’s blockchain doesn’t offer the speeds like those found on other blockchains like Solana. However, their TPS (transactions per second) are significantly higher than that of Ethereum, which is the primary chain that USDC & USDT operate on.”

Enterprise Grade

Though other coins have a strong head start, Ripple believes there is room for RLUSD in a market expected to hit $2.8 trillion by 2028. The company claims its stablecoin is unique because it’s designed to be “enterprise-grade” from the start—RLUSD was built with financial institutions and business payments in mind.

RLUSD will be fully backed by U.S. dollar deposits, short-term U.S. government treasuries, and other cash equivalents. Ripple announced its intentions to be fully transparent about the composition of its reserves and stated it would provide monthly statements detailing its assets.

Regulatory Uncertainty

Ripple  has also designed its offering with compliance in mind, working to build its portfolio of licenses for the stablecoin. Unfortunately, RLUSD hasn’t received regulatory approval yet, and it’s not unclear when that will occur.

Regulatory uncertainty around crypto and digital assets has been a common theme over the past few years. Lawmakers have promised new crypto regulations will be forthcoming, including rules specifically governing stablecoins.

“Despite a number of legal challenges, Ripple is determined to press on and gain market share in the dominating stablecoin market,” Hugentobler said. “Ripple appears to be doing all the right things, yet they have continued to take flack, debatably for the entire industry. Once the regulatory challenges end, Ripple’s conglomerate and wide-ranging product suite will continue to be a leader in industry innovation and standards.”

The post Ripple Is One Step Closer to Stablecoin Launch appeared first on PaymentsJournal.

Luxury sports cars and cryptocurrency naturally share a market among wealthy, status-conscious individuals. Ferrari is capitalizing on that connection by announcing it will accept bitcoin and other cryptocurrencies at its European dealerships starting this month.

The Italian automaker began accepting bitcoin and crypto payments at its U.S. dealers last year. But Europe, the Middle East, and Africa remain its largest market, with more than 1,500 cars sold there in Q1 2024, compared to just under 1,000 in the Americas. Ferrari plans to expand the bitcoin payment option to all of its dealers worldwide by the end of this year.

In Europe, as in the U.S., Ferrari is partnering with bitcoin payments processor BitPay to process the payments. In addition to providing technical expertise, BitPay helps insulate the carmaker’s dealers from crypto pricing uncertainty. When a customer buys a Ferrari using bitcoin, BitPay instantly converts it to traditional fiat currency to eliminate any volatility.

The expansion into Europe indicates that Ferrari views the U.S. bitcoin payment initiative as a success. Enrico Galliera, Chief Marketing and Commercial Officer at Ferrari, mentioned last year that the order books were full into 2025.

Galliera also said at the time that the company’s decision to accept crypto was influenced by Ferrari’s dealers, as well as potential purchasers. “Some are young investors who have built their fortunes around cryptocurrencies,” he said. “Some others are more traditional investors who want to diversify their portfolios.”

Crypto and Luxury Brands

Ferrari isn’t the first luxury brand to embrace crypto. Gucci, TAG Heuer, and Balenciaga have all announced they would accept cryptocurrency payments.

It’s also not the first luxury carmaker to explore this area. Tesla, one of Ferrari’s rivals, announced in 2021 that it would start accepting bitcoin as payment for its electric cars and even invested more than $2 billion worth of bitcoin to facilitate the payments.

However, Tesla reversed that decision within a few months, citing concerns about the climate impact of energy-intensive bitcoin mining. This past May, Tesla announced that it would start accepting the less popular dogecoin for Tesla-related merchandise, although not for purchasing its cars. On the other hand, consumers are able to buy a Ferrari with dogecoin.

The post Sports Cars and Crypto, a Match Made in Retail Heaven appeared first on PaymentsJournal.

Japan is expected to lift regulations that prevent limited partners, or institutional investors, from investing in crypto and digital assets.

To gauge the crypto readiness of Japanese financial institutions, Nomura recently surveyed 547 investment managers. The survey found that 54% of Japanese limited partners plan to invest in digital assets within the next three years. The main reason cited was portfolio diversification, but institutional investors also show interest in digital assets due to their low correlation with other asset types and their potential as a hedge against inflation.

“The report doesn’t indicate the assets under management the financial institutions have, but given Nomura’s size and market positioning, the survey results are meaningful,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “It’s a significant shift in sentiment that over half of the institutions plan to invest in digital assets, and that has changed just over the past few years.”

ETF Enthusiasm

U.S. institutional investors made a substantial impact on the crypto market after the launch of 11 bitcoin exchange-traded funds in January. These ETFs are managed by some of the largest financial institutions in the world, including BlackRock, Fidelity, and Grayscale.

Since the launch, many large banks and hedge funds have taken an estimated $3.5 billion stake in bitcoin ETFs, including Wells Fargo, JPMorgan, and Morgan Stanley.

“The U.S. has the strongest stock market and the most value traded outside of maybe foreign exchange markets,” Hugentobler said. “The launch of the ETFs will continue to increase global awareness and drive inflows over time. It will also spur the creation of additional crypto ETFs based on Solana or Doge, where investors can further diversify and gain access to higher beta investment instruments within the digital asset ecosystem.”

Regulatory Risk

The Nomura report found that ETFs are the preferred vehicle for Japanese institutional investors. Around 53% of respondents said they would invest via ETF, while a smaller percentage (31%) indicated they would invest in digital assets directly.

Although Japanese investment managers are increasingly positive about crypto, they raised a few concerns. Chief among them was the regulatory risk involved with crypto investments. There have been investigations of all the major U.S. crypto exchanges lately, and bitcoin ETFs only received approval after a long legal battle with the U.S. Securities and Exchange Commission.

For those reasons, most crypto industry experts believed the SEC wasn’t likely to approve Ethereum ETFs. It was a significant win for the crypto industry when U.S. regulators recently approved the new ETFs—something their Japanese counterparts likely watched closely.

“As more vehicles become available, such as the bitcoin or Ethereum ETFs, awareness will increase and so will the exposure,” Hugentobler said. “It will all, in turn, lead to a higher price floor, which solidifies the space even more and creates a positive demand feedback loop.” 

The post Japan’s Institutional Investors Await Crypto Deregulation appeared first on PaymentsJournal.

Deutsche Bank, the largest financial institution in Germany, announced it will process the deposits and withdrawals for Austrian cryptocurrency broker Bitpanda. The bank will assign Bitpanda customers with international bank account numbers, and Deutsche will process all of the broker’s fiat transfers in real time.

The partnership is an important step in banks’ tenuous adoption of crypto. Deutsche Bank’s leaders said they were cautious about making the move, but Bitpanda’s platform met all the bank’s stringent compliance requirements. Under the new agreement, all crypto transfers will occur on Bitpanda’s platform.

“For some time, banks of all sizes across Europe have been exploring their options with crypto service providers and looking for ways to get their feet wet in the industry,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “Most of the businesses these banks serve have been holding crypto on their balance sheet for years.”

Regulatory Clashes

Though there have been major strides toward mainstream crypto adoption, the industry has also locked horns with regulators lately. The U.S. Securities and Exchange Commission has brought recent actions against most of the major crypto players, including Coinbase and Robinhood. The SEC has long alleged that digital assets are securities and that crypto platforms are unregistered securities exchanges.

Although Bitpanda is a crypto broker, not an exchange, it’s a big win for the platform that Deutsche Bank entered the partnership in the current regulatory environment. The bank’s established systems and reconciliation processes will greatly facilitate transactions for the crypto broker’s 4 million users.

A New Framework

Widespread bank endorsement has long been considered a critical step for crypto adoption, but the risks to financial institutions have outweighed the benefits. That changed after the passage of the Markets in Crypto-Assets regulation in 2023. The new laws governing digital assets were the first of their kind, and they are expected to take effect this year.

“All this has emerged from the MiCA regulation, which has clearly provided a solid regulatory framework and therefore spurred acceptance of crypto across Europe,” Hugentobler said. “This industry has largely been untapped by banks and institutions, so it’s no surprise they’re trying to get involved now and get their share of revenue and fees.“

The post Deutsche Bank-Bitpanda Partnership Is a Win for Crypto appeared first on PaymentsJournal.

Mastercard announced its peer-to-peer crypto ecosystem, which is now available to users in Latin America and Europe. The credit card giant’s platform integrates with the Lirium, Bit2Me, and Mercado Bitcoin exchanges.

Mastercard Crypto Credential gives users readable aliases that replace the long string of letters and numbers that have traditionally defined crypto wallet addresses. The ecosystem also makes payments safer, verifying every user and interaction to make sure the right asset is routed to the right wallet.  

“This pilot has great potential to bring further innovation in the cross-border payment space,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “Mastercard’s platform conducts the KYC processes to verify users, in addition to expanding its optionality of payment types to its customers for those who aren’t looking to convert their crypto to fiat, or who just want faster payments in general.”

Simplifying the Exchange

The often-complex crypto exchange process has been a barrier to entry for many users, and Mastercard’s crypto solution should simplify transactions. There is added risk when digital assets are transferred cross-border, but all transactions on Mastercard Crypto Credential will be conducted in compliance with the Travel Rule, a regulation designed to identify and prevent illegal activity. 

With the launch, users in Argentina, Brazil, Chile, France, Guatemala, Mexico, Panama, Paraguay, Peru, Portugal, Spain, Switzerland, and Uruguay can now transfer multiple assets over disparate blockchains. Mastercard’s platform will initially integrate with the Lulubit wallet through the Lirium platform, and the Foxbit crypto wallet. 

Centralized DeFi

Mastercard Crypto Credential aims to be a centralized global digital asset exchange. While P2P transactions will be the first applications for the platform, the company hopes to expand the platform to support the exchange of NFTs, tickets, and other payment types. 

While that functionality might be welcome to many, it also raises concerns about the growing centralization of digital assets that were designed to be decentralized. The launch is the latest in an increasing trend of large financial institutions investing heavily in crypto-centric initiatives. Still, Mastercard’s global highway of connections could do more to accelerate crypto adoption than hinder it.

“Mastercard is a payments giant, so the development and launch of this product will have positive trickle-down implications,” Hugentobler said.

The post Mastercard Pilots Global P2P Crypto Ecosystem appeared first on PaymentsJournal.

Cryptocurrency exchange Uniswap released a statement asserting that the U.S. Securities and Exchange Commission’s legal theories on crypto are “weak and wrong.” The statement came in response to the Wells Notice the SEC filed against the crypto exchange a few weeks ago, indicating it will pursue legal action against Uniswap.

The SEC’s biggest misconception, according to Uniswap, is that all digital tokens are securities, when in fact they should be considered a file format for value. The company accused the SEC of attempting to unilaterally alter the definitions of brokers, exchanges, and investments.

“It’s significant that the SEC has chosen to pursue a case against a protocol like Uniswap,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “In a sense, it’s a battle against decentralized code. They’re overreaching and opening a can of worms that shouldn’t be opened—decentralized protocols operate far differently than a traditional company like Apple or Microsoft.”

Expanding Jurisdiction

The Uniswap Protocol gives users a platform to securely exchange crypto directly with each other. The autonomous software excludes intermediaries, allowing for faster and inexpensive transactions. Uniswap asserted its tokens are a file format just like a PDF, and its protocol is open to anyone with an internet connection.

The SEC views the Uniswap Protocol as an unregistered securities exchange run by Uniswap Labs and considers its UNI tokens an investment contract. Uniswap rebutted that the SEC’s goal is to expand its jurisdiction beyond exchanges to communications technology and seek oversight of all markets.

Security or Commodity

The notice to Uniswap was the latest in a series of Wells Notices and lawsuits the SEC has brought against crypto exchanges. The commission has taken action against many of the major crypto players, including Coinbase, Robinhood, and Binance. All those cases hinged on the assumption that crypto should be considered a security, not a commodity.

“I’d be very surprised if Uniswap doesn’t win this lawsuit,” Hugentobler said. “Instead of enacting punishments, the SEC should work with exchanges to establish a sound regulatory framework for crypto companies. All these companies have tried being as compliant as they can, albeit in a decentralized manner, yet they are still being targeted by the SEC.” 

The post Uniswap Challenges SEC’s Crypto Misconceptions appeared first on PaymentsJournal.

The U.S. Securities and Exchange Commission will likely decide the fate of two proposed spot ether (ETH) exchange-traded funds this week, and crypto supporters are bracing for a letdown. The VanEck and ARK Invest ETFs face a May 23 deadline, and some investors worry a denial could lead to a crypto selloff.

If the ETFs aren’t approved, it will likely be due to fraud and security concerns arising from the insufficient regulatory framework around cryptocurrency. Most of the laws regulating securities have been in place for decades and don’t have the bandwidth to address crypto and digital assets.

“Without any cop on the beat, it’s forcing investors to go on their own outside of the investment advisory community because the community can’t help them, because we don’t know what the rules are,” Ric Edelman, head of the Digital Assets Council of Financial Professionals told CNBC. “They’re ending up in scams and frauds.”

Hesitant Acceptance

After the recent bitcoin ETF launch, crypto investors were hoping ether ETFs were next in line. However, the SEC only acquiesced to bitcoin ETFs because it lost a legal battle. Following the reluctant approval, SEC chair Gary Gensler issued a statement cautioning investors about the risks of investing in cryptocurrency.

The SEC aims to take a wait-and-see approach to scrutinize the performance of bitcoin ETFs before approving any other crypto funds. One reason Gensler signed off on bitcoin ETFs is because bitcoin was the only cryptocurrency he considered a commodity, not a security.

Ether is a more complex crypto than bitcoin, so the commission seems almost certain to balk. The SEC is also worried that approving an ether ETF could open the door to a flood of crypto and digital asset funds.

Unlikely Odds

Due to these factors, the crypto community has put the odds of ether ETF approval at 7%. Some experts, however, believe there’s a 30%-35% chance the two ETF applications get the nod.

If denied, ether ETF providers could follow the same route as bitcoin ETF companies and take legal action against the SEC. While they might eventually win, a lengthy court battle could keep ether ETFs off the market for some time. It would also disappoint Grayscale and Bitwise, whose applications are next on the chopping block.

The crypto market has been strong over the past few months, in part due to the bitcoin ETF approval, and ETH holders hope that an SEC denial won’t hinder that resurgence. ETH is currently up over 32% year-to-date.

The post Outdated Securities Laws Could Delay Ether ETF Approval appeared first on PaymentsJournal.

Stand With Crypto, an alliance of 440,000 crypto supporters, announced it will create a political action committee (PAC) to donate to crypto-friendly politicians ahead of the November U.S. elections.

The PAC has identified five initial candidates from both parties that will run for seats in the Senate and House of Representatives. The committee will be entirely supported by contributions from Stand With Crypto’s growing constituency. Once those donations are received, the PAC will distribute the funds directly to its favored candidates to aid in campaign support.

“A uniting movement like this is significant in my opinion,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “From the launch in August of last year to surpassing 400,000 members already, it shows that the broader crypto community is working to support political leaders that will not only enable but encourage innovation in the U.S.”

Bolstering Support

Apart from the PAC, Stand With Crypto has raised over $86 million, which the organization has used to fund informational events and crypto town halls. The group was launched by Coinbase in an effort to bolster crypto support.

Though it has touted itself as a grassroots organization, over half of its donations have come from Coinbase CEO Brian Armstrong. There are still enough enthusiasts in the organization, however, to set the PAC apart. Most of the other digital assets PACs have been dominated by big-name companies.

Many of those same cryptocurrency exchanges have been under extreme scrutiny from legislators, including SEC lawsuits against Coinbase, Binance, Robinhood, and others. Despite regulatory issues, there has been a substantial uptick in the crypto market in the early months of 2024.

Ramping Up

Stand With Crypto hopes to keep the positive trend going, but it may take some time to ramp up. Because the new PAC’s donations will go directly to politicians, donors will have to identify themselves and they will be capped at a $5,000 contribution. Still, those constraints shouldn’t weigh too heavily on the PAC given its rapid growth.

The group has already identified other candidates it plans to support. Stand With Crypto keeps tabs on the legislators that back crypto and ranks them on their crypto friendliness. The organization believes increasing political support is a necessary step to keep America current on cryptocurrency.

“The U.S. has been falling behind the UK and EU on regulatory adoption, and the Stand with Crypto movement is proof we need to catch up,” Hugentobler said. “A sound framework will enable companies to work in confidence and compliance, and help the U.S. continue to be a leader in innovation. “

The post New PAC to Support Crypto-Minded Lawmakers appeared first on PaymentsJournal.

Under pressure from the U.S. Securities and Exchange Commission, Robinhood has taken steps to ensure its crypto division isn’t violating securities law. The trading platform recently delisted several tokens, including Polygon, Cardano, and Solana, in response to the government agency’s litigation against other crypto exchanges.

However, these actions weren’t enough to assuage the SEC. Despite the company asserting it made years of “good-faith attempts” to cooperate with the government agency, Robinhood announced it recently received a Wells Notice from the SEC. The notice serves as a preliminary indicator that the agency has gathered enough information to bring an enforcement action against Robinhood and is likely to do so.

The crux of the complaint is the contention that certain digital tokens should be considered securities instead of currencies, an allegation Robinhood has denied.

“We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law,” wrote Dan Gallagher, Robinhood’s Chief Legal, Compliance and Corporate Affairs Officer, in response to the notice.

Heavy Scrutiny

Crypto exchanges have come under heavy scrutiny from government agencies. The SEC sued Binance and its founder, Changpeng Zhao, on similar securities violations. That lawsuit was one of many legal actions against the company, the latest of which resulted in four months of prison time for Zhao.

The SEC also gained ground in a suit against Coinbase, alleging the crypto exchange engaged in the unregistered selling of securities. The Coinbase and Binance lawsuits spurred Robinhood to make a last-ditch attempt to register with the SEC as a special-purpose broker for digital assets, but this effort proved unsuccessful.

Just Noise

Robinhood is a popular trading platform that boasted 10.9 million monthly active users by the end of 2023. Initially focused on stocks, the company branched out to include a crypto wallet in 2022. While Robinhood has worked hard to avoid government action, the SEC’s efforts may not have a drastic long-term impact on the company.

“The industry will keep experiencing these gut-punches until a regulatory framework is established, but it will survive.” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “In the end, a lot of these notices are just noise. It’s important to remember the bigger picture and consider what is being built behind the scenes.”

After an initial plunge on news of the SEC notice, Robinhood shares are up around 1%.

The post SEC Likely to Bring Enforcement Action Against Robinhood appeared first on PaymentsJournal.

Coinbase smashed Q1 estimates, achieving $1.6 billion in revenue and $1.2 billion in net income. The standout performance came from the bottom line, with diluted earnings per share working out to $4.40, far surpassing analysts’ predictions of $1.09.

This impressive 244.8% earnings beat was largely driven by the recent introduction of bitcoin exchange-traded funds (ETFs). That led the company’s institutional platform, Coinbase Prime, to hit record highs in volume and number of clients.

“The bitcoin ETFs—combined with strong market conditions in Q1—unlocked a flywheel of customer engagement across this more robust product suite,” Coinbase leadership wrote in its letter to shareholders. “In fact, nearly 40% of institutional clients engaged with at least 3 products in Q1.”

Coinbase Prime revenue was up 105% year-over-year, bringing in $256 billion. The crypto exchange has also served as a partner to 8 of the 11 new ETFs. At the close of Q1, Coinbase held $171 billion in crypto assets.

A Strong Market

Outside of institutional investors, the crypto market has experience a surge. Bitcoin led the charge, reaching an all-time high of $73,837.85 in mid-March. For Coinbase, revenue from consumer transactions jumped 99% compared to the previous quarter.

The market climb coincides with the latest bitcoin halving, which has traditionally driven the crypto market upwards. As the market has matured, however, it has fostered increased competition. Crypto.com, which offers a wide range of cryptocurrencies at lower fees, has emerged as a formidable competitor to Coinbase’s dominance.

Legal Concerns

That’s not the only concerning news for the company. The SEC recently made inroads in its lawsuit against Coinbase, alleging the company operated as an unregistered broker. Additionally, the SEC alleges that Coinbase was not simply serving as an exchange because of the crypto funds it created and administered.

Despite the lawsuit, Coinbase shares are up 355% over the past 12 months. After the banner Q1 earnings release, however, Coinbase stock sold off almost 4%. That’s likely due to the heavy run-up prior to the announcement.

The post Bitcoin ETFs, Market Uptick, Drive Banner Q1 for Coinbase appeared first on PaymentsJournal.

The complexity of the bitcoin mining process has been a major drawback for a cryptocurrency that was designed to foster accessibility. Mining rigs are costly and difficult to locate, and there have even been concerns about the continued availability of the Chinese-manufactured chips powering them.

Block, the payments company formerly known as Square, announced it commitment to democratizing the bitcoin mining process. Block’s head, Jack Dorsey, said the company plans to produce a three-nanometer chip designed specifically for bitcoin mining. But he made waves when he posted that Block was also building a full bitcoin mining system.

“There aren’t a lot of specifics yet,” said James Wester, Director of Cryptocurrency at Javelin Strategy & Research. “One of the big challenges as bitcoin evolves, and as mining becomes more difficult in terms of both computing and cost, is that it will lose the decentralization that’s at the heart of what secures the network.”

Fostering Decentralization

Though there have long been concerns about big tech’s involvement in crypto, Block has stated its goal is to foster decentralization, not hinder it.

“We’ve spent a significant amount of time talking to a wide variety of bitcoin miners to identify the challenges faced by mining operators,” Block wrote. “Building on these insights and pursuant to our goal of supporting mining decentralization, we plan to offer both a standalone mining chip as well as a full mining system of our own design.”

Crypto has been a central part of the company’s rise to payments prominence. Block reported it held over 8,000 bitcoin, valued at $340 million, by the end of 2023. That’s not to mention the company’s $66 million in gross earnings from Cash App bitcoin transactions in Q4 2023, a 90% year-over-year jump.

Safeguarding Bitcoin

With so much riding on bitcoin, it’s understandable that Block would take steps to protect a mining process fraught with challenges. Mining bitcoin generates excessive heat and noise, while consumings vast amounts of energy. Dorsey has insisted that “bitcoin mining should be as easy as plugging a rig into a power source.”

Block’s initiative follows the recent bitcoin halving, which saw the number of bitcoin produced by miners reduced by half. However, Block’s plans are more focused on safeguarding bitcoin’s decentralization rather than pumping out crypto.

“Mining has been an issue for some time, but Jack Dorsey isn’t just looking at it as a philosophical problem; he’s actively working to address it,” Wester said. “We’ll wait for more specifics, but the move to make mining more accessible is certainly intriguing.”

The post Block Bitcoin Mining System Could Democratize Crypto Production appeared first on PaymentsJournal.

The nearly daily innovations in cryptocurrency, blockchain, and artificial intelligence (AI) have dominated headlines. Not as much has been made of the workers who make those breakthroughs possible, and the substantial digital skillset it requires to work in the emerging sectors.

In the UK, employers have struggled to find workers who have the skills to thrive in the digital workplace. To that end, members of Parliament have aligned to call for a more intensive education process for digital skills.

“Although the UK is well placed to harness the opportunities presented by the growth of the digital economy, considerable preparation and investment in education, training and skills will be needed to make the most of these opportunities and to ensure that the UK has the necessary talent pipeline to help it realize its goal of becoming a tech superpower,” said Lisa Cameron, Member of Parliament, in a prepared statement.

Crypto Central Player

The UK has been clear about its intention to be a central player in the cryptocurrency industry. A key part of the plan is to solidify stablecoin adoption. UK lawmakers have announced new legislation, taking effect by July, that aims to further regulate crypto and stablecoin activities.

That legislation comes on the heels of a 2023 bill that established crypto and stablecoins as regulated financial assets. After that landmark legislation, there has been much conjecture about the way systemic stablecoins would operate in the UK. Some have even suggested that the Bank of England could regulate stablecoins such as the one PayPal just issued.

Short On Talent

However the crypto system turns out, the UK is likely on the right track. Stablecoins are expected to be one of the top digital asset trends this year. The recent legislative initiatives could set the country up to be the decentralized finance hub it aims to be.

But these efforts to validate crypto could be for naught if the UK can’t find the skilled talent to bring it to fruition. That’s why Cameron and her colleagues have recommended the UK partner with some of the leading blockchain companies in the country to develop education initiatives for digital skills.

Until the UK can bring its workforce up to speed, the shortage of skilled workers is expected to cost the country’s economy $79 billion a year.

The post UK Legislators Want Digital Skills Education to Meet Crypto, AI Demand appeared first on PaymentsJournal.

When PayPal recently announced that its cross-border money transfer platform, Xoom, would now support the PayPal USD (PYUSD) stablecoin, reactions were largely muted. While PayPal’s history with crypto has been somewhat shaky, it’s clear that the company is taking deliberate steps to fuel cryptocurrency adoption.

PYUSD is a stablecoin that is based on the U.S. dollar, and the cryptocurrency was just launched in the latter half of 2023. The stablecoin can be redeemed on a one-to-one basis with U.S. dollars, and the initial focus for the crypto was for use in P2P payments. The company hoped the stablecoin would attract users who have been deterred by crypto’s perceived volatility.

While its release raised eyebrows, the decision to enable the stablecoin for cross-border payments is monumental. Xoom, which was acquired by PayPal in 2015, now supports PYUSD transfers to 160 countries.

According to James Wester, Director of Cryptocurrency at Javelin Strategy and Research, “it’s a pretty big deal for a company like PayPal—a well-regulated, locked-down, risk-averse financial services provider—to use their own stablecoin for cross-border payments.”

New Vistas

The demand for cross-border remittances has increasingly garnered the attention of financial services and payments companies. It has also drawn the focus of crypto and blockchain companies. The fact that PayPal has used its notable resources to create a solution in the space is an intriguing development.

The new model immediately delivers cost-savings for cross-border transfers, which has been a long-time pain point. PayPal cited a report from late 2023 that noted the average cost to send $200 cross-border was around 6%. Xoom won’t charge any fees for transfers to its supported countries.

Another selling point is the absence of crypto sales fees. When users select PYUSD as the sending format, their currency will be converted to crypto at no cost. The sender can also select the fiat currency in which the recipient will receive their funds. Transactions that aren’t conducted in USD, however, will still be affected by exchange rates.

“We had two objectives to achieve,” said PayPal’s Senior Vice President of the Blockchain, Cryptocurrency, and Digital Currency Group, Jose Fernandez da Ponte in a prepared statement, “create something that had a stable value to maximize user confidence and ensure it had utility for commerce and payments.”

Ponte went on to say that the new effort “builds on our goal of driving mainstream adoption of cryptocurrencies while also offering an easy way to securely send money to friends and family at a lower cost.”

Obstacles to Entry

While there is a robust market for cross-border transfers, it also presents significant challenges. It’s estimated that 70% of financial institutions are unsatisfied with the number of cross-border remittances that fail. Those failures have cost companies upwards of $89 billion through the first three quarters of 2023.

One of the main reasons payments fail is problems with verifying the recipient’s personal data. In many cases, humans are still verifying recipient information, and language barriers can play a part in derailing transactions. Cross-border payments are also vulnerable to currency-conversion complexities.

In addition to payment failure issues, there are regulatory issues to combat. Even though stablecoins are touted to be more reliable than crypto at large, the regulatory framework around them has been called into question.  

The Financial Stability Institute said that stablecoin rules aren’t enforced equally across the world, and that regulations are “diverse and fragmented.” There are also concerns about how the loosely-governed coins could be susceptible to data breaches, fraud, or money-laundering.

Reach and Scale

Any apprehensions about stablecoin stability haven’t stalled PayPal’s plans as of yet. Crypto has been at the forefront of the company’s initiatives for some time, as proven by the resumption of its UK crypto activities in November.

“PayPal’s efforts with crypto have been interesting so far especially issuing its own stablecoin,” Wester said. “But bundling its crypto efforts with Xoom to go after the remittances market and offer a lower-cost alternative for cross-border payments, it’s important.”

Cross-border transfers have been a target use case for digital currencies for some time. PayPal entering the market signals a significant shift in how money will be sent across borders.

“Given their reach and scale, this could be a very big deal, especially in areas where low-cost remittance alternatives don’t exist,” Wester said.

The post Why PayPal’s Cross-Border Stablecoin Solution Should Be Bigger News appeared first on PaymentsJournal.

Following the success of the 11 bitcoin ETFs earlier this year, ethereum seemed to be the next in line, as eight issuers submitted applications to the SEC to market Ethereum spot ETFs. However, with the news of an SEC investigation into ethereum, those prospects seem murky.

Ethereum is the world’s second-largest cryptocurrency, trailing bitcoin. BlackRock, while concurrently working on launching its bitcoin ETF, filed to launch an ethereum ETF in November 2023. The spot bitcoin ETFs from BlackRock and ten other asset managers launched earlier this year, but a similar product for ethereum has yet to materialize.

The latest setback stems from the SEC’s inclination to classify ethereum as a security rather than a commodity. Notably, the SEC has been treating bitcoin as a commodity.

The main reason for this differentiation appears to be ethereum’s reliance on a proof-of-stake mechanism within its blockchain network. SEC chair Gary Gensler has said that cryptocurrencies using proof-of-stake technology to handle transactions could be classified as securities. In addition, U.S. Senators, Jack Reed (D-R.I.) and Laphonza Butler (D-Cal.) have asked Gensler to reject the Ethereum ETFs, citing “enormous risks” for retail investors.

The SEC Drags Its Feet

The SEC has been signaling it would delay its decision on the ethereum ETFs. In early March, in the wake of additional applications from asset managers, the agency requested public comments on the approval of ethereum ETFs. The commission has a publicly announced deadline of May 23 for the first wave of applications to market such a vehicle.

BlackRock and seven other asset managers have filed applications for a spot ethereum ETF. Should the SEC fail to approve all eight ETFs by that deadline, all prospective issuers will be required to refile their applications at an unspecified later date.

Currently, there are several ETFs offering exposure to Ethereum through futures, which allow investors to track the price of ethereum without directly holding it. The SEC began approving such vehicles in October 2023.

Futures are derivatives that bet on the future price of ethereum as opposed to the current spot price. By contrast, spot ETFs hold an equivalent amount of the underlying asset that is represented by the ETF.

The post Why the Ethereum ETF May Not Happen appeared first on PaymentsJournal.

Investors poured a record $2.7 billion into crypto assets last week, bringing the year’s total inflows to more than $10 billion. According to CoinShares, which tracks digital asset investments, the annual crypto inflow record set in 2021 is expected to be surpassed sometime this week.

The biggest reason for all of this is the 11 ETFs built around bitcoin that were introduced earlier this year. Bitcoin-related ETFs accounted for $2.6 billion of last week’s inflows, now  representing 14% of bitcoin assets under management.

Leading the way was BlackRock’s IBIT ETF, which reported an inflow of $562.9 million. On March 5, when bitcoin reached a new all-time high, IBIT saw a record inflow of $788.3 million in a single day. Fidelity’s FBTC recorded an inflow of $215.5 million.

As the price of bitcoin continues to soar, more investors are enticed to jump in. The price set another record at $72,000 as of March 11. The CoinMarketCap Crypto Fear & Greed Index has reached “extreme greed” territory at 89.12 points, up from “neutral” at 59.3 points in early February. 

Tech’s Loss Is Crypto’s Gain

Amid the surge in crypto inflows, investors withdrew funds from technology stocks a record pace, with $4.4 billion in outflows exiting over the same week. Tech stocks had a rough week in the market, so it’s hard to say if money was moving out of a desire for crypto or because investors are souring on tech.

But investors shouldn’t necessarily see the runup in crypto assets as a sign of further growth in the price of bitcoin of other digital assets.

“Usually fund flows don’t start moving like this when prices are low,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “The investment industry is the only industry out there where people don’t flock to sales when the assets are cheap. I’m not surprised that we’re seeing record flows as bitcoin’s price is hitting new all-time highs.

“I think the question will be how this chart will look on any significant price pullback or reversal,” he said. “Will it revert to people running out the door rather than buying investments that are on sale, or will they continue to accumulate in this trend regardless of price?” 

The post Money Pours Into Crypto, but for How Long? appeared first on PaymentsJournal.

A wave of bankruptcies across the crypto landscape has led to Gemini, the cryptocurrency exchange founded by the Winklevoss twins, agreeing to pay back more than $1 billion to its customers. As part of a settlement with the New York Department of Financial Services, Gemini will also pay a $37 million fine for “significant failures.”

Cameron and Tyler Winklevoss established Gemini in 2014 as a platform for buying, selling, trading, and storing more than 60 cryptocurrencies. In 2021, the company introduced Gemini Earn, which allowed users to earn interest of up to 7.4% by lending crypto assets to cryptocurrency lender Genesis Global Capital LLC. At its height, the program had about 200,000 members, including 30,000 in New York.

However, the Earn program suspended trading during a crypto crash in November 2022. Gemini stated in an unsigned blog post that it had been diligently “worked tirelessly over the past 15 months to advocate for Earn users and seek the return of their assets.”

The Domino Effect

Genesis initially positioned itself as an “over the counter” Bitcoin trading desk. Unfortunately for Gemini, Genesis Global Capital declared bankruptcy in January 2023, with an estimated 100,000 creditors and between $1 billion and $10 billion in liabilities. The firm had also been charged by the SEC with illegally selling crypto. Genesis’ bankruptcy left 200,000 Gemini Earn customers unable to access assets valued at $1.1 billion.

Genesis’ bankruptcy followed the collapse of Sam Bankman-Fried’s FTX. At one point, Genesis-affiliated entities had more than $8 billion of outstanding loans to FTX affiliate Alameda. As part of its attempt to return to business, FTX filed claims against Genesis in March 2023 seeking to retrieve more than $2 billion in loan repayments and collateral transfers, as well as more than $1.7 billion in assets withdrawn by various Genesis entities from FTX.com. 

Genesis had also been hit hard by the bankruptcy of Three Arrows Capital, which reportedly owed Genesis $1.2 billion at the time of its collapse. Three Arrows’ downfall was spurred by the implosion of Luna and TerraUSD, two stablecoins whose values plummeted to almost zero. Genesis eventually settled those claims with a payment of $33 million.

The post Ripples Through Crypto World End Up Costing Gemini, Winklevoss Twins $1 Billion appeared first on PaymentsJournal.

Vast Bank, the first United States banking institution to let customers buy, sell, and hold cryptocurrencies, has left the crypto market. The Tulsa-based bank posted a notice on its website saying, “we will be disabling and removing the Vast Crypto Mobile Banking application from Google and Apple.”

Vast Bank said any remaining digital assets “will be liquidated and closed.”It does not support transferring the crypto assets to another exchange or platform.

The decision seems to result from regulatory concerns rather than a market failure, despite the fact that Vast claimed the move was intended to “strategically align our operations.” Vast received a cease-and-desist letter from the U.S. Office of the Comptroller of the Currency in October. The letter stated that Vast Bank “engaged in unsafe or unsound practices, including those related to capital; capital and strategic planning; liquidity risk management; project management; books and records; interest rate risk management; IT controls; risk management for new products; and its custody account controls.”

The letter also emphasized that Vast needed to achieve and maintain a total capital ratio of at least 13% and a leverage ratio of at least 10% within 60 days after the order was issued. On December 31, Vast Bank had a total capital ratio of 4.75% and a leverage ratio of 2.46%.

Vast said its crypto accounts amounted to less than 1% of holdings. As of November, Vast held about $2 million in crypto assets, with none of them being the bank’s own assets.

“Vast’s exit from the crypto space, as well as the overall lack of other banks following Vast’s early entry into offering a crypto product, is as much about lack of traction as it is any regulatory pressure,” said James Wester, Director of Digital Assets and Crypto at Javelin Strategy & Research. “The lack of clarity around holding cryptocurrencies is an issue banks simply don’t want to deal with.

“The retail adoption of crypto via a traditional demand deposit account with no capabilities beyond basic buying, selling, and holding of cryptocurrencies has limited appeal,” Wester added. “Had there been a wave of consumers demanding the service from their banks, there might have been more pressure on regulators to work with institutions on a workable regulatory solution. But most consumers are using exchanges like Coinbase, or even companies like PayPal, who provide more utility in their crypto products.”

High Hopes for Crypto

Vast Bank began its crypto offering in the summer of 2021. The first step was partnering with software firm SAP to ensure that it was compatible with the Payment Service Providers Directive, a European regulation for electronic payment services intended to boost innovation in digital assets. The bank also partnered with Coinbase and allowed its customers to buy and sell Bitcoin, Bitcoin Cash, Cardano, Ethereum, Litecoin, Orchid, and Algorand. 

Vast Bank CEO Brad Scrivener said in October 2021 that the bank had already opened crypto accounts for customers from all 50 states. “With our initial announcement, we had significant ‘whales,’ meaning very high-net-worth crypto players, contacting us, because right now they have self-custody, where they have the equivalent of hundreds of millions of dollars buried in their backyard,” he said at the time. “Because we are regulated, this is a place where customers can feel more comfortable being able to get involved and have clarity.”

The post Vast Bank Exits the Crypto Deposit Business After Regulatory Concerns appeared first on PaymentsJournal.

The Securities and Exchange Commission brought 46 enforcement actions against digital asset market participants last year. That number is the highest since 2013, and a 53% increase from 2022. Since SEC chair Gary Gensler took his position in 2021, actions against crypto firms have almost doubled.

Those figures come from the new SEC Cryptocurrency Enforcement: 2023 Update, issued by Cornerstone Research. The report found that the SEC imposed $281 million in monetary penalties for settlements reached in 2023, up about $40 million from the year before. By the end of last year, the total amount of SEC-leveled penalties against crypto operations reached $2.89 billion, roughly 0.1% of the industry’s total value.

Most of the SEC’s allegations are related to fraud and unregistered securities. Seventeen of the enforcement actions from 2023 were related to initial coin offerings, with 14 of them including allegations of fraud.

In 2023, the SEC also brought two administrative proceedings related to non-fungible tokens (NFTs) for the first time ever. Those charges involved allegations of conducting unregistered securities offerings of crypto asset securities in the form of NFTs.

The Benefits of Cooperation

Perhaps most notably, the SEC targeted two crypto exchanges within two days last June. First, the agency went after Binance, accusing the exchange and founder Changpeng Zhao of misappropriating customer money, misleading investors, and continuing to recruit U.S. customers despite not being permitted to operate in the country. Then the next day, the SEC accused crypto exchange Coinbase of operating as an unregistered securities exchange.

Relative to a decade prior, the SEC has been increasingly recognizing self-reporting, cooperation, or remedial efforts. The Cornerstone report notes that 14 of the 27 respondents charged in administrative proceedings in 2023 had engaged in such cooperative efforts. In two of the proceedings, the SEC imposed no monetary penalties because of cooperation.

But that has not been the case for some of the players that the SEC targeted. James Wester, Director of Digital Assets and Crypto at Javelin Strategy & Research, noted that Coinbase had asked for clarification and guidance from the SEC, but was charged nevertheless.

“By bringing this action against Coinbase, the SEC seems to be saying it will not offer direction on compliance to market participants before they offer services but instead will proscribe activities via lawsuits after they have come to market,” Wester said. “That’s not a good method for encouraging innovation.”

Coinbase has since asked the court to dismiss the SEC’s lawsuit. The Coinbase case is still being heard before a deferral judge in Manhattan.

The post SEC Enforcement Against Crypto Firms Grew in 2023 appeared first on PaymentsJournal.

There’s been a sharp decline in the reception of cryptocurrencies by illicit addresses in 2023, according to blockchain intelligence firm Chainalysis. In its newly released 2024 Crypto Crime report, roughly $24 billion worth of crypto was received by illicit addresses last year, accounting for 0.34% of all transaction volume. That’s down nearly 40% from 2022’s figure.

For the second consecutive year, stablecoins accounted for the majority of illicit transaction volume in 2023. Prior to 2022, bitcoin had consistently represented most of the transaction volume each year since 2018. But in 2022, stablecoins suddenly accounted for roughly two-thirds of the illicit traffic volume, and this trend continued in 2023.

Crypto scamming and hacking revenue both fell significantly in 2023. Total illicit revenue for these activities was down by 29.2% and 54.3%, respectively. 

There is an important caveat attached to this. According to Chainalysis: “One year from now, these totals will almost certainly be higher, as we identify more illicit addresses and incorporate their historic activity into our estimates. For instance, when we published our Crypto Crime Report last year, we estimated $20.6 billion worth of illicit transaction volume for 2022. One year later, our updated estimate for 2022 is $39.6 billion.”

The Impact of FTX

The 2023 report had not reported transactions associated with FTX and other firms accused of fraud until the legal processes around them had reached a decision. Now that FTX CEO Sam Bankman-Fried has been convicted of fraud, Chainalysis is retroactively including the $8.7 billion in creditor claims against FTX in its 2022 figures.

Chainalysis’ totals also include funds stolen in crypto hacks, but exclude revenue from non-crypto native crime. So when crypto is used to pay for things like drug trafficking, that is not included in the data.

One area where the report says fraudulent activity is trending down is romance scams. “Our on-chain metrics suggest scamming revenues globally have been trending down since 2021,” the report says. “We believe this aligns with the long-standing trend that scamming is most successful when markets are up, exuberance is high, and people feel like they are missing out on an opportunity to get rich quickly.”

As Brittany Allen of Sift, a leader in digital trust and safety issues, has pointed out, the transparency of blockchain makes it difficult for fraudsters to get away with their crimes for any great length of time. “All it takes is one mistake to reveal their real identity, at which point that mistake is part of the public, permanent blockchain record,” Allen has written. “However, the real challenge for exchanges doesn’t lie in catching these cybercriminals post-attack, but in preventing them from happening in the first place.”

The post Crypto Fraud Is Down, but Illicit Stablecoin Activity Emerges appeared first on PaymentsJournal.

The long-discussed bitcoin exchange-traded funds (ETFs) began trading on Thursday, after the U.S. Securities and Exchange Commission finally approved them on Wednesday. The decision should expand interest in bitcoin, the world’s most popular cryptocurrency, for investors who were leery of holding the digital token directly. It could also bring more technological innovations to the crypto industry.

The SEC made clear that it was not endorsing the safety of bitcoin. In his statement approving the ETFs SEC Chair Gary Gensler said that “investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”

But the demand was immediately evident. Two of the ETFs, the Grayscale Bitcoin Trust and BlackRock’s iShares Bitcoin Trust, saw millions of shares of trading volume within the first 10 minutes of Thursday’s session. The competition set off a fee war, with BlackRock dropping its proposed fee from the initial 0.30% to 0.25%.

The SEC has been considering—and rejecting—proposals for a bitcoin ETF since 2018. BlackRock, the world’s largest asset manager, submitted paperwork to begin marketing a bitcoin ETF nearly a year ago.

Implications for the Industry

As much as this changes investor options, the most significant aspect of it may be its effect on digital currencies in the long run. Growing investor demand for cryptocurrencies could incur long-overdue improvements in the business and technology of crypto.

“Increased demand and its potential impact on bitcoin’s price is what’s being talked about most here, but the implications go much further than that,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “Attitudes toward the asset class will begin shifting. Further research into the industry should help spur innovation and development. Financial institution tooling such as storage, custodial services, prime broker servicing, settlement services, derivatives, and payment applications will all pick up.”

“All of these things are going to help grow adoption within the digital asset ecosystem as more institutions and retail participants will realize the various use cases and solutions that digital asset products offer,” he said. “The need for self-custody tools for any participants will only increase from here.” 

The post Bitcoin ETFs Take Wing, with More Changes to Come appeared first on PaymentsJournal.

Mercari, Japan’s answer to eBay, is planning to allow its users to buy products using bitcoin starting in June. The bitcoin payments would be facilitated through Mercari’s virtual currency trading service, Mercoin. In fact, the bitcoin option will be exclusively available to Mercoin users, emphasizing Japan’s growing reputation as a crypto-friendly environment.

This is an important next step for Mercoin, which launched in March 2023. At that time, its purpose was to allow users to buy and sell bitcoin through the Mercari marketplace app.

“Users can purchase bitcoin for as little as 1 yen, using money added to their balance from bank accounts or their sales proceeds and points earned from selling items on Mercari,” the company said at the time. “Enabling this kind of small investment provides a low-stress way for users to get started. In this way, Mercoin offers an easy and secure experience—even for users who have little to no experience with bitcoin.” 

The trading service has already amassed over a million users in less than a year’s time. Mercari has more than 22 million monthly active users. The customer-to-customer platform itself has been around for only a decade, having launched in February 2013. The app arrived in the United States in 2016.

Japan Embraces Crypto

In addition to bolstering Mercari’s presence on the crypto landscape, the move also points to the support that Japan has shown for digital assets. Japan’s government has recognized bitcoin and other cryptocurrencies as legitimate forms of money since 2016. The country’s Payment Services Act officially regards crypto assets as acceptable payment methods. Unlike in the U.S., the crypto industry is regulated by Japan’s Financial Services Agency. 

In the hopes of attracting digital-asset businesses and platforms, Japan’s government has even loosened its cryptocurrency tax laws. That helped lure international crypto firms like Binance into the Japanese market. Rakuten, another Japanese e-commerce platform that competes with Mercari, has begun allowing its users to convert their loyalty points into crypto.

The next question is whether this type of competition will lead to more American companies accepting cryptocurrencies as payment.

“The new FASB accounting rule for 2024 allows companies to hold bitcoin under fair value treatment,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research “That may entice more companies to accept bitcoin as payment moving forward, since they’ll be more willing to hold it on their balance sheet.” 

The post Mercari Plans to Accept Bitcoin in Crypto-Friendly Japan appeared first on PaymentsJournal.

In the latest move taken by the Indian government to thwart the use of cryptocurrencies, the country’s Financial Intelligence Unit (FIU) has blocked nine URLs belonging to global crypto exchanges. The reason: the exchanges had not complied with the government’s efforts to ensure that digital asset service providers fulfill its Anti-Money Laundering regulations.

The FIU confirmed that it has issued compliance notices to all nine providers and has asked the Ministry of Electronics and Information Technology block their URLs. The crypto entities affected include Binance, KuCoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex. The government did not give a deadline for the companies to comply with the rules.

This action comes after India’s government announced in March that crypto companies must register with the FIU and collect Know Your Customer (KYC) information, among other money-laundering prevention guidelines. Some 31 crypto businesses have registered with the FIU.

India’s History of Anti-Crypto Activities

This isn’t the first time that India has cracked down on crypto activities. In September 2022, India’s United Payment Interface halted the use of cryptocurrency in making payments. “India’s crypto scenario underscores the fragile relationships between government, established banking providers, and upstart crypto platforms as all parties work to find paths forward in the changing environment,” wrote Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research.

The country has also imposed high capital gains taxes on cryptocurrency profits. India has a 30% tax on crypto gains, which is higher than the tax rate on equities or other investments. The Reserve Bank of India has even argued for a blanket ban on virtual currencies.

Last August, Prime Minister Narendra Modi said that there should be more worldwide regulation of cryptocurrency activities. “The rules, regulations and framework around it should not belong to one country or a group of countries,” he said at the time. “So not only crypto, but all emerging technologies need a global framework and regulations.”

To that end, India has been working on a crypto regulatory framework based on a joint recommendation proposed by the International Monetary Fund and the Financial Stability Board. The framework will supposedly impose more advanced KYC rules on crypto companies—one of the key factors that resulted in the current crackdown. In keeping with Modi’s desire for more universal crypto regulation, the framework also proposes a uniform tax policy on cryptocurrencies among all nations.

These new regulations are expected to take effect sometime in 2024.

The post India Moves to Shut Down Nine Crypto Exchanges appeared first on PaymentsJournal.

In the face of increased government scrutiny, three political action committees funded by leaders of the cryptocurrency industry have amassed a war chest of $78 million heading into the upcoming election cycle. One of the most notable aspects of the crypto super PACs, which came to light this week, is the number of competitors teaming up to support it.

The three super PACs—Fairshake, Protect Progress, and Defend American Jobs—are supported by crypto heavyweights Coinbase, Circle, Ripple, venture capital firm Andreessen Horwitz, and the Winklevoss twins. The PACs are expected to use the money in support of pro-crypto candidates running for seats in both the House and Senate. Although super PACs are prohibited from sending money directly to political candidates, Fairshake has already spent more than $1 million in television advertisement backing a select group of lawmakers, 

Pushback Against Overreach

The super PACs have been motivated by recent government action, including a letter sent this week by Massachusetts Senator Elizabeth Warren. Warren targeted several industry groups, including the Blockchain Association, Bitcoin Center, and other crypto advocacy organizations.

“I write regarding a troubling new report that your association and other crypto interests are … working to undermine bipartisan efforts in Congress and the Biden Administration to address the role of cryptocurrency in financing Hamas and other terrorist organizations,” Warren wrote.

The crypto industry was quick to respond. “Engaging like-minded experts to advocate against legislative proposals that one sincerely believes are unconstitutional and detrimental to the nation’s welfare does not constitute ‘undermining bipartisan efforts in Congress,’” wrote Neeraj K. Agrawal of the cryptocurrency policy think tank CoinCenter. “Rather, it is the exercise of the fundamental right to freely associate and petition the government. It’s everyone’s right and no one should apologize for doing it. Resorting to questioning motives often reflects an inability to prevail on the merits of an argument itself.”

With such arguments floating around nearly a year ahead of the election, it’s no wonder that the crypto industry is uniting to assert its power. It’s significant that competitors like Coinbase and Ripple have chosen to team up in this effort. Ripple CEO Brad Garlinghouse said in a statement: “We need to advance leaders who will champion innovation and spearhead paths towards responsible regulation.”

The post Crypto Super PACs Kick Off a Contentious Election Season appeared first on PaymentsJournal.

SoFi’s departure from the cryptocurrency business, effective within a couple of weeks, may seem abrupt, but it has been a long time coming. The digital personal finance company first offered crypto trading in 2019, but that was under a two-year conditional approval granted by the Federal Reserve—and it was never certain that SoFi’s crypto business would extend beyond that.

This announcement has perhaps been inevitable since SoFi received a bank charter in January 2022. That move was part of an aggressive growth stance that has fueled the rapid expansion of SoFi, which is still barely a decade old.

According to the conditions of the charter approval, SoFi either had to receive necessary regulatory approvals for its crypto business or it would exit the sector. “[T]he Bank Holding Company Act permits us to continue our current digital assets related offering for a two-year conformance period from the date we became a bank holding company,” the filing said.

More Catalysts for the Exit

For a while, SoFi was a high-profile player in crypto, hosting an event at Bitcoin Miami as recently as last year. Although the company let users buy and sell more than 20 crypto currencies— including bitcoin, dogecoin and Ethereum, crypto never became a significant part of its business. Its brokerage-related fees, including all crypto-related fees, totaled $6 million in Q3, according to SoFi’s financial statements.

Regulatory pressures have kept the business on thin ice for a while. The immediate catalyst for this move is the Federal Reserve’s novel activities program, which was introduced over the summer. Given the new strictures, SoFi began to suspect its crypto business would never be fully approved by the Fed. The fintech also expected the Fed’s crypto requirements to grow stricter over time.

Then in August, SoFi warned that it had grown increasingly cautious of the Security and Exchange Commission’s scrutiny of digital assets. Among the restrictions floated by the SEC was a requirement that firms maintain in-house custody of digital assets owned by their customers. SoFi went so far as to mention the possibility of being “forced to cease trading in certain types of assets.”

That warning came to fruition this week. SoFi customers have until December 19 to transfer their funds to Blockchain.com.

The post SoFi’s Exit from Crypto Has Been a Long Time Coming appeared first on PaymentsJournal.

Apple is facing a new class-action lawsuit by users of Venmo and CashApp, who claim that Apple conspired to limit peer-to-peer (P2P) payment options on its devices, and specifically limited crypto payment solutions. According to the complaint, Apple’s agreements limit “feature competition” within P2P payment apps, including prohibiting existing or new platforms from using “decentralized cryptocurrency technology.” As a result, users have reduced access to various payment vehicles, which means artificially increased prices when they go to send money or trade cryptocurrencies.

“These agreements limit feature competition—and the price competition that would flow from it—marketwide, including by barring the incorporation of decentralized cryptocurrency technology within existing or new iOS peer-to-peer payment apps,” the complaint said.

What the Suit Is Seeking

The lawsuit seeks an injunction that, if successful, could force Apple to divest or segregate its Apple Cash business. The lawsuit also claims that Apple has excluded at least two Bitcoin wallet apps, Zeus and Damus, from its App Store. The plaintiffs hope to force Apple to permit the usage of the crypto wallets that have heretofore been unavailable.

The complaint was filed by the users of Venmo and Cash App on November 17 in a California District Court. Apple has entered into anti-competitive agreements with both those payment platforms. Significantly, the lawsuit did not include PayPal, the owner of Venmo, or Block, the owner of CashApp. Apparently, the plaintiffs feel that Venmo and CashApp were coerced into this arrangement.

The lawsuit also accused Apple of forcing any new P2P apps for its devices to exclude any potential crypto functionality. The plaintiffs allege that in its restraints, Apple forced new payment apps to prohibit crypto trading “as a condition for entry.”

Increased Scrutiny for Payment Apps

This all comes against the backdrop of the Consumer Financial Protection Bureau’s proposal earlier this month to regulate all payment apps and digital wallets—including Apple Pay, CashApp, and Venmo—just as it would any other financial institution. Under the proposal, all “general purpose digital consumer payment applications” would be subject to the same compliance rules as banking institutions and credit card companies. Apple and its partners would likely prefer to avoid that.

There seems to be little chance of the lawsuit against Apple succeeding. And Apple has recently been working to further integrate Venmo into its functionality. But in the interest of deterring further scrutiny and regulatory encroachment, don’t be surprised if Apple makes some changes to broaden access to different payment apps, and to extend its crypto capabilities—even if the changes are only cosmetic.

The post Where Is the Apple Payment and Crypto Suit Headed? appeared first on PaymentsJournal.

The price of Ethereum jumped by 10% to surpass the $2,000 mark last week, after the world’s largest asset manager, BlackRock, filed to launch an ETF, the blockchain’s native currency. If it makes it to market, the ETF will likely have the effect of attracting billions of dollars in new investment to the cryptocurrency. BlackRock’s argument to the SEC about why the new vehicle should be approved is simple: Crypto investors deserve the kind of protection and security that a major asset manager can provide.

The Nasdaq Stock Market filed with the SEC to list BlackRock’s ETF last week. “To this point, the lack of an ETP [exchange-traded product] that holds spot ETH exposes U.S. investor assets to significant risk because investors that would otherwise seek cryptoasset exposure through a spot ETH ETP are forced to find alternative exposure through generally riskier means,” Nasdaq said in its filing. “Approval of a spot ETH ETP would represent a major win for the protection of U.S. investors in the cryptoasset space.”

An Antidote for Ethereum’s Problems

Ethereum is the world’s second largest cryptocurrency, after Bitcoin. The positive response to the BlackRock registration may help the currency move past some of the concerns that Ethereum investors have noted over the past few years. Ethereum’s notorious transaction costs, known as gas fees, have soared along with the increased activity that has come with more trading. Ethereum’s move to a proof-of-stake system last year was supposed to ease its price and congestion issues, but the BlackRock ETF may exacerbate these problems.

On the other hand, there are many benefits the currency could derive from working with the world’s largest asset manager. That may be why BlackRock emphasized safety and reliability in its filing with the SEC. Among other things, Ethereum knows that its customers would benefit from increased stability.

“Institutional investments and support will not only further solidify the industry, but also help with the overall downside volatility over time,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “It will make a big difference in risk management and retirement planning if the volatility can be dampened.”

In addition to the Ethereum offering, BlackRock also has filed an application with the SEC for a spot bitcoin ETF. CEO Larry Fink said the company wants to diversify its crypto offerings, noting that crypto will “transcend any one currency.”

The post The Logic Behind BlackRock’s Ethereum ETF appeared first on PaymentsJournal.

After announcing in August that it was temporarily pausing its cryptocurrency activities for UK clients, PayPal revealed this week that it had received approval to get back into that business. The payments giant said that Britain’s Financial Conduct Authority (FCA) has approved its registration as a cryptoasset operation, and the company expects it will return to crypto services sometime in early 2024.

“The UK has been a part of PayPal’s larger strategy to expand its crypto services into other markets since they first launched there in 2021,” said James Wester, Director of  Digital Assets and Crypto at Javelin Strategy and Research. “Today’s announcement just demonstrates the challenges faced by companies as they look to other markets.”

When PayPal re-enters the UK market, there will be significant limitations on what it’s able to do in crypto. While the FCA has granted PayPal the ability to offer cryptocurrency services, certain requirements and restrictions have been placed on its financial activities. PayPal’s crypto services will be restricted to existing customers, who will only be able to hold and sell crypto assets, but not purchase them.

That’s very different from the case in the U.S., where PayPal already offers extensive crypto services. With PayPal, you can send and receive crypto to and from eligible confirmed personal PayPal accounts in the U.S. and U.S. territories (excepting Hawaii), or buy, hold, and sell crypto. It can handle Bitcoin, Ethereum, Litecoin, and Bitcoin Cash—and the company has even launched its own stablecoin, although that has recently come under regulatory scrutiny from the SEC.

A Landscape for the Major Players

PayPal’s reemergence in the UK crypto market points up that the current landscape is most favorable for the larger, more experienced players in this space. Even those players have had challenges in dealing with regulatory hurdles, such as PayPal’s subpoena from the SEC over its stablecoin, but they tend to be better equipped to get past them.

“Crypto regulations vary from market to market, and they are still evolving, so companies have new regulations and requirements they have to meet,” Wester said. “Given the immaturity of the space, that will be a challenge faced by companies like PayPal for the foreseeable future. For PayPal and other traditional financial services providers, they have the resources and expertise to deal with compliance challenges in these markets. Newer entrants may find these challenges more difficult to overcome.”

The post PayPal Re-Enters UK Crypto Market appeared first on PaymentsJournal.

Coinbase is ushering in a new era of crypto trading for U.S. retailer traders.

Earlier today, Coinbase Financial Markets announced that Coinbase Advanced customers in the U.S. can now engage with regulated crypto futures contracts. The contracts cater to retailer traders, with Bitcoin and Ethereum futures available in accessible sizes, including 1/100th of a Bitcoin and 1/10th of an Ethereum.

Futures trading aims to equip traders with the tools they need to shield themselves from risk, diversify their portfolios, and embrace leveraged trading. According to Coinbase, these contracts essentially grant traders the freedom to speculate on the market’s trajectory, whether it’s an ascent to new heights or a descent into volatility. That said, it’ll be important to grasp the duality of leverage, which can magnify both profits and losses, and potentially surpass the initial investment.

For U.S. traders, this recent news signifies a profound shift, giving them access to both spot and futures trading.

Mitigating Risk

Crypto future contracts, according to Coinbase, provide traders with the means to pursue both long and short positions, which helps them manage the inherent risk associated with their crypto assets.

The goal now is that traders can access both Bitcoin and Ethereum in more diminutive and affordable seizes, enticing retail traders specifically.

In its blog post, Coinbase noted that: “These contracts offer lower upfront capital requirements and can be an affordable investment option for a broader range of retail customers.”

The company is also looking to better educate its traders and has rolled out a library of education content they can lean on. Coinbase noted that it’s “committed to continuing to equip traders with the resources they need to trade futures in a safe and responsible way.”

The post Coinbase Redefines Crypto Trading for U.S. Traders appeared first on PaymentsJournal.

JPMorgan Chase’s digital token, JPM Coin, is currently processing $1 billion in transactions daily, and the financial giant is planning on making the currency more widely available.

Bloomberg, which first reported on this, recently sat down with Takis Georgakopoulos, JPMorgan’s Global Head of Payments.

“What we do with JPM Coin is the institutional side of that solution,” Georgakopoulos said in the interview with Bloomberg TV. “Working in a permissioned environment with companies that are trusted and trust each other so that way they can move money within their ecosystem 24 by seven.”

Georgakopoulos went on to discuss three major inefficiencies that exist within the payments space. The first one being speed and the fact that there is a delay in making payments, particularly when it comes to making cross-border payments. Secondly, money and information tend to move separately, making it difficult to track and reconcile. Finally, he pointed out that money is fungible, whereas activities are not—and the JPM Coin is a solution to these problems.

“The fact that they’re processing $10 trillion in payments daily is larger than I thought,” said Joel Hugentobler, Analyst for Cryptocurrency at Javelin Strategy & Research. “The JPM coin looks to solve 3 existing issues in payments: speed (or the lack thereof), challenges of money & associated information moving separately, and fungibility.”

“His statements on a retail version and making “tokenized” commercial deposits using the JPM coin type of instrument confirms our stance on the digital asset industry and particularly that stablecoins are going to play a big role in all of this. His comments about 24/7 efficiency, low-to-zero cost with near instant settlement, and programmability features are all areas which we have been talking about at Javelin in which we see this bigger transition taking place -using distributed ledger technology or blockchains – sooner rather than later.”

“More companies are starting to realize the benefits of the available products offered in the digital asset industry. A higher rate environment is likely an additional driver for a surge in recent activity as companies are looking for ways to cut costs and increase revenues while continuing to innovate.”

Are Stablecoins the Answer to Crypto?

Cryptocurrencies have weathered plenty of storms since they were first introduced in 2009 with the launch of Bitcoin. Since then, not much has changed with its inherent volatility, high energy consumption, and its use for criminal operations. While JPMorgan is seeing much success, there are still organizations that are on the fence about launching their own digital currency.

Stablecoins have grown in popularity for being the antithesis of crypto. As their name implies, stablecoins are a type of cryptocurrency that is tied to another asset, which contributes to its stability. Stablecoins have more stability since fiat currencies are less likely to face the extreme volatility that crypto faces.

In his report, Building a Better Stablecoin, Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research, delves into defining what stablecoins are, their solid use cases, and what issuers can do to build a better stablecoin.

Although regulators are also keeping an eye on stablecoins and looking to enforce consumer protection, the future of stablecoins as an alternative digital asset looks promising when it comes to transacting with digital assets.

The post JPMorgan Chase Is Ramping Up its Digital Currency Ambitions appeared first on PaymentsJournal.

Mastercard is actively seeking partnerships with self-custody wallet providers, including Ledger and MetaMask, as the global technology firm continues its expansion into the world of cryptocurrency.

A Web3 strategy workshop report obtained by CoinDesk revealed that Mastercard’s strategic decision aims to assist wallet providers in boosting the number of active users they have, bolstering loyalty and additional revenue streams, as well as enabling cardholders to spend their cryptocurrency in a seamless way.

In an e-mail to CoinDesk, a Mastercard spokesperson said:

“Mastercard is bringing its trusted and transparent approach to the digital assets space through a range of innovative products and solutions—including the Mastercard Multi-Token Network, Crypto Credential, CBDC Partner Program, and new card programs that connect Web2 and Web3.”

Moving Forward with Crypto, Despite Regulations

Cryptocurrencies continue to face significant headwinds, particularly in the United States—and as a result, there’s been more demand for regulation.

Despite these challenges, the cryptocurrency market is still growing, with the global crypto market valued at more than $2 trillion. The potential of cryptocurrency has not been confined to crypto enthusiasts or investors, governments and businesses worldwide are beginning to accept cryptocurrency for payment as well.

Hong Kong, for example, is looking to become a cryptocurrency hub. In June, under new regulation, they began accepting applications for licenses from crypto exchanges. Upon approval, exchanges will be granted permission to sell tokens like Bitcoin to individual traders. Under the new rules, exchanges will be required to assess the client’s understanding of crypto, tolerance for risk, and impose risk-exposure limits.

This is in stark contrast to mainland China, where cryptocurrencies were banned in 2021. It is currently forbidden to sell tokens, trade crypto, or conduct any transactions using virtual currency derivatives. China’s central bank declared that all cryptocurrency transactions were essentially illegal activities that can jeopardize the safety of peoples’ assets.

The post Mastercard Eyes Partnerships with Self-Custody Wallet Companies appeared first on PaymentsJournal.

Binance is no longer offering its Visa debit card services within the European Economic Area (EEA).

Binance Visa debit card holders will still be able to use their current physical or virtual card until December 20. After that date, the company recommends consumers use Binance Pay, its crypto payment solution, to make purchases at participating merchants.

TradingView noted that this decision comes after a series of problems that Binance has been embroiled in. According to its reporting:

“One such incident was the cessation of euro transactions following Paysafe’s withdrawal from processing EUR deposits for its users. However, Binance reinstated euro payments, deposits, and withdrawals to EU customers yesterday.”

Binance Continues to Be Mired with Problems

Overall, things have not looked too promising for one of the world’s largest cryptocurrency exchanges. In June, the Securities and Exchange Commission filed a case in federal court accusing the exchange of “shoddy funds management,” as well as deceiving regulators and investors.

The SEC disclosed an email from 2018 where Binance’s Chief Compliance Officer wrote: “We do not want to be regulated ever.”

Binance was also a key player in the collapse of FTX when it withdrew FTX’s currency in November. When word of insolvency was drawing near, the CEO of Binance, Changpeng Zhao, announced that Binance would liquidate all its holdings in FTT (estimated around $580 million), just before the crash. Although the firm had briefly reported that it would purchase FTX, it soon backtracked on the offer, resulting in FTX’s ultimate demise.

The regulatory tug of war continues as to who has the final word on crypto regulation—the SEC or the Commodities Futures Trading Commission (CFTC). The SEC views crypto as securities, while the CFTC sees them as commodities.

Whatever they decide, it is clear that, without a regulatory framework, confidence in crypto could wane, further hindering the expansion of the crypto industry.  

The post Binance Suspends Visa Card Services in Europe appeared first on PaymentsJournal.

In the dynamic landscape of digital finance, the convergence of cryptocurrency and lightning-fast transaction networks has ushered in a new era of financial efficiency and accessibility. The advent of blockchain technology promised a decentralized future, but it is the Lightning Network that stands at the forefront of this revolution, offering a solution to one of the most pressing challenges in the world of digital currencies: scalability. As traditional payment systems grapple with issues of speed and cost, the Lightning Network emerges as a beacon of hope, enabling near-instantaneous, low-cost transactions on a global scale.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: The Limits of Crypto and the Rise of Layer 2s

Growth of Lightning Network Transaction Volume in USD (millions)

• July 2018 – 0.17
• July 2019 – 9.75
• July 2020 – 8.8
• July 2021 – 55.26

Source: BitcoinVisuals

For more recent data, see the Javelin Strategy & Research’s Report: The Limits of Crypto and the Rise of Layer 2s

About Report

Truly decentralized blockchains attract participation that provides worldwide transparency and reinforces why they were developed in the first place. But blockchain networks also have a problem: As the number of network users increases, so do network congestion and transaction costs. This is where Layer 2 protocols come in.

In their simplest forms, Layer 2s leave transaction execution and activities on the base layer blockchain while handling most other activities off the chain. This, in turn, eases congestion and lowers costs. This Javelin Strategy & Research report delves into Layer 2s, the blockchain issues they can alleviate, and the challenges associated with implementing them.

The post Growth of Lightning Network Transactions for Cryptocurrency Payments appeared first on PaymentsJournal.

After growing demand from its customers, Ferrari is beginning to accept cryptocurrency as payment for its luxury sports cars.

Currently, the luxury carmaker is working with BitPay to accept bitcoin, ether, and USDC for purchases made in the U.S.—and is planning to expand to Europe next year. 

Enrico Galliera, Chief Marketing and Commercial Officer at Ferrari, told Reuters that the company’s decision to accept crypto came from both dealers and the market itself, as investment in crypto continues to grow. In the interview, he noted:

“Some are young investors who have built their fortunes around cryptocurrencies. Some others are more traditional investors, who want to diversify their portfolios.”

The State of Crypto

Global cryptocurrency adoption continues to grow, with India leading the world in crypto adoption.

Other countries, such as France, have become crypto-friendly thanks in large part to recent laws that support both digital currency issuers and traders. As a result, this has led to collaborations, including one between fast-food burger chain Burger King and Instpower.

Although cryptocurrency adoption holds much promise, it continues to be sidelined for the same reasons it has been since the introduction of Bitcoin in 2009. These include high market volatility, lack of knowledge, vulnerability to hacking, and lack of regulation and infrastructure.

Elon Musk—at first a strong proponent of cryptocurrency—began accepting cryptocurrency as payment for his Tesla vehicles in March 2021, only to backtrack a few months later, stating the company would no longer accept Bitcoin as payment due to concerns around its environmental impact.

Similarly, JPMorgan Chase UK recently announced that it would be banning cryptocurrency payments via debit or outbound bank transfers. According to a spokesperson for Chase UK, the firm has seen an increase in crypto scams targeting UK consumers, the company hopes to ensure the safety of its customers’ funds by taking the necessary steps needed.

While there have been some bumps in the road for cryptocurrency—which many are working to iron out—demand is certainly there, as witness by Ferrari’s recent move in the space. While the company doesn’t have any set expectations for how many vehicles it plans to sell via crypto, Galliera told Reuters that its “order portfolio was strong and full booked well into 2025.”

The post Ferrari Adopts Crypto as Payment appeared first on PaymentsJournal.

Beginning Oct. 16, Chase customers in the UK will be prohibited from making cryptocurrency payments via their debit card or by an outbound bank transfer.

In an email sent to its UK customers, Chase noted that if payments were found to be crypto-related, they would be declined.

“We’re committed to helping keep our customers’ money safe and secure. We’ve seen an increase in the number of crypto scams targeting UK consumers, so we have taken the decision to prevent the purchase of crypto assets on a Chase debit card or by transferring money to a crypto site from a Chase account,” a spokesperson said in the email, which was reviewed by CoinDesk.

“While the UK has progressed towards a pro-crypto stance in moving forward with regulatory standards for the industry, they are still in the early phases of compiling a robust regulatory regime for the industry,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research.

“A proper framework is needed,  but it’s a fairly new and very fast-moving industry so the regulatory topics vary ranging from issuance or custody to lending or market abuse practices. Without proper disclosures, KYC/AML processes, onchain analysis tools, etc., firms like Chase UK don’t know how to handle it all so they just decided that they don’t want to deal with it right now until regulation is passed.”

The Decline of Crypto-Friendly Banks

With the fall of crypto-friendly U.S. banks, including Silvergate, Signature, and Silicon Valley, many financial institutions have started distancing themselves from the crypto sector altogether. Last October, Citibank locked out Swan Bitcoin, a trading platform, out of its corporate bank account without prior notice.

The Federal Reserve, which has been vocal about crypto’s place in the traditional banking system, is ensuring that any activities revolving crypto are closely monitored. “What is particularly worrisome is the concern that crypto-friendly banks were targeted by the federal government in some way,” James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research noted recently.

Lack of regulation has not been limited to the U.S. Across the pond, in the UK, numerous banks have also cut ties with the once booming digital currency industry. Growing concerns over fraud and volatility have kept several UK banks from embracing cryptocurrency.

Earlier this year, NatWest Group banned retail and wealth customers from transferring funds into crypto assets, citing concerns about the volatility of the platform. Similarly, HSBC and Nationwide have also announced blockages of crypto payments. Starling Bank has also ended the purchasing and selling of cryptocurrencies via debit cards or bank transfers.

One thing is for certain, without the banking industry, crypto will have a far more difficult time reaching mainstream acceptance.  

The post Chase UK Rejects Use of Crypto Payments appeared first on PaymentsJournal.

Billionaire entrepreneur Mark Cuban fell victim to a crypto scam last week, which resulted in a loss of approximately $870,000.

According to DL News, observers in the crypto community noticed suspicious activity on EtherScan around a wallet labeled “Mark Cuban 2.” The crypto stolen was spread out across 10 different cryptocurrencies, including stablecoins and tokens.

Cuban told DL News that this likely happened because he downloaded a fake version of MetaMask, a popular crypto wallet and browser extension that allows users to manage their Ethereum-based assets and interact with decentralized applications. Cuban is not the only one to be fooled by this common tactic, which aims to capture sensitive information from a user through a bogus—yet realistic—app.  

Crypto Hacks

Crypto hacking has become more prevalent, and understandably, more businesses are on high alert. Blockchain forensics firm Chainalysis estimated that hackers stole $3.8 billion from crypto businesses in 2022. We previously reported on several of these hacks, and how the lack of government regulation makes de-centralized prone to hackers.

Decentralized finance protocols, which enable financial transactions to occur outside of traditional banks, are public and use open-source code. While this can be helpful because it allows for security issues to be discovered and fixed quickly, it also means that cybercriminals can extensively study the code and find vulnerabilities that can be exploited.

As Brittany Allen, Trust and Safety Architect at Sift, noted in a PaymentsJournal article last year, “The transparency of the blockchain makes it difficult for fraudsters to get away with their crimes forever––all it takes is one mistake to reveal their real identity, at which point that mistake is part of the public, permanent blockchain record. However, the real challenge for exchanges doesn’t lie in catching these cybercriminals post-attack, but in preventing them from happening in the first place.”

Cuban’s unfortunate encounter serves as a stark reminder of the ongoing security challenges within the cryptocurrency landscape. As crypto scams and hacks persist, users—regardless of their stature—must exercise the utmost caution, verifying the authenticity of wallet software and staying vigilant against potential threats.

The post Financial Scams Are Impacting Many People, Even Mark Cuban appeared first on PaymentsJournal.

Visa has announced that it will enable its merchant acquirers to settle transactions in stablecoins, which are cryptocurrencies pegged to a fiat currency or a commodity. To do this, Visa is partnering with blockchain company Solana and merchant acquirers Worldpay and Nuvei. This means that merchants who accept Visa cards can choose to receive their payments in a digital currency that is more stable and less volatile than other cryptocurrencies.

“This is a big step for the development of digital currencies as a tool within financial services,” said James Wester, Head of Cryptocurrency at Javelin Strategy & Research. “The settlement process is not an area that consumers see, but it’s a crucial part of how merchants accept payments; it affects their costs and access to funds.”

Visa’s embrace of stablecoins and blockchain technology could transform the way money moves around the world. By allowing its merchant acquirers to settle transactions in stablecoins, Visa is reducing the friction and cost of cross-border payments, enhancing the efficiency and security of the payment system, and providing more choice and flexibility to customers and partners. This news also means that Visa is positioning itself as a leader and a bridge between the traditional and the digital payment worlds.

Visa’s move is interesting for a few reasons. First, it reflects the growing popularity and adoption of stablecoins, which are seen as a reliable and scalable form of digital currency.  Second, it demonstrates the increasing convergence and collaboration between fintech companies and traditional financial institutions, which are leveraging each other’s strengths and capabilities to offer better products and services to customers. 

Third, it indicates the evolution and diversification of the credit card industry, which is facing new challenges and opportunities from the emergence of alternative payment methods, such as mobile wallets, peer-to-peer payments, and cryptocurrencies. By supporting stablecoin settlement, Visa is enhancing its value proposition and competitiveness in an increasingly diverse global payment market.

“By introducing stablecoins into the process, Visa is demonstrating how digital currencies can make settlement more efficient,” Wester said. “This is potentially good for merchants, but it’s also good for digital currencies as it’s a strong use case for highlighting their utility.”

The post Visa to Allow Stablecoin Settlements for Banking Partners appeared first on PaymentsJournal.

X, the social network formerly known as Twitter, has secured a currency transmitter license from Rhode Island regulators, underlining its ambitious foray into the financial services sector, according to Cointelegraph.

The currency transmitter license, obtained on Aug. 28, is mandatory for companies engaged in financial activities concerning money transfers and receipts, spanning traditional fiat currencies and the burgeoning realm of digital cryptocurrencies.

With this regulatory nod, X possesses the authority to facilitate the custody, transfer, and exchange of digital currencies. This brings Elon Musk one step closer to his vision of transforming X into an all-encompassing “everything app,” similar to Alipay and WeChat.

At PaymentJournal, we have covered X and its quest to reorient toward being a social payments platform. Twitter registered in November 2022 to be a money transmitter with the U.S. Treasury’s Financial Crimes Enforcement Network, and it has been proceeding with state-level licenses necessary to transition to becoming a payments company.

The approval from Rhode Island’s regulators follows X’s successful acquisition of money transmitter licenses in Michigan, Missouri, and New Hampshire on July 5. X has now secured transmitter licenses in seven U.S. states.

Although the specifics of X’s forthcoming financial offerings remain shrouded in mystery, insiders with knowledge of the company’s plans suggest that initial services will bear a resemblance to traditional fiat currency transactions, reminiscent of platforms like PayPal, a company co-founded by Musk. However, Cointelegraph reports reveal that Musk has instructed developers to build the platform in a way that allows future crypto functionality to be integrated.

“Clearly, Elon Musk and X are looking at payments as a way to increase the utility of the X platform,” said James Wester, Head of Cryptocurrency at Javelin Strategy & Research. “Licensing and permits, including at the state-level, is an important part of the process, but it’s only the beginning. The big question is whether or not X has the reach, reliability, and reputation that will make it an app consumers want to trust with financial transactions. Will they want to use X for payments given the other choices they have? That’s a big open question.”

The post Elon Musk’s X Continues Push to Become a Payments Company appeared first on PaymentsJournal.

Shanghai announced plans to establish a blockchain infrastructure, aiming to streamline its processes within its economy, public services, and its governing body. The government hopes to have the blockchain infrastructure fully implemented by 2025. 

According to an article by CoinGeek, Shanghai is setting its sights on becoming an international epicenter for blockchain technology. The initiative will be overseen by a “market-led, industry-university-research collaboration,” and the city’s government plans to build five research and development organizations in order to attract top talent and focus on innovation. 

As the government of Shanghai begins to lay the groundwork for the significant effort, it will be looking to test blockchain technology in various ways, including carbon reduction and supply chain finance.  

“This is one more example of China’s ongoing support for blockchain technology,” said James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research. “It has been considered a strategic technology by the Chinese government since 2019, and there have been various incentives and programs developed across China to encourage development of use cases.”  

“Not surprisingly, the Chinese are not as interested in decentralized applications, but the efforts in Shanghai are in keeping with the overall interest and investment in blockchain in China,” he said. 

Crypto Is No Longer a Fringe Topic 

Crypto has experienced a monumental shift within the financial landscape over the past few years. And it’s now being factored into international trade, primarily because of its lower transaction costs and faster payment processing.  

This year, the crypto market is expected to exceed $2 trillion, and it’s continuing to attract new players and digital currencies, eager to capitalize on these opportunities.  

However, with all the clear advantages that crypto offers—security, faster payments, and lower transaction costs—there is still that proverbial elephant in the room: Its unpredictability in the marketplace presents real challenges that can translate into serious losses.  

Adding to these challenges are the constant threats of regulation from governments around the world, as many fear that cryptocurrencies could be the gateway to illicit activities.  

While there’s still much to work out within the crypto landscape, there’s no doubt that crypto has made its mark on the financial landscape. And the government of Shanghai sees the opportunity of crypto and has already placed big bets on it.  

The post Shanghai to Fully Implement Blockchain Infrastructure by 2025  appeared first on PaymentsJournal.

PayPal has launched a U.S. dollar stablecoin, PayPal USD (PYUSD), which can be redeemed one-to-one for U.S. dollars. As of today, eligible U.S. PayPal customers who have purchased PayPal USD will have the opportunity to transfer PayPal USD between PayPal accounts as well as external wallets, if compatible.

According to PayPal’s press release, customers will also be able to send P2P payments using PYUSD, pay for purchases by using PayPal USD by selecting it at checkout, and convert any cryptocurrencies supported by PayPal to and from U.S. dollars.

PayPal USD will be featured as an ERC-20 token issued on the Ethereum blockchain and will be easily accessible for web3 applications, wallets, and external developers.

“This is an important development for crypto and stablecoins,”said James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research. “For a company with the stature of PayPal to dedicate the necessary resources to issue a stablecoin is notable. PayPal, like most financial services companies, is naturally risk averse, so wading into the stablecoin discussion means they are willing to deal with any of the risk and regulatory consequences. That is especially interesting given the regulatory environment around crypto and stablecoins at the moment. But it is also a sign that PayPal sees the value of stablecoins as they look at the future of payments and digital commerce.” 

Stablecoins Are an Answer to Crypto’s Volatility

Cryptocurrencies have been a significant topic of interest for some time now, and 2023 seems to be the year when adoption will flourish. However, the biggest stumbling block to mass adoption—keeping users and investors from embracing crypto—is the perception of volatility.

PaymentsJournal recently discussed stablecoins with Javelin Strategy & Research Analyst Joel Hugentobler, who co-wrote the recent report Building a Better Stablecoin. The biggest draw toward stablecoins is the fact that they are pegged to a “stable reserve asset” such as gold or fiat currency. Fiat currency is in no way as volatile as unpegged cryptocurrencies are.

Merchants are also increasingly adopting these digital assets, which provide low-cost, borderless, and instant transactions.

In their report, Hugentobler and Wester discussed the various benefits of adopting stablecoins and how their continued growth is catching the attention of developers wanting to enhance their offerings.

The only issue that could pose a threat to the innovation and growth of the stablecoin market is the type of regulation that gets applied. It appears that stablecoins could be subjected to more regulatory consideration, as they could be seen as a threat to the integrity of the traditional financial system. Some of the rules and requirements could encompass reporting compliance, taxation, and consumer protection.

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Although 2022 was a turbulent year for Bitcoin, losing more than 60% of its value, its price has since gone up by 83%.   

As adoption continues to increase, Bitcoin must continue to address concerns about its environmental, social, and governance impact (ESG). A recent report from KPMG delves into this and looks at the misconceptions that still surround Bitcoin, as well as the use cases that could potentially draw value. 

Crypto Findings 

When it comes to Bitcoin’s environmental impact, KPMG’s report states that it doesn’t emit direct emissions. The hardware used to mine Bitcoin is powered by electricity, and Bitcoin only uses 110 terawatt hours of energy every year, which is 0.55% of global electricity use. To put that further in perspective, it’s the equivalent of energy used to power a tumble dryer. 

The study also found that there’s a lot of social awareness around Bitcoin, and it can be used to facilitate cross-border payments, especially in developing countries. Bitcoin played a crucial role in raising funds for Ukraine last year, and the efficiency and speed of access to these funds was made possible via cryptocurrency.  

Ongoing Controversies 

The KPMG study aims to showcase the many benefits of crypto and dispel any misconceptions about Bitcoin. But it’s important to note that confusion and controversy around Bitcoin remains.  

Some legislators have heavily criticized crypto, calling it a haven for “financial criminals” and other troublemakers. Those in favor argue that the good in the industry could be negatively impacted by harsh legislation, obstructing its growth.  

“Criticisms of bitcoin mining often come down to consumption of electricity in the proof-of-work protocols,” said Craig Lancaster, Analyst at Javelin Strategy & Research who recently covered the topic earlier this year in a report titled Bitcoin Mining and ESG: The States Start Moving. “But to stop there is to foreclose the possibilities of bitcoin, other cryptocurrencies, and digital assets in general. There is potential—both realized and in development—for blockchain technology to provide elegant solutions for a range of use cases, including such tough nuts to crack as cross-border payments.” 

“Further, bitcoin miners, like any businesspeople, must keep an eye on the costs of doing business, and electricity is a huge one,” he said. “We’re now starting to see cooperative arrangements like the one in Texas, where miners are reducing usage during times of high demand from the electrical grid. There have been innovations where natural gas from well flaring has been used to power mining operations. These kinds of ideas can be innovative, creative, and forward-looking, a much better place to be than forever restating the challenges as if they’re insurmountable,” he said. 

The post New Study Finds that Bitcoin is Still Misunderstood  appeared first on PaymentsJournal.

The cryptocurrency landscape has been characterized as a digital wild west for years, in large part due to its lack of regulation and lack of relevant accounting standards. As a result, it’s been difficult to pinpoint the triggers that contribute to the extreme volatility of these digital assets. Overall, the unpredictability and the inability to foresee crypto’s future worth has made adoption and investment difficult. But stablecoins may be the solution—and have already caught the attention of developers endeavoring to improve financial services.  

In a recent report, “Building a Better Stablecoin,”Joel Hugentobler, Analyst of Cryptocurrency at Javelin Strategy & Research, dives into what stablecoins are, the most popular use cases, and what issuing teams can do to ensure they build a better stablecoin.

What Are Stablecoins?

A stablecoin is a type of digital currency that is pegged to what is considered a stable reserve asset, such as fiat currency or gold. The objective is to offer all the perks of using cryptocurrency without the instability that may come with it. Fiat currencies rarely experience this type of price volatility as compared to unpegged cryptocurrencies such as Bitcoin.

Merchants are increasingly adopting stablecoins as they are borderless, instant, and low-cost transactions. Use cases are expected to continue expanding as they become a more permanent fixture in the cryptocurrency ecosystem.

“A stablecoin can provide a viable cross-border payment option to send money at reduced costs with faster settlement speeds, where international wires can take multiple weeks,” said Hugentobler. “They can also offer programmable features through what’s called smart contracts. A transaction could be preprogrammed to transfer funds on a home purchase that’s completely dependent on an inspection being completed.”

“I think it’s going to be a key driver as stablecoin adoption increases that the benefits and use cases will rise as well,” he said.

Hugentobler believes that as the adoption for stablecoins increases, banks will experience a healthy dose of competition for services.

How Issuing Teams Can Build Better Stablecoins

Stablecoins may be the answer to a more stable digital asset, however not all are created equal. To build a better stablecoin, issuing teams must focus on financial transparency.

“The single most important thing an issuer can do to build a better stablecoin and promote confidence for consumers and users is to provide transparency through verified and audited financials,” Hugentobler said.

“These reserves, how they are backing their stablecoin, need to be clearly stated because stablecoin issuers like Circle and Tether, at times can be under pressure when they need to fulfill redemption requests near instantaneously,” he said. “Providing comprehensive and audited financial statements can induce confidence in consumers.” 

Stablecoins Will Continue to Gain Traction

In the crypto world, stablecoins are an attractive option to risk averse crypto users. Without having to weather the impact of price or market volatility, use cases will continue to rise, settlements will be instant, and payments will be secure.

Although still in its infancy stablecoins are poised to revolutionize the future of finance.

Learn more about the recent growth in the stablecoin sector, as well as the benefits of stablecoins.

The post Stablecoins: The Answer to a More Stable Digital Asset appeared first on PaymentsJournal.

Once considered a fringe asset, cryptocurrency is now at the forefront of global economic conversations. The digital medium of exchange—hinging on cryptographic technologies for security and anonymity—is no longer just an investment instrument. It’s becoming an integral part of the financial landscape, especially in the realm of international trade.

As we delve further into the digital age, the potential implications of widespread cryptocurrency adoption are coming into clearer focus. These digital currencies offer promising advantages such as reduced transaction costs and expedited payment processing. However, they also pose unique regulatory challenges that need to be addressed to ensure sustainable and inclusive growth.

As we explore the economic implications of cryptocurrency in the sphere of international trade and unravel how this digital innovation is shaping transaction dynamics, its also important to look at the influence on regulatory frameworks, as well as the broader implications for the global economy.

The Upsurge in Cryptocurrency Adoption

From obscure beginnings more than a decade ago, cryptocurrency has transformed into a global financial phenomenon. As of 2023, the global crypto market has exceeded $2 trillion, with thousands of digital currencies vying for a slice of this burgeoning market. This rapid expansion is not confined to individual investors or tech enthusiasts; businesses and even governments have started to acknowledge the potential of cryptocurrencies.

Leading this paradigm shift is Bitcoin, the pioneering digital currency, closely followed by Ethereum and other altcoins. These digital assets offer a decentralized, peer-to-peer payment system that can operate independently of traditional banking and governmental oversight. The promise of lower transaction costs, instant payments, and enhanced security offered by blockchain technology has piqued the interest of businesses globally.

Cryptocurrency adoption is not uniform, however, with certain regions demonstrating a higher propensity for embracing this technology. Asian economies like South Korea and Japan, and Western nations such as the United States and the UK, are leading the way in integrating cryptocurrency into their economies.

In the context of international trade, these advancements could prove transformative. Cross-border trades, often burdened with high costs due to currency exchange fees, handling charges, and the involvement of intermediaries, are ripe for disruption. As businesses around the globe start recognizing the potential of cryptocurrencies, we are witnessing a tectonic shift in international trade dynamics.

Lower Transaction Costs and Speedy Transactions

One of the most profound advantages of cryptocurrency in international trade is the potential to reduce transaction costs. Traditional cross-border transactions often involve hefty fees levied by banks and financial institutions. These can include wire transfer fees, currency exchange fees, and additional costs for third-party intermediaries.

Cryptocurrency transactions, on the other hand, bypass these intermediaries by using a decentralized network. This peer-to-peer system effectively eliminates the need for middlemen, thereby reducing associated costs. For businesses engaged in international trade, this could mean significant savings.

Cryptocurrencies also promise faster transactions. Traditional banking systems, especially for cross-border transactions, can be slow, taking from a few hours to several days to process. Conversely, cryptocurrency transactions can be almost instantaneous, irrespective of the geographical distance between the transacting parties. In an era where time is money, such speed can make a massive difference in international trade dynamics.

Despite the clear advantages, the volatility of cryptocurrencies poses a challenge. The value of cryptocurrencies like Bitcoin and Ethereum can fluctuate widely, causing potential losses. However, the advent of stablecoins—cryptocurrencies backed by a reserve of assets—can potentially mitigate these risks.

Regulatory Challenges and Solutions

While cryptocurrencies offer notable advantages, they also present unique regulatory challenges. Due to their decentralized nature and relative anonymity, digital currencies have been linked to illicit activities such as money laundering and terrorist financing. This creates a need for robust regulatory frameworks to monitor and control cryptocurrency transactions.

Regulation is a double-edged sword. While it’s necessary for security and investor protection, over-regulation could stifle innovation and impede the growth of the cryptocurrency market. Striking a balance is a challenging task that regulators worldwide grapple with.

Countries have adopted varying approaches to cryptocurrency regulation. Some nations like China have imposed strict regulations and even outright bans. Conversely, others like Singapore and Switzerland have fostered a more accommodating environment, providing legal clarity and support to cryptocurrency initiatives.

On the international stage, standardizing cryptocurrency regulations is an even more formidable challenge. This is due to the variation in regulatory norms across nations, making it difficult to devise a one-size-fits-all solution. Nevertheless, international bodies like the Financial Action Task Force (FATF) are working towards global regulatory standards to combat the illicit use of cryptocurrencies.

These challenges underscore the importance of regulatory agility in response to the evolving crypto landscape. Policymakers should aim to create a conducive environment for the growth of cryptocurrencies while mitigating the associated risks. In this regard, global collaboration is crucial. International bodies, governments, and the crypto industry must work together to shape a regulatory landscape that is adaptive, resilient, and inclusive.

The Future of Cryptocurrency in International Trade

As we venture further into the digital age, it’s becoming clear that the integration of cryptocurrencies into international trade could significantly shape the future economic landscape. The reduction in transaction costs and time, combined with enhanced security provided by blockchain technology, is enticing more businesses and governments to explore the potential of digital currencies.

The promise of cryptocurrencies extends beyond operational efficiencies. They could democratize financial systems by providing unbanked populations access to financial services. In many developing nations where banking infrastructure is limited, cryptocurrencies can provide a decentralized, cost-effective method of transferring funds, thereby fueling economic growth and financial inclusion.

However, the successful integration of cryptocurrency in international trade hinges upon several factors. Crucially, developing robust and harmonized regulatory frameworks will be critical to mitigating risks and fostering a secure environment for crypto transactions. Simultaneously, overcoming technical challenges, such as scalability and energy consumption, will be key to ensuring the sustainability of blockchain technology.

Moreover, the public and private sectors need to invest in education and training to build the necessary skills and knowledge to navigate the crypto landscape. This will aid in dispelling misconceptions, promote informed decision-making, and encourage responsible adoption of cryptocurrencies.

Despite the challenges, the potential of cryptocurrencies to redefine international trade is undeniable. As technology evolves, so too will our means of exchange. It is up to governments, businesses, and individuals to ensure that this evolution leads to a more efficient, inclusive, and sustainable global economy.

The economic implications of cryptocurrency in international trade are profound and far-reaching. They promise to not only reshape how we conduct business across borders but also how we perceive value and trust in the digital age.

Looking Ahead

The integration of cryptocurrency in international trade offers significant potential to reshape global economic dynamics. By reducing transaction costs, expediting processes, and offering enhanced security, cryptocurrencies, underpinned by blockchain technology, promise to revolutionize international trade practices. This transformative potential is increasingly being recognized, with more businesses and governments exploring the adoption of digital currencies.

However, this emerging landscape is not without challenges. Regulatory hurdles, brought on by concerns of illicit activities, the decentralized nature of cryptocurrencies, and their relative anonymity, pose significant issues. While some countries have responded with stringent regulations, others have fostered a more welcoming environment. To effectively leverage the potential of cryptocurrencies, a balance between fostering innovation and ensuring security must be struck.

The future of cryptocurrency in international trade extends beyond efficiencies. By offering financial access to unbanked populations, digital currencies could democratize financial systems and spur economic growth. However, the realization of this future hinges on the development of robust regulatory frameworks, overcoming technical challenges, and investing in education and skills development.

In a nutshell, the economic implications of cryptocurrency in international trade are profound. With the right approach, cryptocurrencies could lead us toward a more efficient, inclusive, and sustainable global economy.

The post How Cryptocurrency Is Reshaping the Global Trade Landscape appeared first on PaymentsJournal.

In a continent plagued by inflation and corruption, cryptocurrencies are helping Africans seeking financial stability and inclusion, according to Cointelegraph.

Weak national currencies, unreliable banking systems, and government corruption have hindered economic growth and financial inclusion in Africa. Cryptocurrencies can offer a way out of this cycle of instability, providing alternatives for international payments, as well as enabling efficient money transfers, and serving as a hedge against inflation.

Crypto is giving Africans the opportunity to participate in the global economy, irrespective of the limitations imposed by their local currencies or traditional banking systems. While some countries in Africa, such as Botswana, have embraced cryptocurrencies with legal frameworks in place, others have taken a more restrictive stance. Bans on banks and financial institutions working in cryptocurrency are common in Africa, but these can be evaded by using decentralized finance platforms.

Look at Zimbabwe. Earlier this year, we covered the crushing level of inflation in Zimbabwe.

Zimbabwe reintroduced the Zimbabwean dollar in 2019, with one Zimbabwean dollar equivalent to $1 USD. Since then, inflation has resurged at an alarming rate, resulting in a significant devaluation of the Zimbabwean dollar. Currently, $1 USD is equivalent to approximately 900 Zimbabwean dollars, and inflation reached a staggering 230% in January 2023.

Consequently, many businesses in Zimbabwe have reverted to demanding payments in U.S. dollars, which are in short supply. This has led many to use informal ledgers and chits to keep track of purchases. Zimbabweans with access to digital currency through decentralized finance platforms, may have an easier time retaining savings in a currency hedged against inflation.

While regulatory challenges persist, the growth of crypto-related ventures and the increasing adoption of cryptocurrencies in Africa signify the continent’s emergence as a significant player in the crypto space.

According to a report by Crypto Valley Venture Capital (CV VC) and Standard Bank, blockchain startups in Africa were able to raise $91 million in the first quarter of 2022, which is a 1,668% year-on-year increase compared with Q1 2021’s growth of 149%. The report predicts that crypto unicorns may emerge from the region within two to three years as more venture capitalists show interest in the region.

Many Africans rely on remittances from abroad or within the continent to support their families, businesses, and communities. Cryptocurrencies offer a cheaper, faster, and more accessible way to send and receive money across borders, especially in countries with high inflation and currency devaluation. Some of the leading crypto platforms in Africa are Binance, Luno, VALR, Paxful, LocalBitcoins, Quidax, Bundle Africa, and Trust Wallet. All of these provide a lively crypto environment in Africa, which is likely to continue to flourish.

The post Crypto Is Transforming Africa’s Financial Landscape appeared first on PaymentsJournal.

In the midst of a regulatory crackdown on the cryptocurrency industry, FTX, the failed crypto company, has ambitious plans to relaunch its flagship international cryptocurrency exchange. However, with ongoing bankruptcy proceedings, the road ahead is fraught with challenges and uncertainties.

FTX’s Chief Executive, John J. Ray III, recently announced that the company has commenced the process of soliciting interested parties for the relaunch of the FTX.com exchange, according to the WSJ. Among those expressing interest in supporting the restart is blockchain technology company Figure.

FTX’s attempt to revive its operations takes place against a backdrop of increasing regulatory intervention which its own implosion helped cause. The successful retrieval of misspent customer funds is critical to FTX’s recovery, but it’s a task that poses considerable difficulties. Investigations led by Ray have uncovered details of FTX’s improper use of customer funds, including investments in various ventures. Recovering these funds has proven to be an arduous process, exacerbated by the significant decline in the value of these assets compared to their initial purchase price.

FTX has to also resolve its dispute with Bahamian liquidators, who seized a substantial number of FTT tokens (FTX’s in-house cryptocurrency) in November. Failure to reach a settlement framework is resulting in prolonged litigation over the rightful ownership of these assets, further complicating FTX’s path to recovery.

It’s seems likely that FTX will attempt a rebrand, especially if its founder is convicted of financial crimes. However, why people would choose to use their rebranded crypto exchange over competitors at this point seems to be a mystery. New competitors such as EDX—a centralized crypto exchange powered by Wall Street—will likely be seen as a more secure way to trade crypto, especially because it’s located in the U.S. Regardless, the crypto trading market is significantly more competitive now than when FTX started, and regaining market share will be a challenge.

“At this point, those in charge of FTX have little to lose in attempting to revive the company and salvage what value they can,” said James Wester, Co-Head of Cryptocurrency at Javelin Strategy & Research. “I’m certain there are plenty of people within crypto who would prefer FTX to disappear forever, especially in the current regulatory climate, but there is a potential benefit to this effort if it helps the company recover funds that can go towards making investors and customers whole.”

The post FTX Navigates Regulatory Storm as it Seeks to Reboot Cryptocurrency Exchange appeared first on PaymentsJournal.

EDX Markets (EDX) has recently launched its digital asset marketplace, offering industry leaders a more mainstream alternative to platforms such as FTX and Binance, which have faced regulatory and financial troubles. Backed by major Wall Street firms including Citadel Investments, Fidelity Investments, and Charles Schwab, the EDX marketplace aims to provide a trusted and regulatorily-compliant trading experience. The exchange began executing trades in the past few weeks.

EDX is looking to set itself apart from other crypto exchanges through its non-custodial model. By doing so, EDX avoids directly handling customers’ digital assets, mitigating conflicts of interest, and reducing the risk of asset loss or misuse. Instead, the platform serves as a marketplace where participants can agree on prices, and the actual transfer of cryptocurrencies and cash occurs between the involved firms. This model mirrors the traditional stock market, where investors submit their orders through brokerages rather than accessing the exchange directly.

One of EDX’s key upcoming developments is the launch of EDX Clearing, a clearinghouse designed to facilitate trade settlement. But what’s different is that customers aren’t required to have money sitting on the EDX exchange.

Overall, EDX’s conservative approach to listing cryptocurrencies, focusing solely on Bitcoin, Ethereum, Litecoin, and Bitcoin Cash, is a strategic move to avoid potential conflicts with regulatory bodies such as the Securities and Exchange Commission (SEC). Those currencies have not been labeled securities, as opposed to other cryptocurrencies.

As the cryptocurrency landscape continues to evolve, EDX’s emergence marks a significant development in the industry. Its success in attracting backing from major financial institutions, its non-custodial model, and its focus on regulatory compliance all contribute to trading environment that is perceived by some to be safer. It could also to lead to broader adoption of cryptocurrencies by the public. Consumers may be more inclined to trade cryptocurrencies when they are on an exchange supported by their bank.

The post EDX Markets: Wall Street’s Answer to Safe and Efficient Crypto Trading appeared first on PaymentsJournal.

Apple said it will remove Damus from its App Store if the decentralized social messaging app doesn’t remove a certain component off its payments feature.

According to CNBC, Apple is giving Damus 14 days to remove the Bitcoin tipping function from its app. The feature—which has fallen out of Apple’s terms by not using its in-app purchase system—is called “zap” and enables users to send Bitcoin to their favorite content creators through the blockchain’s second layer, Lightning Network.

Apple has expressed concerns about content creators using zaps to sell digital content on its platform, and in general, has forbidden app creators from using in-app payments to sell added content or add-ons. The only loophole is that the payments be made through Apple, who takes a 30% cut.

In a statement, Apple said that the company reviews “all apps against the same set of guidelines that are intended to protect customers and provide a fair and level playing field to developers.” It stated further that it “identified a feature in the Damus app that allows users to send a tip in connection with digital content in the app, which violates App Store Review Guidelines.”

Another Blow Towards Decentralized Apps and Other Emerging Technology?

Backed by Jack Dorsey, former Twitter CEO, Damus could be setting a precedent for all future attempts of decentralizing social media apps. Suspicions loom as the Damus team was set to give a talk at Oslo’s Freedom Forum about how Bitcoin and decentralized social media can help support financial freedom, just this week.  

Apple’s desire for control over emerging technology was seen charging 30% commission on in-app NFT sales, in which Epic Games CEO Tim Sweeney called the move as “grotesquely overpriced.”

Dorsey wrote in a tweet that “this seems to be a misunderstanding by @apple of how this feature works and what it’s for. It’s a critical part of the future of the internet. It has the capacity to bring people around the world into the economy without the traditional gatekeepers.”

The post Apple Will Remove Damus from App Store if Bitcoin Tipping Isn’t Removed appeared first on PaymentsJournal.

First Binance, now Coinbase.

The Securities and Exchange Commission filed another cryptocurrency-targeted lawsuit Tuesday, accusing crypto exchange Coinbase of operating as an unregistered securities exchange. The complaint was filed in Manhattan federal court.

The move comes a day after the agency went after Binance with a lawsuit, accusing the exchange and founder Changpeng Zhao of misappropriating customer money, misleading investors, and continuing to recruit U.S. customers despite not being permitted to operate in the country.

The regulator’s complaints at the center of the Tuesday filing against Coinbase constitute the heart of its ongoing attempts to bring the cryptocurrency into line with securities law.

“Coinbase has elevated its interest in increasing its profits over investors’ interests, and over compliance with the law and the regulatory framework that governs the securities markets and was created to protect investors and the U.S. capital markets,” the SEC’s filing read.

Coinbase, on the other hand, has been bracing for this action for some time. In a March blog post—written in response to the SEC’s Wells notice to the company, a precursor of enforcement action—Coinbase said it has been operating with transparency, only to be bullied by regulators. On Tuesday, the day of the SEC’s filing, the exchange’s chief legal officer, Paul Grewal, was scheduled to testify before a House committee regarding the new Digital Asset Market Structure Discussion Draft. Coinbase released a preview of his planned remarks Monday.

“Congress needs to draw the lines between when digital assets and the technology that underpins them should be regulated as commodities, when they should be regulated as securities, and when financial regulations should not apply or simply would make no sense,” Grewal wrote. “As the legislative process unfolds this bill will no doubt evolve, but we believe it already offers a strong foundation on which to build a workable and balanced regulatory framework for crypto innovation within the U.S.”

All About Regulation

The SEC’s view, under Chairman Gary Gensler, is that some cryptocurrencies and other digital assets are securities and are thus subject to the oversight of his agency in the United States. In Gensler’s view, the Howey Test—a Supreme Court rule for determining whether assets qualify as investment vehicles—holds sway. The wide view within the cryptocurrency industry contends that the Howey Test doesn’t apply.

Gensler’s perspective also puts his agency at odds with other governmental regulators, notably the Commodities Futures Trading Commission, which has also sought to oversee cryptocurrencies and digital assets. The CFTC’s purview includes such financial products as derivatives, futures contracts, and options.

These disputes, and the attendant murkiness, have stymied the industry in the United States and prompted crypto insiders to warn that the industry could abandon the U.S. market and seek shelter in friendlier overseas locales.

“Today’s lawsuit against Coinbase is not unexpected,” said James Wester, Research Director for Digital Assets and Crypto at Javelin Strategy & Research. “The SEC’s recent activity against other exchanges, and the chairman’s public positions, have made some action against Coinbase inevitable.”

The proposed legislation Grewal was scheduled to speak about Monday is one congressional attempt to bring clarity to the situation.

Tuesday’s filing—more so than Monday’s, which centered more on alleged malfeasance on the part of Binance than on legitimate areas of regulatory dispute—seems certain, at least in the short term, to keep matters far from resolution.

“The issue with the Coinbase lawsuit is that it comes after Coinbase has asked for clarification and guidance on its activities from the SEC,” Wester said. “By bringing this action against Coinbase, the SEC seems to be saying it will not offer direction on compliance to market participants before they offer services but instead will proscribe activities via lawsuits after they have come to market. That’s not a good method for encouraging innovation.”

The post SEC Targets Another Crypto Exchange, Suing Coinbase appeared first on PaymentsJournal.

The Securities and Exchange Commission, already embroiled in a fundamental dispute with cryptocurrency firms on matters of turf and regulation, is bringing action against the world’s largest exchange. In a case filed in federal court Monday, the agency accuses Binance of shoddy funds management and lying to investors and regulators.

The filing of the case was first reported by the New York Times.

The action comes against the backdrop of an overarching dispute between the SEC and the cryptocurrency industry. The agency, in the words of Chairman Gary Gensler, views cryptocurrencies as securities and thus subject to its regulations. The industry has countered that such regulation will drive it out of the United States.

In a recent appearance before a House oversight committee, Gensler told lawmakers that “I’m trying to drive it to compliance, and if they’re not complying with the laws, then they shouldn’t be offering their products to U.S. investors.”

Binance, in particular, has been hostile toward the reach of regulation. In the case filing, the SEC cited a 2018 email from Binance’s chief compliance officer, who wrote: “We do not want (Binance.com) to be regulated ever.”

The Heart of the Accusations

In the case filing, the SEC accuses Binance of the following:

• Mixing billions of dollars in customer money and shuttling it off to another company, Merit Peak Limited, owned by Binance founder Changpeng Zhao.
• Misleading investors about the efficacy of its detection and control of manipulative trading.
• Continuing to recruit U.S. customers despite not being permitted to operate in the country.

Binance and Zhao “enriched themselves by billions of U.S. dollars while placing investors’ assets at significant risk,” the lawsuit said.

Binance Under Pressure

The case is the latest blow to Binance, which has been laboring under increased scrutiny from across the U.S. regulatory and legal landscape.

The Justice Department is looking into suspicions of money laundering by the exchange. Late last year, auditor Mazars announced that it was parting ways with cryptocurrency companies generally, affecting Binance. And the exchange’s share of the market has contracted.

The SEC’s action, which includes 13 charges against Binance and Zhao, comes on the heels of a civil enforcement action by the Commodities Futures Trading Commission in late March.

At the time, the CTFC said, “This should be a warning to anyone in the digital asset world that the CTFC will not tolerate willful avoidance of U.S. law.”

Interestingly, the SEC and the CTFC are mired in their own tussle over crypto—namely, which agency is the preeminent regulator. The SEC’s view is that crypto assets are securities, whereas the CTFC considers them commodities.

It’s regulatory murkiness that those in the industry are eager to see resolved.

“Binance and its CEO have been scrutinized for some time, but the lack of regulatory clarity continues to affect U.S. players, even those who are trying to comply with regulations,” said Joel Hugentobler, Analyst of Cryptocurrency at Javelin Strategy & Research. “At the end of the day, everyone knows fraud has to be addressed, but we have another example here where ‘crypto’ is not the issue; it’s potential bad actors. I don’t see this Binance issue changing the overall demand for crypto in general over the longer term.”

Overview by Craig Lancaster, Analyst/Content Specialist, Financial Services and Payments at Javelin Strategy & Research.

The post SEC Accuses Cryptocurrency Firm Binance of Malfeasance appeared first on PaymentsJournal.

Mainland China has banned cryptocurrencies since 2021, however, Hong Kong will allow retail investors to trade cryptocurrency under its new regulation. Beginning June 1, authorities will accept applications for licenses from crypto exchanges, enabling them to sell tokens such as bitcoin and ether to individual traders.  

Christopher Hui, Hong Kong’s secretary for financial services and the treasury, told AFP in an interview that the new crypto exchange regulations have drawn in over 80 inquiries with the city’s investment promotion agency. 

“Despite the potential risks involved, (virtual assets) also carries with it fundamental value,” he said. “So for these positive elements to be harnessed, these activities have to be allowed in a regulated way.” 

Regulators Have Their Eyes on Cryptocurency

Following the collapse of the trading platform FTX, regulators are once again on a mission to crack down on crypto markets.  

Although Hong Kong was skeptical about allowing crypto exchanges to accept retail clients, Hui recognized that there was “considerable interest” in trading.  

With these new rules, crypto exchanges are required to evaluate the client’s knowledge of cryptocurrencies, risk tolerance, and enforce risk-exposure limits.  

We have covered how the regulation of cryptocurrencies has become an increasingly contentious issue. The debate still remains as to the way it must be regulated to the need of regulation at all.  

The post Hong Kong Plans to Become Cryptocurrency Hub  appeared first on PaymentsJournal.

Tuesday dawned with news that stretches the utility of crypto-related rewards and payments in Latin America and Europe.

Crypto Rewards

Fold, which offers Bitcoin rewards and no-fee bitcoin purchasing through payments partnerships, has placed a local office in El Salvador, to mark its entry into Latin America. Notably, El Salvador was the first country in the world to use bitcoin as a legal tender.

In Europe, meanwhile, Yield App—a digital wealth platform that touts the ability to “safely earn passive yield on your digital assets at the click of a button”—is partnering with Volt, a London-based real-time payments network. Through the integration of Volt’s pan-European open-banking solution, Yield App customers can buy cryptocurrency in real time directly with their bank.

Fold in El Salvador

El Salvador adopted bitcoin as legal tender in September 2021, becoming the first country to do so. The move drew widespread blowback, with critics citing bitcoin’s perceived instability and environmental impacts, among other concerns.

Of late, bitcoin transaction fees—the cost of processing by a miner and confirmation in a transaction—have risen sharply, causing pain for Salvadorans using the currency. As of Monday, transaction fees averaged $4.67 U.S. A week earlier, the average fee sat at $30.91 U.S.

Despite those challenges, Fold, which has processed more than $1 billion in volume, cast its move into the market as a display of confidence in the long-term growth of cryptocurrency in Latin America. The region has a significant population without access to traditional banks.

“We’re thrilled to be establishing an office and local team in El Salvador,” Will Reeves, Fold’s CEO, said in a statement released by the company. “As a country that has embraced bitcoin and has been a pioneer in adopting new monetary technology, we believe that El Salvador is the perfect place for Fold to expand its presence in Latin America.”

Yield App in Europe

The partnership between Yield App and Volt offers additional on-ramps to their solution for users who traffic in the British pound and the euro. The joining of forces is aided by the use of open-banking technology, giving customers an enhanced digital payment experience.

“It’s time for the industry to embrace open banking solutions so that retail crypto investors aren’t left outside in the cold,” Gero Piskov, Card and Payment Manager at Yield App, said in a prepared statement. “As advocates of the latest payment technologies, we’re thrilled to partner with Volt to provide our customers with fast, secure and seamless transactions directly from their banking app.”

The post Fold Takes Bitcoin Rewards to Latin America; Yield App, Volt Partner on Crypto appeared first on PaymentsJournal.

Liechtenstein, the microstate bordered by Austria and Switzerland, has moved forward with plans to accept Bitcoin as payment for government official services.  

Via the effort, all cryptocurrency payments will be instantly converted into Swiss Francs to avert exchange rate issues. What’s more, the alpine country is taking the necessary cautionary measures needed, which is in line with the region’s growing acceptance of cryptocurrency. 

Liechtenstein Becoming Crypto-Friendly 

According to Finbold, Liechtenstein became the first government in the world to legislate cryptocurrencies. This was possible through the passing of the Liechtenstein Blockchain Act in 2019. Since then, many crypto-related businesses have made this country home, and is considered one of the few “financial centers in Europe” that promotes market expansion for cryptocurrency banking and investment services.  

This, in combination with a fusion of modern technology as well as a favorable government regulatory environment, makes the country an attractive center for the crypto space. As does that fact that the Liechtenstein Cryptoassets Exchange (LCX) is strategically located in Liechtenstein to have easier access to the broader European market.  

“That Liechtenstein is small and nimble no doubt informs how it has embraced forward thinking about digital assets,” said Craig Lancaster, Analyst and Content Specialist at Javelin Strategy & Research who has written about bitcoin regulation. “Still, one can’t help but notice the contrast with how regulation and legalities concerning the space have unfolded in the United States, which of course isn’t small or nimble.” 

“This is an industry crying out for cogent regulation and one that isn’t getting it. Liechtenstein provides an example of how to approach digital assets in a way that recognizes they’re here to stay and folds them into the existing ecosystem.” 

A Look Ahead 

This move will undoubtedly spur a greater adoption of Bitcoin as a viable currency for everyday transactions. As the world of finance continues to embrace the digital age, small countries like Liechtenstein are setting a precedent for other nations to follow. 

The post Liechtenstein Is Becoming a Center of Innovation and Investment in the Crypto Space  appeared first on PaymentsJournal.

Cryptocurrency coin Baby Doge announced it would soon go live on payment cards backed by a prepaid card issued by Canadian firm FCF Pay, likely as an attempt to create additional market opportunity for the fledgling coin.

Yuri Mochan provides details on the Baby Doge plan in U Today:

“The official account of Baby Doge Coin (BabyDoge) has tweeted that less than 24 hours remain before the virtual crypto card of BabyDoge goes live, powered by Canadian crypto payments platform FCF Pay. Despite the big adoption news on the horizon, BabyDoge’s price is in the red, trading at $0.000000002642; that is, minus 2.45% over the period of the last 24 hours.”

Attaching crypto accounts to prepaid Visa and Mastercard programs provides simple and easy access to crypto owners who want to easily create liquid spending opportunities with their holdings. Established exchanges such as Binance have created repaid programs in certain markets such as Latin America to encourage normalization of crypto as a payment currency as opposed to an unsecured investment opportunity. In these cases, General Purpose Reloadable prepaid cards serve a critical role by providing access to standard payment rails and fiat currency conversion, while also giving users the flexibility to load value as needed.

The key to success for forward momentum in combining crypto and prepaid should involve clear identification of related partners such as the card issuer, as well as reasonable fees to the consumer. Adding nearly valueless meme coins only encourages the adoption of high fees in order to create financial value to the platform. The FCF Pay website highlights fees including $6 for a new card, $3 for a balance refill plus a 3.5% reload fee and a $2 monthly fee. In contrast, the Binance Card, using its issuance in Columbia as an example, reports no card issuance fee, no monthly fees, and a transaction fee of 0.9%. To benefit users there is also a cashback rewards program with their card. Binance also requires KYC identity verification, providing addition layers of security.

Moving crypto from speculative investment to usable currency requires discipline to innovate by taking advantage of established protocols in payments that serve to protect the consumer. The move by Baby Doge appears to be an attention grab for a low value meme coin and the minimal security protections and KYC standards with FCF Pay only exacerbate the poor connotation of crypto instead of highlighting the potential changes within the payments industry.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Javelin Strategy and Research.

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As the cryptocurrency industry awaits a legal framework from Congress—two House committees are now collaborating in an effort to bring legislation forward—the Biden administration is pushing a proposal to tax miners for their energy use.

In a blog post published Tuesday by the Council of Economic Advisers, the administration said it wants Congress to impose a 30% tax on the cost of the electricity used in cryptocurrency mining.

From the post: “Cryptominers’ high-energy consumption has negative spillovers on the environment, quality of life, and electricity grids where these firms locate across the country.”

And: “Currently, cryptomining firms do not have to pay for the full cost they impose on others, in the form of local environmental pollution, higher energy prices, and the impacts of increased greenhouse gas emissions on the climate.”

The proposed excise tax is dubbed DAME, for Digital Asset Mining Energy.

Mixed Cryptocurrency Mining Approaches in the States

As Javelin Strategy & Research detailed in a recent report, Bitcoin Mining and ESG: The States Start Moving, the absence of any legal framework for mining operations by the federal government has prompted individual states to step into the gap and impose their own rules.

Bitcoin, by far, is the most notable example of a cryptocurrency that is mined using proof-of-work protocols, whereby large computer operations solve complex algorithms and gain access to coins. The resultant energy use from these large operations has been targeted for increased regulation by some states.

The result has been a scattershot of rules, some designed to rein in crypto mining (New York) and some putting up a welcome sign for mining operations (Missouri and Mississippi, for example).

Who’s the Regulator?

By any measure, these attempts at bringing legal coherence and regulation to a nascent industry so far have spawned mostly chaos.

Two federal agencies, the Securities and Exchange Commission and the Commodity Futures Trading Commission, are engaged in a turf battle over who has oversight of crypto and digital assets.

SEC Chairman Gary Gensler has staked out the view that digital assets are securities and wants crypto firms to register with the agency and behave like the firms it traditionally oversees.

The CFTC, in contrast, has labeled bitcoin and ether, the two dominant cryptocurrencies, as commodities. Chairman Rostin Behnam wants Congress to give the agency control over crypto spot markets.

And then there’s Congress itself. The two-committee gambit by House Republicans—Financial Services and Agriculture, which have oversight of the SEC and the CFTC—is the latest effort legislative effort to bring clarity to the space.

“Two committees working hand in hand on a joint legislative product like this is unprecedented, and I believe it vastly increases our chances of getting it right,” said Rep. French Hill (R-Ark.), the chairman of the Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion.

How Much Energy?

As of Tuesday, the University of Cambridge Bitcoin Electricity Consumption Index showed an estimated annualized total of 131.22 terawatt hours, with a theoretical low of 63.64 terawatt hours and a theoretical high of 231.98.

The consumption has risen dramatically from 2017:

However, Javelin Strategy & Research analyst Joel Hugentobler described the proposed tax as a blunt and errant instrument that, if enacted, will drive the industry away.

“Taxing miners, whatever the reasoning is, is going to result in their going to another country where they can find power just as cheap and won’t have to pay taxes,” he said. “The federal government keeps saying it wants to be the leader in innovation, but everything it’s proposing, or has taken years to propose—regulatory framework in general—is proving otherwise.”

He also took issue with specifics of the administration’s case for the tax, pointing out that crypto miners already avail themselves of renewable power and innovative approaches such as harnessing natural gas flaring sites for power, thus reducing methane emissions.

“Miners don’t raise the power prices to consumers. They sign agreements with utility companies to lock in their price per kilowatt hour,” he said. “It’s a win-win for both parties. The utility gets guaranteed payment for supplying the power, and the mining company gets a guaranteed price. And miners are willing to shut down in cases of emergency so that additional baseload power is available for citizens.

“What they’ve done in Texas with the Ercot power grid is unbelievable. In blackouts, miners have been able to shut down within 10 minutes and supply that power to those who need it. No other industry can do this.”

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In an expected but still major development, the European Union has gained its first rules to govern the cryptocurrency industry, with the approval of the Markets in Cryptoassets (MiCA) regulation.

The legislation is notable in that it’s the first attempt at supervising the nascent industry on a large scale. Mairead McGuinness, European Financial Services Commissioner, has said she expects the law to take effect in July after formal approval by the 27 member states of the union.

The legislation has been a long time in coming to this point—a three-year journey—and has been hailed by executives in the crypto space, who have long advocated for legislative clarity over clunky and contentious regulatory actions.

The development in the EU stands in stark contrast to what’s happening in the United States, where the Securities and Exchange Commission leadership has flatly declared digital assets securities that fall under the agency’s supervision. Chairman Gary Gensler was on Capitol Hill this week, sparring with Congress over what some lawmakers call overzealous rulemaking by the agency.

What MiCA Will Do

Once the new rules are established in the EU, they will require companies in the crypto space to become registered in one of the EU member states. Once that registration goes into effect, the company will be able to operate across the union. Rules will be in place to ensure adequate risk management and governance processes.

Certain requirements under the rules will be implemented gradually, according to a report from Bloomberg. For example, the rules regarding stablecoins will be implemented in July 2024.

“We are putting safeguards in place that would prevent companies active on the EU market from engaging in some of the practices that led certain cryptoasset operators to collapse,” McGuinness said while the rules were being debated in parliament.

What MiCa Won’t Do

Critics of the rules say they’re already outdated. The industry is still reeling from high-profile collapses last year, such as the FTX debacle.

The current rules don’t take in crypto lending, decentralized finance, and nonfungible tokens, all major components of last year’s failures.

Still, the presence of some large-scale governance is being widely welcomed—and is being urged on in places, like the United States, where the pace is well behind that of the EU.

Time to Move

Javelin Strategy & Research analyst Joel Hugentobler said the rules in the EU will be attractive to crypto companies, which could prove costly to jurisdictions that aren’t matching them.

“The U.S. is at risk for losing market share or even the global leader in innovation status by continuing the path they’re on,” Hugentobler said. “It would be better for U.S. regulators to implement an ‘OK’ piece of regulation soon than for them to continue to butt heads in disagreement to find a ‘perfect’ piece of regulation that takes much longer.

“If they don’t come out with some clarity and guidance for the industry soon, it won’t be a surprise to see a flood of businesses out of the United States to the EU.” 

The post Vote Gives EU a Common Set of Crypto Rules appeared first on PaymentsJournal.

A sale of 9,800 in seized bitcoin has netted the U.S. government $215 million.

The sale was completed last month. It involved a small number of the roughly 50,000 bitcoin the government seized from James Zhong, a Georgia man, in 2021. Federal prosecutors announced in November 2022 that Zhong had pleaded guilty to wire fraud in obtaining the bitcoin a decade earlier from Silk Road, a dark web marketplace that was shut down in 2014.

The sale brought in almost $22,000 on a per-coin basis.

How Zhong Got the Goods

According to the news release put out by the U.S. Department of Justice after Zhong’s guilty plea, the original theft and the subsequent recovery of the bitcoin played out as a high-tech caper.

The government says Zhong defrauded Silk Road of its money and property by creating a series of accounts designed to shroud his identity, then launching a series of 140 rapid-fire transactions that tricked the Silk Road withdrawal processor and released more than 50,000 bitcoin into his accounts.

He funded those accounts with an initial deposit of 200 to 2,000 bitcoin.

Silk Road was hardly innocent, a haven for drug dealing and illicit goods and services and the laundering of money. In 2015, after international authorities had shut down Silk Road, founder Ross Ulbricht was convicted on seven charges—including drug trafficking, criminal enterprise, aiding and abetting the distribution of drugs over the internet, computer hacking, and money laundering—and was sentenced to life in prison.

As one example of Zhong’s scheme, prosecutors laid out a series of actions he took on Sept. 19, 2012:

• First, he deposited 500 bitcoin into a Silk Road wallet.
• Less than five seconds later, he made five withdrawals of 500 bitcoin in rapid succession—all within a single second—and came away with 2,000 bitcoin.

How the Government Got Zhong

On Nov. 9, 2021, IRS Criminal Investigation agents searched Zhong’s Gainesville, Ga., house and located 50,491.06251844 of the approximately 53,500 in bitcoin crime proceeds they were seeking.

According to the Justice Department’s November 2022 release, the bitcoin was found in an underground floor safe and “on a single-board computer that was submerged under blankets in a popcorn tin stored in a bedroom closet.”

U.S. Attorney Damian Williams of the Southern District of New York emphasized the latter details in announcing Zhong’s guilty plea: “This case shows that we won’t stop following the money, no matter how expertly hidden, even to a circuit board in the bottom of a popcorn tin.”

Following the Money

At the time of the seizure of Zhong’s ill-gotten bitcoin, the government pegged the value of the cryptocurrency at $3.36 billion. That’s roughly $66,000 on a per-coin basis, a bit below the reported value for that day. The March sale represents a small slice of what the government will eventually liquidate from the seizure.

As noted above, 9,800 bitcoin at $215 million comes to roughly $22,000 on a per-coin basis.

Late Thursday, the bitcoin price was around $30,600.

Somebody is making out on that investment. Neither Ulbricht nor Zhong, but somebody.

Context Matters

Javelin Strategy & Research analyst Joel Hugentobler said it’s important to look beyond the flashy headlines at what’s really going on with bitcoin.

“The bitcoin network has reached a milestone in Q1 2023, settling over $100 trillion worth of transactions across the globe since its inception in 2009,” he said. “According to Chainalysis’ data, less than 1% of all crypto transactions are linked to illegal activities.”

He said it’s also a call to leverage the technological advantages of crypto transactions to further impede illicit activity.

“Fiat cash has been the go-to method used for illegal activities for decades,” Hugentobler said. “The kicker here is that transactions on the blockchain can be screened for those types of transactions while cash cannot.” 

The post U.S. Gets $215 Million in Sale of Bitcoin Seized in Wake of Silk Road Fraud appeared first on PaymentsJournal.

Uniswap, a decentralized finance (DeFi) exchange, has launched a mobile wallet that aims to encourage users to buy and trade crypto. 

According to the company, this effort intends to relieve users of constant headaches about self-custody wallets.  

“Self-custody makes DeFi safer and ensures your crypto can’t be misused by a centralized party. But too many people get stuck at the starting line. We get thousands of user support tickets from Uniswap Web App users confused by wallets. So, we’re proud to bring you a self-custodial wallet that is simple, safe, and easy to use,” the company noted in its blog.   

Via the wallet, users are able to trade tokens, switch between Mainnet, Polygon, Arbitrum, and Optimism, as well as have the ability to favorite tokens and wallet addresses to keep track of any ongoing trends or activities that are happening.  

The mobile wallet also gives users the ability to back up their seed phrase on iCloud—or manually—and get notified when transactions are complete through the app’s push notifications.  

Mobile Wallet Adoption 

Rolling out a mobile wallet to streamline the process is a good next step for Uniswap—not just in eliminating any possible confusion users may come across when buying and trading crypto—but in also giving them access at their fingertips.  

As with anything crypto-related, there are hurdles to overcome. But, regulation and compliance is necessary—and will continue to be top-of-mind with any potential reiterations Uniswap may have of its new mobile wallet.  

The post Uniswap Rolls Out Mobile Wallet, Enabling Users to Buy Crypto  appeared first on PaymentsJournal.

With a little more than seven months remaining in India’s G20 presidency, the country’s finance minister is renewing the call for a unified policy to help blunt the risks involved with cryptocurrency investments.

In remarks this week at the Peterson Institute for International Economics in Washington, D.C., Nirmala Sitharaman noted that the crypto collapses affecting investors worldwide mitigate against the effectiveness of reforms on a country-by-country basis.

“Cryptocurrencies are a very important part of the discussion under the G20 India presidency, given so many collapses and shocks in cryptocurrencies,” she said. “We seek to develop a common framework for all countries to deal with this matter.”

It’s a call Sitharaman has issued before, citing the global nature of crypto assets. Her attention to the issue, amid India’s G20 presidency, has brought the discussions into the mainstream of the G20, an intergovernmental forum dedicated to addressing global economic issues.

India’s G20 presidency expires on Nov. 30 of this year.

India and Crypto

That this push is coming from the finance minister of India is interesting given that country’s history with digital assets. At various points, the Indian government has considered legal frameworks and even the outright banning of cryptocurrencies, before it moved toward such regulatory actions as mandatory reporting of crypto trading and investments by companies. Amid the skepticism of cryptocurrencies, the Indian government has embraced the blockchain technology underpinning the industry.

In February 2022, Sitharaman proposed a 30% tax on income from the transfer of digital assets, without deductions.

Rahul Pagidipati, the CEO of India-based cryptocurrency exchange Zebpay, told Entrepreneur India that he welcomes the move toward a global approach: “We strongly believe that a regulatory framework ensuring investor protection and a less restrictive tax policy will enhance the growth and adoption of crypto in India and around the world.”

The Drawbacks of a Piecemeal Approach

In the United States, regulators and lawmakers at the federal and state levels are grappling with how, when, and whether to impose restrictions on the nascent industry. The result, so far, has been a lack of coherence and an application of regulatory scrutiny that has drawn onlookers and ire.

A Javelin Strategy & Research report, Bitcoin Mining and ESG: The States Start Moving, detailed how states are taking positions to welcome or repel the industry, creating a mishmash that’s difficult to navigate. Although that report focuses on environmental, societal, and governance concerns, the lack of a steadying framework affects all elements of the industry. It’s a situation that’s likely to persist, given the disparate and varied interests.

The post India’s Presidency and G20 Leadership Calls for Coordinated Plan to Reduce Crypto Risks appeared first on PaymentsJournal.

Burger King has partnered with Instpower, to place their power bank rental machines throughout the chain’s various locations in Paris , which will process payments via crypto payment services Binance Pay and Alchemy Pay. 

The CEO of the European distributor of Instpower machines, Yann Phu of Flash Development, expressed his excitement about his company’s products being available in Paris: 

“This collaboration with Burger King in Paris has taken us to the next level with our operations in Europe. Instpower’s machines will enable customers to power their devices while on the move.” 

He continued: 

“In Asia, these powerbanks are used widely, but in Europe, the market is only just beginning to embrace them. By having Alchemy Pay helping users to pay with crypto via Binance Pay, we are bringing cutting edge payment options to Europeans.” 

Is France the New Epicenter for Crypto? 

In 2019, France launched a “national framework on digital currencies,” in which French Finance Minister, Bruno LeMaire, proposed the adoption of a single regulatory framework for crypto assets.  

The laws also heavily favor digital currency traders and issuers, creating an ideal environment to thrive within the country’s borders. In fact, before these participants can engage in any business transactions, they must apply for the proper certification.  

France sees digital currencies as an innovative way to accumulate capital, and numerous crypto exchanges, including Crypto.com and Binance, have set up shop in France, acquiring the necessary permits. Also, in February 2023, Miss Opèra, a clothing store, as well as La Carlie, a bar, had payment services set up by both Ingenico and Binance.

French officials also believe that this will fuel better understanding as to how digital currency works, giving it a significant advantage over other countries. Those at the helm of regulation also hope to put an end to speculation that currently surrounds the digital currency space.

Moving Forward with Digital Currency

Although the digital currency space has been mired in controversy, it is still worth giving it a fighting chance, if those that participate in the space do so responsibly. In their report, “Next Steps for Crypto: Weathering the FTX Fallout,”, authors James Wester and Joel Hugentobler offer their recommendations to eliminate what is currently holding the market back, in order to move forward, post-FTX. 

The post Burger King Is Accepting Crypto in Paris  appeared first on PaymentsJournal.

The collapses earlier this month of Silicon Valley Bank, Silvergate Bank, and Signature Bank—three institutions considered cryptocurrency-friendly—continue to reverberate in financial services. The latest bit of fallout concerns crypto clients of Signature Bank, who have been given an April 5 deadline to close their accounts and move their money.

Flagstar Bank, a unit of New York Community Bancorp, stepped in with a deal to rescue Signature Bank a week after the March 12 collapse, but its move did not cover the crypto deposits. Hence, the April 5 deadline.

“Those are the deposits we are encouraging customers to move before April 5,” an FDIC spokesperson told Reuters. “If they have not by that day, we will mail checks to the address on record.”

Fail. Fail. Fail.

The failures of Silvergate Bank, Silicon Valley Bank, and Signature Bank came in quick succession:

• Silvergate Bank, March 8: The California bank’s owner, Silvergate Capital Corp., announced that it would “wind down operations and voluntarily liquidate the bank in an orderly manner in accordance with applicable regulatory processes.” The bank, long a provider of financial services and lending to cryptocurrency developers and exchanges, had ridden high during the crypto bull market but saw its deposits fall precipitously during crypto winter.
• Silicon Valley Bank, March 10: The bank, based in Santa Clara, Calif., suffered an old-fashioned bank run, with depositors pulling money at a prodigious rate and forcing the bank to sell bonds at a loss of $1.8 billion. That spooked depositors, who subsequently pulled even more money. The bank’s stock price plummeted, trading was halted, and the state of California stepped in and put it into receivership under the FDIC.
• Signature Bank, March 12: The SVB shutdown rolled into New York-based Signature Bank, where customers withdrew billions of dollars. On March 10, the bank saw its stock decline 23%, the largest fall since it went public in 2004. Two days later, the bank failed.

The Particulars of Signature Bank

The Signature Bank failure, in particular, has drawn skepticism from some observers because the status of its balance sheet didn’t appear as perilous as the others. Former U.S. Rep. Barney Frank, a bank board member, suggested that regulators “wanted to send a very strong anti-crypto message.”

“The additional scrutiny that Signature is receiving is likely due to the Justice Department investigations claiming that (Signature) didn’t have sufficient processes and internal systems in place to monitor or detect money laundering,” said Joel Hugentobler, an analyst in Javelin Strategy & Research’s cryptocurrency practice. “Whether there actually was money laundering or not is yet to be determined.”

The Broader Impact on Crypto

What’s clear is that the upending of the three crypto-friendly banks has added to the tumult in the industry. Hugentobler indicated that the most reliable on-ramps and off-ramps between cryptocurrencies and fiat currencies have eroded as a result.

“I think other substitutes will emerge,” he said, “but they will need to implement stricter anti-money-laundering processes, among other areas of concern that banks have recently experienced.” 

The post FDIC to Signature’s Crypto Clients: Get Money Out by April 5 appeared first on PaymentsJournal.

In a series of seven tweets Wednesday, Coinbase CEO Brian Anderson revealed that his company has received a Wells notice from the Securities and Exchange Commission, typically a precursor of enforcement action.

In the tweets, Anderson said Coinbase rigorously assesses the assets for inclusion on its exchange and rejects more than 90% of the applicants, noting: “We are right on the law, confident in the facts, and welcome the opportunity for Coinbase (and by extension the broader crypto community) to get before a court.”

The news comes at a time of tumult for the industry with regulators and legislators. The SEC and its chairman, Gary Gensler, have been perceived within the industry as particularly hostile to cryptocurrency as it leads the charge toward regulation.

Anderson vs. SEC

In the tweets, Anderson said the SEC reviewed Coinbase “in detail” two years ago in approving it to go public and that its filing was clear on its listing process and “included 57 references to staking.”

“Going forward,” Armstrong wrote, “the legal process will provide an open and public forum before an unbiased body where we will be able to make clear for all to see that the SEC simply has not been fair, reasonable, or even demonstrated a seriousness of purpose when it comes to its engagement on digital assets.”

About Coinbase

On its website landing page, Coinbase claims 108 million customers—individuals and businesses. It offers solutions for institutional investors, as well as buying and selling services for individuals, collectors, creators, and borrowers.

Coinbase has also avoided the pitfalls suffered by other prominent exchanges, such as FTX.

It’s undeniably a tough period for the cryptocurrency and digital assets, as the industry waits and hopes for a coherent national policy to emerge and watches states sweep in to fill regulatory vacuums.

James Wester, the Director of Cryptocurrency and Digital Assets at Javelin Strategy & Research, sees the SEC’s move as not just a bad sign for Coinbase but also for the industry at large.

“This is one more occasion where regulators have decided to go after the good actors in the space,” Wester said. “Crypto has undoubtedly attracted plenty of bad actors, but Coinbase is not one of them. Like many companies in the space, Coinbase has pushed for clear regulations and oversight with the full intention of complying with those regulations.”

What a Wells Notice Is

Wells notices date to 1972 and are named for John A. Wells, the chairman of an SEC committee formed by then-Director William A. Casey to review the agency’s enforcement practices and policies.

A Wells notice goes out to signal a possible enforcement action by the SEC and to give the recipient an opportunity to provide information about why such action shouldn’t be pursued.

Armstrong said he’s intent on taking that opportunity.

“We are proud to stand up for our customers and the industry in these moments,” he tweeted.

Said Wester: “We still don’t know what the Wells notice is in reference to, but it is looking more like the companies that are trying to do the right thing are finding themselves targeted. That’s not an encouraging sign.”

The post Coinbase CEO Signals Looming SEC Action appeared first on PaymentsJournal.

After Silicon Valley Bank failed last week, stablecoin USD Coin lost value and fell to as low as $0.88 over the weekend, before regaining most of its value, per Yahoo Finance.

Stablecoins are a type of cryptocurrency designed to maintain a stable value relative to an asset, such as the U.S. dollar, the euro, or gold. Currently, the most popular stablecoins in the U.S. are Tether and USD Coin, which are pegged to the U.S. dollar—meaning they’re backed by U.S. dollars similar to how gold is used to back paper currency.

Unlike traditional cryptocurrencies like Bitcoin, which can fluctuate wildly in value, stablecoins are pegged to a specific asset, which in theory should provide greater stability and predictability in value. Stability in value makes the currency safer to hold and safer to accept. Merchants can be hesitant to accept payment in a currency that could lose a significant amount of value overnight.

The wider cryptocurrency market is still relatively new and unpredictable, with prices fluctuating based on market sentiment and speculation. This volatility can sometimes spill over into stablecoins, even though they are supposed to be insulated from these swings. The fear that even stablecoins fluctuate too much to be relied upon has received some fuel recently.

Despite these concerns, many experts believe that stablecoins have a bright future. They could provide a bridge between traditional finance and the world of cryptocurrencies, offering a stable and reliable way to transact in digital assets.

The post Stablecoin Has Trouble Living Up to Its Name appeared first on PaymentsJournal.

Binance is launching a prepaid cryptocurrency card in Columbia, following its debut in Argentina last August.

“The staggered launch pattern allows Binance to evaluate the marketplace, with key interest in Latin America and provide an important outlet to easily convert crypto into fiat currency,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “This step is a needed next step to better integrate crypto into traditional commerce and prepaid debit cards create the right environment to actualize that opportunity.”

Binance is partnering with Colombian company Movii to produce the cards. Movii provides digital banking services and mobile payments solutions to individuals and businesses.

Movii’s mobile app allows users to create a digital wallet that can be loaded with funds via bank transfer, credit card, or cash deposit. Once the wallet is funded, users can make payments to merchants or other users by entering their mobile phone number or scanning a QR code.

When Binance customers use the prepaid cryptocurrency card, the crypto will be converted to local currency in real-time. Users pay with whichever cryptocurrency they choose from the 12 cryptocurrencies Binance supports. Cardholders will also be able to check their transaction history and access customer service through the card’s dashboard. Top of Form

Combining prepaid cards and cryptocurrencies can provide users with a convenient and accessible way to store and spend their digital assets, while also taking advantage of the benefits of traditional payment networks.

Binance’s partnership with Movii fits with the trend of cryptocurrency companies partnering with fintechs to expand the reach of their exchanges. For the general public, cryptocurrency exchanges have been rather niche, particularly because there has been little use for crypto in day to day purchasing. Partnering with other fintech companies allows cryptocurrency platforms to offer a wider range of financial products and services is helping to change that.

The post Binance Launches Prepaid Crypto Card, Partners with Movii appeared first on PaymentsJournal.

A bill that could significantly impact the crypto, blockchain, and decentralized finance (DeFi) sectors has advanced in Illinois, according to a recent article in NewsBTC. House Bill 3479, sponsored by Representative Mark L. Walker, includes a proposed law called the Digital Assets Regulation Act (DARA), which seeks to regulate digital asset business activity in Illinois, including crypto, blockchain, DeFi, and NFT sectors.

The bill grants the state more power to investigate unapproved digital asset transactions, and arrest those who go against the guidelines. DARA has received mostly negative reactions from the crypto industry, but has gained some support for clarifying the legal status of various crypto-related transactions. When regulators only tell firms when they have screwed up—without specifying exact policies—it keep firms guessing and doesn’t necessarily help them as they look to avoid similar mistakes in the future.

The regulation of crypto has become a contentious issue, with debates around how it should be regulated, if at all. While some argue that crypto should remain unregulated to preserve its decentralized nature and ensure that government intervention does not stifle innovation, others believe that regulation is necessary to protect investors and prevent financial crime.

Illinois’ proposed bill is an example of the latter, seeking to regulate digital asset activity to ensure that clients’ interests are protected while crypto businesses remain compliant with laid-down rules.

“In trying to establish a regulatory regime for crypto, Illinois is attempting to offer companies in the space some clarity,” said James Wester, Director of Cryptocurrency at Javelin Strategy & Research. “There are, however, several issues that are concerning. First, by creating a very tight window for submitting an application and gaining approval if the bill is passed, Illinois is making it very difficult for companies to comply.”

“In the case of New York’s Bitlicense, which the Illinois bill seems to emulate, the process for application and approval is very long,” he said. “Will Illinois be able to handle applications or will companies simply have to abandon working in the state? Additionally, the language for what is covered is so broad that it could affect future development in the space as digital assets begin to encompass things like gaming. Will gaming companies be required to seek approval?”

“Regulatory clarity is good, but it needs to be balanced with providing flexibility, especially in a quickly evolving space.”

Regulation of crypto has become a global issue, with countries taking different approaches. China and India, for example, have banned or discussed banning cryptocurrencies, while on the other end, El Salvador has adopted Bitcoin as its national currency. The U.S. is somewhere in the middle—regulators have been increasingly scrutinizing crypto, and federal regulators are developing a regulatory scheme for the industry. In the absence of comprehensive federal regulation, states like Illinois are stepping in with their own ideas.

As the regulation of crypto continues to evolve globally, it’s essential to strike a balance that protects investors and ensures innovation can continue. This is especially the case if crypto is to move from a nice product to one that is widely adopted in the economy.

The post Illinois Takes a Strong Stance on Crypto Regulation With Proposed Bill appeared first on PaymentsJournal.

Signature Bank, a NYC-based bank, failed on Sunday and was taken over by the FDIC. It’s the third-largest bank to have failed in the United States—the FDIC took over Silicon Valley Bank and Silvergate, known as “crypto’s bank,” last week.

“The collapse and closing of three crypto-friendly banks within one week is certainly an issue to the crypto industry,” said James Wester, Director of Cryptocurrency at Javelin Strategy & Research “What is particularly worrisome is the concern that crypto-friendly banks were targeted by the federal government in some way.”

“Regardless, this could provide additional fuel for companies building in the crypto and digital asset space to migrate offshore,” he said.

In a joint statement, the FDIC, the U.S. Treasury, and the Federal Reserve said all deposits at Silicon Valley Bank and Signature Bank would be guaranteed. That said, shareholders and certain debt-holders of the banks won’t be protected, per the WSJ. President Biden has approved this plan, which involves making a “systemic risk exception” for these banks because of the risk of further harm to the economy should customers not have access to their deposits. This is similar to what was done during the 2008 financial crisis, with the bailout of the bank Bear Stearns.

In a separate article, the WSJ highlighted bipartisan criticism of this approach from regulators, and noted that part of this financial instability can be traced to legislation that was passed in 2018 to deregulate smaller banks.

Specifically, the legislation cut the number of banks subject to heightened Federal Reserve oversight by raising a key regulatory threshold to $250 billion in assets from an earlier $50 billion cutoff. By raising the threshold, the new legislation gave regulators space to lighten the load for SVB and other midsize firms like it. 

Had the lightened rules not been in place for such lenders, for instance, SVB’s capital position likely would have eroded slowly over time as the Fed raised interest rates. That would likely have prompted the firm and its supervisors to take steps earlier to place the lender on sounder financial footing before last week’s meltdown, say industry observers. 

Until their collapse, Silvergate, Signature Bank, and Silicon Valley Bank occupied a crucial place in the crypto world: Silicon Valley Bank provided accounts for many crypto exchanges, Silvergate ran the Silvergate Exchange Network, enabling customers to move money between exchanges instantaneously. And Signature Bank has a payments network named Signet, which allowed crypto clients to make real-time payments in dollars 24/7. If Signet goes away, it will become a lot harder for crypto traders to get in and out of exchanges.

The post Crypto-Friendly Signature Bank Is the Latest Bank Collapse appeared first on PaymentsJournal.

Crypto has not had much of a banner year for most of 2022. If any of the recent turbulent events are any indication, the call for more protective safeguards for consumers and investors alike is in order.

Consumer trust is at an all-time low when it comes to cryptocurrency. Many dubbed 2022 as a “crypto winter,” due to the malpractices that crypto exchanges have engaged in. With the very public fall of FTX, opponents of digital currencies have been quick to chime in, solidifying their stance that the crypto industry offers nothing more than rampant fraud.

Crypto is Bad For the Environment

According to a recent Forbes article, crypto, blockchain, and sustainability may be somewhat of a contradiction.

There’s a large amount of energy consumption required to run a blockchain. In fact, blockchains “currently account for .58% of global electricity consumption.” What’s more, in order to mine Bitcoin, it takes roughly the same amount of energy as the U.S. federal government.  

Luckily, Ethereum has stepped up by transitioning from “Proof-of-Work,” which is an energy intensive mining process, to “Proof-of-Stake,” significantly reducing its carbon footprint. The crypto community has been keen on looking into more greener types of energy.

Tougher Verification Methods Ahead

With greater incidences of fraud and cyberattacks, financial conduct authorities as well as governments have moved forward with establishing critical boundaries. Consumers are also demanding that more be done to protect them and their interests. Therefore, you will see more of them choosing exchanges with more stringent regulations.

In a separate article from Fintech Magazine, Michael Ramsbacker, CPO of Trulioo, an online identity verification fintech said:

“Our own research last month found that 83% of crypto users said crypto companies should be doing more to reassure and protect customers. Against this backdrop, I think it will increasingly be a case of the market deciding how the crypto sector recovers and the direction it takes going forward. I predict that we’ll see mainstream crypto investors voting with their wallets and favouring platforms (and jurisdictions) that are embracing, rather than trying to escape, regulation.”

Build Back Better

So what lessons can be learned from crypto’s free fall from the prior year? Trust needs to be rebuilt. More robust regulation, greater transparency, and accountability are great places to start.

The post Is The End of the Crypto Winter Near? appeared first on PaymentsJournal.

The cryptocurrency industry, shaken by the FTX collapse and other failures and caught in the spin cycle of federal politics and regulatory scrutiny, is now seeing high-profile partnerships paused.

Visa and Mastercard are delaying the launch of certain crypto-adjacent products and services while they wait for the market to settle and for regulation of the cryptocurrency space to clarify. Reuters reported the developments, citing sources who asked not to be named.

A spokesperson for Visa cast the move as temporary but said: “Recent high-profile failures in the crypto sector are an important reminder that we have a long way to go before crypto becomes a part of mainstream payments and financial services.”

A Mastercard representative took a similar tack: “Our efforts continue to focus on the underlying blockchain technology and how that can be applied to help address current pain points and build more efficient systems.”

Suffering Black Eyes

Indeed, blockchain technology and its associated smart contracts and transparency have been touted as potential breakthroughs in a range of financial services as well as use cases beyond finance. Crypto advocates point to the potential for a fairer, more egalitarian economic system, greater efficiency of capital, improved cybersecurity, and secure identity-proofing, among other applications.

After the FTX implosion, Javelin Strategy & Research, in an impact note by James Wester and Joel Hugentobler, noted that its failure and others have “captured the attention of the broader public, providing a big black eye for the industry and fueling additional skepticism about cryptocurrency and digital assets.” The analysts called for the industry to step up its game in terms of governance, risk, and compliance but also to stay the course with decentralized finance, noting its breakthroughs.

Cryptocurrency Draws Attention from Washington

The messes in the cryptocurrency space have drawn scrutiny from regulators and lawmakers. The Securities and Exchange Commission and chairman Gary Gensler have long taken the view that crypto and digital assets are securities under U.S. law, not legal tender.

Meanwhile, in Congress, the debates have been pitched and contentious, with some legislators decrying crypto as a haven for “financial criminals” and other bad actors, while others warn that the upside of the industry could be sacrificed by laws and regulations that inhibit it too broadly.

What’s Next?

In Javelin’s 2023 Cryptocurrency Trends & Predictions report, Wester and Hugentobler suggested that legal treatment of cryptocurrency would evolve quickly but that “nothing is particularly clear” in how it would play out. In the early part of 2023, that lack of clarity persists, and the card companies backing away from cryptocurrency—even if temporarily—seem to be acknowledging that.

In recent years, card companies had announced a series of partnerships centered on digital currencies and blockchain technology. Mastercard joined with a crypto lender, Nexo, a little more than a year ago to introduce a “crypto-backed” payment card. American Express, a year earlier, was considering crypto as a possible redemption vehicle for reward points. The Reuters report, quoting an unidentified source, suggested that crypto is not a priority now.

According to Thomas Hayes, chairman and managing member at Great Hill Capital, regulation must firm up before such initiatives advance.

“They cannot and should not move ahead until there is a clear regulatory framework,” he told Reuters.

The post Cryptocurrency Uncertainties Prompt Visa, Mastercard to Pause Partnerships appeared first on PaymentsJournal.

The practice of crypto firms using in-house tokens is coming under increased scrutiny, according to a recent article from the WSJ.

FTX used native crypto tokens called FTTs as part of its exchange. FTX companies used the tokens as collateral for loans, which became a problem when the value of the tokens collapsed, per the WSJ.

James Wester, Head of Cryptocurrency at Javelin Strategy & Research, elaborated on the practice in a recent report, and noted that the company was essentially acting like the federal reserve, crafting its own “monetary policy” and printing its own “monopoly money” currency. Furthermore, the native tokens are not traded much. As a result, their value is not stable, so swings in price can be epic.

There are many other cryptocurrency platforms that have native tokens, but some of the most well-known ones include:

1. Ethereum (ETH) – Ether is the native token of the Ethereum platform, which is used to pay for transactions on the network and as collateral for smart contract execution.
2. Binance Coin (BNB) – BNB is the native token of the Binance platform, which is used to pay for trading fees, withdrawal fees, and other services on the Binance exchange.

The argument provided in favor of having native tokens is that they serve as a utility token for the platform and ecosystem. They also provide a way for users to invest in the success of the platform and potentially profit from its growth. Additionally, having a native token can help to incentivize participation in the ecosystem, as users may be more likely to hold and use the token if they have a stake in the success of the platform.

However, native control of these tokens has serious downsides. Because the trading platform essentially can print its own money, this can lead to corruption.

From the WSJ article:

“If somebody has their own proprietary token, by definition, they have insider information on the token, and then they are actively trading that token, that raises a lot of questions about insider trading,” said Austin Campbell, an adjunct professor at Columbia Business School.

Without using an in-house token, FTX would likely not have reached the size that it did, and it’s fallout may not have been as extreme.

The utopian vision of cryptocurrency revolves around the idea that finance has been crippled by regulation. But in this case, a little more regulation would have helped. While native tokens are not all bad, they can create incentives for bad behavior, which is why U.S. regulators are getting involved.

The post In-House Crypto Tokens = Monopoly Money appeared first on PaymentsJournal.

The Bank of Italy is preparing for the upcoming European Union legislation entitled Markets in Crypto-Assets Regulation (MiCA)—which is being voted on this month by the European Parliament—and is looking at ways to integrate distributed ledger technology (DLT), according to Kitco. 

MiCA “is intended to close gaps in existing EU financial services legislation by establishing a harmonized set of rules for crypto-assets and related activities and services. Among other things, MiCA imposes restrictions on the issuance and use of stablecoins.” Bank of Italy governor Ignazio Visco made some comments at a recent event about the benefits that DLT offers, such as cheaper cross-border transactions and increased financial system efficiency. These are quite active use cases, as we have pointed out in various research pieces.

B2B (or corporate banking) uses of course go beyond cryptos, although central bank digital currencies (CBDCs) and crypto, in general, aims to solve for key issues in corporate banking and payments such as reducing settlement times to zero, adding new choices for liquidity, creating transparency across the transaction life cycle, and improving security through a cryptographic payment. For major financial institutions, the largest area of interest seems to be in the technology of blockchain rather than the currency at large.

The article from Kitco goes on to talk about how Italy had generally low investment and interaction with cryptos up until the recent 2022 market woes, and therefore it didn’t experience the types of financial issues seen elsewhere. Governor Visco estimated the number of Italian households that own crypto assets at 2% and said those holdings were “modest amounts on average,” while the “exposure of Italian intermediaries to these markets is also very limited.” There are some other points made regarding various suggestions and project submissions being fielded, both from within and outside of Italy.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post New Law Will Harmonize Crypto Rules in Europe appeared first on PaymentsJournal.

Cryptocurrencies have moved from a speculative asset to a practical one. One area in which crypto can serve and improve is the current business-to-business (B2B) payments space.

In a recent PaymentsJournal podcast, Daniel Artin, Vice President of Strategic Partnerships at Boost, and Elly Aiala, Chief Compliance Officer at Boost, joined Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator, to discuss how businesses should consider adopting blockchain technology, and specifically, stablecoins, to ensure transparency, traceability, and security in their B2B payments.

Current State of B2B Payments

First, let’s set the current state of B2B payments. Even with all the innovation that the payments space has witnessed in the last few years, B2B payments are still fraught with problems.

“This niche of payments in the market is littered with pain points,” said Artin, “primarily due to costly fees, late payments, poor management of data, inaccurate data entries, and oftentimes lack of education in the marketplace around innovations to solve these problems. Buyers and suppliers are used to delayed payments [and] frequent disputes amongst one another, and there is a status quo of distrust that occurs amongst commercial trading partners. Since the B2B payments space is a trillion-dollar addressable market, we believe this a large ramp for digitization.”

Artin blamed inertia for the lag in adopting new ways of accepting B2B payments. Many businesses continue to use legacy systems implemented decades ago despite their inefficiencies.

And organization leaders are not keen on taking a leap into the unknown. “A lot of CFOs and treasurers looking to optimize payments are risk-averse and naturally so,” added Artin. “You’re taking systems, processes, and workflows that have worked for 60 to 70 years and now asking [business leaders] to migrate that to a new digital form that you may not fully understand or know.”

Cryptocurrencies are still shrouded in mystery, which is why they need to be unpacked to reveal how they actually work and to discuss successful use-cases.

But before diving in, let’s tackle the challenges surrounding cryptocurrencies today.

U.S. Regulation: A Stumbling Block to Adoption

You cannot begin a conversation about cryptocurrency without mentioning regulation. Regulation has been ever-present since the popularization and growing adoption of cryptocurrency began.

“Our [U.S.] approach to cryptocurrencies and other technologies in this space has been picking up speed,” said Aiala. “But it is very much in development and exists primarily as a combination of both enforcement and draft legislation and frameworks. This impacts institutional adoption. In order to know why the U.S. regulation is where it is today, you need to know what cryptocurrency and blockchain technology is doing to the existing financial infrastructure.”

Aiala used the analogy of gathering the world’s best soccer players to play a game without rules or compliance. The result is that the game will not function safely or efficiently. The current referees, or two regulatory parties, competing to earn the position of top regulator for cryptocurrencies are the Commodity Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC).

Aiala asserted that without historical knowledge and experience using crypto and blockchain technologies, it is difficult for policy makers to create regulations that will endure the test of time. Technology, as well as its use cases, is never static but always changing.

The way around all the fear, mistrust, and misinformation is for leaders in the crypto space to stay diligent in educating policy makers, informing them so that the appropriate regulatory frameworks can be developed. It’s not only about growth and innovation in the crypto space, it is also about ensuring that end users are safe in using this technology.

Although change is coming and more policy makers and consumers are being introduced to this new financial technology, the current lack of official rules keeps many institutions from adopting crypto.

Why Replace Legacy Systems with Blockchain Technology

There are many benefits for companies to incorporate and replace their current infrastructures with blockchain technology. These include transparency and traceability, consensus mechanisms, security and audit, and smart contracts.

With transparency and traceability, businesses would have the advantage of having all participants within the network see the data as they are updated in real time.

Also known as consensus protocols, consensus mechanisms would allow businesses to verify transactions and ensure the security of the blockchain or protocol.

Blockchain is incredibly secure, making accounting and auditing a breeze and eliminating human error. Blockchain also ensures the integrity of its records. Another important factor is that the ledger is immutable. No one can change a transaction after it has been submitted. This includes record owners.

Smart contracts are programmatic rules that can be carried out automatically within the blockchain after certain rules are met.

“We live in a world where buyers and suppliers have established pre-negotiated commercial trading terms,” added Artin. “Aside from contract penalties, early-pay discounts, [or] trade financing, there’s no way to enforce these rules blindly by buyers and suppliers. Hence the disputes. But with smart contracts, these conditions and terms can be programmed, and automatically fulfill those obligations across both parties on their behalf automatically. It’s touchless, it’s automatic, and it instills a newfound level of trust among parties that otherwise [was] not there.”

One significant use case concerns Walmart Canada, whose shipping fleet of 2,500 produces a whopping seven billion invoice permutations annually, and of which 70% of freight contracts resulted in disputes. When Walmart Canada implemented blockchain, invoice disputes dropped to below 2%.

“Our research goes back five to six years, and one of the earliest use-cases we identified for blockchain was international and domestic trade,” Murphy said. “It’s [blockchains] really getting rolled out quickly. International trade and the use of smart contracts is a bright use-case.”

Looking Ahead for B2B Payments

The use and adoption of cryptocurrency are still at an early stage. And businesses are certainly not clamoring for adoption either. What we do know is that blockchain has the mechanics and infrastructure necessary for businesses to vastly improve the current state of B2B payments.

The post Crypto as a Practical Solution to B2B Payments appeared first on PaymentsJournal.

Many readers of these pages will be familiar with the flip-flop on the part of Russia vis-à-vis the use of cryptocurrency, which prior to the various western sanctions placed upon Russian payments capabilities resulting from the Ukraine invasion, had been against the use of bitcoin et al.

However, as we have been tracking over the past 6-plus months, this has changed quite a bit from the pre-invasion stance by Russian law and regulator stances. According to Livemint, a development of which we were not previously aware of; that is, Russia’s (and Iran, along with some un-named ‘friendly’ countries’) interest in developing stable coins for cross-border settlement. However, the news is that these stablecoins would be backed by gold. Gold-backed U.S. dollars were scuttled back in 1971 by President Nixon’s administration, and the world has been working from a floating market rate fiat currency standard ever since. Russia has been continuously working to bypass the payment sanctions (mostly SWIFT, but some others as well, including EU restrictions on Russian cryptos), so the higher interest in crypto settlement systems is nothing surprising other than the gold part. 

Livemint goes on to explain how Russia is working with Iran on a gold-backed crypto system, which of course seems entirely feasible, but then there would be logical questions around scale and feasibility, one of which is ‘how much gold would be required to make an effective system of transfer?’ The article is too high-level for that, but we would expect more to come in the coming months. 

What’s more, the article suggests that Russia’s “Finance Ministry hopes to resolve issues related to cross-border payments in cryptocurrencies during the autumn session of the State Duma, the lower house of parliament.” We would expect that to happen, although no details are given as to the process. Just as with Russia, Iran has been more consistently subject to various sanctions as well, so in August 2022, the appropriate ministry approved the use of cryptocurrency for imports. It is quite logical for these two countries to be working together—as well as some other usual suspects—to find a workaround to the traditional pathways to cross-border transactions.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post Gold-Backed Crypto Coming to Russia appeared first on PaymentsJournal.

Ukraine’s adoption of cryptocurrency continues, more recently with one of the largest pharmacy chains in the nation, ANC Pharmacy, now accepting digital payments.  

ANC Pharmacy has teamed up with Binance Ukraine to accept contactless cryptocurrency payments via Binance Pay. With more than 1,000 stores across Ukraine, it is said to be one of the largest executions of Bitcoin payments in Europe, according to Coin Telegraph. World events such as the current war in the country have reinforced the importance of having a more independent currency, not tied to a specific country or region.  

According to Binance Ukraine’s General Manager, Kirill Khomyakov, crypto payments services such as Binance Card are legal as there is no current ban on crypto-sourced transactions in the country.  

In order to use the crypto payments, users will need to download the Binance app and then open ANC’s website. Once a product has been selected online, users can make their payment by using Binance Pay and pick up their order at their chosen location.  

Over the past few years, Binance has been making headway across Ukraine, promoting crypto adoption. In September 2022, Binance collaborated with Varus, a Ukrainian supermarket, to enable customers to make their grocery purchases via the Binance Pay Wallet. 

By and large, cryptocurrency is seeing worldwide adoption and across numerous industries. This is especially beneficial for e-commerce businesses. PaymentsJournal has written about the importance of using crypto payments, especially during times of uncertainty.   

“One of the big criticisms of cryptocurrencies is that it’s a solution in search of a problem, but the conflict in Ukraine has shown exactly how cryptocurrencies can be used where fiat currencies, financial services, and payment infrastructure are unavailable or unreliable. Where that isn’t an issue, it’s easy to forget that access to digital payments isn’t guaranteed in many parts of the world. Crypto is already offering a solution to those challenges,” said James Wester, Director of Cryptocurrency and Co-Head of Payments at Mercator Advisory Group.

The post Cryptocurrency Payments Now Accepted at Ukraine Pharmacy  appeared first on PaymentsJournal.

Whether you have dabbled in it or not, chances are you’ve at least heard of cryptocurrency. It’s a hot topic that has escaped the financial sphere and spilled into the public sphere. Today, a surprising number of people have tested out cryptocurrency payments. Regardless of how much experience people have with the currency, most have an opinion.

But what exactly is cryptocurrency? It can be a hard concept to wrap your head around.

At its most basic level, cryptocurrency is a digital or virtual payment system. What makes the whole concept special is that it’s supposed to be nearly impossible to hack or counterfeit, which makes the money incredibly secure. It also doesn’t exist within the traditional financial system which decentralizes transactions and requires payments to be verified by a system of users.

Growing Crypto Interest

Though the use of cryptocurrency started slowly, use of the financial technology has taken off over the past handful of years. The industry expanded by over 190% between 2018 and 2020. Today, there are well over 300 million crypto users across the globe. Surprisingly, many of these users feel incredibly confident in market trends for crypto and trust the system as a means of generating income.

Surprisingly, the age range of crypto investors is much more diverse than one might expect. On the surface, cryptocurrencies can seem pretty technical and the type of thing that is likely to attract a younger audience. However, that isn’t exactly the case. Many older adults are choosing to make smart investments and diversify their portfolios by incorporating cryptocurrencies. 

Most investors are utilizing popular cryptocurrencies such as Bitcoin, Ethereum, or Tether. However, with nearly 20,000 different types of cryptocurrencies in circulation, there is something for everyone. It creates a very exciting opportunity for anyone looking to try out the tech.  

Benefits of Crypto Transactions

This massive rise in the number of people utilizing cryptocurrencies is slowly starting to change the world of business around us. E-commerce, in particular, is set to drastically change due to the rise of cryptocurrencies. Today, hundreds of businesses across various industries are starting to incorporate and accept crypto payment options. One interesting example of the potential future is how cryptocurrency could link to online gaming.

We can see from this industry some of the biggest advantages of incorporating crypto with e-commerce. For instance, online gaming could be designed so that players could make in-game goods purchases using crypto. These purchases could allow them to be more successful or advance through levels faster. The use of cryptocurrencies could be beneficial in that they allow for almost instantaneous transactions, eliminate global exchange rate issues, and provide a secure means of transferring funds. This is just one of many benefits crypto offers to the online gaming industry that could exist throughout the e-commerce realm.

Research suggests that online and credit-based transactions increase when people are nervous about the economy. Individuals may use this to help supplement incomes. In many ways, making it easier to allow people to utilize their cryptocurrencies may help them feel more financially secure or stable during times of uncertainty.

Multiple Industries Are Getting Involved

Today, all sorts of major industries are linking up their payment systems to crypto markets and beginning to accept all major forms of crypto. These include industries such as social media platforms, retail markets, the hospitality sector, and even the healthcare industry.

The healthcare industry isn’t exactly known for being quick to adopt modern data filing and payment technologies. In fact, oftentimes when we go to pay medical bills, we quickly realize how far the rest of the world has come. Thousands of people try to negotiate their healthcare bills or get onto payment plans that help to make their payments a bit more manageable. The incorporation of crypto into medical payment systems can make a huge positive difference for many.

Not only that, but the use of crypto and blockchain technologies in the healthcare system can actually help to make payment and private healthcare information a lot more secure. Since all cryptocurrency payments are made in a blockchain setting, users can expect that their personal healthcare data will not be hacked or shared during payments. Ultimately, this can lead to better patient-doctor relationships due to better communication about medical records and improved payments and transactions.

The post How Cryptocurrency Payments Are Changing E-Commerce appeared first on PaymentsJournal.

A recent WSJ article provides ideas about how crypto can be regulated to prevent further implosions of crypto marketplaces like FTX. The report notes that promoters of cryptocurrency have exploited its ambiguous nature to avoid federal regulation. Is crypto a security? A currency? A commodity? A bank product? None-of the above?

Crypto proponents have sought to exploit the situation by arguing that a large portion of digital assets should not be treated as securities, but instead as commodities where the spot market has no federal regulator.  Doubling down, they have characterized their choices not to voluntarily comply with existing regulations as the result of “regulatory uncertainty,” when the real motivation is avoiding compliance and its costs.

When Bitcoin was launched globally, and coupled with decentralized finance, the idea was to essentially create a new financial system that would make the old one obsolete. Because crypto currencies have been implemented outside of national financial systems, regulating them is more challenging and complex. However, cryptocurrency was designed to make moving money between parties easier, not to avoid regulation. Indeed, there are many international industries that are well regulated by international bodies, including finance, air travel, and shipping industries. There is no reason for crypto to be any different.

In the article, Jay Clayton and Timothy Massad, former chairmen of the SEC and CFTC, weigh in on what they think will work best for regulating crypto. Their first proposal would require crypto intermediaries (including exchanges and decentralized finance platforms) to implement basic consumer protections that are standard for other assets.

We believe the SEC and the CFTC should publish a core set of standards, including (1) segregation of customer assets, (2) limits on lending, (3) restrictions on operating conflicting businesses such as trading, (4) prohibitions against fraud and manipulation including wash trading (where someone trades with themselves or an affiliate to inflate the market price or volume of a security), and (5) governance requirements.

The former chairmen also proposed the SEC and CFTC require crypto intermediaries use only stablecoins that comply with certain regulations, and enforcement of existing financial laws.

According to James Wester, Director of Cryptocurrency at Javelin Research, the narrative that crypto should merit special treatment when it comes to regulation is off-target.

“The idea that crypto has been ungovernable, or that it exists in an unregulated ‘wild-west’ is not accurate, and the piece by the former chairmen show how that view of crypto is off base,” Wester said. “As the chairmen say in their op-ed, frameworks and standards already exist in current financial regulations.

“Their basic proposals for crypto exchanges and platforms—better governance, safeguarding customer assets, prohibiting fraud, eliminating conflicts of interest—are what we expect from institutions and actors within financial services today, and existing regulations enforce them for traditional financial services,” he added. “Using those existing regulations, and the authority already extended to the CFTC and SEC, can—and should—be expanded to include cryptocurrencies and digital assets already.”

The post Regulating Crypto in 2023 appeared first on PaymentsJournal.

PayPal is expanding its crypto services to Luxembourg. They launched in the U.S. in 2020 and in the UK a year later.

According to a recent article by The Cryptonomist, Paypal has its eyes on the European Union. And the expansion in Luxembourg makes sense given that its currently home to PayPal’s EU headquarters. This serves as a potential gateway into the EU’s other 26 countries.

The timing is also key as PayPal anticipates the EU’s Markets in Crypto-Assets (MICA) will become law by the end of the year. This will enable all crypto service providers to sell their products across the entire EU. This regulation gives companies that are registered in each member state a license to sell their services through an identification registration process. In the past several months, crypto exchanges such as Coinbase and Binance have taken advantage of this opportunity. What’s more, Gemini and Nexxo are now registered in Italy.  

PayPal’s expansion into Luxembourg, with plans to further expand in the EU, will make both the sale and purchase of cryptocurrency a reality. What’s more, customers in Luxembourg will be able to explore cryptos within the safe and familiar space they have come to know. It is within the PayPal ecosystem. It’s also within this environment that customers will have access to educational content. And they will have their questions answered to understand the risks and opportunities with cryptocurrency.

Fintech giants such as PayPal have been the biggest proponents of crypto adoption. We have covered this feature here.

The post PayPal to Offer Crypto Services in Luxembourg appeared first on PaymentsJournal.

During a recent New York Times DealBook event, Larry Fink, CEO of BlackRock, spoke a lot about the current state of crypto, as well as the future of tokenization.  

During the conversation with Andrew Ross Sorkin, Fink—who invested $24 million in FTX—shared his thoughts on where the space is heading:

I believe that most of these [crypto] companies won’t be around, I do believe that. Think about FTX, its failure was creating its own token. It wasn’t a DeFi or a ledger open to the world … it was not distributed. I actually believe this technology is going to be very important. The next generation for markets and the next generation for securities will be tokenization of securities. If we can have that distributed ledger, that we know every beneficial owner and beneficial seller. We all have our code of who’s buying and who’s selling—[it’s] instantaneous settlement. It changes the whole ecosystem.

We’ve previously covered how tokenization will be the future of payment security, and more financial institutions are betting on this payment method. Combining tokenization with a distributed ledger, which effectively puts financial transactions in the public domain, has the potential to really change the way the financial system works. Indeed, as Fink notes, a distributed ledger would have made FTX and Alameda Research’s shady transactions obvious.

James Wester, Head of Cryptocurrency at Javelin Strategy & Research, elaborates on the FTX implosion and the future of crypto in a recent report. He notes that FTX represented assets with native tokens specifically for use on FTX, which the company exploited to cover up its finances.

“By effectively creating a printing press that could churn out unlimited FTT tokens, then using those tokens as collateral for loans—and doing so in a completely opaque manner—FTX and Alameda were able to paper over growing balance sheet holes with a worthless asset,” said Wester.

Tokenization still has the potential to improve transparency and fluidity in payments. But companies using tokens which are unique to their own trading platforms have been cast into doubt. Those companies control the power to “print” those tokens when they are in a financial pinch, acting like a central government bank which can print more money to increase liquidity. More regulation of tokenization will allow for maximizing its benefits, while minimizing risk of misuse.

To read more about the future of crypto, read the report here.

The post Tokenization Is (Still) the Way of the Future appeared first on PaymentsJournal.

This article from Nasdaq is a review of the status of the executive order (EO) on cryptos. The EO was issued back in March. We commented on several of these papers a couple of months back. To date, the departments of Treasury, Commerce and Justice, as well as the White House Office of Science and Technology Policy, have published responses to the executive order. The various reports by different agencies pursue certain directions in line with requirements from the executive order and their respective purviews.

The author explains, for example, that the Justice Department pursued crypto crimes. This is while the Commerce Department recommended more engagement with both private companies and international regulators “to promote development of digital asset policies … consistent with U.S. values and standards.” The Treasury issued several reports as well, including an overall framework and also had a public commentary period. The EO contributing author also indicates that ‘responsible development’ was a key guideline. This means that financial inclusion and overall consumer benefit must be a goal.

Future of Money

We will leave aside the political aspects of the EO. The article states that the reports tried to holistically assess what the ‘future of money’ looks like. The EO co-author also points out that the EO was written a while ago and that a lot of things have happened in the crypto world subsequently to reinforce many of the points around transparency and better communication about the industry, along with effective regulation. The whole question about the legality of the Fed issuing a digital currency is also an open question.

U.S. Moving Slow

In any event, readers who have interest can read through the piece and pick up what they need, and it includes several links to released reports as well.  The bottom line is that the U.S. is moving relatively slowly compared to other central banks across the globe, which certainly is reflective of the existing USD dominance in trade markets, which in turn reduces urgency to ‘not fall behind’ since the consequences of such are not actually known.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post A Look at the Executive Order on Cryptos and What It Means appeared first on PaymentsJournal.

The European Central Bank’s (ECB) announced they were launching an investigation phase of the Digital Euro project in 2021. In the wake of this, five companies—including Amazon—are currently in a drafting process to help design a retail payment interface for e-money. Where does crypto come in for the ECB?

The ECB received broad interest in its call for expressions of interest from a pool of 54 front-end provider companies. These are companies who are willing to participate in the prototyping exercise. According to the ECB, the Digital Euro can “contribute to the economic growth” of the Euro Area.

However, the increasing pressure of the US dollar on the euro and growing interest in crypto payments despite the crypto winter paint a different picture for the future of the digital euro.

Here is a look at some of the main hurdles the ECB will need to address head-on. These will need to be addressed before the digital euro takes root.

The Euro Is Weakening

2022 will probably go down as “the worst year in the euro’s history.” However, the euro’s collapse has been well-telegraphed for several years now.

The European Central Bank’s (ECB) quantitative easing program (QE) has been one of the primary drivers of the euro’s decline. The QE was implemented in 2015 to boost the Eurozone economy

Under the 2015 QE, the ECB bought government bonds and other securities in the open market. This purchase was to increase the money supply of the euro and lower interest rates. Unfortunately, this policy has been incredibly detrimental to the euro. It has increased the supply of euros while simultaneously decreasing demand for the currency.

In addition to QE, the Eurozone has implemented several other policies over the years. These other policies have added to the euro’s woes.

First is the European Union’s (EU) bail-in policy introduced in 2014. This policy allows for the confiscation of deposits to rescue failing banks. This led to a decrease in trust in the banking system, as people were afraid that their money could be confiscated anytime.

Second is the negative interest rate policy (NIRP), which was first implemented in 2014. Under NIRP, commercial banks are charged a 0.4% fee on deposits held at the ECB. This has led to a decrease in lending and investment, as banks are reluctant to lend money out when they have to pay a fee to hold onto deposits.

Third, there is the EU’s fiscal compact, which was introduced in 2012. This policy requires member states to maintain a balanced budget and limits government spending.

The Strengthening of US Dollar

Meanwhile, the US dollar has strengthened against the euro over the course of several years.

This trend is set to continue in the coming years as the US economy continues to recover, given the move by the US Federal Reserve to hike interest rates to a 40-year high.

The Rise of Cryptocurrencies

The conflict between Ukraine and Russia has also exacerbated the lack of consumer confidence in the Eurozone and highlighted the need for crypto.

Indeed, a raft of crypto-based benefits, such as the capacity to use crypto to support humanitarian endeavors, has been seen. Simply put, crypto allows individuals to donate directly to those in need without going through conventional centralized methods.

As demand for the euro continues to wane, the popularity of their proposed digital euro remains in question as interest in cryptocurrencies continues to rise despite the crypto winter. Our own internal statistics support this: despite the crypto winter, Q3 2022 figures show 2X the volume of transactions and 1.94X the number of transactions of the same period in 2021.

A Rigid Crypto Demographic

In addition, crypto users are known to be rigid in their decisions about their payment methods. As a result, most crypto natives are accustomed to using USDT, despite the recent controversy around the stablecoin. This is because crypto users are highly skeptical of government-backed fiat currencies and prefer to stick with decentralized cryptocurrencies that they believe cannot be easily manipulated by central authorities.

For this reason, the digital euro must compete with other fiat currencies, such as the US dollar, and emerging crypto-payment solutions.

Suppose the digital euro can’t get traction from crypto-natives, who are essentially the early adopters of any new technology. In that case, it’s hard to see how the digital euro will ever go mainstream.

The Future of the Digital Euro, Crypto and the ECB

So far, the digital euro has been met with much skepticism from the ECB and the crypto community. This is because the digital euro doesn’t offer anything new or innovative that would make it appealing to crypto natives.

What’s more, the digital euro is being introduced at a time when trust in the traditional banking system is at an all-time low and when alternatives to fiat currencies are on the rise.

As such, the best move for the ECB is to focus on integrating crypto’s decentralization into their existing payment infrastructure rather than trying to create a new centralized digital currency from scratch

The post Why the ECB Should Embrace Crypto Instead of Pushing for the Digital Euro appeared first on PaymentsJournal.

Twitter may soon accept Dogecoin as payment. Dogecoin’s price jumped over 22.5% in the previous week, from $0.075 to $0.094, according to Decrypt. The incorporation of payments on the social media platform is merely speculative. However, featuring Twitter CEO Elon Musk’s preferred digital coin in the line up makes perfect sense.  

Musk recently shared some internal Twitter presentation slides. These included blank spaces next to Twitter payments. Some have theorized that this could be where cryptocurrency will be accepted.   

Valued at close to $13 billion, Dogecoin has overtaken other digital coins such as Solana, Litecoin, Cardano, and Polygon. Dogecoin currently stands as the eighth largest cryptocurrency by market cap. Created by IBM software engineer Billy Markus and Adobe engineer Jackson Palmer, Dogecoin was reportedly created to mock Bitcoin.  

Ironically, Musk has both rallied and criticized Dogecoin, leading to significant fluctuations in its value in the last couple of years. He notably appeared on Saturday Night Live, deriding the coin and seeing an immediate drop of 30% in value shortly after.  

We have covered the extreme volatility of cryptocurrencies and how the government aims to rein in the unruly nature of these digital coins.  

Dogecoin will be undergoing some much-needed improvements. Ethereum co-founder, Vitalik Buterin announced plans to partner with the Dogecoin Foundation to help Dogecoin transition from its current Proof-of-Work (PoW) mechanism to Proof-of-Stake (PoS). This is to avoid the considerable amount of energy needed to confirm transactions.  

The post Dogecoin Could Be Accepted on Twitter as Payment  appeared first on PaymentsJournal.

This piece in Mind Matters takes aim at bitcoin as a speculative mass hype. This is on the level of the Dutch Tulip bubble, the South Sea bubble, and the dot-com bubble. Of course, not all bubbles are the same. But at least the dot-com bubble period (late 1990s-early 2000s) was based on the realities of new technology breakthroughs. And it produced companies including Amazon, eBay, and Priceline.

Greater Fool Theory

In any event, the author goes on to make the case that the bitcoin (and other cryptos) craze will end badly at some point. This is based on the argument that it produces nothing and has its basis in the “Greater Fool Theory.” This theory means one will pay a foolish price for the asset as long as one can find a greater fool to buy it later. He explains the bubble cause as “an asset’s price rises far above its intrinsic value.” Of course this is what people have been asking now for a decade, but what’s the underlying value of bitcoin? I suppose one could ask the same vis-à-vis fiat currency, which is a means to exchange value and has no real value other than the backing government’s promise to recognize it as legal tender—at least since the gold standard was removed in 1971.

The author certainly makes compelling points. And in light of the FTX situation unfolding as we write, it surely gives one pause as to where this all might be going. The author mixes in blockchain technology as being “slow, expensive, and environmentally unfriendly.” It’s not necessarily blockchain, which has many different uses and is being widely adopted in global trade workflows and the basis for cross-border CBDC payments, but the method of mining bitcoin and gaining consensus, which is where all the computing power is applied and time delays arise.  

Bitcoin at the Point-of-Sale

That’s why bitcoin has not gained wide adoption as a method of payment at the point-of-sale (POS). Since the throughput time is not practical for immediate payment. Decentralized cryptos have not been widely adopted as transaction currencies in general. And they certainly have not been accepted wholesale since value fluctuations are too volatile. This hasn’t prevented major card networks and various fintechs and PSPs from incorporating crypto exchanges into their products and acceptance flows. Readers should have a look and add this to the spectrum of perspectives around bitcoin and other decentralized cryptos.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post Reconsidering Bitcoin appeared first on PaymentsJournal.

Cryptocurrency markets have often sold themselves as having an advantage: they are largely unregulated by government agencies by design. The underlying idea of decentralized finance was a utopian vision. In this vision governments do not control money. After all, many see governments as unpredictable.

Regulation a Key Ingredient

Recently industry leaders have come to see regulation by government agencies as a key ingredient. In fact, it is necessary for the wide scale adoption of cryptocurrency and decentralized finance. A greater swath of consumers will adopt cryptocurrency and decentralized finance. A recent article in Ars Technica highlights this shift. It says that if regulation doesn’t keep up, the crypto industry may move out of the U.S.

In the United States, the lack of regulatory clarity threatens to slow down not just mainstream adoption of new technologies but also innovation in digital payment options, potentially cutting off consumers and businesses nationwide from sought-after conveniences, simply because regulators can’t keep up with how digital assets are being used today.

Fraud on Crypto Platforms

One obstacle to wide scale adoption of crypto is the epic level of fraud on crypto platforms. PaymentsJournal has covered this extensively, noting how smart contracts can include code which divert funds in crypto transactions, amounting to theft. Many customers are used to the Federal Reserve guaranteeing their bank accounts should banks go under. After all, fraud is a rare occurrence to them. So, Crypto seems like the wild west. For widespread adoption, the U.S. has to create regulations which prevent fraud and security risks associated with digital assets.

Applying Regulations to Crypto

According to James Wester, Head of Cryptocurrency at Mercator Advisory Group, the call for regulatory clarity is not necessarily about determining what’s illegal and what’s not.

“We have plenty of regulations on the books that cover payments, securities, options contracts, derivatives, and every other type of financial product or service,” said Wester. “Financial services is one of the most regulated industries we have. We also know a lot about risk, compliance, fraud, and security and how to regulate them in traditional finance. What the call for regulatory clarity in crypto is about is the application of those regulations to digital assets and cryptocurrencies.”

“It’s about determining which agency is responsible for policing bad actors,” he added. “It’s about how ownership of digital assets, a topic that will be vital in an evolving digital economy, should be treated from a legal and regulatory perspective. To this point, the process to determine those things has been slow—arguably, too slow—and lacked leadership. If any good comes out of the FTX bankruptcy from a regulatory standpoint, I hope it will be that interagency posturing and taking a wait-and-see approach is no longer considered acceptable.”

The post Lack of Regulation Holds Back Crypto Adoption appeared first on PaymentsJournal.

Bitcoin is unique in that there are a finite number of them: 21 million. The Lightning Network is essentially a second layer on top of the bitcoin blockchain that enables instant, scalable payments. With Lightning, you can send and receive money almost instantly, and for very low fees. That makes it ideal for micropayments, or small payments that are too expensive to make with traditional methods like credit cards or Paypal. How will this affect P2P crypto payments?

According to a Twitter post by Cash App’s Bitcoin Product Lead, the company will now allow its 44 million users to send and receive bitcoin payments on the Lightning Network. That’s a significant move for the P2P crypto payment space.

Utilizing the Lightning Network solves a big problem for everyday bitcoin usage because it speeds up transactions to near instantaneous rates with small or no fees, and solves for making bitcoin micropayments. Cash App has set a $999 limit for sending or receiving payments every seven days.

According to its website, all transactions using a QR code will default through the Lightning Network unless a user reaches their limit, or they choose to send through the traditional Bitcoin Network.

Overall, consumer interest in using crypto to make payments is low, and crypto is still primarily used as an investment vehicle. As integrations abound and transacting becomes frictionless, maybe further adoption will occur.   

Overview by Ben Danner, Research Analyst at Mercator Advisory Group.

The post P2P Crypto Payments Gets a Boost with Lightning Network’s Integration on Cash App appeared first on PaymentsJournal.

Bitcoin may be used as a form of portfolio insurance, according to Fidelity Digital Assets, a subsidiary of Fidelity Investments.

Fidelity believes that bitcoin will “stand in stark contrast to the path that the rest of the world and fiat currencies may take — namely the path of increased supply, additional currency creation, and central bank balance sheet expansion.”

The article also highlighted a recent study that Fidelity Digital Asset put out. It looks at the current state of bitcoin. According to the research, the current financial system relies heavily on the U.S. dollar. And, with the strength of the dollar continuing to increase, it’s “wreaking havoc among other countries.”

And the differences between the U.S. dollar and bitcoin is what sets the cryptocurrency apart, per Fidelity. The company noted that:

“Comparatively, bitcoin remains one of the few assets that does not correspond to another person’s liability, has no counterparty risk, and has a supply schedule that cannot be changed.”

The maximum number of bitcoins that a person can issue is 21 million. The inflation rate for Bitcoin is 1.7%. Many expect it to drop further.

Although cryptocurrency adoption is growing, there are some investors and businesses that are proceeding with caution. As we have previously covered on our site, cryptocurrencies are very attractive to some investors that are less risk-averse and are willing to make a substantial return on investment at an unprecedented speed.

The post Will Bitcoin Be Used As Portfolio Insurance? appeared first on PaymentsJournal.

The buzz and speculation about CBDCs continue. Most of the sovereign nations are in some stage of prep, study, pre-launch or full launch of their own version. 

In this piece from Kitco, the author discusses CBDCs as mostly inevitable in some form and potentially troubling. It uses PayPal and Ye (Kanye) as analogous examples as to why. Keep in mind that, the CBDC use cases are retail (to some extent B2B but not in any scalable way). They replace printed bank notes with digital representations. The main question is how will they be distributed (through commercial banks or central banks) in terms of account management. 

Hence the author raises the privacy question and uses the ‘cancel’ of Ye’s JPMC business accounts and PayPal’s aborted ‘misinformation’ policy as reason’s why, with the concern being toxic overlaps between business and politics.

The author goes on to discuss the following point. Using the recent crypto reports from the U.S. executive branch, emanating from the March White House executive order, the author gives examples of how crypto policy can have all sorts of extraneous extras that can be tied to ideology and not purely commercial exchanges. Then there is a point made about the awful stock market year and how bitcoin—and we suppose other cryptos—remain a viable choice as alternative investment options. It’s worth a read.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post Should You Beware of CBDCs? appeared first on PaymentsJournal.

BOSTON, Oct. 13, 2022 /PRNewswire/ — BlueSnap, a global payment orchestration platform of choice for leading B2B and B2C businesses, today announced a new partnership with BitPay, the world’s largest provider of Bitcoin and cryptocurrency payment services. This product partnership will give businesses the ability to accept and get paid out in up to 15 different cryptocurrencies and seven fiat currencies globally, and supports BlueSnap’s mission to help businesses across the globe increase their revenue and reduce costs.

“As many as 85 percent of major retailers already accept some form of crypto payment, and even small businesses are picking up on the trend with one-third of SMBs beginning to accept crypto. Together, BitPay and BlueSnap will bring this popular payment method to more businesses and consumers globally,” said Merrick Theobald, Vice President of Marketing at BitPay. “We are proud to work with BlueSnap on this partnership, especially as more businesses adopt this growing trend of accepting cryptocurrencies as payment for products and services.”

As a result of this partnership, businesses will be able to accept and get paid out in leading cryptocurrencies including Bitcoin (BTC), Bitcoin Cash (BCH), ApeCoin (APE), Dogecoin (DOGE), Ethereum (ETH), Litecoin (LTC), Shiba Inu (SHIB), Wrapped Bitcoin (WBTC), Ripple (XRP), as well as 5 USD-pegged stable coins (BUSD, DAI, GUSD, USDC, and USDP) and 1 EURO-pegged stable coin (EUROC). Because crypto protocols are global by default, the addition of cryptocurrency acceptance and payout will help BlueSnap’s customers conduct business with key stakeholders around the world more seamlessly. Businesses who accept crypto payments also benefit from lower processing costs, access to a new customer base and no chargebacks. The partnership will also allow customers to accept crypto and be paid out in fiat currencies including USD, EURO, GBP, PESO, CAD, AUD, NZD.

“We are excited to partner with BitPay, one of the most well-respected crypto companies in the industry,” said Ralph Dangelmaier, CEO of BlueSnap. “Our work together further supports BlueSnap’s strategic growth, and we are eager to make an impact in this new space. We look forward to driving further payments innovation through growing technologies like blockchain and cryptocurrency.”

To learn more about BlueSnap and how to set your business up to accept and get paid out in cryptocurrency, please visit https://bit.ly/3LYpzy9.

About BlueSnap
BlueSnap helps businesses accept global payments a better way. Our Payment Orchestration Platform is designed to increase sales and reduce costs for all businesses accepting payments. BlueSnap supports payments across all geographies through multiple sales channels such as online and mobile sales, marketplaces, subscriptions, invoice payments and manual orders through a virtual terminal. And for businesses looking for embedded payments, we offer white-labeled payments for platforms with automated underwriting and onboarding that support marketplaces and split payments. With one integration and contract, businesses can sell in over 200 regions with access to local card acquiring in 47 countries, 100+ currencies and 100+ global payment types, including popular eWallets, automated accounts receivable, world-class fraud protection and chargeback management, built-in solutions for regulation and tax compliance, and unified global reporting to help businesses grow. BlueSnap is backed by world-class private equity investors, including Great Hill Partners and Parthenon Capital Partners. Learn more at BlueSnap.com.

About BitPay
Founded in 2011, BitPay is one of the oldest cryptocurrency companies. As a pioneer in blockchain payment processing, the company’s mission is to transform how businesses and people send, receive, and store money. Its business solutions eliminate fraud chargebacks, reduce the cost of payment processing, and enable borderless payments in cryptocurrency, among other services. BitPay offers consumers a complete digital asset management solution that includes the BitPay Wallet and BitPay Prepaid Card, enabling them to turn digital assets into dollars for spending at tens of thousands of businesses. The company has offices in North America, Europe, and South America and has raised more than $70 million in funding from leading investment firms including Founders Fund, Index Ventures, Virgin Group, and Aquiline Technology Growth. For more information visit bitpay.com.

The post BlueSnap Partners with BitPay to Offer Cryptocurrency Acceptance and Payout appeared first on PaymentsJournal.

Cryptocurrency hasn’t yet been fully embraced by consumers or investors since its inception in 2009. Critics continue to decry its lack of intrinsic value and volatility compared to traditional stocks or currencies. However, there are some indications that hard line could be softening. While Treasury Secretary Janet Yellen says that it would likely take years for the United States to implement a federal cryptocurrency, the option certainly appears to be on the table.

As more countries examine crypto’s viability and potential regulations with a keener eye, we may be approaching a make-or-break moment, where we see digital currencies either adopted or shunned by major governments.

While some companies have already taken the plunge to accept crypto payments, an officially recognized digital dollar could change the game for brands and consumers. Here are a few consequences that we could see if the U.S. moves to implement a federally-recognized digital currency.

Cryptocurrency could emerge as a mainstream payment method

Right now, digital currencies aren’t really “currencies,” but more like speculative assets that, when sold, can trigger tax liabilities in the eyes of the IRS. Outside of some notable exceptions, few businesses are accepting Bitcoin for everyday purchases. It’s hard to make a business case for accepting a currency that transacts more like stock than cash.

The decision of whether to accept crypto as a valid payment currently falls on companies. As it stands, these are assets that aren’t backed or ensured by governments. That makes accepting something like Bitcoin a risky proposition for most businesses, especially when a tweet from Elon Musk could dramatically shift the price.

A quick look at the market for Bitcoin shows a high of $67,582 USD in November 2021. As of September 30, 2022, the price was roughly $19,431. That means that someone who invested $100 in Bitcoin just over nine months ago would now be left with $28.75. Investors in Luna were even less fortunate. Companies value stability and the ability to manage expenses efficiently. Right now, crypto assets are somewhat antithetical to that.

With support from the U.S. government and a more robust infrastructure in place, these concerns could be alleviated, with brands and consumers feeling emboldened to spend and accept crypto. Government backing would give cryptocurrency intrinsic value, just as treasuries ultimately instill value into their paper currencies. Once the U.S. reaches that point, it won’t be long before a digital dollar is normalized as legal tender.

Investors could lose interest as regulation yields stabilization

While a federally-recognized and regulated cryptocurrency would be a much larger part of people’s everyday lives, it could dilute investor interest. In many ways, the volatility and chance to rake in massive profits quickly is what has made cryptocurrency so attractive to retail investors who have higher risk appetites.

The crypto investing landscape in its current form is a financial Wild West. As governments work to catch up to a rapidly growing and increasingly complex trend, regulation is slowly taking shape. Formal action could be months or years away, meaning that, for now, crypto could continue on its wild roller coaster ride that already has investors spooked.

For those looking to invest safely and sustainably, regulation will be a good thing. Variance equals risk in the investing puzzle, and while riskier assets hold the promise of larger returns, that volatility tends to turn off risk-averse investors.

Less-pronounced peaks and valleys could cause cryptocurrencies to lose their trendy status and become more mainstream. In many ways, we’re seeing what appears to be a prelude right now, as major markets and more traditional investing circles become enamored with digital currencies. Fidelity recently became the first provider to allow investors to put Bitcoin in their 401(k)s, and growing adoption suggests it won’t be the last.

Back-office operations could be made more efficient

A legitimized national cryptocurrency could be a boon for corporations in streamlining transactions and back-office operations. While not necessarily relevant to consumers, it would drive change for many of the companies that they regularly interact with, replacing some of today’s more manual processes that may be a bottleneck.

Waiting periods and processing delays could be dramatically shortened, as money could transfer immediately once transactions are verified—and a digital dollar linked to the user could allay some fraud fears. Storing currency on a digital platform mandates consideration of cybersecurity. Still, government backing would do a great deal to make a federal cryptocurrency safer than today’s decentralized options.

Tips for corporate crypto preparedness

With all that said, the financial and fintech industries would need to take the proper steps to ensure their readiness if and when a federal cryptocurrency is instituted. Changes to existing regulations and tax codes should be expected, and companies will need to maintain compliance with anti-money laundering and know-your-customer rules, as well as relevant tax laws wherever they’re selling. This could also mean more complexities when it comes to selling cross-border.

Blockchain technology will also have to become an area of investment for these businesses, as it powers the production, use, and ownership of digital currencies. Without the right infrastructure in place, blockchain transactions might not be possible for businesses otherwise interested in the concept.

Perhaps the most important consideration is security. Currency that lives on the web adds new challenges to that conversation. With sensitive financial data and transactions, there is no room for error when it comes to staving off bad actors. Rushing the process of making cryptocurrency a part of your business could mean exposure to unnecessary risk. Companies will need to carefully map out every scenario, be honest in identifying their own vulnerabilities, and move aggressively to patch any holes.

Ultimately, it’s hard to predict all of the nuances that a federal cryptocurrency could bring to the financial landscape. However, it’s plain to see the adoption of a federally-backed cryptocurrency would have significant ramifications for consumers and investors alike.

The post What Will Be the Tipping Point for Digital Currencies? appeared first on PaymentsJournal.

Many of Russia’s largest banks have been denied access to the SWIFT network, save for certain energy-related payment activities. There have also been a number of other restrictions placed on Russia’s ability to move funds around by key members of the G20. In response, Russia legalized cross-border payments with cryptocurrencies. 

According to a recent article at Cointelegraph, European Union (EU) regulators have pushed back by completely banning members from receiving cryptocurrency payments from Russia.

The EU and United States have been very active in the Russia sanctions area, given the ongoing conflict with Ukraine and subsequent steps taken by Russia to annex regions of Ukraine. We commented earlier in PaymentsJournal on some of the payments ‘workarounds’ being utilized by Russians, including the use of CBDCs with China. I expect that the real impact of the sanctions has not been felt yet, and that the brunt of the sanctions will be felt by the Russian people. 

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post Russian Cryptocurrency Banned by the EU appeared first on PaymentsJournal.

The initial vision of Amazon as a bookseller is in the rearview mirror, as the company made it to the top of electronic commerce. My first purchase at Amazon was the kid’s classic, “Goodnight Moon,” which dates back to March 2003, and since then, my purchasing has included everything from auto accessories to pool filters and window dressings. While the book shows signs of passing through the grubby hands of children, and the original recipient is far past her college graduation, it remains a reminder of Amazon’s early days. Indeed, Amazon has gone beyond its objective to be the “everything store.” What is the Amazon payment strategy?

Amazon Payment Trends

While most of my Amazon purchases stem from the Chase Amazon Visa card, which rewards me with a whopping 5% cash-back, Amazon is involved in an array of payment options that extend into central bank digital purchases, installment lending, and business procurement. It is quite a distance from the original mission, and if your household is like mine, you found Amazon as a critical resource during COVID. Amazon delivery trucks are on my street twice a day, even now.

But payments drive commerce, and Amazon is deep into the mix on important long-range topics. While Amazon One is cool and interesting, the current impact in face-to-face sales is somewhat anecdotal.  While the payment form may gain traction in years ahead, Amazon is hyper-focused on three important payment trends today:  digital currencies, installment lending options (BNPL), and B2B procurement.

Central Bank Digital Currencies (CBDC) Will Soon Rule the World

While crypto-currencies can bring the creeps to conservative bankers because of limited audit trails and unstable values, when you put a central bank behind the process, there is an entirely different value proposition. While the U.S. Federal Reserve is in its early stages on this matter, the European Central Bank (ECB) is actively testing CBDCs with Amazon at the forefront of online commerce. The ECB approaches the topic from multiple angles, including Amazon. Other companies include “Nexi and Worldline, Spain’s CaixaBank (CABK), and the European Payments Initiative, a consortium of euro-area banks,” according to Coinbase. According to the article, a digital euro “could be issued in 2026.”

Amazon Payments and Installment Lending/BNPL

BNPL take-up took an interesting course from the Scandinavian region to Australia, then Europe, and the rest of the world. The idea was not novel—companies like Household Finance and GECC built their business around merchant financing options. What BNPL did, though, was to invert the payments focus from a consumer enabled with a credit card to a merchant enabled with a payment option. Amazon recently aligned with Affirm for this option and is using the functionality in the U.S. While Affirm certainly has had some bumps in the road, the firm has solid footing, understands capital markets, and is in payments to stay, unlike many traditional BNPL firms.

B2B Procurement

While Shopify and Amazon toil about whether it should be Shop Pay or Buy With Prime, the bigger picture is that business procurement is a massive space for payments, which Amazon discusses in their 2022 State of Procurement Report.

As Amazon leaped beyond Margaret Brown’s classic book—and the credit card I used to buy it 20 years ago—there is certainly more ahead, and Amazon will be there, A to Z.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group.

The post Amazon & Payments: Taking Positions in Three Important Industry Topics appeared first on PaymentsJournal.

Stanford University researchers have proposed token standards, based on ERC-20 and ERC-721, that enable transactions to be unwound, which some argue breaks the cryptocurrency prime directive of immutability. What will stop cryptocurrency crime?

According to an article from The Defiant:

“Reversibility—the ability to redo transactions on blockchains—has long been a challenging project for crypto scientists. The Stanford team believe it may hold the key to making cryptocurrencies more protected from hackers. Chainalysis, the blockchain forensics firm, estimates that hackers stole $14B in crypto hacks during 2021. Yet to make this proposition work, technologists would have to tinker with one of the most sacred properties in cryptocurrency systems: immutability.” 

But is that really the best way to slow criminal activity?

Today the card networks and issuing banks offer zero liability, but that service often requires banks fund the criminal activity. The largest volume of card-related fraud is the direct result of improper or no cardholder identification—think prepaid cards—and a poor authentication process criminals can bypass. So much of the fraud loss experienced today could be prevented if issuers implemented better identity validation when accounts were opened and better authentication techniques across all their customer touchpoints, including card usage. Zero liability kicks in when those basic building blocks fail.

Criminals love pseudo-anonymity as do too many cryptocurrency business leaders. When you don’t need to worry where your investment dollars came from, business funding gets much easier. We were stunned when an honest CEO did what nobody else has done, he closed down his NFT business due to the rampant crime that was clearly visible. That article is important to read for anyone really interested in mitigating cryptocurrency and NFT criminal activity.

If we want cryptocurrencies to have a net positive impact on society, we need to know who was involved in the transaction and who is funding the business. Making it easier to unwind a completed transaction requires an arbiter which crosses another cryptocurrency tenant; the lack of any centralized authority.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group.

The post What Will Stop Cryptocurrency Crime: Making Transactions Reversible or Identifying Participants? appeared first on PaymentsJournal.

Will adults that have used cryptocurrency also use DeFi to perform interest rate swaps? In a recent article, Simon Jones, the CEO of Voltz Labs suggests that may be the case.

“He points to a CNBC poll that indicates that 20% of US adults report using cryptocurrencies. However, the same poll indicates that 25% of those respondents view cryptocurrencies in a negative light, casting doubt on his argument that consumers will naturally use them for interest rate swaps,” said Tim Sloane, Vice President of Payments Innovation at Mercator Advisory Group.

“[It also seems that] Jones is ready to see the gatekeepers of financial products and services replaced with decentralized, open and permissionless protocols,” he said. “These are indeed revolutionary technologies, but they are also a hotbed of criminal activity driven by the difficulty of validating the participants which makes Ponzi schemes and other criminal activities all too easy to implement. While this article identifies challenges it fails to address that smart contracts are not yet sufficiently stable or transparent enough for interest rate swaps.”

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The post Are Interest Rate Swaps Part of The Future of Crypto? appeared first on PaymentsJournal.

Australian Senator Andrew Bragg is looking to make the use of digital yuan for cross-border transactions more widespread in the country, according to a recent article from Crypto News Flash. Steve Murphy, Director of Commercial and Enterprise Payments at Mercator Advisory Group, examines this recent proposal and whether Chinese banks in Australia should be able to use digital yuan for transactions.  

He says: 

In a recent draft bill, Senator Bragg has also proposed a licensing framework to help regulate crypto exchanges. Most readers who follow these pages will know that the Chinese government has been pushing their central bank digital currency (CBDC) and they’ve been doing ongoing field testing, although these have been [primarily] retail scenarios. We have been providing commentary on the topic and recently added some member research around cryptos in B2B use cases as well.

While the technical usage of a digital yuan is something that can of course be rolled out, the real question is the motivation behind the proposal. The article mentions that Senator Bragg also criticized the current Labor government for its slow recognition of crypto’s importance in the future world of economic transactions. Interested readers can get some more background details on the controversy by looking at these Payments Journal articles.

The post Australian Senator Pushes for Use of Digital Yuan appeared first on PaymentsJournal.

You can’t say crypto without mentioning Decentralised Finance (DeFi). Institutions are pouring billions of dollars into new and exciting ventures almost every week. What makes DeFi very exciting is that it is peer-to-peer – there is no governing central institution telling you what you can and can not do with your own assets. Where does MetaFi come in?

But there’s a lot to sort out before we reach the global DeFi adoption we all dream of. You have to be a crypto ninja to know where to start and even then DeFi can’t do everything that CeFi can do. For example, how do you buy the crypto needed to interact with DeFi protocols without passing through a centralised institution? And once you have made your returns on DeFi, how do you cash out?

Today we’ll be exploring the benefits and drawbacks of both CeFi and DeFi, and how combining them (MetaFi) may just be the right way forward.

CeFi – The Good and Bad

Centralised Finance (CeFi) is what we are all used to. It is what you get from your high street bank or insurance company. When using CeFi you expect a smooth and reliable experience, just step into a store and buy an item with their debit card, it only takes a single swipe. The money will be automatically deducted from the user’s bank account without the person themselves having to do any more than wave a card at a reader.

The customer also knows that his funds are safe, and if there is a problem, there is always somebody that can help fix the issue. When using a CeFi service you can also count on the fact that these companies are themselves highly regulated with strict monitoring.

However as your common sense tells you and the 2009 depression proves, putting all your blind trust in the financial institutions on Wall Street has some downsides. Firstly, there is the centralization risk. With CeFi your funds are effectively in the hands of the institutions. And, unfortunately, it is not uncommon for users to face power abuses by centralised crypto exchanges or banks. Freezing of funds, stopping withdrawals, and not allowing certain actions are common sights when the market is in turmoil and it means you can wave bye-bye to your hard earned savings.

On top of that, by relying on a middleman CeFi services generally come with higher costs and fees and take a lot more time.

DeFi – Ups and Downs

DeFi, on the other hand, excels at allowing users to earn without having to pass through a middleman. Thanks to the peer-to-peer nature of the blockchain, crypto holders can make use of DeFi protocols with no third parties involved. Or in other words, DeFi cuts out the stereotypical Wall Street Fat Cat and gives users back the control of their funds.

In addition to this, DeFi offers a rich ecosystem of products and services, from DEX’s to yield deposits and staking pools, providing endless possibilities. Users of DeFi services tend to earn a lot more than their CeFi counterparts.

However, as with everything else, DeFi also has drawbacks. DeFi protocols are always very complicated. It’s unrealistic to expect even experienced crypto users to understand and properly use products such as a yield vault. Imagine having to read Facebook’s terms of use every time you wanted to use Facebook, to know what you are letting yourself in for. It’s just not going to happen for most people.

And if you don’t know what you are doing, and there is nobody to back you up if you make a mistake, then DeFi clearly represents a much higher risk than the CeFi governance approach. A phrase you hear often in crypto is ‘be your own bank’. But if we are honest with ourselves, do we really want to be our own bank, with everything that entails? Imagine if you forget the key to the bank (in crypto this is usually a key phrase) and you are locked out forever. In DeFi everything is in your own hands, including the responsibility of storing your funds.

Not that many people, or businesses for that matter, are prepared to take that risk. Which means that the huge benefits of DeFi, especially the opportunity to earn on dormant funds, is being wasted.

MetaFi – The Best of Both Worlds

DeFi and CeFi both have their pluses and minuses which appear to be almost the polar opposites of each other. What if we just combine the two inside one solution so that the pluses and minuses can balance out? A so-called “MetaFi” ecosystem, which would allow them to cover each other’s weak spots and reach their full potential.

CeFi excels at its accessibility and can help create a single access point for all of the DeFi ecosystems, allowing for full blockchain interconnectivity. A CeFi infrastructure would also better protect users’ funds from scams, hacks, and loss of seed phrases, making the whole experience less daunting. On the other hand, DeFi could bring to the table a certain degree of decentralisation and a rich ecosystem of services, as well as lower fees and faster services.

Bridging the two systems brings the best out of each other. MetaFi is the best bet for crypto adoption, making digital assets more accessible, efficient, and easier to use for businesses and individuals alike.

The post MetaFi – The Secret Way To Earn With Crypto appeared first on PaymentsJournal.

One key question facing policymakers is how to regulate crypto. Due to its decentralized nature, cryptocurrency does not fall under the jurisdiction of any one country or regulatory body. This presents a challenge for legislation, as there is no existing framework to control cryptocurrency. Some have suggested that cryptocurrency should be regulated in a similar way to other financial assets, such as stocks and bonds. Others have proposed more creative solutions, such as creating a new class of asset specifically for cryptocurrency.

We suppose this post at Cointelegraph catches no reader by surprise, especially since we just commented a couple of days back on a previous article about the same thing.  In this case the central bank of Russia (Bank of Russia) is now saying that crypto legalization is inevitable.  We are not deep into the Russian legal system but one would assume that legislation in some form is required first, however, it could be that BoR has the authority to declare crypto as legal under the Russian system.

‘The Bank of Russia, the country’s central bank, has reportedly admitted that cross-border payments in crypto are inevitable in the current geopolitical conditions….The Russian central bank has been rethinking the approach to regulating crypto and agreed with the finance ministry to legalize crypto for cross-border payments, the local news agency TASS reported on Monday….Deputy finance minister Alexei Moiseev reportedly said that the Bank of Russia and the finance ministry expect to legitimize cross-border payments in crypto soon.’

The catch here is that the use case being legitimized has to do with foreign payments only, whereas domestic crypto in still not made for prime time.  One can see the clear reason for this logic of course, given that Russia is being partially sanctioned by various countries and payments networks, resulting in limited access to cross-border payment alternatives.  We assume domestic crypto payments will be coming as well, but Russia would want to build its own infrastructure first, similar to their effort to create the Mir credit card.

‘Russian lawmakers have been historically opposed to the idea of using cryptocurrencies as a payment method. In 2020, Russia adopted a major crypto law, “On Digital Financial Assets,” which officially prohibited the use of cryptocurrencies like Bitcoin (BTC) for payment purposes. The Bank of Russia has been skeptical about the idea of cryptocurrency payments because it wanted to protect the Russian ruble as the only legal tender in the country….The idea of crypto payments for national trades in Russia surfaced in late 2021. Then, Russian President Vladimir Putin said it was “still premature” to use crypto for trades of energy resources like oil and gas.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post More Developments on Crypto in Russia appeared first on PaymentsJournal.

Russia has been increasingly interested in cryptocurrency, with President Vladimir Putin recently ordering the development of a national digital currency. Russia‘s Central Bank has also been working on a digital currency, although it is not yet clear when this will be launched. There are several reasons for Russia’s interest in cryptocurrency. One is that it could help to circumvent Western sanctions, which have been imposed on Russia in response to its annexation of Crimea and involvement in the conflict in Eastern Ukraine. Another reason is that crypto could help to boost Russia’s economy, which has been struggling in recent years. Finally, digital currency could also help to increase Russia’s anonymity and, as a result, its power on the global stage.

Some readers might react to the title of this piece, ‘Russia says crypto is “safe alternative” for cross border payments‘, found in Coinjournal, with a ‘sure, what else would Russia say’ type of reply.  Russia has been under heavy sanctions from various international payments systems since the invasion of Ukraine and so funds movement across borders have been restricted for the largest banks (save for energy requirements).  So, when the Russian Prime minister says that cryptos can be a ‘safe alternative’ for cross-border payments one must keep that statement in the proper perspective.

‘While on one level it feels silly to talk about cryptocurrencies in Russia when there is a literal war going on, this is a crypto site….In that context, some very interesting developments have come out of Russia over the last day. Russian Prime Minister Mikhail Mishustin declared cryptocurrencies could be a “safe alternative” for cross-border payments….“We need to intensively develop innovative areas, including the adoption of digital assets. This is a safe alternative for all parties that can guarantee uninterrupted payment for the supply of goods from abroad and for export.”

The author goes on to mention that Iran also made a similar statement. It’s rather expected since that country has been sanctioned for years, given the nuclear program.  But the key point is the mainstreaming of bitcoin, as an example, which is used as an example given remittance costs in El Salvador, where the country is a heavy user.  The issue for larger transactions of course is the volatility of bitcoin and other cryptos, so we’ll see where this goes.

‘This brought up what can at times be a polarising subject – the use of crypto as a potential medium to evade such sanctions. These comments by Mishustin referring to crypto as a “safe alternative” will do nothing to dampen that debate….But it does demonstrate the power of crypto. I saw this first hand in my trip to El Salvador last month, where people spoke of the advantages Bitcoin offered regarding remittances. El Salvador is in the top 10 countries in the world for remittances as a portion of GDP, and the average fee on such remittances is a crazy 6.5%….’Cutting these fees out through using Bitcoin can be a huge plus to those receiving money from loved ones abroad. In Russia and Iran’s case, while remittances will be aided too, they are not as big a factor as they are for El Salvador. In their cases, the massive boon is the enhanced ability to evade sanctions.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post Russia and Cryptos appeared first on PaymentsJournal.

A metaverse is a user-created virtual world that uses blockchain technology to enable the creation of digital assets. Proponents of the metaverse believe that it has the potential to become a new, decentralized internet where users can own their data and create their own virtual realities. The metaverse is still in its early stages of development, but there are already a number of applications and platforms that are being built on top of the metaverse blockchain. The metaverse blockchain is a decentralized platform that enables secure, transparent transactions between users. By using blockchain technology, the metaverse blockchain provides a secure and tamper-proof ledger of all transactions.

This article contributed to Entrepreneur argues that DeFi has greater opportunity to grow than the metaverse, despite the recent DeFi failures and precipitous drop in value of cryptocurrencies. The author identifies these drawbacks but argues growth will come for both DeFi and metaverse, but that because DeFi can delivers value to existing regulated entities and financial giants (see Project Guardian as an example), it is more likely to grow rapidly versus the consumer oriented metaverse.  I would add to that argument that the DeFi infrastructure already has several different implementations, albeit mostly incompatible implementations. It would be just as simple however to argue that the lack of metaverse regulatory oversight might enable it to grow faster than DeFi. Regardless which you expect to grow faster, neither can be successful until critical issues in the shared blockchain infrastructure that we have documented here, here, here, as well as here, are resolved:

“In that sense, DeFi is starting to find ways to fulfill Bitcoin’s original promise to empower the little guy to make money through decentralized protocols. It is also following through by letting him spend that money at places that matter.

As DeFi continues to open access to and expand on traditional investment vehicles, cross-chain launchpads such as Synapse Network, which jumpstarts businesses with customizable offerings ranging from anti-bot solutions to tokenomic models, will help them scale. In turn, the rate at which DeFi as an industry matures and changes everything we know about finance will accelerate.

That’s not to say the Metaverse won’t rise again or that blockchain won’t play a significant role. With major players like Meta and Microsoft actively bringing their visions to fruition, it’s almost inevitable that smaller innovators will reenter the game. The Metaverse as a use case of blockchain and NFTs is much younger than the more traditional financial applications. In the Bitcoin family, as in most families, the older child paves the way for the other siblings.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Which Will You Bet On: DeFi Versus Metaverse appeared first on PaymentsJournal.

Bitcoin is a digital currency that was created in 2009. Unlike traditional currencies, bitcoin is not regulated by a central bank or government. Instead, it is based on a peer-to-peer network of users who buy and sell bitcoin using a decentralized platform. Bitcoin has become increasingly popular in recent years, as more people have begun to see it as a viable alternative to traditional currency. In addition, bitcoin has also been used as a way to make purchases online without having to go through a third-party provider such as a bank or credit card company. This has led to bitcoin being seen as a potentially transformative force in the world of finance and fintech. While there are still some concerns about the stability of bitcoin, its popularity continues to grow, and it is likely that it will become even more mainstream in the years to come.

The Texans are accepting bitcoin via a partnership with BitWallet that enables fans to purchase single-day suites. According to FromThisSeat.com, a single-day suite typically costs $14,000 or more. Note that the Texans are not the only sports team accepting crypto, the Nashville-based Tennessee Titans partnered with UTXO Management for a broader set of bitcoin payments, enabling fans to purchase season tickets, game suites, and sponsorships. All of this comes after the NFL in March this year granted teams limited permission to seek blockchain sponsorships, but continued to ban cryptocurrency promotions and fan tokens:

“According to the team, it has already made its first crypto sale after selling a suite to digital marketing agency EWR Digital.

A single game suite refers to an exclusive football viewing space in the stadium. It accommodates a small group of fans with buffets, beverages, TVs, and a prime location to view the game.

Also Read: Huge Jump In NBA Crypto Sponsorships, From $2M To $130M

The Texans have not mentioned anything about the price range for the single suit, but according to the Seat, a single game suite for the team may cost anywhere from $14,000 to $25,000.

Earlier in April, the Nashville-based Tennessee Titans partnered with digital asset fund UTXO Management to enable Bitcoin payments, allowing fans to purchase season tickets, game suites, and sponsorships.

During the same month, the Dallas Cowboys signed a crypto sponsorship deal with Blockchain.com to be its official digital asset partner.BitWallet helps users to hodl Bitcoin BTC/USD, and also supports other cryptocurrencies such as Ethereum ETH/USD, Litecoin LTC/USD, Dogecoin DOGE/USD, Shiba Inu SHIB/USD, and Bitcoin Cash BCH/USD.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post NFL team The Texans accepts bitcoin via BitWallet for single game suites that cost $14 – $25K appeared first on PaymentsJournal.

This posting at CoinTelegraph summarizes the current stance by the ECB (European Central Bank) on digital assets. As many readers will already know, the Euro Zone has active regulators and many of them, since each country needs to ratify whatever is proposed by the EC.  In this case we are talking about the licensing process for companies that want to deal in Cryptos. The regulation referenced is the MiCA (Markets in Crypto Assets), which applies to any cryptocurrency-associated company or individual that wants to offer their coins, assets or services in Europe. The scope involves several categories of agents, including custodians and administrative services in the cryptocurrency industry. Moreover, all trading platforms, exchanges (whether fiat to crypto or crypto to crypto), and asset issuers are subjected to the MiCA. The ECB would be one entity reviewing these companies as part of their core responsibilities for licensing review, at least as far as we understand it.

‘In a Wednesday statement, the ECB’s banking supervision division said it would be taking steps to regulate digital assets as “national frameworks governing crypto-assets diverge quite extensively” and given the seemingly differing approaches to harmonization following the passage of the Markets in Crypto-Assets (MiCA) regulation and the Basel Committee on Banking Supervision issuing guidelines for banks’ exposure to crypto. The ECB said it would apply criteria from the Capital Requirements Directive — in effect since 2013 — to assess licensing requests for crypto-related activities and services.’

While we are not familiar with all the details of MiCA, the ECB is simply pointing out some of the due diligence criteria that will be applied when license reviews are underway.  Cryptos are still relatively new and this particular legislation does not get fully rolled out until 2024 anyway.  The piece also points out that the ECB recently released a study whereby a CBDC is preferred over decentralized cryptos or even stable coins as a means for x-border payments. We recently covered B2B uses for cryptos in a member research paper. Those interested should give it a quick read and dig into more detail.

“The higher the complexity or relevance of the crypto business, the higher the level of knowledge and experience in the field of crypto should be,” the ECB said. “Senior managers or board members with relevant IT knowledge and chief risk officers with robust experience in this area are important safeguards.”….According to the ECB, there is “work ongoing” to analyze the role crypto may play in Europe, which will “remain an area of focus for European banking supervision in years to come.” With the passage of MiCA, global regulators may begin to standardize rules for crypto service providers within the European Union.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post ECB Starting to Enforce Due-Diligence Criteria on Crypto appeared first on PaymentsJournal.

Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and to control the creation of new units. Crypto is decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services.

This article from Wired focuses on the SEC’s activities to identify crypto as a security. I don’t know if it is, or is not, a security, but I have often used the analogy that it operates like a diamond market. I also recognize that crypto, as it operates today, supports far too much criminal activity. The crypto elite suggest that anonymity, or pseudo-anonymity, is a positive attribute. If the only way we can force crypto exchanges to track user identities is to declare it a security, then so be it. However, one expects there is a less disruptive approach that would accomplish this without taking the draconian step of declaring it a security:

“If you have paid casual attention to crypto news over the past few years, you probably have a sense that the crypto market is unregulated—a tech-driven Wild West in which the rules of traditional finance do not apply.

If you were Ishan Wahi, however, you would probably not have that sense.

Wahi worked at Coinbase, a leading crypto exchange, where he had a view into which tokens the platform planned to list for trading—an event that causes those assets to spike in value. According to the US Department of Justice, Wahi used that knowledge to buy those assets before the listings, then sell them for big profits. In July, the DOJ announced that it had indicted Wahi, along with two associates, in what it billed as the “first ever cryptocurrency insider trading tipping scheme.” If convicted, the defendants could face decades in federal prison.

On the same day as the DOJ announcement, the Securities and Exchange Commission made its own. It, too, was filing a lawsuit against the three men. Unlike the DOJ, however, the SEC can’t bring criminal cases, only civil ones. And yet it’s the SEC’s civil lawsuit—not the DOJ’s criminal case—that struck panic into the heart of the crypto industry. That’s because the SEC accused Wahi not only of insider trading, but also of securities fraud, arguing that nine of the assets he traded count as securities.

This may sound like a dry, technical distinction. In fact, whether a crypto asset should be classified as a security is a massive, possibly existential issue for the crypto industry. The Securities and Exchange Act of 1933 requires anyone who issues a security to register with the SEC, complying with extensive disclosure rules. If they don’t, they can face devastating legal liability.

Over the next few years, we’ll find out just how many crypto entrepreneurs have exposed themselves to that legal risk. Gary Gensler, whom Joe Biden appointed to chair the SEC, has for years made clear that he believes most crypto assets qualify as securities. His agency is now putting that belief into practice. Apart from the insider trading lawsuit, the SEC is preparing to go to trial against Ripple, the company behind the popular XRP token. And it is investigating Coinbase itself for allegedly listing unregistered securities. That’s on top of a class-action lawsuit against the company brought by private plaintiffs. If these cases succeed, the days of the crypto free-for-all could soon be over.”

Mercator Advisory Group has a report that examines the growing role of financial institutions in the cryptocurrency landscape and highlights areas of opportunities for payment providers and fintechs.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post The Days of the Crypto Free-For-All Could Soon Be Over appeared first on PaymentsJournal.

Leading cryptocurrency exchange Binance announced their initial Latin American launch of their crypto prepaid card offer, in partnership with Mastercard. The card’s purpose will serve to make conversion of crypto currencies to fiat currency more simple. Ritu Lavania reports further in The Crypto Times:

“The card will unleash a seamless transactional experience in which their cryptos will be converted to fiat in real-time during the purchase and also get up to 8% crypto cashback on a few limited purchases.”

The Binance card will work for crypto purchases and payments. Binance customer swill be able to use the card to purchase additional holdings of various cryptocurrencies and on the flip side, will allow users to easily make purchases at Mastercard accepted locations. Users can choose which cryptocurrencies to use from their holdings while merchants receive traditional fiat currency as payment:

“Walter Pimenta, Executive VP, Mastercard Latin America and the Caribbean, said ‘Our work with digital currencies builds on our strong foundation to enable choice and peace of mind when people shop and pay.’”

Using the prepaid networks allows consumers to choose how much of their crypto portfolio to they choose to fund on their card and provides an simple conversion point from their crypto wallet to their physical wallet. Users can manage their cards through a dashboard on either the Binance website or app, pricing instant access to information and ability to fund their card. Users can also easily access paper currency directly with free ATM withdrawals. These moves highlight an effort to normalize use of crypto currencies by using the card networks in fashions similar to international transactions where each party uses or receives the currency of their choice. These moves, and the use of prepaid as the vehicle to move crypto, are critical for crypto to move from speculatory investing into an everyday choice to complement cash, credit and debit.

Overview by Jordan Hirschfield, Director, Prepaid Advisory Service at Mercator Advisory Group

The post Binance and Mastercard Launch Crypto Prepaid Card in Latin America appeared first on PaymentsJournal.

Crypto and DeFi are two of the most talked-about topics in the financial world today. Crypto refers to the use of cryptography to secure transactions and control the creation of new units of currency. DeFi, short for decentralized finance, is a new way of conducting financial transactions that does not rely on central intermediaries like banks. Crypto and DeFi are often spoken about in tandem because they share a common goal: to provide a more efficient and democratic way of handling financial transactions.

Crypto companies and enthusiasts are always throwing unwarranted hype at any situation. Stock market is healthy, crypto is doing better. Stock market is sinking or inflation skyrocketing, it is the only way out. Those hyping crypto and DeFi want you to believe they always produce a profit, it’s as if the crypto winter and the failure of multiple exchanges and DeFi implementations in the last few months never happened! When Bloomberg, Coindesk, CoinTelegraph, Fortune, and The Motley Fool all provide good arguments for why DeFi is in deep trouble, maybe we shouldn’t be declaring it our savior? Not to pile on, but I also wrote about the technical issues around these topics months ago here and here. As to why CBDC might be needed despite the availability of stablecoins, maybe the $60B failure of TerraUSD (UST) four months rings a bell?

There has been much talk of central bank digital currencies (CBDCs), yet when we have deflationary stablecoins already in the ecosystem, whose value can be pegged to collaterals, such as other cryptocurrencies or even traditional assets, what is the real benefit of a CBDC? The whole idea of a stablecoin is to offer a crypto asset whose value isn’t prone to extreme volatility. Most stablecoins achieve this stability by pegging their value to a fiat currency, such as the U.S. dollar or a basket of assets, which could include fiat and cryptocurrencies.  

Moreover, most stablecoin projects also incentivize people to stay invested in the ecosystem by offering up derivative versions of assets they have locked in liquidity pools, allowing investors to engage in other DeFi protocols even while their main assets remain locked. They can earn generous interest and still use derivatives to take our loans, or earn yield in other places, compounding their initial investments.

DeFi is providing new avenues for economic growth while also giving power back to every individual, not just the superrich. By not being pegged to a nation-state currency and instead the broader development of the crypto-powered economy, DeFi protocols can offer generous incentives to save, earn and borrow with very little initial investment capital needed. 

Mercator Advisory Group has written a viewpoint discussing the practical uses for crypto for corporate banking and payments.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post An argument that crypto and DeFi are investments to fight inflation appeared first on PaymentsJournal.

The headline of this brief piece posted in Cointelegraph will likely come as no surprise to most readers; the ECB is basically endorsing CBDCs over Bitcoin (among others) as a means of transferring value cross-border. Members will know that we recently released a research paper on the growing uses of cryptocurrencies in the B2B space. In that paper we point out that the BIS reports that as of 2021 14% of central banks in their purview were deploying a CBDC and 60% were experimenting with at least one form (this includes the U.S., which we have pointed out in these pages as well). 

‘A recent study conducted by the European Central Bank (ECB) on identifying the ultimate cross-border payment medium crowned central bank digital currencies (CBDCs) as the winner against competitors, including banking, Bitcoin (BTC) and stablecoins, among others….ECB’s interest in identifying the best cross-border payment solution stems from the fact that it serves as the central bank of the 19 European Union countries which have adopted the euro. The study, “Towards The Holy Grail of Cross-border Payments,” referred to Bitcoin as the most prominent unbacked crypto asset….On the other hand, the ECB recognized CBDCs as a better fit for cross-border payments owing to greater compatibility with forex exchange (FX) conversions. Two major advantages highlighted in this regard are the preservation of monetary sovereignty and the ease of instant payments via intermediaries such as central banks.’

One of the biggest hurdles for Bitcoin is of course the relatively slow transaction settlement associated with the proof-of-work layer, which runs counter to the growing ‘need for speed’ in modern transaction processing.  Interestingly enough, the article goes on to point out that a central bank governor in Australia has the opposite view, favoring private solutions. The subject is front and center so we’ll see more about this consistently over the next couple of years.

‘Contradicting the ECB’s reliance on CBDCs, Australian central bank Governor Phillip Lowe believed that a private solution “is going to be better” for cryptocurrency as long as risks are mitigated through regulation….Mitigating risks related to crypto adoption can be fended off by strong regulations and state backing, stated Lowe, adding:

“If these tokens are going to be used widely by the community, they are going to need to be backed by the state or regulated just as we regulate bank deposits.”

In Lowe’s view, private companies are “better than the central bank at innovating” the best features for cryptocurrency.’

Among commercial cards, Mercator Advisory Group sees development in crypto rewards and expanding crypto payments acceptance, while in treasury and trade, there are uses in cross-border payments, liquidity and cash management.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post European Bank Bets on CBDCs appeared first on PaymentsJournal.

What’s possible in global payments continues to be redefined, revisited, and reimagined. The traditional lines between banking, payments, and commerce have all but dissolved. The rules that once limited who participates in money movement — and how that movement happens — have been rewritten. This connected world is creating new opportunities to shape the future of commerce and financial services.

The Global Payments Report from FIS is designed to help financial institutions and merchants navigate global and local trends in payments.

The Current Global Payments Landscape

The seventh edition of The Global Payments Report offers a snapshot of the current payments landscape: globally, by region, and in 41 select markets. The report tracks consumer payments when shopping online and at the point of sale, identifies key payment trends, and projects scenarios through 2025 for payment method shares as well as market size. A series of thought leadership articles, with perspectives on current themes in the world of payments from FIS payments experts, complement original research.

The report has two parts, outlined below.

Global and Regional Trends

Part one focuses on global and regional trends in the payments industry. See what FIS experts think about the trends transforming the payments ecosystem, including:

• How super apps have transformed Asia and attracted tech giants that want to own a piece of the super-app pie.
• What’s in store for merchants and financial institutions as crypto and central bank digital currencies continue to shake up the global financial landscape.
• How embedded finance is changing the way customers manage their lives.
• What the evolution of real-time payments means for consumers, businesses, and financial institutions.
• How financial technology is influencing financial inclusion.
• Key developments transforming Europe’s payments landscape.

Breakdowns for Global Payments by Individual Country

Part two focuses on individual countries and examines trends in the way consumers pay for things. This section is particularly helpful for international FIs and merchants looking to customize their business plans for local markets.

The section provides market guides for 41 countries, each of which starts off with an overview of the financial trends in the country, and then describes how consumers purchase goods at points of sale and in e-commerce. The authors then use their research to project how this will change by 2025, complete with sleek graphs.

Help For Financial Executives

Overall, this report would help financial executives learn more about how the payments industry is changing globally and how that will affect the markets they do business in.

To learn more about the state of payments, consider reading
The Global Payments Report from FIS:

The post The Global Payments Report from FIS appeared first on PaymentsJournal.

Decentralized finance, or DeFi, is a rapidly growing sector of the cryptocurrency industry that offers an alternative to traditional financial products and services. DeFi platforms are built on blockchain technology and allow users to trade, borrow, lend, and invest without the need for a centralized intermediaries.

The phrase “If it’s too good to be true, it probably is” should be applied to this recent article, about the recent collapse of the value of cryptocurrencies. The first hint is when the author claims that the failure of Terra, Celsius, and Three Arrows Capital was a “Black Swan” event. It was only a Black Swan event for those that thought the value of crypto couldn’t crash or those that ignored the string of inter-related crypto loans that were issued. Perfect blockchain transparency doesn’t mean people are paying attention to its flaws  and typical consumers have no idea about the inter-workings of these DeFi implementations, they are simply drawn to promises of never ending profit – and that’s why regulators are critical to stability. DeFi needs that regulation ASAP:

“There exists a small sector within DeFi, particularly in the lending space, that has shown signs of resilience despite periods of stress. These DeFi protocols have continued to see healthy demand in both lending and borrowing activities of institutions as evidenced by the continued growth in total loan origination. Veterans in the lending space such as AAVE and Compound have also ventured into the lucrative institutional lending space. AAVE introduced AAVE PRO while Compound set up Compound Treasury, targeted at meeting the institutional needs to gain DeFi exposure.

This dose of healthy demand comes amidst traditional financial institutions’ clients demanding greater exposure to DeFi. A 2021 report by Fidelity has shown that 40% of crypto hedge funds and venture capitalists have expressed interest in digital assets due to opportunities to participate in DeFi ecosystems. The biggest reason for interest in digital assets, according to Fidelity, is their high potential upside. Unsurprisingly, the higher risk-adjusted return of DeFi lending protocols makes more investment sense in an inflationary environment.”

Another important component of DeFi solutions is the actual smart contract technology. Mercator has written a viewpoint on smart contracts and creation tools requires to ensure transparency and trust.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Claims that DeFi can Defy Bear Markets are Optimistic appeared first on PaymentsJournal.

Author’s Note: At the time of publishing this article, the world is experiencing the beginnings of  a second “crypto winter” whereby fundamental flaws in certain decentralized projects (namely Terra’s stablecoin, Luna) have raised systemic concerns and destabilized the entire ecosystem. While this article has been in the making before these market movements, it is, nonetheless, still a great time to check in on the promise and potential of decentralized, blockchain-based services to manage personal data (and the sharing of such data). How will this affect DeFi lending?

Background: In the aftermath of the 2008 crisis, banks suffered a massive vote of no confidence from the world at large. Their failure to advance their own systems and basic lending services in lieu of juicier profits from exotic financial products (after the repeal of Glass-Steagall in 1999 opened the doors for the merger of retail and investment banks) resulted in two massive movements. The first was the fintech movement which aimed to build new rails on top of existing frameworks and infrastructure. The second movement was crypto, which aimed to completely throw out existing systems and disintermediate financial services entirely.

The promise of disruption of crypto and decentralized finance (DeFi)– in lending, in particular– has been exhilarating in scope and ambition and has attracted billions in venture investment. Imagine, a tokenized world, where your identity is securely managed on a blockchain, your car is a token that can be wrapped in a smart contract that can be used as collateral in an instant cross-border crypto loan. Access to capital would be immediate, transparent, and global. 

However, 14 years after Satoshi’s white paper, we take a hard look at how DeFi has fared vis a vis fintechs, which have also been working arduously with the significant speed advantage of centralized decision-making. What is evident is that things have moved much slower than expected in crypto ubiquity, that full disintermediation of information and asset ownership is no easy task, and that the promise of self-custody may not be as attractive to the general public as was previously thought.

In the meantime, lending tech startups, like OneBlinc, have been busily plugging away to create alternative credit scoring algorithms from information that, until recently, was virtually inaccessible. This data includes instant payroll feeds, made possible by new rails created by Open Payroll pioneers like Argyle. While the DeFi movement has been trying to build a standalone system from scratch (with several bangs and busts of projects along the way), fintech players have been steadily connecting existing systems more efficiently and creating multi-billion dollar sub-niches in the process.

DeFi’s Limitations in Lending

As fintech geeks, we have been eagerly watching DeFi from the sidelines and rooting for it. But as credit fanatics, we have been disappointingly underwhelmed by the limitations of on-chain lending. For asset-backed lending, we do see the promise for digital assets, but even DeFi’s most ardent supporters must admit that that tokenizing real world assets is an impossible feat if the intent is to fully disintermediate real-world agents from the process, i.e. you can’t truly tokenize a car, while the Department of Motor Vehicles still exists. Many critics will even argue that not even NFTs are truly trustless, and that OpenSea is an intermediary that can unilaterally block or grant access to assets on the platform. Our conclusion is that (at least in the near future) truly decentralized DeFi lending will, unfortunately, be restricted to crypto collateralized loans– and even in this case, restricted to super low Loan to Value ratios, due to the volatile nature of crypto.

We believe that unsecured credit will continue to be the realm for centralized players, for the reasons above, but more importantly there are two main showstoppers for DeFi:

1. No real world collections mechanisms: On-chain transaction behavior could be used as an input into credit models, but unless ownership of specific private keys could be attached to a real world person, there would be zero consequences to not repaying the loan. I.e. you need real world enforcement for unsecured loans to happen.
2. Inability to store enough data on chain: Unsecured credit models must take several inputs (in many models this could be dozens) in order to underwrite a loan. The nature of decentralized blockchains makes it impossible to keep so much data for every single person, while still maintaining consensus and having any modicum of speed in on-chain updates. A decentralized credit bureau is virtually impossible in terms of the amount of data to be stored on-chain. The solution would be to consult trusted external data providers, which, in itself, would defy the purpose of a “trustless” system, since you could still be censored by external parties.

Solutions Already Exist to Support Users Today

In addition to not suffering the constraints of DeFi, “Centralized Finance” has been evolving at light speed to fill in historical and emerging consumer needs by leveraging new infrastructure that was not existent in 2008. OneBlinc, for instance, is able to deliver almost-instant emergency loans to underserved users who– not just an approval decision, but actually have cash in their checking accounts ready to go. OneBlinc is able to do this because of several leaps in financial services evolution, including:

• Open Banking: API access to bank statements provide rich insight to a user’s ability to actually service a loan that goes miles beyond what a credit score tells you.
• Open Payroll: The holy grail of unsecured lending is being able to ascertain an applicant’s employment history and real income. Disruptors like Argyle have changed the game for lenders like OneBlinc by massively reducing the time and increasing the quality of underwriting.
• Cloud Services: As a three-year-old startup, processing millions of data points from almost one hundred APIs during our underwriting process would not have been possible 15 years ago. Cloud providers, like AWS, allow us to not only process these instantly, but also provide other tools, like Machine Learning, that deliver continuous improvement to our processes. 
• Better Payment Rails: One of the original raisons d’être for crypto was the speed and cost of transactions. For anyone who has recently paid for a Bitcoin or Ethereum transaction, it is evident that this promise has fallen behind the massive advancements in payments. Companies like Tabapay have created the infrastructure to make instant payments for fintech companies like OneBlinc, which in turn allows us to deliver a never-before-seen level of service in our industry.

The post The Promise of DeFi Lending Services appeared first on PaymentsJournal.

My short answer; it’s totally imagined and not for just the reasons identified by Bloomberg. DeFi software does not just spring into existence, it needs to be created, fixed, and managed. The idea that this can be done democratically through voting is flawed. Deciding who gets to vote is the first undemocratic decision. However, the bigger issue is that as the number of use cases operating on top of the platform increase, so does the need for modifications to support those use cases. This might involve obvious changes, such as support for integration with other blockchains or cryptocurrencies, but there will certainly be changes required to meet the needs of specific use cases as well. Getting the resources to develop for a new use case is problematic; few users stand to benefit, and precious resources are needed to focus on developing and deploying major enhancements.

Anyone that tells you that deploying new operational software on an existing high volume blockchain is simple is lying- just look at the problems that have ensued with each new release of Bitcoin and Ethereum. In the worst case scenario the blockchain is split, as has already happened to both Bitcoin and Ethereum, with some voters and their own solutions deciding to stay on the original version while other voters and solutions migrate over to the new version. Now imagine a Decentralized Autonomous Organization (DAO) worth billions suddenly needing to decide if it will migrate its blockchain and smart contract environment it will remain operational on. These and Oracles are key components likely to be modified to address the needs of the majority – whoever they happen to be. Then there are also the additional issues raised by Bloomberg:

“There’s a tension in crypto that Stacy-Marie is fascinated by. On the one hand, there’s this prevailing belief in the necessity, indeed the superiority, of decentralization. On the other hand there’s reality: when things hit the fan, folks respond by seeking a bailout, by demanding someone – perhaps even a regulator! – hold fraudsters accountable, and by consolidating around the strongest and biggest players in the market. In an industry so prone to spectacular scams and expensive hacks, this tension is ever-present. Can you simultaneously reject all forms of centralized control and then demand help from centralized authorities in times of trouble?”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

Please also check out: Watch out DeFi, the Regulators Are Coming!

The post Is The So-called Democratic Nature of DeFi Real or Imagined? appeared first on PaymentsJournal.

Over the past few years, crypto has emerged as a powerful force in the financial world. With its decentralized structure and ability to facilitate peer-to-peer transactions, crypto has the potential to upend traditional finance. One of the most promising applications of crypto is in the area of decentralized finance, or DeFi. DeFi is a rapidly growing field that utilizes crypto assets and smart contracts to provide a variety of financial services. These services include lending, borrowing, and trade execution, among others. While the potential of DeFi is great, there are also some challenges that need to be addressed. One of the biggest challenges is identity verification. Due to the pseudonymous nature of crypto, it can be difficult to verify the identity of users.

As was mention in this article posted by CoinDesk, Eddie Yue, the CEO if the Hong Kong Monetary Authority, told a G20 meeting that crypto and decentralized finance will remain a significant force. That would be true given they operate on technology that makes intervention extremely difficult and provide significant value despite the obvious problems with the current solutions, such as lack of identity and fraud management, limited inter-operability between the currencies, blockchains, smart contracts and Oracles. There is also very little discussion today regarding how current payment systems could be integrated into the blockchain-based solutions using tokens, which would solve multiple problems:

“Hong Kong Monetary Authority (HKMA) CEO Eddie Yue thinks cryptocurrency and decentralized finance (DeFi) will continue to play an important role in the financial system despite the recent instability in the sector.

Speaking during a meeting of G20 financial officials, Yue called for greater regulation of the crypto industry to prevent another crash like the collapse of algorithmic stablecoin terraUSD (UST) and its companion token, LUNA, reports FinBold.

“Despite the [UST-LUNA] incident, I think crypto and DeFi won’t disappear – though they might be held back – because the technology and the business innovation behind these developments are likely to be important for our future financial system,” Yue said.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Hong Kong Authority states the obvious at G20: ‘Crypto and DeFi Won’t Disappear’ appeared first on PaymentsJournal.

Cryptocurrencies are digital or virtual currencies that use cryptography to secure their transactions and to control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services. Non-fungible tokens (NFTs) are a type of cryptocurrency that represents a unique asset, such as a piece of art or a collectible. NFTs cannot be exchanged for other assets like traditional cryptocurrencies, but they can be traded on crypto exchanges. Crypto assets can be used to transfer value and ownership of assets between individuals without the need for a central authority. Crypto exchanges are online platforms where cryptocurrencies can be bought, sold, or exchanged for other cryptocurrencies or fiat currencies. Where does 3AC fit in?

Three Arrows, known as 3AC, was a hedge fund that claimed to manage more than $10 billion in assets, but now faces Chapter 15 bankruptcy protection from U.S. creditors in the Southern District of New York amid the larger impact that is evolving from the dropping value for cryptocurrency which has highlighted the many cracks in the system:

“According to Friday’s court filing, Zhu and Davies, both former traders for Credit Suisse, participated in an introductory Zoom call last week to discuss basic steps to preserve their assets. Neither founder turned on his video, and both remained muted for the duration, with all dialogue conducted through counsel. Their lawyers said at the time that they “intended to cooperate.”

During the meeting, representatives helping to facilitate the liquidation requested immediate access to 3AC’s offices and to information related to their bank accounts and digital wallets. As of Friday, that access had not been granted, the filing says.

When the fund’s liquidators previously arrived at 3AC’s Singapore office in late June in an attempt to meet with the founders, “the offices appeared vacant except for a number of inactive computer screens.”

The filing notes that while the office door was locked, the representatives could view unopened mail addressed to Three Arrows, which “appeared to have been pushed under the door or propped against the door.” Neighbors in surrounding offices said they had last seen people in the 3AC office in early June.

Meanwhile, creditors are trying to determine what assets remain.

Teneo’s Russell Crumpler, who was tasked with helping to facilitate the bankruptcy process, said in a sworn statement that there is a “real risk” that 3AC’s assets would disappear “absent immediate authority to pursue discovery.”

“That risk is heightened because a substantial portion of the Debtor’s assets are comprised of cash and digital assets, such as cryptocurrencies and non-fungible tokens, that are readily transferrable,” Crumpler said in his statement.

There are reasons for such concern. One of 3AC’s NFTs was transferred to another crypto wallet, according to a well-known NFT collector and investor.

In Friday’s filing, creditors requested that the court suspend 3AC’s right to transfer or dispose of any assets. Attorneys are also asking that the court subpoena the founders or others who may have information about 3AC’s assets. That could include banks, crypto exchanges and counterparties.

3AC’s insolvency has already had a major impact on the broader crypto market, because so many institutions had money wrapped up with the firm.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post 3AC Crypto Hedge Fund Owners Go Missing appeared first on PaymentsJournal.

Crypto ATMs are a type of payments kiosk that allows users to buy and sell cryptocurrency. These machines are similar to traditional ATM machines, but they use cryptocurrency instead of fiat currency. Crypto ATMs typically allow users to buy Bitcoin, Ethereum, Litecoin, and other digital assets. In some cases, they may also allow users to exchange one cryptocurrency for another. Crypto ATMs are becoming increasingly popular as more people become interested in investing in cryptocurrency. They offer a convenient way to buy and sell digital assets, and they can be found in many retail locations around the world.

Politico posted an in-depth article regarding the proliferation of ATMs that can facilitate crypto transactions. The article reports that there about 34,000 of these kiosks (or “BTMs” as they are called) in existence with the vast majority of them in the U.S. This little corner of the payments industry has received a relatively light regulatory touch to date, but regulators are circling and trying to figure out how to balance the objectives of allowing cryptocurrencies to evolve and maybe flourish  particularly when they serve the needs of the un-banked, but also clamp down on their use in illegal activities. I would hazard a guess that it will take some time before any specific regulation is handed down given the complexity of the issues and the lack of clarity around which agencies really regulate cryptocurrency. Here are some excerpts from the article:

Welcome to the world of cryptocurrency ATMs, also known as “BTMs” (the B is for Bitcoin), which have mushroomed in the past several years, even if most people don’t understand exactly what they’re for. The precise number of these machines in the United States seems to depend on who’s counting, but most analyses put it at about 34,000. That’s nearly 90 percent of the world’s total tally. Canada ranks a distant second with an estimated 2,500.

Crypto fans and crypto companies see the machines as an extension of the promise embodied by Bitcoin, the largest cryptocurrency: another step in the democratization of finance.

But as they’ve proliferated, state regulators across the country, and even some federal officials, have started to raise concerns. Legitimate companies may run most of these machines, but some are set up by unlicensed operators. The regulators worry that crypto ATMs can too neatly serve the interests of money launderers and fraudsters, or could hide payments to sex and drug traffickers; even for honest brokers, their fees are considerably higher than normal bank transactions. They also market themselves, sometimes aggressively, to low-income people who may not understand the risks of moving their money into cryptocurrency, which is currently in the midst of one of its intermittent crashes.

States are trying to figure out how to handle these machines at a time when they’re still grappling with what to do about crypto itself. In most states, banking officials head up the task of sorting through policy. And in most states, they haven’t yet explicitly decided that digital money trades need the same kind of money transmitting licenses that govern traditional finance.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Crypto ATMs Have Regulators Stymied appeared first on PaymentsJournal.

Economic disruptions are never fun, but they weed out some innovations that seemed like a good idea at the time but would not likely survive economic turmoil. Mercator covered the crypto topic in 2021, where we noted that regulators and financial institutions bridle growth and ensure market stability.

The Wall Street Journal notes that “The Crypto Party is Over,” as global economies face a shift from a bull to a bear market, quoting Mark Cuban, who put the Crypto and the upcoming economic climate into context:

“The reality is that like stock, with crypto, everyone is a genius in a bull market.”

“Now that prices are falling for both, those companies that were unnaturally sustained by easy money will go away.”

The economic change does not mean crypto is gone forever, but the gold rush, which operates outside fiat currencies, backed by governments and industry, will take a more conservative posture. Some progressive thoughts on the exchangeability of money and cash flow are inside cryptocurrencies.

In some ways, the whole concept of crypto modernized the thoughts of Adam Smith in his classic “The Wealth of Nations.” If you recall days of Economics 101, Smith talks about money as a store of value, and its ability to facilitate commerce, in the days before the American Revolution, when bartering was beginning to phase out.  Indeed, I might have a cow, you might have a loaf of bread, so how do we make a sandwich, was the simple way to look at it. With the growth of currency, there was value established by country authorities, which facilitated trade.

The big question with crypto, though, was: can private entities control it?  Would governments push aside their right to make fiat currencies to allow technologists to take control? Not likely, we think, but there are some excellent concepts there that fit today’s world.

Perhaps it is similar to Buy Now, Pay Later in that a good idea exists, but established players will not likely cede control.

Back to the WSJ.

At times, crypto has looked like a combination of Beanie Babies, dot-com stocks and the Velvet Underground: It is manic, it is money, and all the cool people are into it. It has also shared characteristics with other bubbles throughout history, marked by speculation bordering on delusion, disregard and disrespect for risk, and greed.

Now, with markets sliding and inflation plaguing the global economy, cryptocurrencies have been among the first assets sold.

Since bitcoin hit an all-time high in November, roughly $2 trillion of cryptocurrency value—more than two-thirds of all the crypto that existed—has been erased. Bitcoin itself has plunged to $21,206, roughly 69% off its all-time high of $67,802.30.

And, in a world where currency stability is necessary, crypto never hit the mark.

The crypto world is no stranger to booms and busts, which many in the industry refer to as “winters.” But many investors and workers feel this crypto crash more acutely than previous ones. Some crypto products and companies may no longer exist when the dust settles.

Let’s face it: the world is bracing for an economic storm. Crypto did not build confidence, though there are some interesting components that serve the world in the long haul.

For now, hang onto your buck, euro, loonie, pound, shekel, or yen. With the downturn, you will need them.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

The post Shifto in Crypto: Losses and Layoffs Up, as the Prospect Wanes appeared first on PaymentsJournal.

Cryptocurrencies have been gaining in popularity in recent years, with Bitcoin becoming a household name. However, there is still a lot of confusion about what cryptocurrencies are and how they work. Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and to control the creation of new units. They are decentralized, meaning they are not subject to government or financial institution regulation. Cryptocurrencies are often used as a way to fund criminal activities, as they can be transferred anonymously and cannot be traced. Where does Binance fit in all this?

This Reuters Special Report documents the staggering amount of funding that cryptocurrencies, including Binance, have enabled for foreign enemies and criminals, and now NFTs are joining the party. Implementing strict Know Your Customer processes is the only way to mitigate this problem, and yet the growing sense of distrust in governments and business has driven people around the world to search for safe and anonymous places to keep their money: 

“During this period, Binance processed transactions totalling at least $2.35 billion stemming from hacks, investment frauds and illegal drug sales, Reuters calculated from an examination of court records, statements by law enforcement and blockchain data, compiled for the news agency by two blockchain analysis firms. Two industry experts reviewed the calculation and agreed with the estimate.

Separately, crypto researcher Chainalysis, hired by U.S. government agencies to track illegal flows, concluded in a 2020 report that Binance received criminal funds totalling $770 million in 2019 alone, more than any other crypto exchange. Binance CEO Changpeng Zhao accused Chainalysis on Twitter of “bad business etiquette.”

Binance declined to make Zhao available for an interview. Responding to written questions, Chief Communications Officer Patrick Hillmann said Binance did not consider Reuters’ calculation to be accurate. He did not respond to requests to provide Binance’s own figures for the cases identified in this article. He said Binance was building “the most sophisticated cyber forensics team on the planet” and was seeking to “further improve our ability to detect illegal crypto activity on our platform.”

As Reuters reported in January, Binance kept weak money-laundering checks on its users until mid-2021, despite concerns raised by senior company figures starting at least three years earlier. In response to that article, Binance said it was helping drive higher industry standards and the reporting was “wildly outdated.” In August 2021, Binance compelled new and existing users to submit identification.

With around 120 million users worldwide, Binance processes crypto trades worth hundreds of billions of dollars a month. The sector was hit by a sharp correction in May, its overall value slumping by a quarter to $1.3 trillion. Zhao said he saw “new found resiliency” in the market.

Meanwhile, his company is extending its reach into traditional business, announcing a $200 million investment in media group Forbes this year and committing $500 million to Tesla boss Elon Musk’s bid to take over Twitter. A Forbes spokesperson declined to comment. Musk didn’t respond to requests for comment.”

Cryptocurrencies have been gaining in popularity in recent years, with Bitcoin becoming a household name. However, there is still a lot of confusion about what cryptocurrencies are and how they work. While cryptocurrencies may be used to fund criminal activities, they can also be used for legitimate purposes.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Binance Launders $2.35B for NK, Russia, and a Multitude of Criminals appeared first on PaymentsJournal.

In a sign of potential cryptocurrency regulation, the British Treasury is beginning planning on a proposal to regulate stablecoins following their initial request for feedback in Spring 2021. Tolga Akmen details the plan in Vice:

“In April 2022, the government published a response to the consultation saying it intended to push forward legislation that would regulate stablecoins by ‘amending existing electronic money and payments legislation.” This response also acknowledged, however, that any framework would need to account for the risks posed by the collapse of a stablecoin firm that served as a “systemic payment system” or was a “service provider of systemic importance.’”

In their response, the British government acknowledges that failing stablecoins could disrupt broader economic stability and would instruct the Bank of England power to take over failing currencies:

“The Treasury says that an amended Financial Market Infrastructure Special Administration Regime (FMI SAR) would be the most appropriate way to deal with such a failure. In short, FMI SAR gives the Bank of England the power to oversee and direct the actions of a payment firm to ensure that their services continue in the event of a failure that could destabilize the economy.”

Any proposal would be sent to Parliament after August 2 and considered when time allows. The actions of the British Treasury add to recent comments by U.S. Treasury Secretary Janet Yellen, that the U.S. Treasury would also be looking into regulatory controls spurred by the collapse of algorithmic stablecoin UST in May.

Overview by Jordan Hirschfield, Director, Prepaid Advisory Service at Mercator Advisory Group

The post UK Starts Planning to Regulate Stablecoins appeared first on PaymentsJournal.

Peer-to-peer platforms are merging as outlets for crypto buyers and sellers to facilitate transactions and avoid potential regulatory issues with traditional banks. Piyush Shulka reports in MoneyControl, highlighting the example of platform WazirX and stablecoin Tether:

“Cryptocurrency exchange and trading platform WazirX has a peer-to-peer platform named WazirX P2P through which users can place their orders to buy or sell cryptocurrencies.

A buyer first places an order to buy Tether (USDT). Upon getting matched with a seller, the buyer pays cash directly to the seller. After the seller confirms receipt of payment, WazirX releases the escrowed Tether to the buyer. A similar process is followed when a client wants to sell cryptocurrency.

In this set-up, the exchange only facilitates the transaction – it does not accept payment from customers nor does it transfer funds to their accounts. All payments are made directly between the buyer and seller brought together by the exchange. The reason is that most banks don’t give their customers access to crypto transactions…”

This process could be of added need in countries like India, where regulatory reforms from the Reserve Bank of India are limiting purchases and inhibiting banks from participating in the crypto market.

“Bankers said the biggest challenge in dealing with cryptocurrencies is the lack of clarity on the regulation of the asset. The RBI has repeatedly sounded caution over the use of cryptocurrency and the threat that it poses to financial and economic stability. The central bank has cited multiple risk factors including high volatility, the absence of underlying assets, and its highly speculative nature to warn investors against using cryptocurrencies.”

P2P will not be without its limits as the market inherently requires matching of buyers and sellers of stablecoins, which will take time in a developing market.

Overview by Jordan Hirschfield, Director, Prepaid Advisory Service at Mercator Advisory Group

The post Crypto Users May Circumvent Regulatory Hurdles with P2P appeared first on PaymentsJournal.

This article asks if cryptocurrencies are more similar to stocks or to gold. I’d argue they are more like diamonds where the supply is privately controlled. Coinbase faces a class-action lawsuit that argues it is dealing in unregistered securities, a position the SEC has also signaled:

“U.S. laws impose meticulous regulations and burdensome disclosure requirements on issuers and intermediaries that sell securities, a category of assets that includes stocks and bonds. They also create potentially crippling liabilities for anyone who skirts the law.

Cryptocurrency platforms have sought to minimize headaches by arguing that the tokens they list in the U.S. are commodities, like gold, which have no full-time federal regulator.

For trading venues that allow U.S. investors to buy and sell scores of digital tokens, the cost of getting it wrong is potentially catastrophic, industry lawyers say.

‘If successful, plaintiffs would have this court effectively freeze the accounts of innocent [Coinbase] users who, by their own choice, transact with one another in these tokens,” Coinbase attorneys wrote in the motion to dismiss the case.’ ”

Coinbase indicates that the assets it holds could be forfeited in bankruptcy which suggests that the owner of the asset is actually Coinbase.

The post Coinbase Faces Class Action as Cryptocurrency Values Plunge appeared first on PaymentsJournal.

The crypto and blockchain industries are evolving at a rapid pace, with the combined market capitalization of digital assets surging to nearly $1.9 trillion by April 2022. The cryptocurrency space has been the hotbed for numerous new trends, such as the DeFi boom, the NFT craze, and the more recent Play-to-Earn (P2E) revolution.

At the same time, while cryptocurrencies are gaining increased adoption among the global population, a growing number of institutional investors and businesses are joining the industry to reap its benefits.

As a result of all this activity, regulators all over the world are struggling to keep up with the swift evolution of the crypto market. Financial watchdogs and government agencies take a reactive stance, with their actions often coming across as inconsistent and confusing.

Consequently, market players are left unsure about how they should proceed despite their efforts to comply with regulatory rules.

The UK’s Case Study of Regulatory Confusion

From a complete lack of rules to extreme measures such as a blanket ban on digital assets, crypto regulation remains fragmented across the globe. At the same time, we can observe significant inconsistencies on the national level as well, for which the UK serves with an excellent case study.

Deeming digital asset ads as “red alert,” the Advertising Standards Authority (ASA) started to crack down on the promotional activity of local cryptocurrency businesses in July 2021. According to the regulator’s statement at the time, its goal was to protect consumers by taking down misleading and irresponsible crypto advertisements.

By March 2022, the regulator issued an enforcement notice to over 50 companies promoting crypto solutions, instructing them to review their campaigns and adhere to the new rules. Upon failure to comply by May 2, the ASA may take targeted enforcement action against digital asset firms.

The above actions are part of a joint effort between the ASA and the Financial Conduct Authority (FCA) that aims to reduce harm to investors by cracking down on ads promoting risky assets.

As one of the first targets of the regulatory operation, the advertising watchdog banned the Floki Inu memecoin project’s London underground “Missed Doge? Get Floki” campaign in March this year. A few months earlier, the same happened to Luno’s ads, which the ASA considered misleading.

In addition to that, the Bank of England also joined the group of crypto-skeptic UK regulators. As part of its statement, the BoE urged the nation’s banks to approach digital assets with “utmost caution,” warning about the potential financial risks cryptocurrencies could pose to the market in case they continue to grow.

Based on the above actions, the stance of different regulators appeared to be more or less in sync with each other. Yet, it took less than a month to replace consistency with confusion in the field of UK crypto regulation.

Going right against the crackdowns and strict stances of the other regulators, the UK’s Economic and Finance Ministry (HM Treasury) said it took a “forward-looking approach” towards cryptocurrencies.

With the goal to make the United Kingdom a global hub for crypto, the HM Treasury expressed its intent to amend its existing framework to incorporate stablecoins as a means of payment. At the same time, chancellor Rishi Sunak asked the Royal Mint to create an NFT, which could be issued by this summer.

Considering all the actions and the contradictory approaches, we see a case of incoordination between the different branches of the same government. As one side vies for stricter oversight and restrictions, the other seems to be willing to go forward with a regulatory framework that aims to boost the local crypto market.

Taking into account how the FCA handles crypto licenses, the Treasury’s forward-looking approach seems even stranger.

Since January 2021, it is mandatory for all cryptocurrency businesses serving UK customers to register with the financial agency in order to operate in the country. By March 2022, over 80% of the crypto companies that applied for a license either withdrew their applications or were rejected by the FCA as they were unable to meet the very high benchmark.

Is There a Solution?

The resulting confusion around local crypto regulatory frameworks leaves many market players wondering how they should adapt. But what is the way out of this rather unfortunate situation?

As the most realistic and effective solution, different regulators must put a significant focus on communicating, coordinating, and cooperating with each other. And they should not only do this within the UK but on the global stage as well.

Similar to how banks, stockbrokers, money transfer solutions, and other financial service providers are supervised, crypto regulation should be international and equally comprehensive. And this has to be a standard the entire industry should move towards.

At the same time, regulators should continue with their efforts to protect investors. Despite the seeming lack of coordination with other departments, it makes great sense that the FCA and the ASA are cracking down on misleading ads that fail to address the real risks behind crypto investments.

When consumers without prior knowledge or experience with сrypto see an ad about this asset class, many of them get the impression that it is something simple to grasp. Thinking that it would be easy to earn money quickly with cryptocurrency, they invest their savings in digital assets without putting much thought into it, especially if the ads urge people “not to miss out on a great opportunity.”

But more often than not, rushed decisions inspired by the fear of missing out result in investors losing money.

That said, regulation alone is not enough to truly change this market. It is not about the strictness of rules; it is about people actually understanding what kind of assets they are investing their money into.

And crypto is a complex asset class that introduces people to a great number of new concepts and technologies, such as blockchain networks, smart contracts, NFTs, DeFi protocols, and decentralized autonomous organizations (DAOs).

For these reasons, regulators should not only oversee cryptocurrencies and issue laws and bans, but also explain how they work to the public by developing educational courses. In addition, it may also be a good idea to implement these topics to be studied in universities that cover financial and technical subjects. This would help ensure that the newer generations of market players come better prepared to engage with the crypto industry.

The Road to Effective Crypto Regulation

Whenever the world faces new emerging technology, there is always an initial period of confusion and adaptation as it struggles to be accepted by society.

This is very much the case with cryptocurrencies today. They have proven by now to be more than a passing fad, but there are still ways to go before they can reach mainstream adoption.

However, if this industry is to move forward in the truest sense, it is crucial to introduce comprehensive and unified regulatory standards as well as educate the public about crypto.

The post Road to Comprehensive Crypto Regulatory Framework appeared first on PaymentsJournal.

Seeking to move beyond their core stock trading business and improve on slowing results, Robinhood announced plans to release a companion app to allow for users to store personal holdings of cryptocurrency and NFTs. Kate Rooney at CNBC writes further:

“The app will let users store non-fungible tokens, and connect to NFT marketplaces and “decentralized” stock exchanges. It will also let users earn yield through other platforms and access a “variety” of crypto assets on other exchanges, Robinhood said.

Robinhood, which touts its no-commission stock trading structure, will look to offer a similar differentiation in the crypto wallet arena:

“The new app notably won’t charge network fees, despite Ethereum and bitcoin fees running at $70 in some cases. A Robinhood spokesperson said the crypto product will rely on third-party liquidity providers “competing” for customers’ transactions behind the scenes, in order to offset those network fees.”

The new wallet adds to Robinhood’s expanding strategy which has included more reach into cryptocurrency over the past year as well as extended stock trading hours. The new wallet gives users the ability to choose to purchase crypto in both custodial and non-custodial fashion.

Overview by Jordan Hirschfield, Director, Prepaid Advisory Service at Mercator Advisory Group

The post Robinhood to Release Crypto and NFT Wallet appeared first on PaymentsJournal.

Investing in cryptocurrency is an increasingly popular way to build wealth, and fraudsters have become some of its most loyal adopters. With the crypto market now worth over $3 trillion, the industry represents massive opportunities for gains—and losses.

The recent Securities and Exchange Commission announcement of crypto regulations and the Department of Justice’s latest crypto seizure shed light on exactly how much money and risk is at stake behind the seemingly-open doors of crypto exchanges.

In early April, the SEC shared new plans to expand investor protections and begin regulating crypto exchanges. These plans come on the heels of a $3.6 billion seizure of cryptocurrency by U.S. law enforcement in February, which was the department’s largest financial seizure in history. While specifics around the SEC’s regulations have yet to be disclosed, it showcases that the federal government is taking steps to ensure that crypto will not be a safe haven for cybercriminals to commit fraud.

The complicated money laundering process unearthed in the DOJ seizure shows just how difficult it is to “wash” stolen crypto. The fraudsters charged with the crime used fake identities to set up online accounts, leveraged programs to automate transactions, and spread the stolen funds across various exchanges and dark web markets through “chain hopping.” Despite these sophisticated and complex efforts, once the currency began exchanging hands, it became evident on the publicly-accessible blockchain.

The case was solved in part due to proactive outreach from and cooperation between crypto exchanges and federal authorities. With crypto already falling under increased regulation from agencies like the IRS and SEC, we could see increased requirements for crypto companies from law enforcement as well, such as mandating proactive reporting. The ramifications of this crypto bust and the new SEC regulations should be a wake-up call for crypto exchanges, reinforcing the need to focus on identifying and proactively stopping fraud.

Cryptocurrency is under fire

Valued at a whopping $5.5 trillion, the fintech industry experienced tremendous growth in recent years, creating a perfect high-return environment in the eyes of fraudsters. According to a recent report, account takeover fraud exploded across fintech by 850% from 2020 to 2021, with the vast majority of attacks concentrated in crypto and digital wallets. Chainalysis also reported that crypto scammers took home a record $14 billion in cryptocurrency in 2021, a 79% increase from 2020.

So why the increase in attacks? As consumers traded in their physical bank branches for digital-first financial services and alternative payments like cryptocurrencies, fraudsters preyed on the lack of consumer education, the absence of sufficient fraud controls, and the regulatory limbo associated with crypto. Fraudsters know that crypto offers both immediately redeemable value and the potential for long-term profit. The many investors who are not cautious enough, or not willing to store their crypto in more secure ways, make these crypto exchanges prime targets—especially if only protected by a username and password.

From a fraudster’s perspective, crypto makes for an optimal target because the transactions are quick and irreversible. If a fraudster takes over a legitimate user’s account on an exchange and liquidates the balance, there is little that the exchange can do to fix the situation other than to take a loss, which they are not guaranteed to do.

Why crypto companies must prioritize fraud prevention

The transparency of the blockchain makes it difficult for fraudsters to get away with their crimes forever––all it takes is one mistake to reveal their real identity, at which point that mistake is part of the public, permanent blockchain record. However, the real challenge for exchanges doesn’t lie in catching these cybercriminals post-attack, but in preventing them from happening in the first place.

Fraudsters will continue to leverage automation to commit attacks at scale, and expose new vulnerabilities within crypto exchanges to exploit. Any crypto company without a plan in place to proactively prevent fraud and account takeovers at scale is at a distinct disadvantage. Businesses cannot risk tarnishing trust with traders. Just 5.6% of the U.S. and UK population trust cryptocurrency as a safe investment, and one instance of fraud can break down existing trust. With the right strategy and technology in place, crypto companies can better detect fraudulent signups, stop unauthorized transactions, and defend trusted accounts from suspicious sessions.

How to strengthen cryptocurrency fraud controls

With cryptocurrency threats on the rise, the SEC’s regulations are welcome, but these preliminary regulations will only act as a baseline to protect businesses and consumers. Crypto companies must go beyond regulations to proactively invest the right resources to prevent a growing volume of hacks and fend off fraudulent behavior. The last year alone saw a 200% uptick in digital wallet abuse and a 140% increase in crypto exchange abuse.

Now is the time for crypto organizations to respond. Adopting a layered approach to fighting fraud can help ensure end-to-end protection, including verifying customers on the front end and monitoring account behavior with fraud prevention solutions bolstered by machine learning on the back end.

Companies that utilize anti-money laundering (AML) regulations and know-your-customer (KYC) solutions help make the crypto space safer and more reliable. Another wise security precaution is to provide options for customers to secure their own assets, such as enabling, or even requiring, multi-factor authentication (MFA). MFA requires multiple methods of verification to confirm a user’s authenticity, combining independent credentials such as a password, mobile push notification, or fingerprint.

It’s also an important practice to talk to customers about fraud. Explaining and warning against common scams creates transparency and shows how much the business values consumer education. Companies can establish a firm barrier against fraudulent activity by providing guidance on how customers can keep their online activity safe, along with reinforcing their own efforts to keep accounts secure. Ultimately, the responsibility lies with businesses to ensure trust in their platforms.

The post SEC Regulations, DOJ Crypto Bust Underscore Urgency for Proactive Fraud Prevention appeared first on PaymentsJournal.

I agree with the logic of this article, but I have one question. If enough people willingly ignore the benefits of a centrally controlled currency so they can be “free,” does logic even matter anymore? This article also doesn’t address NFTs which dodge the question of currencies because they are about buying and selling assets, but today “being free” apparently means remaining anonymous which has created a crime wave that should make people stop and think:

“For longer that I’d like to admit, I’ve built expertise within banking- and retail payments infrastructure. Being highly curious about all matters digital, especially within my profession, I’ve added distributed ledger technology, blockchain, tokenization, cryptocurrencies, as well as central bank digital currencies to my areas of subject matter expertise.

So, now that every Tom, Dick, Harry, and sadly, El Salvador, have gotten into cryptocurrencies, and Gucci as well as both Mastercard and Visa enable real-life spending of these, I thought it important to add serious food for thought to those that have, or consider, engaging in the cryptocurrency space.

What is money?

Let’s start with what money actual are: Money is a generally accepted, recognized, and centralized medium of exchange in an economy, used to facilitate transactional trade for goods and services. At the core, and above all, is trust in value of such money – as well as the financial eco-system as a whole. Providing that trust, is the role of central banks. They do this, by ensuring stable prices and low inflation, financial stability, as well as provide safe and efficient payments including issuing so-called Fiat money.

Over time, and for practical reasons, states and governments have enabled the private sector to play a key role in the financial eco-system and today, we have collectively come to entrust commercial banks with our money. Through a vast, regulatory framework, we consider our bank account as a secure storage of our money. We accept and agree that instead of central bank issued cash, we may pay each other via various payment initiation methods such as online bank, cheque, credit and debit cards, Apple Pay, Google Pay, Swish, Twint, Venmo, Vipps, MobilePay, etc.”

[Some of] the trouble with cryptocurrency

Bitcoin might have been envisioned as “A Peer-to-Peer Electronic Cash System” by yet-to-be-identified Satoshi Nakamoto. But the actual use of what we think of as “Bitcoins”, is far from a means of payment, let alone a form of money. Bitcoin and most other cryptocurencies fail on several of the agreed characteristics of money.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Why Cryptocurrencies Are Assets, Not Currencies appeared first on PaymentsJournal.

We have urged crypto buyers to make sure they receive and hold the private key and avoid exchanges that hold your private keys for you. I thought this was to avoid the exchange being hacked, and now this Fortune article indicates that Coinbase, and probably other exchanges, suggest that “the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings.” That isn’t possible if you are holding the private key, not a token that represents your private key that is held by the exchange. We translated this into an opportunity for banks in “How Banks Can Safely Do Cryptocurrency,” published April 2019. Do your due diligence, people!

“Hidden away in Coinbase Global’s disappointing first-quarter earnings report—in which the U.S.’s largest cryptocurrency exchange reported a quarterly loss of $430 million and a 19% drop in monthly users—is an update on the risks of using Coinbase’s service that may come as a surprise to its millions of users.

In the event the crypto exchange goes bankrupt, Coinbase says, its users might lose all the cryptocurrency stored in their accounts too.

Coinbase said in its earnings report Tuesday that it holds $256 billion in both fiat currencies and cryptocurrencies on behalf of its customers. Yet the exchange noted that in the event it ever declared bankruptcy, “the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings.” Coinbase users would become “general unsecured creditors,” meaning they have no right to claim any specific property from the exchange in proceedings. Their funds would become inaccessible.

That shouldn’t happen.

An individual’s ownership of cryptocurrency is supposed to be immutable and absolute; that’s one of the key selling points touted by blockchain evangelists everywhere. But when a user creates a Coinbase account, they often end up storing their cryptocurrency in a wallet controlled by Coinbase, which means the individual is giving away at least part of their control over their own funds.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Coinbase Says It Will Take Your Crypto to Pay Off Debt If It Goes Bankrupt! appeared first on PaymentsJournal.

On the 7th March, ex-footballer Michael Owen tweeted: Looks to me like blockchain is here to stay. I’ve been involved in football my whole life and I’m now working with blockchain specialists on a really exciting new football project. Many were sceptical, particularly of Owen’s tech credentials. One journalist had the most withering reply: Hello Michael, do please explain why “blockchain is here to stay”. Any particular blockchain you have in mind? Do you have a view on proof-of-work vs proof-of-stake? This exchange is emblematic of the big problem cryptocurrency faces. There are a good number of enthusiasts—and a good number of sceptics—but the majority of people have no strong opinion one way or the other. Crypto’s success depends on winning those people over, and celebrity endorsements are clearly not working. So what will?

A familiar pattern

Crypto adoption is following a familiar trend. From 2015 until today the number of people using crypto is very similar to the number of internet users from 1998 until 2005. If this continues, then we should see a billion crypto users before the decade is out.

Internet adoption wasn’t just down to how useful it was, but how easy it became. Today it is as simple as asking for a Wi-Fi password. Ubiquity depends on simplicity, and with crypto, enthusiasts are just unable to say the same—yet.

To buy and pay with crypto is to engage with complex systems, quite different from the simple pay-and-go we’re used to. First you need to choose between a broker or a crypto exchange. Brokers are simpler, but exchanges tend to be cheaper. Once verified, you then need to deposit fiat currency (make sure your broker accepts fiat currency!) and place an order. When using an exchange, there is still a choice of whether to store the cryptocurrency on the exchange, or on a hot or cold wallet.

There are signs that this is changing, however. Card schemes are starting to get behind crypto and supporting branded cards. This is the sort of celebrity endorsement that may actually move the needle—ex-footballers aren’t trusted when it comes to moving money around, but brands like Visa and Mastercard are. Better still, there are now a handful of large, established crypto exchanges who are trusted, and as their brand visibility and reputation spreads, crypto will certainly move up the trust scales. The combination of these trusted household names, plus the simplicity they offer, will facilitate the uptake of crypto and deliver a more ‘usable’ environment for cryptocurrencies. 

Education and building trust

According to Pew Research, 16% of Americans have invested in, traded or used cryptocurrency. Another study by the crypto platform Gemini showed that 64% of Americans were interested in using cryptocurrency. That is nearly half of US adults keen to get involved in crypto, but with no experience yet.

Turning that interested half into regular users will require educating and building trust from consumers and businesses. For example, crypto exchanges should be doing more than making buying and selling crypto simple. They should also be looking at how they can make the wider use cases of crypto better known and understood. 

For instance, crypto exchanges should be exploring and simplifying crypto use cases for their customers, guiding them on their way. People are keen to use crypto, and by harnessing that enthusiasm, exchanges will be pushing at an open door. Crypto can be much more than just a trading or investment option, but by leaving these other options difficult to explore, people are far more likely to see crypto as a passing fad.

There’s also the opportunity for crypto companies to connect up banking payments and current account-type facilities, offering a truly modern experience for their customers. Adding banking payments not only means that crypto companies can save on acquiring fees, they can also create stickier customer relationships—it’s one more step towards the simple “one-click” experience that they are used to.

The potential of cryptocurrency is that it will offer choice—that people will be able to personalise and choose how their money and assets work for them. For instance, it can make high speed international remittances simple and near-instant, large transactions safe, and combinations of fiat currency, digital assets, and cryptocurrency straightforward. But we need to build towards this future, creating new crypto enthusiasts as we go. Trusted brands, relatable use cases and continuing to build simple experiences will be key to this, not celebrity endorsements.

The post Enthusiasts Aren’t Enough to Make Crypto Go Mainstream—We Need Ordinary People Using Everyday Payments appeared first on PaymentsJournal.

Another release of NFTs, this time for a land grab in the multiplayer game Otherside, created what amounted to a denial of service attack on Ethereum. The cost of getting a transaction processed jumped to more than $2,500, which meant you would be paying a 10% fee on a transaction of $25,000 and far more than that on smaller transactions:

“A multi-billion dollar cryptocurrency company has apologised to users after its sale of “metaverse land” sparked a frenzy that temporarily overwhelmed the Ethereum cryptocurrency.

Yuga Labs, the company behind the Bored Ape NFTs beloved of Jimmy Fallon and Paris Hilton, announced the sale of its latest tokens – representing plots of land in a forthcoming multiplayer game called Otherside – on Sunday. A total of 55,000 plots were sold, at a flat price of 305 ApeCoin (a currency created by Yuga), which is worth about £4,500 at current exchange rates.

Demand for the plots was so high that it overwhelmed the Ethereum blockchain, one of the layers of infrastructure that all cryptocurrency projects rely on to operate. As users raced to be one of the lucky few able to secure an “Otherdeed”, transaction fees on the network rose higher and higher, until an individual NFT purchase cost more than £2,500 in fees alone. One user, who successfully secured two Otherdeeds, paid a transaction fee of over 5 ETH (£11,000) on top of the £9,000 to buy the land itself. Others lost thousands of pounds failing to secure the tokens at all: if a user runs out of money while paying the transaction fees, the transaction fails, but the fees aren’t refunded.

For most of those who secured Yuga’s latest token, the eye-watering fees have paid off, at least in the short term: tokens that sold for £4,500 are already reselling for more than £9,000. But people who were unlucky enough to be trying to carry out other cryptocurrency business at the same time have racked up hefty losses. Molly White, a cryptocurrency expert who runs a site chronicling the sector, tracked multiple examples over the day of NFT sales worth less than £500 being hit with transaction fees of more than £2,000.

“Gas fees, which increase based on network congestion, spiked to shocking levels,” White wrote. While most sales on OpenSea, the most popular marketplace for NFTs, were for Otherside deeds, “some people oddly continued to buy and sell cheaper NFTs”, she added.

In total, more than $100m was spent on transaction fees to buy Otherside NFTs, while Yuga Labs took another $300m in payments. When the sale was over, the company apologised for the chaos it had caused. “We know that the Otherdeed mint was unprecedented in its size as a high-demand NFT collection, and that would bring with it unique challenges.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Proof Cryptocurrencies Are Slower and More Expensive than Cards appeared first on PaymentsJournal.

The information presented as facts in this article is suspect because the sources are all participants in providing crypto solutions. For example, the subtitle states: “Reduced fees, faster transactions. . .” Not so fast; cryptocurrency fees and transaction times are notoriously unstable on both Bitcoin and Ethereum. You can use an intermediary like Lightning Network, but this adds another intermediary that increases risk to your payment operations.

The article also states that cryptocurrencies are safer. This is clearly a matter of perspective. From the consumer perspective, crypto lacks the ability to dispute a charge and doesn’t offer Zero Liability. This article also doesn’t point out that there are several important use cases supported with cards today that merchants can’t implement with crypto unless there is a smart contract controlling the payment, such as Pay at the Pump, tipping, or lodging.

Lastly, I’d beware survey results that identify huge market opportunities and adoption from the suppliers that sell the solutions being investigated:

“Providing crypto payments is one way to improve customer experience. It is especially significant for the 93% of crypto owners who say they would consider using crypto to make a purchase (while 57% have already made at least one crypto purchase in the last year).

Secure, in-store networks, mobile payments and biometric authentication may completely eradicate the need for traditional checkouts. Payment requests to a customer’s mobile device make paying in crypto as easy as with Visa (V), PayPal (PYPL) or any preferred digital payment option.

Stores of the future will be designed around these types of fluid, mobile-first and customer-centric experiences, so there’s no surprise nearly three-quarters of businesses surveyed see accepting new forms of payments as fundamental to their growth.

Conserving risk

Offering crypto payments comes with both pros and cons for merchants. Accepting cryptocurrency requires a certain amount of effort, whether by modifying retailers’ existing point-of-sale (POS) terminals or redesigning their entire shop floor.

Likewise, the volatility of cryptocurrencies make them a risk, and they can be subject to complicated tax rules and regulations.

This complexity often forces retailers to be specific in their terms and conditions and to have impeccable book-keeping – a benchmark that should be set across the industry.

Crypto isn’t alone in having structural problems: Fraudulent credit card transactions and ID theft increased by 35% during the coronavirus pandemic and small, independent businesses remain some of the greatest affected. Mobile device crypto payments could be a step towards security there: because they are customer-led transactions, rather than routing through third-parties, crypto reduces the attack vector for fraud opportunities.

In addition, blockchain transactions are final – both a blessing and a curse. Retailers may manage their cash flow better but also need to keep track of how much exactly each customer has paid in case of a refund.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Crypto Will Gain Broad Acceptance by Retailers… Says the Crypto Acquirer appeared first on PaymentsJournal.

Bitcoin is a form of digital currency that was created in 2009. Unlike traditional currencies, which are issued by central banks, Bitcoin is not subject to any central authority. Instead, it is “mined” by a network of computers that solve complex mathematical problems. Bitcoins can be used to purchase goods and services, and are also traded on various exchanges. While the value of Bitcoin has fluctuated wildly over the past few years, it has shown signs of stability in recent months. Some businesses have started to accept Bitcoin as a form of payment, and the currency has also gained traction as an investment vehicle.

It has been roughly 8 months since El Salvador made bitcoin legal tender and the Salvadorian government has certainly encouraged its citizens to switch. The government offered a $30 incentive to those that loaded the government’s Chivo bitcoin wallet and then encouraged usage with a $0.30 per gallon gas discount. According to a survey conducted by the National Bureau of Economic Research (NBER) these inducements drove 54% of Salvadorians to initially download the wallet but shows only 20% continue to use it. This relatively low usage is likely driven in part by low merchant adoption. Only 20% of companies report accepting bitcoin as a form of payment. One could argue that this supports the trope that new forms of payment are slow to be accepted and that old forms rarely die:

“Months after Bitcoin (BTC) became legal tender in El Salvador, a study conducted by the National Bureau of Economic Research (NBER) shows that 20% of businesses have started to accept BTC as a payment method.

The study, surveying adults from 1,800 households in El Salvador, aimed to measure the adoption of BTC in the country after the Bitcoin Law was passed. The researchers found that BTC is gaining ground compared to other payment methods.

According to the report, users who have downloaded the government-backed Chivo Wallet have “decreased their use of cash by 10%, while their net use of debit cards has been reduced by 11%.””

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post El Salvador’s Bitcoin Experiment Lesson: Change Doesn’t Come Easy appeared first on PaymentsJournal.

This piece is posted in Finextra and announces a partnership between National Institutional Facilitation Technologies, a bank-led organization and the foremost payments operator in Pakistan, and the 2019 Silicon Valley startup M10 Networks, which provides a platform for digital currency management. Pakistan is catching up to the modernization trend, and in some ways this effort is similar to their neighbor India’s efforts over the past decade to further digitize commerce across the national spectrum. This is a B2B effort and recognizes the growing potential influence of cryptos (especially CBDCs and stablecoins) in trade preferences during the 5-10 year coming window.

‘The partnership between M10 and NIFT was developed in response to the 2021 overhaul of tax laws by Pakistan’s Federal Board of Revenue, which requires companies to make digital payments for expenditures of more than Rs250,000…

Under the agreement, NIFT will act as the local operator of the M10 platform and use the M10 shared hierarchical ledger and digital authorisation technology to authorize digital payments. NIFT will settle digital payments using its existing settlement mechanisms and in compliance with local regulations. Subject to regulatory approval, M10 and NIFT will work together, along with nine local participating banks, to enable the authorization of commercial payments between commercial entities in Pakistan.’

While we have not received a briefing and thus have no real details as to the underlying tenor, etc., the M10 platform is a CBDC and stablecoin enabler, and as far as we can tell is not promoting its own digital coin (we don’t know how or whether there is any connection with global football star Mesut Ozil). The effort is at this point is perhaps similar to other distributed ledger networks, which have been to some extent fueling innovation in cross-border transactions.

‘“M10’s turnkey solution offers central banks and participating commercial banks everywhere the ability to quickly realize the benefits of digital payments in full compliance with today’s regulation and without disruption to their conventional systems,” says Marten Nelson, CEO and Co-founder, M10 Networks. “Our shared, hierarchical ledger technology supports secure, low-cost B2B and cross-border payments and can process up to one million transactions per second. With NIFT acting as a local operator, the M10 platform will contribute significantly to the modernization of Pakistan’s payment infrastructure and enable participating local banks to easily comply with the country’s new tax regulations.”’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post NIFT and M10 Partner on B2B Payments Automation appeared first on PaymentsJournal.

What are stablecoins? Stablecoins are a type of cryptocurrency that is designed to minimize the volatility of the price. Unlike Bitcoin and other cryptocurrencies, which can fluctuate wildly in value, stablecoins are pegged to a stable asset, such as gold or the US dollar. This makes them an attractive option for those who want to use cryptocurrency for payment or investment but don’t want to deal with the volatility. There are a few different types of stablecoins, each with its own advantages and disadvantages. The most popular type is the USD-backed stablecoin, which is linked to the US dollar. This type is relatively stable, but it is subject to the fluctuations of the US dollar. Another popular type is the gold-backed stablecoin, which is linked to the price of gold. Gold-backed coins tend to be more volatile than USD-backed, but they offer a level of anonymity that USD-backed can’t match.

In the latest move to provide connection between fiat currency and cryptocurrency, Stripe is launching a new service to allow companies to pay users with stablecoins. Ryan Browne writes further for CNBC:

The $95 billion online payments company said Friday it will start offering merchants the ability to make payouts in crypto through the stablecoin USDC, which is issued by crypto firm Circle. Stablecoins are tokens that are pegged to fiat currencies to maintain a stable price. In USDC’s case, as the name suggests, the cryptocurrency is backed by the U.S. dollar.

Market volatility had caused Stripe to cease offering crypto support in early 2018, but new advancements in both the market and technology are providing new opportunity for Stripe to relaunch efforts to support Crypto, like stablecoins:

The firm has since warmed to crypto amid hype over “Web3,” a movement in tech that calls for the creation of a decentralized version of the internet based on blockchain technology. Stripe last year formed a team dedicated to exploring crypto and Web3.

The service will be launched initially for a limited number of creators and puts Stripe in line with many competitors that are beginning to launch crypto enabled solutions.

Overview by Jordan Hirschfield, Director of Research at Mercator Advisory Group

The post Stripe to Allow Companies to Pay with Stablecoins appeared first on PaymentsJournal.

As cryptocurrencies continue to flow into the financial mainstream for use in commerce and investment, they are also growing as tools that facilitate crime. Chainalysis, a blockchain research firm, reported a 79 percent increase in the value of criminal activity linked to cryptocurrencies last year, to a record USD $14 billion. This fact is making them objects of regulatory scrutiny.

Countries around the world have made, or are considering, regulations that require banks and other organisations that handle cryptocurrency transfers to update their know-your-customer (KYC) and know-your-transaction (KYT) compliance and reporting procedures. U.S. President Joe Biden has just signed an executive order that directs federal government agencies to work together to better understand and ultimately regulate digital assets.      

Whatever rules the Treasury Department, or any other regulator, comes up with, they are likely to mean more work for any business that deals in cryptocurrency. Banks already are required to have stringent KYC and anti-money-laundering (AML) procedures in place when dealing with fiat transfers, but crypto exchanges do not.

The requirements have not been there, and neither has the desire to implement such procedures. It would entail costs and inconvenience for the exchanges, and their customers certainly have not been clamoring for it. Indeed, one of the key attractions of cryptocurrencies has been the anonymity available to both parties in a transaction, the amount and time of which are incorporated into the blockchain that records it, but not information about the participants.

It’s almost certain now that crypto exchanges will have to compile this information to comply with the U.S. rules, and other similar ones, and the exchanges will have to update their KYC and AML processes. There is also the possibility they will have to go back over old transactions and uncover the parties, which will not be a simple task. If there is a silver lining, it is that crypto exchanges are new and nimble entities, built on digital foundations, so they can respond more quickly and with less disruption to their organizational structures and operations when changes, in this case to their payment and fraud monitoring systems, are called for. Banks, by contrast, often labor under hidebound attitudes, organizational silos, and legacy data systems, impeding progress.

Currencies without countries

A key difference between cryptocurrencies and conventional national and regional fiat currencies is that cryptocurrencies have no sovereignty. They’re not issued by a government, so authorities have been slow to claim jurisdiction over their use, or to demand information from financial intermediaries. That is changing because it is considered unfair, at least in the corridors of regulatory agencies, for transactions that are the same in all meaningful ways as ones made with Euros, Yen, Pounds, Francs, or Dollars, to escape the same scrutiny.

The virtual nature of cryptocurrencies means, moreover, that there is no there there. If bitcoin is transferred from the wallet of a sender in the United States to the wallet of a recipient in New Zealand, nothing physical, or even electronic, is transferred between those countries. That’s why it’s more accurate to say that a cryptocurrency transaction represents a movement of value, not a movement of money.

That makes cryptocurrency dealings hard to track, and regulators are especially keen to track them because they are used to conduct a lot more movement of value these days, and an unsettling amount of it is for nefarious purposes – laundering the proceeds of drug sales, or for carrying out Ponzi schemes and other scams – as the Chainalysis data, reported by Reuters, showed. The firm compiled its data by examining transfers to wallets associated with crime. As of early this year, those wallets held the equivalent of more than US $10 billion.

As alarming as the increase in criminal financial activity is, Chainalysis pointed out that the US $10 billion figure represents just 0.15 percent of all cryptocurrency transaction volume last year. Also, it is difficult to know what impact the Coronavirus pandemic had on financial crime during the last two years. Still, the firm said the volume of criminal transfers might be higher than reported, as its data could only include transfers involving the illicit wallets it knows about.

One of these is not like the others, or is it?

It might seem paradoxical, given the innovative, disruptive nature of cryptocurrencies, but the regulation under consideration by the U.S. Treasury is designed essentially to ignore the differences between cryptocurrencies and conventional currencies, and to treat cryptocurrency transactions like any other. Here is the intention of the regulation, as stated on the Treasury Department website:

“…to clarify the meaning of ‘money’ as used in the rules implementing the Bank Secrecy Act requiring financial institutions to collect, retain and transmit information on certain funds transfers [and to] ensure that the rules apply to domestic and cross-border transactions involving convertible virtual currency…that either has an equivalent value as currency, or acts as a substitute for currency.”

Whatever its final form, the regulation will be legally enforceable on American institutions only, but the size of the American economy and the global presence of its banking industry ensures that few jurisdictions will escape its impact. And there is little doubt that supervisory authorities elsewhere, including Australia, will introduce requirements of their own. Which would put cryptocurrency firmly in AUSTRAC’s crosshairs.

The obligations that the Treasury Department and eventually its peers impose will be felt most acutely when crypto exchanges examine how they are going to fulfill their KYC and KYT obligations. Key here will be how they identify the underlying owner of the asset, but given the unending innovation in cryptocurrencies and digital assets, the complexity of ultimate ownership, and the challenges authorities are likely to face – and to impose on the industry – as they try to regulate with enough force to be effective but not so much that activity is driven underground, there are bound to be plenty more      challenges on the way.

The post Cryptocurrency Transactions Come under Regulatory Scrutiny Globally as U.S. Regulators Strengthen AML Rules appeared first on PaymentsJournal.

Utilization of cryptocurrency to complete payments in India has been halted despite an announcement from Coinbase that they would begin accepting transfers from India’s United Payment Interface, emblematic of the uncharted territory for crypto within government policies and traditional banking sectors. Bloomberg Quint reporters Sidhartha Shukla & Suvashree Ghosh provide additional details:

Coinbase wasn’t the only one affected. Since its announcement, at least four other companies that provide crypto-related trading services have either suspended rupee deposits or seen banks and payment gateways pull support for money transfers onto their platforms, according to executives at the firms and local media reports. Two other exchanges had lost support for rupee deposits from a payment service provider before the incident.

The move by UPI is adding to additional pressure on crypto trading volumes within India, but customers are still able to convert cryptocurrency back to fiat currency:

Those actions put additional pressure on already falling trading volumes, exchange executives said. The industry is also bracing for a new tax on all crypto transactions above a certain size that will take effect on July 1. The government this month introduced a 30% levy on income from digital asset investments. Daily trading volumes on Indian crypto exchanges, which collectively cater to about 15 million people, has tumbled between 88% and 96% since peaking last year, data from CoinGecko show.

India’s crypto scenario underscores the fragile relationships between government, established banking providers, and upstart crypto platforms as all parties work to find paths forward in the changing environment.

Overview by Jordan Hirschfield, Director of Research at Mercator Advisory Group

The post Crypto Payments Halted in India appeared first on PaymentsJournal.

2022 is shaping up to be a definitive year for cryptocurrency with more than 81 million Blockchain.com wallets to date, a slew of Super Bowl LVI commercials dedicated to crypto, and new regulatory discussions on the horizon. What’s more, 21% of banks have incorporated blockchain technology into their businesses in some form, including big names like JPMorgan, Citi, Wells Fargo, and PNC.

Despite the massive rush toward crypto, there are still many roadblocks that hinder the adoption by businesses and the accessibility of crypto for consumers. With the White House’s recent executive order to coordinate efforts among financial regulators to better understand the risks and opportunities presented by digital assets, now is the time for crypto exchanges, financial institutions, and fintechs to take action to address these challenges. We’ll talk about three of those roadblocks – weak verification protocols, the risk of fraud, and lack of regulation – and what needs to happen as the world of crypto changes at an unprecedented pace.

Addressing weak verification protocols

One of the primary roadblocks to wide adoption of cryptocurrency is addressing how crypto exchanges verify customer identities and accounts as a core part of Know Your Customer (KYC) and anti-money laundering procedures. A 2020 study by CipherTrace found 56% of the analyzed 800 cryptocurrency exchanges and over-the-counter trading desks followed weak or porous KYC practices. Similar to legacy financial institutions, crypto exchanges have struggled to successfully onboard users to their platform quickly, while also diminishing fraud.

Strong KYC programs are essential for traditional financial services organizations, but many crypto firms struggle with balancing anonymity and stronger verification processes. In addition, most crypto firms tend to be engineering-led organizations where the knowledge needed to build KYC, anti-money laundering (AML) procedures, and digital verification processes are not as commonplace. And, with the increased number of central bank digital currencies (CBDCs) appearing in the market, KYC regulations surrounding crypto are only going to increase.

Crypto companies may need to verify a user’s identity at several key points – from opening a new account to making a trade or transfer. And while complying with regulation is important, so is delivering a convenient user experience. The most pragmatic way to approach this challenge is to work with partners. Speed is critical in the fast-paced landscape of crypto and leveraging a proven verification technology will allow for integration to happen more quickly for the benefit of your customers. The fintech markets have seen an increase in the number of identity verification services as these problems have permeated not only cryptocurrency exchanges but also many neobanks.

Protecting consumers from fraud

Blockchain, the technology that enables the existence of cryptocurrency, allows for transactions that clear and settle as soon as a payment is made. Cryptocurrencies like Bitcoin and Ether are built on public blockchains that anyone can use to send and receive money. This stands in contrast to current banking systems, which often clear and settle a transaction days after a payment. There are pros and cons to the real-time nature of crypto transactions.

On the plus side, blockchain networks can help alleviate the high costs of maintaining a global network of correspondent banks. An Accenture survey among 8 global banks found that blockchain technology could bring down the average cost of clearing and settling transactions by $10 billion annually.

On the other hand, Blockchain, like many other consumer-facing services, are not immune to fraud and scams. Because public blockchains cut down on the need for trusted third parties to verify transactions, they can also be victims of high rates of fraud. For example, the Federal Trade Commission (FTC) received nearly 7,000 complaints of cryptocurrency investment scams from October 2020 through March 2021, with reported losses growing more than tenfold, to above $80 million.

The key is understanding the weaknesses and limitations of technologies like blockchain, and leveraging it in ways that will not play into attackers’ hands. While it is impossible to control all fraudulent actors, it is possible to better understand and manage risks to help mitigate them. Having the right data analytics and monitoring tools, as well as implementing a robust risk management strategy, can help catch problems before they occur. 

Taking a stand in the crypto regulatory landscape

This March, an executive order from the Biden administration called out the need for financial regulators to coordinate efforts and better understand the risks and opportunities presented by digital assets.

The backdrop of this order is legacy banking systems struggling to match the speed of innovation that is present among more efficient networks. Cryptocurrencies and exchanges have adopted decentralized finance as a core tenet of their operation. This technology operates with smart contracts built into its structure. The open source nature of the blockchain platforms, combined with the high volume of innovative and unregulated activities on the chain, is creating efficiencies that banks can’t match with legacy technologies.

However, cryptocurrencies lack clear rules of the road from Washington. Without clear guidance, we risk disrupting significant innovation, and destroying value that many individuals and institutions currently have invested in the crypto ecosystem. Those risks could make America less competitive on the global stage, and rob consumers of the next generation of innovative, affordable solutions. Regulatory guidance will only help improve consumer safety when it comes to blockchain and other cryptocurrencies. Contributors in the financial industry should support each other in seeking regulatory clarity on the path to a free and open financial system – one that is consumer-centric, privacy-preserving, and operationally efficient, as well as financially inclusive.

According to research by Crypto.com, the number of crypto users is projected to break 1 billion by the end of 2022. With mass adoption ahead – and mainstream companies across multiple industries beginning to accept Bitcoin payments – it’s even more critical that the financial industry comes together to solve some of the privacy, security, and regulatory challenges that cryptocurrency faces.

The post 3 Roadblocks to Widespread Crypto Adoption appeared first on PaymentsJournal.

The lack of a primary concern regarding crypto has Washington in a pickle and the closest they can get to agreement is that stablecoins should be stable. With that consensus under their belt, the argument turns to how:

“The Biden administration is asking lawmakers to pass legislation that would treat stablecoin issuers like banks, a step that Republicans and some Democrats oppose in favor of a lighter statutory touch. Other Democrats are skeptical of compromising with Republicans on the issue at all, instead pushing the Biden administration to take more aggressive steps itself.

How—and if—Congress resolves the debate over the roughly $185 billion stablecoin market is an early test of whether Washington will ultimately write new laws or wield existing frameworks to regulate the broader $2 trillion cryptocurrency industry.

“This is a relatively narrow segment of the crypto universe and it would be very constructive if we provided some regulatory certainty and clarity,” said Sen. Pat Toomey (R., Pa.), the top Republican on the Senate Banking Committee, who last week released a draft bill on the issue. “Stablecoins are the logical place to start and the place where there’s the most interest in starting.”

While policy makers say they want to craft rules that could support stablecoins’ wider adoption, they worry about their meteoric growth. The reserve assets of the largest stablecoin, Tether, have been the subject of multiple investigations, with the Commodity Futures Trading Commission last year accusing it of misrepresenting that its dollar reserves were equivalent to its coins. Tether Ltd. agreed to pay a $41 million settlement but didn’t admit any wrongdoing in the case.”

Stablecoins are a more visible target for legislation because they should be pegged to the dollar using dollar reserves. That means a run on the stablecoin will impact the US Dollar itself and that is worrisome.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Attention in Washington Shifts from Crypto Writ Large to Stablecoins appeared first on PaymentsJournal.

Utilization of cryptocurrencies for common purchases continues to be an area of developing need. Merchants’ preparedness to accept crypto is not fully developed, necessitating transfers to fiat currency. EU processing company Swapin is seeking to ease the crypto to fiat process to allow for smoother transactions from crypto holdings. Be In Crypto contributor Shilpa Lama offers details on how their system operates:

Swapin offers two B2C-based crypto-to-fiat payment solutions currently in the form of Instapay and Instafill. For anyone making a one-off payment, Instafill is the perfect solution. For recurring expenses such as bills, subscriptions, rent, loan payments, and more, there is Instapay.

Instapay begins with a drop-down menu allowing users to select from a set of predefined payment types, such as electricity, TV & internet, bank loans, education, and many others. Other utilities and bill types are also possible.

Users must fill out all related recipient details, set a payment description, and include the beneficiary’s IBAN account information. After reviewing all input info is correct, clicking pay initiates the payment and sets up the predefined payment for future repeat use.

Swapin anticipates a limited European rollout in 2022 as they continue to enhance their value proposition:

A 2022 company roadmap revealed the aggressive plan to expand into Germany, France, and Nordic countries. Persuasive marketing campaigns are planned along with the localization of the new Swapin website and the launch of a multilingual mobile app.

Swapin exemplifies the near-term need to allow low-friction conversion of crypto to fiat currency in order to facilitate commerce. The space should diversify as crypto wallets become more developed and accepted for both consumers and merchants.

Overview by Jordan Hirschfield, Director of Research at Mercator Advisory Group

The post Swapin Aims to Ease Crypto-to-Fiat Transfers appeared first on PaymentsJournal.

Bitcoin is riding the wave. Thanks to FinTech big shots like PayPal and Square, interest is at an all-time high as first time traders are now easily able to purchase currency through mainstream apps. FinTech giants have started to provide it to users as an alternative currency, thus widening their user-base. With lower transaction fees and fewer fleeting risks, both merchants and businesses are appreciating the near instantaneous settlements. 

Merchants and businesses aren’t alone in their appreciation. P2P cryptocurrency payment options are not only cheaper, but faster than what is offered by conventional money service businesses. Advanced and early use by payment applications like Square and PayPal will allow simple access to a very large amount of people and offer a major position of advantage to Bitcoin. 

FinTech’s power doesn’t stop with Bitcoin. It is also playing a major role in the use of Crypto ATMs. These allow users to buy and sell cryptocurrency in a secure, user-friendly way. The ATMs are popping up all over, are free to sign up, and can easily scan the coin or crypto wallet address destinations. Money can be deposited and immediately converted and sent. These ATM’s also give users the added bonus of purchasing cryptocurrency with a debit or credit card. 

Byte Federal CEO Lee Hansen says, “We are working diligently with our team of experts to continue to roll out new FinTech solutions, it will soon be possible to have a full banking experience at the ATM. Buying and selling cryptocurrencies, gold, and converting cryptocurrency into cash are already available to our users, next steps are going to be even more exciting and offer a host of new services.” In fact, some additional solutions we could see come from these ATM providers are features like sending money transfers overseas to loved ones using Bitcoin, enhancing the ability to change bitcoins into cash and cash into bitcoins, Bitcoin checking account services, and Bitcoin debit and credit cards.

Sending money transfers overseas to loved ones using Bitcoins

Facilitating a fast transaction overseas can seem like a difficult task. However, Crypto ATMs have proven to be extremely instrumental for seamless cross-border payments. Fees are low, and when P2P chooses to transfer value and benefit fully from the advantages over traditional money, crypto becomes the medium to do so. 

Enhancing the ability to change bitcoins into cash and cash into bitcoins

With the rise of Bitcoin and cryptocurrency, these ATMs have made the process of changing bitcoins into cash and cash into bitcoins easier, faster and safer. These ATMs are available in most major cities around the world, making these transactions accessible to millions, with more ATMs being installed at a rapid pace.

Checking account services

Opening a Bitcoin checking account is the first step in investing in Bitcoin. It is basically a virtual bank account, but unlike banks, these accounts are not insured by the FDIC and there are no checks or standard bank fees. They are great for businesses and P2P to use internationally because they are cheaper to use than traditional banking transactions. These accounts are referred to as bitcoin wallets, and opening accounts are super easy. First is deciding what type of wallet to use (private or hosted) and then selecting either an app, software, hardware, or third-party service and then simply follow the step-by-step instructions. 

Bitcoin debit and credit cards

Bitcoin debit and credit cards are on the rise. Debit cards allow individuals to make online or in-person purchases or withdraw cash from ATMs using Bitcoin, even if the vendors or ATMs do not accept cryptocurrency. Cardholders preload their debit card with a set amount of cryptocurrency which is converted automatically during the purchase. Crypto credit cards function much like regular credit cards, with the difference being that they source funds and pay rewards using digital currency like Bitcoin. Users can enjoy flexible spending with enhanced rewards due to the backing of popular and trusted card networks like Visa and Mastercard. 

Crypto ATMs are changing the money game. With all of the user-friendly, safe, and accessible ways to use them, they are rapidly becoming more popular and trustworthy. It is no wonder that experts feel that Bitcoin will be able to easily serve the unbanked community. Using Bitcoin does not require one to file paperwork or open a bank account. Users need only internet access and use of a smartphone or computer. Downloading a Bitcoin wallet is typically free, some require small fees, and businesses and P2P can also store their Bitcoin on trusted crypto exchange platforms. There is not a central authority regulating how Bitcoin works which thereby eliminates the bureaucracies of traditional financial systems. 

Because of FinTech giants’ recent involvement in cryptocurrency, more and more people are switching the way they use currency completely, slowly investing into cryptocurrencies, or at least have an interest in doing so. The popularity has led to the rise in Bitcoin use and therefore, the need for these crypto ATMs. 

Virtual currency is not subject to government, political, or any other kind of institutional influence, allowing for complete discretion and the unbanked to transact at their convenience. Not only are individual investors excited about Bitcoin, but major institutions are entering the scene. FinTech big shots such as Square are making major investments. Square recently invested 1% of its total company assets into Bitcoin, making a strong case for any skeptics. 

The post Why Bitcoin Is Riding the Fintech Wave appeared first on PaymentsJournal.

Even as NFT crime skyrockets and Forrester declares all of Web3 the seed of a dystopian nightmare, Visa has announced it is jumping in. The head of crypto at Visa states in the article: “We think NFTs represent a new form of e-commerce.” Maybe, but so far it has been criminal acts that dominate the headlines and even WeChat bailed on the idea of enabling NFTs. The criminal activity is driven by the lack of validating the ownership of the NFT site itself (perhaps merchant services onboarding could help?) and a lack of provenance for many of the objects the NFTs encapsulate (a harder problem to solve). These attack vectors are exacerbated by the lack of rigorous identity verification for all the buyers and sellers on many NFT sites which enables kiting and money laundering.

The press release indicates Visa will educate artists through “technical and product mentorship,” but few artists are likely to have the technical knowledge required to properly evaluate all aspects of the platform. They certainly won’t have the leverage required to convince NFT platforms to fix any problems they discover. I’d like to see Visa utilize its technical and regulatory capabilities to develop a “NFT Certified by Visa” program. This would provide a safe harbor for buyers and sellers and Visa’s broad brand awareness would surely compel some NFT platform providers to make the changes needed to participate.

With a properly secured platform (PCI certification perhaps?) and with solid identification required to participate, fraud would be more easily detected and make it easier to make those criminals face justice.

“Aside from collecting NFTs, Visa has built out its crypto team, and in December 2021 launched a crypto advisory practice to help clients and partners consider a deep dive into the space.

“We think that [NFTs] are a fundamental primitive tool that can reshape commerce and create new opportunities,” Sheffield said. “But there’s still a ton of questions around how does it evolve? Which blockchains to use? How do you stand out? How do you reach customers? And so we want to learn as much from the creators as we think they can learn from us.”

Going forward, Visa wants to embed itself in these crypto technologies to follow the future of commerce, Sheffield said. “We’re incredibly excited about NFTs,” Sheffield said. “We want every [NFT] marketplace to be able to accept Visa cards because we think NFT’s will exist across many different networks.”

As for next steps? Visa wants to make buying an NFT as easy as it is to buy anything else online, Sheffield said.”

And still no mention of safe.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Visa Launches NFT Solution for Creators; No Zero Liability Parachute appeared first on PaymentsJournal.

Cryptocurrency has now taken a firm hold in society, moving from being something of a niche or underground concept to becoming far more mainstream. (It’s even a popular topic on TikTok!) While the exact number is hard to pinpoint, there are more than 14,500 cryptocurrencies globally – and growing. Most people think of the best-known ones, like Bitcoin, Ethereum and Dogecoin, but those are just the tip of the iceberg in a market now worth more than $3 trillion.

The rapid adoption is understandable. Cryptocurrency offers many benefits by eliminating centralized control of money by governments and providing a cheap, secure and fast payment method across the world. That said, bad actors have taken notice and are also using cryptocurrency for nefarious purposes – and that’s where financial institutions can’t turn a blind eye.

Cryptocurrency’s illicit uses

The security and anonymity that cryptocurrency offers are precisely what also makes it appealing to malicious actors. In fact, crypto crime hit an all-time high of $14 billion in 2021, nearly double from the prior year. That figure’s likely to rise in 2022; the Department of Justice recently announced arrests in one of the biggest heists involving cryptocurrency – a $4.5 billion Bitcoin laundering scheme.

Crypto offers a lot of appeal for bad actors. For instance, if you’re trying to extort money from someone as part of a ransomware attack – a typical scenario – then you need to be able to get the money from the victim, whose digital assets have been blocked, without being traced. Cryptocurrency is ideal for this, from the ransomer’s perspective.

Here are three major areas where we’re seeing crypto used for nefarious purposes.

Ransomware: U.S. victims of ransomware paid hackers $590 million in the first half of 2021 – more than all ransomware payments in 2020 – and Bitcoin was the primary payment method, according to the U.S. Treasury. Worldwide, more than $5.2 billion in Bitcoin payments were potentially linked to ransomware, the Treasury also found. There’s even at least one cryptocurrency startup that’s specifically focused on helping ransomware victims pay their attackers.

Money laundering: The ease of use and guarantee of anonymity has made crypto popular for money laundering. The process of cleaning illicit earnings has three steps: placement, layering and integration/extraction.

The first, placement, entails introducing illegitimate funds into the legitimate financial system. Then, it’s moved around through multiple accounts to make it more difficult for authorities to trace funds back to its origins – this is the layering step. And that’s where cryptocurrency can play a key role. No longer do you have to rely on the lax scrutiny of say, a Swiss bank; now you can do this via cryptocurrency. That allows you to essentially put a black box around the entry point and the final destination of the money.

Moving money across borders: The peer-to-peer functionality of crypto currencies makes it far easier to move large capital funds across borders without the ability of centralized governments to stop or intercept them. That’s because no participant in the network can establish a gate between the two other wallets to approve or decline a transfer. That’s been particularly problematic for countries like China, which have policies in place to retain capital within their borders, but those policies are enforced through the traditional finance system like banks and currency exchanges.

Cryptocurrency Regulatory action lags

There are many steps being taken towards cracking down on cryptocurrency, but as with almost all financial regulation, it’s always going to be at least a few steps behind what the criminals are currently doing. The fact is that cryptocurrencies remain largely unregulated – and what regulation does exist has been a piecemeal approach. The IRS, the Securities and Exchange Commission, and the Office of the Comptroller of the Currency have all issued various pronouncements on crypto regulation, but only covering the individual aspects of it that fall under the purview of each agency.

In the meantime, crimes are being committed. So, banks and financial institutions have to protect themselves rather than just sitting on their hands until regulations force them to act. They will be fined for money laundering that occurs on their watch, regardless of whether it involved cryptocurrency or regular currency.

Actions steps for banks and other financial services organizations

The number one way to protect your organization is not to engage with cryptocurrency at all. But that doesn’t make much business sense for most organizations. The reality is that crypto is rapidly growing in adoption and more customers want to use it.  This is something organizations need to really think about: Do the potential benefits ultimately matter more than the potential downfalls? If so, then organizations have to find a way to root out the fraudulent and criminal behavior that crypto enables.

This is where your anti-money laundering (AML) and know your customer (KYC) tools come into play. For instance, customers who are using cryptocurrencies may need to come under different levels of scrutiny. You can have hard-coded rules that separate these users out or use other KYC processes that let you treat cryptocurrency users a little differently. But, if a large enough number of your customers are using crypto, this almost becomes moot.

The more realistic approach is to lean on technological solutions like ML/AI-based transaction monitoring, which will pick up even very subtle differences in the behavioral patterns of two entities, hence targeting much more accurately the malicious actors without disrupting the activity of regular customers. Ultimately, that’s going to be much less painful – and more effective – for the financial firm.

This is still very much a rapidly evolving field, and there are bound to be some missteps and lessons along the way. But the big takeaway is that financial organizations need to understand the potential problems and have an active, defined plan for how they are going to approach prevention and detection, regardless of what regulatory action does or doesn’t come to fruition.

Advanced crime prevention

The rise of decentralized finance has created additional obstacles for financial institutions and regulators to prevent digital currencies from enabling money laundering. Financial institutions need to take action now – they can’t wait until their hands are forced by regulation, because the regulation lags behind and the risk is real now. Fortunately, there are already tools in place that can help – they may just need a bit of tweaking. AI can also play a role in helping you detect new forms of financial fraud, avoid fines, and prevent crime.

The post Minimizing Cryptocurrency-Based Fraud without Regulatory Support appeared first on PaymentsJournal.

It is an exciting time to be in business. The emergence of web3 technologies such such as non-fungible tokens (NFTs) and stablecoins are presenting new opportunities for businesses to streamline money movement and other use cases.

Stablecoins specifically have a slew of practical applications that make evaluating their suitability within a business environment crucial. And, according to Bradley Riss, CCO at Checkout.com, “If NFTs are the gateway for consumers to enter Web3, stablecoins should serve the same purpose for businesses.”

To unpack this statement and explore what value stablecoins can provide in the business world, PaymentsJournal sat down with both Riss and Tim Sloane, VP of Payments Innovation at Mercator Advisory Group.

Stablecoin business use cases around money movement 

Stablecoins can deliver on the promise of improving the movement of value between any two parties, whether that be a business sending money to a business, a business sending money to customers, customers sending money to a business, or consumers exchanging money among themselves. To underscore this value, Riss offered three stablecoin business models that show how they can improve money movement: 

Business model #1: Money remittance 

Moving small amounts of money across borders is often inefficient and expensive. It also involves complying with assorted global – but locally regulated – banking facilities. With stablecoins, “the transaction could be run on a chain instantly for nothing–maybe not free, but a fraction of [a] cent. In that sort of business, the alternative would be [to] take money in via a bank transfer or even a debit card, for example,” Riss said. 

While debit and bank transfers have made enormous strides over the years, they are not perfect. Settlement cycles mean that businesses still need to front that liquidity, taking on a line of credit and adding to their business inefficiencies. That’s where stablecoins moving on a blockchain come in. “If, in theory, that money could be transferred to them on demand or hourly or instantly, then that liquidity gap disappears and you’re making the system much more efficient,” he added. 

Business model #2: The gig economy

Freelance networks often consist of small and medium enterprises (SMEs) in affluent countries contracting cost-effective developers in another nation. For example, a business in the United States may want to work with a contractor based in Kenya. 

“The actual movement of money from, for example, the U.S. to Kenya [can be] done on a chain using the right chains for free and arrives in near-real time. The alternative would be using that SWIFT-esque example [where] that $100 that needs to get there may have $35 cut out of it, another 5% taken on FX when they convert Dollars to Shillings, and could take five days to get there,” explained Riss. 

Business model #3: Peer-to-peer payments

Domestic peer-to-peer (P2P) payments can be easily accomplished through apps such as PayPal, Cash App, and Venmo, but they become more complicated when payments are international. Consider the hypothetical scenario of a daughter in the United States who wants to send money to her father who lives in France. “Using the underlying blockchain technology [of stablecoins] would be a way for [her] in real-time to send value, money, in a stablecoin form to him. Maybe it arrives in USDC, maybe it arrives in a Euro denominated stable coin,” Riss said.

Commenting on these use cases, Sloane noted that “almost all of those examples are, in essence, cross-border examples of the challenges associated with moving value. And that has been an age-old problem.”

Stablecoin usage could mimic NFT consumer interest 

Non-fungible tokens, or NFTs, are a cryptographic token stored on a blockchain that can be sold and traded. NFTs come with unique identification codes and metadata that distinguish them from one another. They can be used to represent real-world items, such as artwork and real estate, as well as digital goods. Tokenizing real-world assets makes it possible for them to be bought and sold more efficiently. 

Much of growing consumer awareness around NFTs involves industry buzz and public figure involvement. For example, celebrities including Eminem, Paris Hilton, Jimmy Fallon, and Steph Curry have been in the news for purchasing Bored Ape Yacht Club NFTs, a collection of 10,000 images of apes with unique traits and outfits.  

Riss believes that like NFTs, consumers’ initial touchpoints with cryptocurrency will come from recognizable products or public figures engaging in the space. “There’s obviously a lot of [NFT] buzz in the industry, and I think that has brought a lot of people in. So, I think a lot of consumers’ first touchpoint with crypto won’t be yield farming an alt coin for an attractive APY [annual percentage yield]. It will be a product that they recognize, something which they like the design of [or] something that maybe has a celebrity tie-in and brings them closer as a fan,” he said. 

The takeaway

There are many buzzwords being discussed in the crypto space. Knowing where to start in terms of implementing them begins with embarking on an educational journey. This means gaining a deep understanding of terms such as NFT, blockchain, distributed ledger, cryptocurrency, stablecoins, Web3, and more. 

“Get an understanding of what the blockchain technology can do,” Riss advised. “If, for example, you’re a fintech and cash flow is important to you, then very potentially the application of stablecoins would have value within your business. If you’re a content producer, very possibly an NFT will be something that your user base or fan base will find appealing,” he added.

Businesses that fail to take these technologies into consideration risk putting themselves–and their customers–at a disadvantage. “Our role in the industry is to help our customers and their customers move value seamlessly. But, of course, as new technologies emerge that improve upon that, I think it would be foolish for any organization who is involved… [to] not look into this and see if it can improve operations for their business inefficiencies,” concluded Riss.  

The post Stablecoins: Practical Applications for Improving Money Movement appeared first on PaymentsJournal.

Like Gutenberg’s press, cryptocurrencies have become the agent for spreading ideas. The key difference is that unlike Guttenberg’s press, many cryptocurrencies physically embody the ideas that they espouse. Buying a coin is still a get-rich bet, but it may also be part of an ecosystem that implements anarchy, socialism, or even Georgism.

One of Buterin’s concerns are frivolous applications, NFTs specifically, that hijacked the Ethereum platform. NFTs drive such high volume and high dollar values that congestion fees approach or exceed $100. This in turn makes transactions too expensive for low value social programs, such as Buterin’s favorite, “Proof of Humanity”.

This looks like a redux of the internet age. Idealists coded and released standards that are highly resistant to failure and available to all. That in turn started a landgrab that made some people extremely rich and enabled free speech. It also enabled broad criminal activity and that free speech includes more hatred and lies than we had hoped. So cryptocurrencies and blockchains are following a well-worn path. Money corrupts and anonymity appears to enable monsters more than it does angels.

“To Buterin, the worst-case scenario for the future of crypto is that blockchain technology ends up concentrated in the hands of dictatorial governments. He is unhappy with El Salvador’s rollout of Bitcoin as legal tender, which has been riddled with identity theft and volatility. The prospect of governments using the technology to crack down on dissent is one reason Buterin is adamant about crypto remaining decentralized. He sees the technology as the most powerful equalizer to surveillance technology deployed by governments (like China’s) and powerful companies (like Meta) alike.

If Mark Zuckerberg shouldn’t have the power to make epoch-changing decisions or control users’ data for profit, Buterin believes, then neither should he—even if that limits his ability to shape the future of his creation, sends some people to other blockchains, or allows others to use his platform in unsavory ways. “I would love to have an ecosystem that has lots of good crazy and bad crazy,” Buterin says. “Bad crazy is when there’s just huge amounts of money being drained and all it’s doing is subsidizing the hacker industry. Good crazy is when there’s tech work and research and development and public goods coming out of the other end. So there’s this battle. And we have to be intentional, and make sure more of the right things happen.””

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post The Father of Ethereum, Vitalik Buterin, Isn’t Happy With Crypto’s Direction appeared first on PaymentsJournal.

Dan Schulman of Paypal states that a focus on a specific form of crypto, such as bitcoin, is a mistake; rather, it will be the impact digital assets have on current financial systems. Despite that statement, Bloomberg states that PayPal is developing its own stablecoin. PayPal states it will work with regulators to assure a smooth launch and Bloomberg has found evidence of the stablecoin in PayPal’s iPhone app:

“Dan Schulman is the CEO of PayPal (NASDAQ:PYPL) and a proponent of cryptocurrency. Through Axis Tel Aviv video conference, Schulman shared his thoughts about cryptocurrencies, as he sees a bright future in crypto and believes that blockchain will provide new opportunities in the financial sphere:

“The intersection between CBDC, stable coins, digital wallets, and enhanced utility of payments through cryptocurrencies is not just fascinating, but I think will redefine a lot of the financial world going forward.” However, Schulman doesn’t regard the value of Bitcoin or any other cryptocurrency as the main focal point. Instead, he explores how digital assets can impact the current financial system.

“I’m very excited about what crypto and digital ledger technology can do to the financial system going forward. I think the initial things that everyone thinks about crypto, buying and selling it, and what the price of bitcoin is going to be tomorrow, that’s the least interesting part about digital currencies to me,” he said.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Crypto Will “Redefine the Financial World Going Forward” appeared first on PaymentsJournal.

This article reviews the potential impact of Biden’s executive order (EO) across the financial regulatory and oversight agencies, including the SEC, the Commodity Futures Trading Commission, the OCC, and the Financial Stability Oversight Council (FSOC). The EO will almost certainly drive significant attention since it identified crypto as a potential systemic risk, the same terms used to pass the Dodd-Frank legislation. As such, the act of releasing the EO indicates that crypto is an issue that the White House wants all the financial regulatory powers to prioritize and manage in a more holistic fashion than is currently being done.

In the past the Federal Reserve has indicated it wouldn’t wade into the crypto waters unless congress or the White House told them to. So with this EO the White House has told them to. The EO also confirms that crypto has benefits and requires Treasury Secretary Janet Yellen to convene the Financial Stability Oversight Council (FSOC) within 210 days and then produce a report outlining crypto stability risks and regulatory gaps and to make proposals for regulation, supervision, and identify needed legislation.

Within the crypto industry there is hope that the EO may change the existing stance of the FSOC that currently identifies all digital assets, stablecoins, and decentralized finance, as a potential risk to the financial system. Hence, now is the time to step up efforts to influence the government. At the same time the banking community has raised alarms that a Central Bank Digital Currency could potentially disintermediate them from their clients:

“The March 9 order marks the first time the White House has formally weighed in on cryptocurrency, and although it is, in essence, a plan for the Treasury Department and other regulatory agencies to make a plan, it’s still a watershed moment.

It’s also a moment when stakeholders can exert influence to shape what the ultimate trajectory of regulation and policy will be. Digital asset advocates are hopeful that regulation will bolster trust (and encourage the U.S. government to more seriously consider its own digital currency), while banks are hoping for clear rules of the road and consumer advocates are hoping crypto can help households underserved by the existing financial system get a leg up and more fully participate in the economy.

“What this all means in practice will be the devil in the details,” said Josh Lipsky, a senior director at the Atlantic Council, who previously advised the International Monetary Fund and worked for the Obama White House. “To be regulated is to be legitimized, so it’s a question of who will be on what side of that, and what those regulations will look like.”

Crypto advocates were largely happy with the executive order. Instead of solely focusing on risks, the executive order also acknowledged what it sees as cryptocurrency’s potential, quelling some fears.

The Blockchain Association called the order “further proof that the crypto ecosystem is now a vital and inseparable part of the national economy.” Markets cheered the move, with bitcoin prices jumping about 10 percent on Wednesday before coming down on Thursday.

And by and large, the crypto order set off a positive reaction from the banking corners of Washington. The Bank Policy Institute lauded the “clarity” more federal action of crypto would bring, and applauded the idea of bringing crypto and fintech startups into a regulatory scheme. The trade group noted that “regulated financial institutions have been stuck on the sidelines waiting for further regulatory action before expanding their digital offerings.”

Banks were more tepid on a central bank digital currency, however. The Bank Policy Institute said it believes further research on U.S. digital currency would show that “CBDCs would pose considerable and unavoidable costs to the financial system and economy while producing few, if any, tangible benefits.”

American Bankers Association President and CEO Rob Nichols said in a statement that the group is “concerned that it clearly directs federal agencies to begin pursuing a central bank digital currency even before determining if a U.S. CBDC is actually ‘in the national interest’ as the order also requires.”

What follows is an examination of the near-term and longer-term impacts of the administration’s renewed focus on crypto.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post A Deep Dive into the Potential Impact of Biden’s Crypto Executive Order appeared first on PaymentsJournal.

This brief posting in Finextra points out the 15-page executive order issued by the White House yesterday around the topic of CBDCs and crypto assets in general. The EO covers a lot of ground that has already been trodden over by the Fed in testing efforts (continuing) and other statements and publications. This is the type of stuff that we would expect normally takes place in cabinet meetings, so it seems to be just a clarification and formalization of creating policy positions and notifying congress that it should be on the radar.

‘The Order lays out a national policy for digital assets across six key priorities: consumer and investor protection; financial stability; illicit finance; US leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.

In a statement, NEC director Brian Deese and National Security Advisor Jake Sullivan, says: “We are clear-eyed that ‘financial innovation’ of the past has too often not benefited working families, while exacerbating inequality and increasing systemic financial risk. This history underscores the need to build robust consumer and economic protections into digital asset development.”’

In reading over the EO a couple of things can be surmised. The up-front timeframe of 180 days and scope for a report and framework from the Secretary of the Treasury is pretty much already covered within the Fed Board of Governors discussion paper released back in January. There are a couple of other things on the ‘to do’ list, including reports from the Secretary of Commerce (180 days) and the Attorney General (90 days) around competitiveness and international law enforcement. All these reports are to be coordinated with other cabinet members, so this is just meant to show that everyone is basically on the same page.

Another report is then due within one year of the submitted framework which will describe priority actions taken under the framework and its effectiveness. Not quite sure what that means, but could be legislative actions or recommendations. The EO also ‘encourages’ the Fed Chairman to continue what they are already doing, so perhaps just putting the Fed on notice that someone is finally paying attention to this. Net net, we won’t be seeing an e-dollar for another while, which we already knew, but maybe this accelerates something.

‘The Order also places “urgency” on research and development of a potential United States CBDC. It directs the Government to assess the technological infrastructure and capacity needs for a potential US CBDC and encourages the Federal Reserve to continue its research, development, and assessment efforts, including development of a plan for broader US Government action in support of their work.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post White House Issues Executive Order on Crypto and CBDCs appeared first on PaymentsJournal.

This article indicates that FIS’s Worldpay crypto acceptance solution has already helped merchants accept “billions of dollars of crypto purchases.” It also reports that Worldpay will be rolling out a service to enable crypto exchanges to accept cards for cash-in as stablecoins, and is working on accepting a digital wallet. So will consumers shift to crypto as the primary new way to hold value and spend?

There will be two major factors associated with that change in behavior: How many merchants accept the payment type (which is partially driven by transaction cost and the effort and cost to deploy a new payment type), and which currency and payment type the consumer prefers.

Mercator deploys multiple surveys every year to evaluate consumer payment behavior and business acceptance methods. It will be interesting to see if small businesses turn to crypto acceptance and how consumer behavior evolves relative to buying, holding, and selling/spending crypto. Relatively few consumers hold crypto and even fewer spend crypto today. But as the market evolves, and if crypto becomes more stable, that could change, and more consumers might decide to use crypto. Regardless of the market size of crypto holders, the key question for payments is: Which payment type will the consumer prefer?

Will they prefer using crypto directly, using bar codes or QR Codes or mobile wallets, or will they prefer a card/token-based solution that delivers the benefits many have become familiar with, including zero liability, dispute capabilities, and in some cases significant rewards? Mercator will keep asking those questions:

“Buying crypto is just the beginning. Worldpay is planning to leverage those relationships to move beyond allowing consumers to buy crypto with credit or debit cards, its primary crypto business at present.

• With a big bet on stablecoins, Worldpay is hoping to mainstream crypto payments with two new products it’s readying for release.

• First, it plans to let crypto-native businesses such as crypto exchanges accept fiat payments via Visa or Mastercard and convert the proceeds to stablecoins, said Nabil Manji, head of Crypto and Emerging Business at Worldpay. This product, especially useful for companies that use stablecoins as their reserve currency and prefer not to touch fiat, is expected to launch by the end of June.

• The second product, “pay by crypto,” would let any Worldpay merchant accept stablecoins and other cryptocurrencies as payment directly from consumers, online or in person. The merchant would have the option to immediately convert the payment to fiat if it wants. The product is still being developed, but could be available later this year or early next year.

• Instead of paying with a card, consumers could use a crypto wallet — which is a notable move coming from a payment processor that built its business on cards.

Could this unlock shopping with crypto? The pay-by-crypto product would potentially provide consumers with many more merchants where they could spend their crypto, since Worldpay has more than 1 million merchants worldwide.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Will Crypto Acceptance Be Done as Crypto or as Tokens? appeared first on PaymentsJournal.

Worldpay, already processing about $15 billion in credit and debit purchases of cryptocurrencies, is moving forward with additional plans to support crypto. The company is launching a new product this summer to allow acceptance of fiat currency to convert into stablecoins, and is in development for a second product to allow merchants to accept crypto payments with the option to convert those payments immediately back to fiat currency. As Tomio Geron reports in Protocol:

“It’s planning to leverage those relationships to move beyond allowing consumers to buy crypto with credit or debit cards, its primary crypto business at present. With a big bet on stablecoins, Worldpay is hoping to mainstream crypto payments with two new products it’s readying for release.”

Worldpay currently works with crypto exchanges Binance, Coinbase, Crypto.com, and OKEx, and has a network of more than 1 million merchants, highlighting the potential depth of both services once consumers show the willingness to spend crypto. Final details, including merchant fees, are still to be determined.

Overview by Jordan Hirschfield, Director of Research at Mercator Advisory Group

The post Worldpay Moving Forward with Dual Crypto Offerings appeared first on PaymentsJournal.

2021 was a major year for cryptocurrency. We witnessed all-time-highs and steep plummets, but one clear trend amongst the volatility is that public discussion on the topic reached hitherto unseen levels. This was fueled by such diverse factors as bitcoin upgrades, NFT artwork, China’s September ban, and Elon Musk’s SNL antics. Can cryptocurrency regulation calm the clamor?

The spotlight has carried on into 2022, and not always for favorable reasons. The market had been predicted to grow at an annual rate of nearly 13% until 2030, meaning that regulators were paying extra attention to an industry that has regularly been labeled ‘ungovernable’. The dramatic crash of January 2022 has brought further attention; with approximately $1.4 trillion wiped from the combined crypto market, more eyes were on crypto than ever before.

Issues with crypto

The clamor to take control of crypto is an inconvenient necessity for regulators, given its reputation for being so difficult for them to deal with.

Current SEC Chairman Gary Gensler likened the cryptocurrency market to the “Wild West”, labeling it an asset class “rife with fraud, scams, and abuse”, and claiming that investors don’t have enough regulatory protection. He explained, “There’s a great deal of hype and spin about how crypto assets work. In many cases, investors aren’t able to get rigorous, balanced, and complete information.”

There are, of course, always perspectives to consider. Crypto’s decentralized nature challenges the fiat currency system, and weakens a government’s control over the economy. A central bank is no longer required because peer-to-peer transfers can be made between parties, and so intermediaries become redundant. The crypto setup therefore does away with these intermediaries (banks, financial institutions) and, by extension, the elements of a government’s system through which it can exert influence. It would be fair to say that a rebellious streak naturally courses through cryptocurrency; it challenges long-established systems, and government authority.

 The market has often been charged with claims of insufferable volatility. This has seen it likened to the Gamestop trading saga, where social media influencers used aliases and carefully cultivated Reddit boards to manipulate the market in a seismic way. While this particular scenario occurred in the regular stock market, the comparison certainly does crypto no favors, given the anger it elicited from traditional institutions that were incensed by the outcome.

Taxation is another complication, although not just for the underhand reasons that one might expect. As Scott Duke Kominers, Associate Professor of Business Administration at Harvard Business School explains “Another basic challenge is around taxation of crypto income. This isn’t just about tax avoidance concerns — a lot of people would like to pay taxes on their crypto but have absolutely no idea how to do so.”

Due to its inherent characteristics of decentralization and anonymity, criminals have naturally flocked to crypto as a ‘clean’ currency to be used for illegal activity. There is also the significant environmental impact of crypto mining to take into account –  cryptocurrencies require staggering levels of energy to process the data associated with mining. Approximately 30 kilotons of electronic waste are annually produced as a byproduct of Bitcoin mining.

While there are certainly ethical issues to be considered, there is also a narrative unfolding which is difficult for a capitalist society built on The American Dream to derail; that of the little guy sidestepping the well-trodden path in pursuit of individual prosperity. However, governments are certainly prepared to use whatever tools are at their disposal to reassert control over the economy.

A global crackdown

In recent months, we have seen crypto-focused measures taken in many nations across the globe, with varying levels of urgency and severity.

China occupies the more decisive end of the scale. In September 2021, the Chinese Central Bank decreed that any cryptocurrency transactions conducted within their borders were now illegal.

In January 2022, UK Chancellor Rishi Sunak shared the UK Treasury’s plans to tighten regulatory standards around the industry.  The Treasury said it would bring crypto ads under the scope of existing legislation that covered financial promotions, adding the Financial Conduct Authority (FCA) to its list of regulators. The Treasury was keen to stress that its aim was to increase consumer protection from ‘misleading’ promotions, but not at the expense of innovation.

Gary Gensler became chair of the SEC on April 17th, 2021, and the organization has magnified its focus on the cryptocurrency market under his tenure. He has asked Congress to pass legislation giving the SEC the authority to monitor crypto exchanges, and just one month after his appointment, the SEC sued five individuals who helped raise over $2 billion from investors, in one of the agency’s then-largest digital asset cases. Similar enforcement actions continued as the year progressed, but the market crash at the start of 2022 elevated the regulations and sanctions to another level entirely.

White House executive order for Cryptocurrency Regulation

Following January’s crash, it was reported that the White House had begun preparing a cryptocurrency executive order that we can reportedly expect to see imminently. To shape this, President Biden has requested for various federal agencies to assess the risks and opportunities posed by digital currencies, and delve into the details of a central bank digital currency.

The intention is to look at the impact of digital assets on financial stability, and to review standardizing crypto regulations with other countries. What those regulations will entail is not yet certain, but based on the UK admitting the FCA into the fray, there is a good chance that US crypto standards will fall more in line with their FCA equivalents, the SEC and FINRA, and their rules governing financial services institutions.

Jaret Seiberg, a financial services analyst at Cowen Washington Research Group, claimed that the administration’s involvement is, “symbolically significant, as the White House is acknowledging that crypto is becoming economically important. The White House would not issue such an order if it wasn’t convinced that crypto will continue to grow and spread throughout the economy,”

This assertion is supported by the work being done to address the environmental issues afflicting cryptocurrency. New methods for validating crypto transactions are being developed and implemented to reduce its tremendous energy requirements. These include proof of stake, proof of history, proof of elapsed time, proof of burn, and proof of capacity. None of  these alternatives rely on extensive computing power, reducing the ethical liability over the energy-sapping process known as proof of work, and suggesting that crypto is anticipated to be here in the long term.

Tightening the leash with Cryptocurrency Regulation

In its short lifetime, cryptocurrency has managed to operate outside the authority of the strictest watchdogs for a variety of reasons. These include its fragmented, decentralized nature, its uncertain status as a legitimate currency, and resistance from within the relatively rebellious and tech-savvy crypto community.

The spotlight is now shining more brightly as crypto has infiltrated the zeitgeist, rendering it impossible for those invested in a traditional economic system (i.e. governments) to ignore it without sacrificing a fragment of control.

While cryptocurrency has many detractors, it is a polarizing market, and its number of supporters is growing. January’s crash has again demonstrated its unpredictability, and matters appear to have escalated to a point of imminent regulatory overhaul. The White House Cryptocurrency Executive Order is bound to be quite a read.

The post How Regulators are Tackling the ‘Wild West’ of Cryptocurrency appeared first on PaymentsJournal.

ALPHARETTA, Ga.—February 16, 2022 — Bakkt Holdings, Inc. (NYSE: BKKT), a trusted digital asset platform that enables consumers to buy, sell, send and spend a range of digital assets, today released findings from its “Bakkt Loyalty and Rewards 2022 Outlook Study” of 1,000 U.S. consumers who are members of three or more loyalty programs. It uncovered the evolving nature of crypto preferences within the loyalty and rewards landscape and identified aspects that attract and influence behaviors and demands. 

Earning cash back has long been the leading choice for the average U.S. consumer. However, the results of the study signal a new challenger. The growing ubiquity of cryptocurrency is shifting consumer behavior as 72% of those who purchased crypto at least one time in the past six months, are likely to redeem loyalty points for cryptocurrency. In addition, about half of crypto buyers are interested in earning cryptocurrency instead of points. The ability to earn crypto as a reward for everyday spending is quickly rising to the preference level of earning cash back instead of points. It’s apparent based on the study results that consumer perceptions of crypto rewards are favorably influenced by their relationship to cryptocurrency, with those who said they have bought crypto seeing great appeal in crypto rewards. In addition, income level was found to be a driver of crypto interest, even for those who have not yet purchased it, with 58% of consumers with income over $100,000 saying they are likely to redeem points for cryptocurrency. 

“We’re witnessing in real-time the prominence of cryptocurrency in transforming customer experiences, including a rise in the demand for more flexible options such as redeeming points for cryptocurrency or instead earning cryptocurrency as an option,” said Bakkt Chief Product Officer of Loyalty & Rewards, Nancy Gordon. “The ecosystem is growing expeditiously, and brands can be on the cutting-edge of loyalty innovation by introducing crypto rewards that offer the richer experiences consumers are craving.” 

Key National Findings 

• Points on Points on Points: Crypto-buyers and those with incomes over $100k are more likely to use loyalty programs across major categories, over-indexing the average U.S. consumer in hotel, gas, travel, and finance. Crypto buyers and those with income of more than $100k are more likely to report greater loyalty enrollment in 10 programs or more. 
• The Crypto-Appeal: For the 43% of U.S. consumers who trade crypto, the primary reason that they trade cryptocurrency is the potential for long-term returns, and 35% see it as a quick means of making money in the short to medium-term. Still, an emerging and sizable populace of crypto buyers (51%) also sees the value of earning cryptocurrency in addition to loyalty points. 
• The Crypto-Pro: More than 64% of the crypto-buyer respondent group are more familiar with loyalty point conversion and management than the average U.S. consumer, with men in this group polled having more than 60% familiarity and women polled having 46% familiarity. Crypto buyer respondents cite multiple options for redemption, unlocking special loyalty statuses by achieving milestones across multiple programs, and earning cryptocurrency instead of points as their top loyalty program needs. 
• The Crypto-Education Gap: Of the consumers who said they are not likely to redeem points for crypto, 44% responded that the biggest barrier to redeeming cryptocurrency is understanding what can be bought with crypto. Financial literacy and consumer understanding is the gap that separates consumers from trading cryptocurrency and taking advantage of the new ways to monetize and spend digital assets. 

About the Study 
Commissioned by Bakkt and conducted via an online survey tool, the study polled 1,000 consumers across the U.S. and was fielded in December 2021, providing insight into how individuals interact, redeem and accrue loyalty points, as well as examining what outlook consumers want for the future of the industry. Participants were screened for membership of at least 3 or more loyalty programs. 

To learn more about this research, please click here. 

To download the Bakkt App, visit the App Store^® and Google Play Store™. 

About Bakkt: 
Bakkt is a trusted digital asset platform that enables consumers to buy, sell, store and spend digital assets. Bakkt’s platform, now available through the Bakkt App and to partners, amplifies consumer spending and bolsters loyalty programs, adding value for all key stakeholders within the Bakkt payments and digital assets ecosystem. Launched in 2018, Bakkt is headquartered in Alpharetta, GA. For more information, visit: https://www.bakkt.com/ | Twitter @Bakkt | LinkedIn https://www.linkedin.com/company/bakkt/ 

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At times it appears Fintech gets away with not following regulations, but the SEC just stopped BlockFi from offering its lending program in the U.S. until it addresses regulatory requirements. For dodging these requirements it has been issued a fine of $100 million:

“A cryptocurrency company that allowed nearly 600,000 users to earn interest by lending their holdings to other traders will pay $100 million to settle claims that its product violated investor-protection laws.

BlockFi Lending LLC, which held as much as $14.7 billion in assets at its peak last year, will pay the highest fine ever agreed to by a cryptocurrency company, Securities and Exchange Commission officials said. The settlement is the first enforcement action targeting a crypto lending platform, according to the SEC. The company neither admitted nor denied wrongdoing.

BlockFi and its competitors amassed customers in recent years as crypto traders discovered they could reap yields much higher than interest rates paid by most banks or bond issuers. The company didn’t seek approval to act as a bank or money manager, and its interest-bearing accounts weren’t registered with federal bank or securities regulators.

BlockFi will stop offering the accounts in the U.S. and will seek to register a new product, BlockFi Yield, under SEC rules.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post SEC Shuts Down Crypto Lending Platform BlockFi and Fines It $100M appeared first on PaymentsJournal.

ALPHARETTA, Ga. – February 14, 2022 — Bakkt Holdings, Inc. (NYSE: BKKT), a trusted digital asset platform that enables consumers to buy, sell, send and spend a range of digital assets, today announced that Valliance Bank, a leading provider of tailored financial solutions, will offer bank customers access to bitcoin and Ethereum through the bank’s mobile app. Valliance Bank will make cryptocurrency access simple and approachable within the digital banking environment through the secure, trusted and regulated Bakkt^® crypto connect solution.

Bakkt’s flexible platform lowers the barriers to entry allowing banks and other partners to entrust Bakkt with custody and transaction responsibilities. Several participating banks have joined the Bakkt crypto connect solution, which is anticipated to launch in Q2 2022.

“We’re excited to partner with Valliance Bank and to bring crypto experiences fit for the needs of their clients,” said Sheela Zemlin, Chief Revenue Officer, Bakkt. “Cryptocurrency has reached the masses but many are still on the sidelines unsure how to get started and looking for a convenient entry point from a relationship they already trust.”

“Our core banking platform provider recommended Bakkt. By partnering with Bakkt, we’re opening the door to a new, dynamic opportunity to provide modern and compliant financial solutions to our clients who have a growing interest in cryptocurrency,” said Alicia Wade, President and COO of Valliance Bank. “More and more of our clients each week are signaling they’re ready to get started with crypto. We’re excited to partner with Bakkt as we innovate and broaden our offering beyond the traditional deposit accounts. Bakkt crypto connect is an easy-to-get-started solution which plugs right into our existing mobile banking app, allowing our clients to buy, sell and hold crypto in one seamless experience.”

Valliance Bank has assets totaling over $580 million with five locations between Oklahoma and Texas in addition to its virtual bank V.BANK. Valliance Bank participation is conditioned on the successful integration with the bank’s core processor.

About Bakkt:
Bakkt is a trusted digital asset platform that enables consumers to buy, sell, store, and spend digital assets. Bakkt’s platform, now available through the Bakkt App and to partners, amplifies consumer spending and bolsters loyalty programs, adding value for all key stakeholders within the Bakkt payments and digital assets ecosystem. Launched in 2018, Bakkt is headquartered in Alpharetta, GA. For more information, visit: https://www.bakkt.com/ | Twitter @Bakkt | LinkedIn https://www.linkedin.com/company/bakkt/

The post Valliance Bank Chooses Bakkt to Offer Clients Access to Cryptocurrency appeared first on PaymentsJournal.

Tim O’Reilly coined the term Web 2.0 even before HTML was widespread. I suspect our opinions align on these topics because we both went through the PC boom and bust then the Internet boom and bust. As a result, we have witnessed the grand visions of decentralization get dashed and recentralization take over, driving winners, losers, and revenue – which drives meaningful valuations. I’d urge everyone to read the entire interview, not just this small excerpt:

“Is all the money pouring into blockchain and Web3 a bubble?

Tim O’Reilly: I think there’s a lot that’s interesting about the blockchain, in theory. But when you really scratch, an awful lot of technical people have said, “Hey, there’s not a lot there.”

Now, that was also a response that many people had to the world wide web. To existing software developers of the day, it seemed trivial. So even though the technology is slow and very expensive, and it’s hard to use distributed databases, there’s a lot of investment pouring into the space, and people are trying to figure out actual things that might actually be useful. And I think that it is certainly possible.

Web3 is attributed to the idea that there’s going to be a new decentralized web based on cryptography and the blockchain. I defined this term “Web 2.0” 17 years ago, and my whole point was that Web 2.0 was the second coming of the web after the dot-com bus — that’s how I defined it.

When people ask me about Web3, I say the same thing: We won’t know what Web3 is until after the current bubble pops — because we’re in the middle of a bubble, just like the dot-com bubble, where there’s all kinds of crazy startups getting outrageous valuations, with less to show for it.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Internet Guru Tim O’Reilly Speaks Volumes on Blockchain, Crypto, NFTS and Web3 appeared first on PaymentsJournal.

A Forbes article suggests that China’s efforts to criminalize all forms of cryptocurrencies has not had a significant impact on cryptocurrency values, likely because Twitter enabled cryptocurrencies to be sent and received using the Lightning Network late last year.  Twitter has been integrated to the Strike Bitcoin Lightning wallet service to enable these “Bitcoin tips.”  

The Lightning Network is important in this enablement as it acts as an adjunct to Bitcoin to speed up transactions through aggregation before they are put onto the Bitcoin blockchain. This makes every transaction much faster and lowers the cost to make a transaction:

“In June, the authoritarian government banned local banks from enabling cryptocurrency transactions and outlawed the energy-intensive practice of bitcoin mining, in which specialist computers are put to work solving complex problems in a race to earn newly minted bitcoins.

That clampdown triggered a 20% crash in bitcoin’s price, yet the latest, more draconian measure has moved the needle by less than 5%.

Bitcoin was almost completely unchanged on Saturday, having found strong support at its 200-day exponential moving average.

And while mainstream media outlets like the BBC, Sky News, The Times and The Guardian rushed to report on the negative developments in China, news coverage of the positive adoption by Twitter TWTR +7.1% was almost entirely restricted to financial outlets like Bloomberg and CNBC.

Twitter began integrating the Strike bitcoin Lightning wallet with its platform last week, enabling users to send and receive bitcoin as easily as tweeting out a thought.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Kicking China to the Floor: Bitcoin, Lightning, Twitter, Strike, Muddled Together. appeared first on PaymentsJournal.

Silvergate was partnering with Diem to implement the Diem USD stablecoin. However, that fell apart when the Fed intervened and warned Silvergate it might not “allow the activity.” This was apparently the last straw for Zuckerberg, who then decided to sell the Diem assets. Now, we find Signature Capital has acquired those assets, so apparently the Fed’s warning was specific to Diem and not stablecoins in general. What a lucky coincidence for Silvergate:

“Silvergate Capital CEO Alan Lane told CNBC on Monday the bank holding company hopes to launch a stablecoin by the end of this year, following its acquisitions of assets and intellectual property from Mark Zuckerberg’s beleaguered cryptocurrency project.

The California-based financial firm, which through its subsidiary Silvergate Bank operates the crypto-focused payments platform Silvergate Exchange Network, confirmed it was buying assets from the Diem Group on Monday. Silvergate had previously been a partner on the Facebook-backed project.

‘The Facebook engineers that developed this over the last couple years are truly world-class engineers,’ Lane told “Mad Money” host Jim Cramer in an interview.’We were working last year with Diem and we got to know the team very well, and we couldn’t be more excited to, essentially, be taking the reigns and bringing a stablecoin to market hopefully later this year.’”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Surprise! Diem Partner Silvergate Capital Quickly Buys Diem Assets appeared first on PaymentsJournal.

The details regarding what services will be offered is a bit vague and in theory could be as simple as linking to the crypto account of the individual to report the balance. That said, it is more likely they are shooting higher and intend to support the ability to buy, hold, and sell crypto. This is huge business for those few regulated exchanges that know how to manage crypto accounts as is done in core systems. Of course, every core system provider is building out support for crypto, so that’s an easier road to follow. The article discusses NFTs as if they are just another cryptocurrency, but regulated entities need to be extremely cautious regarding NFTs (see here and here):

“According to the survey readout, blockchain and cryptocurrencies were major points of focus within investing circles and received a significant amount of media attention in 2021. Rightly so when you consider the hundreds of millions of dollars that flooded into the non-fungible tokens (NFTs) and decentralized finance (DeFi) sectors last year.

Given those massive inflows, banks cannot afford to ignore cryptocurrencies nor their client requests to offer crypto services. Here are the key findings from the survey:

• 44% of banking execs expect to offer some form of crypto support to clients by the end of this year.

• That is more than twice the number who offered those services in 2021.

• 60% of surveyed wealth management advisors expect that their clients will increase crypto holdings or start investing in those digital assets in 2022.

• A third of wealth managers expect to actively manage their client’s crypto portfolio, up from 13% who currently provide that service.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post 44% of 200 Surveyed Bank Execs Plan to Offer Crypto Services in 2022 appeared first on PaymentsJournal.

This article indicates Mark Zuckerberg is investigating the sale of Diem assets. Given the failure of Diem to develop its solution with any transparency, and with a healthy disregard for engaging regulators, this isn’t surprising.

It is unknown if the technology was developed in a sufficiently generalized way so that it can be profitably repurposed. Diem was constructing the technology to be operated under a complex organizational structure of multiple partners which may have added complexity to the architecture, software, and security:

“Diem said in May that an affiliate of the firm, Silvergate Bank, was to be the issuer of the Diem USD stablecoin, a type of cryptocurrency pegged to the U.S. dollar that’s typically used to buy and sell other crypto. After a lengthy back-and-forth between the Diem advocates and regulators, Fed officials finally told Silvergate last summer that the agency was uneasy with the plan and couldn’t assure the bank that it would allow that activity, the people said.

Without a green light from the bank’s regulator, Silvergate was left unable to issue the new asset with confidence the Fed wouldn’t crack down, and so the Diem effort had no coin.

A Fed spokesman declined to comment on the agency’s talks with the Diem advocates. The Diem Association declined to comment. Meta didn’t immediately respond to a request for comment.

It’s unclear how a potential buyer would value Diem’s intellectual property, or the engineers that helped develop it. Discussions are early, the people cautioned, and there’s no guarantee Diem will find a buyer.

Meta owns about a third of the venture and the rest of it is owned members of the association, according to one of the people. Association members, which include venture capital firms and technology companies, agreed to invest and pay to join when the group was formed, the person added. It’s unclear which firms, besides Meta, ended up investing in the initiative.

Diem’s website shows that its partners include venture capital firms such as Andreessen Horowitz, Union Square Ventures, Ribbit Capital, and Thrive Capital as well as Singapore state-owned investor Temasek Holdings Pte. Its website also lists crypto-focused companies like Coinbase Global Inc., and others such as ride-hailing company Uber Technologies Inc. and commerce platform Shopify Inc.

In November, the federal watchdogs finally made it clearer what they were after. Stablecoin issuers should be regulated banks if the tokens are to be used as a means of buying and selling things, the President’s Working Group on Financial Markets said in a report. The group of regulators said they feared what might happen if a vast network of a tech company’s users suddenly began transacting in a new currency, and that combining a stablecoin issuer with a big corporation ‘could lead to an excessive concentration of economic power.’”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Zuckerberg Investigating Sale of Diem Assets appeared first on PaymentsJournal.

Visa indicates that cryptocurrencies may be going mainstream outside of North America, according to small business owners surveyed by Visa in nine countries. The survey indicates business owners in United Arab Emirates, Hong Kong, Singapore and Brazil are most interested in pursuing cryptocurrencies as a payment type:

“Small businesses outside North America are more open to accepting digital currencies, including Bitcoin, as forms of payment.

Visa found that more than 30% of small business merchants in the United Arab Emirates, Hong Kong, Singapore and Brazil plan to offer customers the option to pay using crypto in the coming months. Digital currencies have taken off in each of those jurisdictions, despite varying regulations.

In contrast, 19% of small businesses in the United States and just 8% in Canada expect to offer crypto as a payment option in 2022.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Visa Survey Says Small Businesses Are Adding Crypto as a Payment Type appeared first on PaymentsJournal.

The cryptocurrency market has grown tremendously over the past eighteen months, and mainstream use cases associated with digital currencies continue to emerge. With the surging interest in crypto comes pertinent questions about what specifically is driving the growth, who is using the technology and for what purposes, how regulatory efforts will affect the market, and more.

To learn more about the future of payments and how traditional and digital payment ecosystems will co-exist in the future, PaymentsJournal sat down with Nabil Manji, Senior Vice President, Head of Crypto and Emerging Business at Worldpay from FIS, and Tim Sloane, VP of Payments of Innovation at Mercator Advisory Group.

Crypto users and reasons for expansion

According to Mercator research, just under 20% of American adults hold cryptocurrency. There is a stark division by age bracket: 34% of respondents ages 18-44 own crypto, compared to only 10% of those ages 44-65 and 1% of those ages 65+. And the market is only growing. The current market capitalization of cryptocurrency is nearly $3T, up from a few hundred billion dollars just 12-18 months ago. Understanding who finds crypto appealing will be crucial for financial institutions, companies, and merchants looking to enter the crypto space.

Much has changed in the crypto space over the past few years. According to Manji, there are three broad drivers of crypto growth:

1. Continued technological innovation – Whereas crypto was primarily a speculative investment even just a few years ago, use cases of blockchain-based technology are broadening to include examples such as P2P transactions and non-fungible tokens (NFTs).
2. Increased legitimacy through regulation – People are becoming more comfortable using crypto for payment or exchanges due to regulations that didn’t exist a few years ago, particularly in Europe, with some additional cases in the U.S. and Asia-Pacific region.
3. Governments exploring CBDCs – Central Bank Digital Currencies and other alternative payments and rails have recently been a significant investment target for governments from the UK, France, Nigeria, Singapore, China, and the UAE, affecting the business and consumer market.

Merchants and cryptocurrencies

As of November 2021, there are 79 million blockchain wallets in use globally. Merchants are accordingly beginning to accept more crypto at point-of-sale. Just as with the larger ecosystem, Manji noted three factors contributing to merchant interest:

1. Enormous market capitalization – Merchants want to tap into the value of crypto and to sell their goods and services, particularly high-ticket items like air travel and luxury goods, which consumers might be willing to explore new payment methods to access.
2. Payment agnosticism – Merchants already support all kinds of payment methods, and as a general rule, do not want payment method to be the reason a customer can’t complete a purchase.
3. Expensive credit card fees – Moving business strategy away from the hands of card suppliers will be cheaper for merchants and potentially free them from the hassles of disputes and chargebacks, plus prepare businesses for wider supply chain finance options.

Conversely, merchants may feel some trepidation about integrating cryptocurrency into their business. There are still many unanswered questions. “If I have crypto on my balance sheet, how do I account for that?” Manji asked by way of example. “What are the tax implications of holding and transacting cryptocurrency? Are there any regulatory considerations that I need to be aware of?”

Adding another layer, the adoption of CBDCs are a “when, not if” question, and when governments introduce central digital bank currency, it will be legal tender by definition and its acceptance will be mandated. Merchants risk falling behind if they are unprepared to make these changes in advance. As the details are clarified at both a governmental and industry level, Manji emphasized that both merchants and payments companies like FIS must lean in and bolster their understanding of the challenges and opportunities involved with crypto.

Crypto growing pains

The world is going through growing pains when it comes to embracing crypto. In many ways, the landscape is quite fragmented at the moment. Besides the fact that even blockchains with the same basic function can look different, blockchain-based crypto can also be directed either towards the account/payment infrastructure or towards investment-side NFTs, which are very different animals from one another. “Regulators are broken up into these very narrow silos,” said Sloane. “I think they’re really having trouble getting their heads around this broad spectrum of capabilities.”

At least in the U.S., there seems to be an aimlessness when it comes to classifying crypto; “It’s neither fish nor fowl,” Sloane quipped. To understand the problem, you might invoke the old cliché of not “thinking outside the box” or “trying to teach an old dog new tricks.” Manji explained: “The feeling is that we’re trying to take a set of regulatory institutions and laws that were designed in a different time and with a different set of aims and goals applied to different technologies.” Trying to apply those protocols to new use cases of this sort doesn’t make sense. “It’ll be interesting to see how different governments seek to harmonize existing frameworks and laws,” Manji continued, “or whether they will start from a clean sheet of paper and do something completely new. I think that’ll drive a lot of what the innovation, use cases, and products and services will look like.”

Regulation for crypto and blockchain

At the moment, blockchain as a technology is largely unregulated, much like the internet. “It’s more about what applications are being built,” Manji clarified. “Which of those should we regulate, and why or why not?” The key is to manage decentralized blockchain-based applications without stifling innovation. Some of the core blockchain-based cryptocurrency services that used to be unregulated, such as crypto exchanges, wallets, and qualified custodians, are all now regulated in most jurisdictions. The expectations around regulation and security for these services – including consumer requirements, anti-money laundering, sanctions screening, and suspicious activity reporting – may soon look the same as they do for similar pre-existing financial offerings.

Regulatory requirements may help ease skepticism and represent a significant next step in the development of a legitimate crypto ecosystem. According to Manji, the narrative around crypto was quite different even just two years ago, with many viewing crypto merely as a convenient vehicle for criminal activity. However, jurisdictional entities like the Financial Action Task Force (FATF) and Interpol have leaned into the technology and realized that with the correct regulation, it can greatly benefit institutions and governments in actually preventing those same kinds of crimes. “Chainalysis, Elliptic, CipherTrace, and others have helped governments bust longstanding crime and trafficking rings, and that wouldn’t have been possible in the traditional kind of fiat and financial services ecosystem,” explained Manji.

The future of cryptocurrency

Given the rapid clip at which crypto and blockchain have exploded over the last five years, who knows what the next five years will bring? Three prominent trends are expected from an FIS perspective:

1. Continued blockchain expansion – NFTs, decentralized finance, CBDCs, stablecoins, and more applications will likely continue to grow, and within 3-5 years will see widespread consumer and business adoption.
2. Interoperability – Significant value in blockchain will drive innovation on both the application and protocol layer front, allowing different parties to move between different chains and assets, particularly for G20 economies to enable cross-border CBDC transactions.
3. Continued digitization of life – Concepts like the metaverse and digital identity, accelerated by COVID, are inspiring the world to transcend using existing technologies and financial services, and instead asking whether blockchain can create new industries in and of themselves.

Although the world of payments – and the world in general – seems to always be advancing, one critical and under-asked question is about progress for progress’ sake: Some might maintain that traditional currency works perfectly fine, and while blockchain technology is cool, it is a solution in search of a problem. Both Manji and Sloane disagree with that contention.

Sloane pointed out a couple of practical use cases. “Crypto is a great opportunity to apply digital identity,” he said. “My hope is that we see a major shift in how we execute all of those standard regulations around KYC to embrace the new role of identity on the internet.” Sloane continued to discuss the benefits to efficient account validation: “Payments today have been bolted onto accounts. You can’t make a payment without knowing the balance of the account… blockchain and crypto eliminates that because the account and the crypto are one and the same.”

Additionally, U.S. payment rails are not as efficient as they might be, according to Manji. Conversion rates and consumer satisfaction with their banking providers are both lower than expected. Legacy infrastructure, antiquated or clunky regulations, and slow manual processes can all interrupt efficient, timely, cost-effective payments. There is clearly room for improvement. “Is blockchain going to solve all those problems?” concluded Manji. “Absolutely not. But is there an opportunity for blockchain to come in and be a new set of infrastructure or technology layer to improve some of those things and benefit everybody in the ecosystem? Absolutely.”

The post Crypto: Past, Present, and Future appeared first on PaymentsJournal.

It’s no secret that cryptocurrency and its underlying blockchain technology continue to make headlines. With companies such as Tesla announcing its acceptance of bitcoin (it has since backtracked on this due to environmental concerns), Coca-Cola launching over 2,000 crypto accepting vending machines, and sports stars like Aaron Rodgers requesting to be paid in cryptocurrency–the phenomenon seems to be here to stay.

However, these payment developments are predominantly in the business-to-consumer (B2C) space. The crypto boom for B2C companies hasn’t genuinely translated to the business-to-business (B2B) environment yet. Although, it seems change could possibly be on the horizon. Businesses are starting to embrace blockchain technology in a multitude of ways. Consider these developments: In October 2021, Ubisoft announced its plans to incorporate play-to-earn principles into its business model through cryptocurrency. Soon after, in November 2021, Deloitte announced its strategic alliance with the Avalanche blockchain to improve state and local governments’ recovery from natural disasters.

Companies embracing blockchain technology isn’t exactly widespread cryptocurrency payment adoption, but are the tides changing? What is stopping B2Bs from accepting crypto? And when could B2Bs receiving cryptocurrency become commonplace? We’ll start by exploring further where things currently stand.

The current state of the B2B payment environment

As of late 2021, B2B companies are resistant to accepting cryptocurrency as a form of payment on the majority. According to a recent B2B payments research, only 32% of B2B company representatives show considerable interest in accepting cryptocurrency payments. That same study revealed 59% of B2B Companies are not open to cryptocurrency as a form of payment at all. Conversely, only 2% of those studied currently accept cryptocurrency. Within the survey data, there is an interesting group of companies that are open to accepting crypto at the right time (22%), not accepting crypto but intend to (7%), and those actively exploring the possibility of crypto payment acceptance (10%).

Additionally, the payments study revealed that cryptocurrency would need to offer convenience and currency value appreciation to really drive industry adoption. With those desired outcomes in mind, what are some headwinds preventing cryptocurrency from guaranteeing convenience and value appreciation?

Headwinds for B2B crypto acceptance 

A catalog of factors is causing B2B companies to shy away from cryptocurrency payment acceptance. Here are a few prominent factors preventing cryptocurrency from currently being accepted:

1. Volatility

Cryptocurrency markets can be staggeringly volatile. According to an Investopedia.com article, “In a single day in May 2021, the price of Bitcoin plunged by about 30% before recovering to be down about 12%.” Cryptocurrency’s volatility can be partially attributed to the preceding items on this list.

2. Utility 

B2B companies need to feel that they can use cryptocurrencies as money to spend or convert into cash without the aforementioned significant volatility risk. They’ll need to see their upstream vendors and service providers accepting crypto as a form of payment for this to happen. There’s a chicken and egg problem here that’s unlikely to resolve itself without robust adoption among consumers.  

3. Security 

The cryptocurrency has been rife with high-profile security breaches. B2B Companies are willing to wait on the sidelines until these security issues are resolved, and they can confidently rely on the reality of accepting cryptocurrency as payment.

4. Fear of regulation

The cryptocurrency industry is widely unregulated, and regulation is inevitable. China recently banned cryptocurrency mining, and India is expected to outlaw cryptocurrency almost completely. These regulatory winds are causing B2B companies in the U.S. to take a cautious, late-mover approach to cryptocurrency payment acceptance.

When might B2Bs accept cryptocurrency payment?

As I mentioned before, it’s not all bad news for cryptocurrency. In addition to companies embracing blockchain technology, web3, which empowers technology such as non-fungible tokens (NFTs) through cryptocurrency, is exploding in popularity. So when might B2B companies start to embrace cryptocurrency payment?

B2B companies will continue to be highly cautious and lag behind the B2C companies. B2Bs will be hesitant to introduce volatile assets onto their balance sheets which is a primary precursor to accepting cryptocurrency as payment. However, the actual kicker is that B2Bs will need to see cryptocurrencies used as currencies. Blockchain developments aside, cryptos are not being used as a traditional currency–specifically as a medium of exchange. Cryptocurrencies are essentially being used as a speculative store of value or token.

Eventual B2B cryptocurrency payment acceptance isn’t guaranteed 

As the B2C world continues to adopt cryptocurrency and blockchain technologies, the B2B companies might one day follow suit. However, this development seems far off. For this to happen, cryptocurrency values will need to stabilize, avoid the onslaught of potential regulation, improve security flaws, and showcase increased utility as an actual currency. While there’s no guarantee crypto will ever cross these gaps, it could potentially be a lasting, influential component of the financial industry and business at large if crypto can address these concerns. B2B companies will only be willing to adopt it as payment when crypto makes sense from a convenience, cost, and profitability standpoint, which could be some time into the future. Regardless, it’ll be a fascinating development to monitor over the next few years.

The post Moonshot: The Tipping Point for Cryptocurrency Acceptance in the B2B Space Seems Vastly Far Out appeared first on PaymentsJournal.

Cryptocurrencies’ key properties are pseudo-anonymity and decentralization. Nevertheless, these capabilities such as improved anonymity also support illegal activities often including fraud, human trafficking, and money laundering. Criminals are drawn to privacy, which fuels a variety of illicit activities, and financial distress and cultural security threat for you. Regulatory bodies have expanded their surveillance of the blockchain and digital assets area in order to safeguard both clients and their assets from illegal activities.

Arthur Hayes, a rich businessman and financier, is the former chairman of BitMEX, a Bitcoin trading platform founded by three billionaires. Hayes surrendered on April 6, 2021, to face US accusations for breaking the Bank Secrecy Act (BSA). The BSA is intended to compel US financial firms to help US government authorities in detecting and preventing financial crimes. The Financial Crimes Enforcement Network (FinCEN) of the United States Department of the Treasury discovered that BitMEX failed to enforce the necessary policies, processes, and corporate governance to prevent clients from utilizing a virtual private network (VPN) for navigating trading platforms and circumventing Internet Protocol monitoring. [Full disclosure: I worked at FinCEN, the Treasury Department, and the Department of Justice.]

Given the regulatory oversight and risk of complications that cryptocurrency companies face from both the authorities and felonious actors, organizations associated with digital currencies and blockchain technology would be wise to re-evaluate their compliance programs and best practices in order to protect their businesses as the crypto world awaits new regulation in response to cyber-enabled financial crime and governments responding with zero tolerance.

The genesis of a “culture of compliance”

Noncompliance can have dire implications, spanning financial fines and lawsuits to judicially enforced company cease-and-desist orders and even incarceration. Compliance standards and significant fines push companies to comply, but it also motivates staff to act correctly and professionally toward the company, exhibiting professionalism both for the client base and the confidential material under the employer’s custody. Compliance is integrated into the business culture, most notably beliefs and actions, to achieve this professional and compliance-first approach. It is vital that compliance habits are established from the executive level, by upper leadership and C-Suite officers.

As the company expands, the payoff in a compliance culture becomes more apparent. It could come as a shock how unprepared a company is to comply with rules as it expands. The BSA isn’t the only crypto-related regulatory scheme in the US, and FinCEN isn’t the only federal authority with an involvement in crypto assets. To become and remain compliant, Virtual Asset Service Providers (VASPs) must adhere to the dynamic and evolving requirements of multiple regulatory authorities.

VASPs must conform to the changing and developing standards of different regulatory agencies in order to have and maintain compliance. The strength of a company’s compliance depends on its familiarity with the agencies that regulate the territory in which it performs. The cultural foundations of compliance, which are imprinted on workers, may inspire them to meet the criteria, but the organization may not be fully prepared. The following agencies have adopted regulations that are crucial to the culture of compliance in its essence for VASPs:

• The Office of Foreign Assets Control (OFAC): An organization within the United States Department of the Treasury in charge of overseeing and implementing financial sanctions on specified foreign nations, segments, businesses and residents in order to accomplish US foreign policy and national security goals.
• The Financial Crimes Enforcement Network (FinCEN): FinCEN’s objective is to safeguard the financial sector from unauthorized use, to combat money laundering, and to improve national security via the collection, processing, and distribution of financial intelligence, as well as the tactical use of financial powers.
• Securities and Exchange Commission (SEC): The SEC’s purpose is to safeguard investors, ensure fair, regulated, and productive markets, and promote capital creation. The SEC works to foster an economic climate worthy of the people’s trust.
• Commodity Futures Trading Commission (CFTC): The purpose of CTFC is to safeguard the public from deception, manipulation, and abusive activities in the marketing of commodities and financial futures and options, as well as to build public, innovative, and financially prudent futures and alternative markets.

Global Economic Sanctions, Anti-Money Laundering, Customer Identification and Know Your Customer programs, securities legislation, and commodities regulation are all governed by the previously stated regulators in order to fulfill their objectives. They keep cryptocurrency companies as well as other financial institutions liable for any security breaches resulting from their customers’ transactions.

The repercussions of noncompliance or neglecting to establish a compliance culture are severe. This can be the impending failure for a VASP in rare situations. To maintain adequate compliance duties, the appointment of a Chief Compliance Officer, regular compliance education, staff awareness initiatives, testing and inspection of compliance controls, and also a specific contact point inside the legal department should be in place.

The post Cultivating a Culture of Compliance to Support Business Growth appeared first on PaymentsJournal.

There are various financial benefits of trading Bitcoin, but what about those not directly related to improving your economic landscape? There is plenty of literature out there about how successfully trading Bitcoin can catapult you into financial freedom. However, it’s about time we open up the conversation about how trading Bitcoin can help you develop new skills and improve your life in ways unrelated to finance.

Connecting the financial benefits with those unrelated to money will hopefully give you a more complete view of how influential Bitcoin trading can be in your life.

Here are five non-financial benefits of trading bitcoin that potential investors can enjoy.

Increase your knowledge of cybersecurity

First, as we become more and more immersed in technology, cybersecurity becomes much more important not just for businesses but also for individuals. We must take the harmful effects of a cybersecurity breach seriously and learn to protect ourselves from the threats cyberthieves present.

Trading Bitcoin can increase your knowledge of cybersecurity because the more you learn about trading, the more you’ll learn about things like blockchain, VPNs, the importance of encryption, how to back up your data, all about malware, and other related cybersecurity technology.

With this sort of knowledge, you’ll keep your trading data as secure as possible, and all other information passed through your mobile and tech devices.

Grow highly sought-after workforce skills

When you get into the Bitcoin trading world, you’ll learn much about investing, which is terrific if you’re pursuing a job related to finance. But, at the same time, you’ll also have the luxury of growing highly sought-after workforce skills.

For example, this resource reveals top business skills graduates should have to set themselves apart from the competition in the workforce. On this list are adaptability, analytical reasoning, and decision-making, all of which can be fleshed out while investing in Bitcoin. Here’s how:  

• You learn to adapt to the constant change in Bitcoin investing.
• You’ll be required to interpret all you learn about trading Bitcoin and leverage those insights to make better investment decisions.
• You’ll learn to make quick decisions that benefit your overall trading strategy.

In addition to these highly sought-after workforce skills, you can also develop your ability to assess risks.

Learn how to assess risks

There are various risk levels in investing in general. However, when we focus on trading Bitcoin, things get a bit riskier. Do you know what else presents many risks? Life. You won’t just face risks with Bitcoin, but throughout your life in various ways. So, learning to assess risks appropriately is crucial.

Learning how to invest in Bitcoin can help you learn how to assess risks through a low-threshold investment opportunity. First, you can start small while understanding how your Bitcoin investments fluctuate and how that fluctuation affects your finances and life. Then, as you get more comfortable with trading, you can take more significant risks and explore what makes those risks good ones to take. 

Continually develop financial literacy

This is related to finances, but it’s more about growing skills that lead to a healthy relationship with finances versus something that directly deposits money into your bank account. Trading Bitcoin is an opportunity to develop financial literacy continually.

It’s incredible how many people don’t have the practical skills needed to manage money responsibly. Luckily, investing in Bitcoin can boost your financial literacy and help you nurture specific principles.

For instance, you’ll grow your budgeting skills by setting aside money each month to trade Bitcoin. You’ll help your ability to save by learning how not to touch the money in your investment accounts. You’ll also learn more about banking when you open a separate account for investing.

Improve networking and relationship-building skills

Learning how to trade Bitcoin not only requires a commitment, but it also requires your willingness to learn from and work with others. You won’t know everything there is to know, nor will you learn everything on your own.

Instead, you’ll learn many successful techniques, trends, and other trading information from those already successful. For instance, you’ll connect with other Bitcoin traders on social media and grow your professional network in dedicated trading groups. Or you’ll attend events and conferences where you can network with other traders and experts.

Trading Bitcoin allows you to improve your networking and relationship-building skills. Learning to connect with new people and nurture personal and professional relationships is crucial for trading successfully and excelling in life generally.

Conclusion

Trading Bitcoin is an obvious plus for your finances if you can learn to do it well. At the same time, trading Bitcoin can benefit your life in ways that have nothing to do with fattening your pocketbook.

For instance, it can help you develop new skills like adaptability, analytical reasoning, and decision-making. It can also improve your networking capabilities and relationship-building skills.

To top it off, trading Bitcoin can grow your cybersecurity knowledge, help you learn to assess risks appropriately, and continually develop your financial literacy.

So, take your time working through all that comes with trading Bitcoin and enjoy the holistic benefits it provides.

Image Source: Pixabay

The post How Trading Bitcoin Can Develop New Skills appeared first on PaymentsJournal.

The two have more in common than most think. Both are global, and social networks and virtual worlds are likely to be the method by which most users access and use crypto. International trade law and the international financial infrastructure grew up slowly over time, which was fine since the slow growth rates provided time to ponder.

The worldwide growth rate of crypto makes time to ponder difficult. The growth and complexity of crypto, as compared to existing regulated markets, is mind-boggling. Can we trust new more efficient blockchains? Are these markets and technologies similar? Bitcoin, Ethereum, stablecoins, smart contracts, exchanges, NFTs, Central Bank Digital Currencies, they all have a different role to play and so regulations would need to be specific to those roles – yet the roles continue to evolve even as more and more value is poured into them. So, the rapid growth rates put more people at risk of loss, while the technologies and the role each plays remain fluid, but Congress has started to ponder all of this and the crypto industry is ready to make it all seem simple.

Consider the industry claim that crypto will better serve the underbanked. We don’t yet know what the final transactional costs will be for bitcoin until the halving is completed, and yet transactional costs have already hit several high points and Exchanges need to make a profit. Consider this revelation from Coinbase Chief Financial Officer Alesia Haas at the Congressional hearing:

“Lawmakers including Rep. Ritchie Torres (D., N.Y.) asked about the potential for crypto to help immigrants send remittances between countries, a process that can be slow and costly through banks or money-transfer companies. Supporters often tout that as a use.

But such transactions remain uncommon. Using cryptocurrency involves a learning curve, mistakes can be irreversible, and there aren’t enough outlets offering crypto remittances to give it a competitive presence.

One of the few confrontational exchanges Wednesday took place between Rep. Brad Sherman (D., Calif.) and Ms. Haas over the amount of Coinbase’s transaction fees. Mr. Sherman asked if buying and selling $100 of bitcoin over two days could result in nearly $6 in fees. After initially saying she couldn’t answer the question, Ms. Haas eventually said depending on the product, he could be correct.

Mr. Sherman expressed deep skepticism of cryptocurrency’s potential uses and urged regulators to protect investors if Congress fails to pass meaningful legislation.

Most lawmakers displayed less-formed opinions of the crypto industry than they typically do of other sectors such as social media or banking. While testifying in Congress can often be uncomfortable for corporate bosses, some of the executives who participated in Wednesday’s hearing expected it to advance their cause.

“I think it went really, really well,” Circle Chief Executive Jeremy Allaire said after the hearing. “It was very comprehensive, not contentious.””

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post DC Hasn’t Decided How to Regulate Social Networks, Now Targets Crypto appeared first on PaymentsJournal.

Many companies have realized that they can’t rely on an international banking system flogged with supply chain issues and wire transfer delays. This has pushed the world to consider a circular economy and the digitization of currencies for real-time settlements when buying and selling products.

This adoption is largely driven by developing countries looking to confront supply chain issues and adopt crypto or fiat settlements via the Lightning Network to have quicker, faster, and better payments. For example, Guatemalan developers from the IBEX Mercado founding team are building projects on the Network to allow business owners to buy and sell cryptocurrency as retail infrastructure and purchase Bitcoin for savings.

Let’s look at what the Lightning Network does and the advantages it poses.

What is the Lightning Network?

When Bitcoin first came about, you simply sent a request to the blockchain network to send a transaction. Your payment got included in a block, you paid a small fee to miners, and your transaction was added within 10 minutes and confirmed within an hour. That changed as Bitcoin gained popularity; with more transaction requests on-chain ledger, the network couldn’t meet the demand.

The developers behind the Lightning Network claim it will solve Bitcoin’s scalability problems. As a second-layer payment protocol, it is designed to be layered on top of blockchain-based cryptocurrency technology and intended to enable fast, off-chain transactions among participating nodes, boosting the opportunity for liquidity and real-time settlements.

The Lightning Network creates open channels between users for small, cheap payments and trades IOUs back and forth before settling accounts on the blockchain, leveraging zero-proof trust and arbitration.

Lower costs of transactions

The Lightning Network means financial freedom, independence, and huge cost savings, especially for small businesses. Sometimes, 2-3% of small businesses’ gross revenue is lost to credit card fees due to vendor, supplier, and utility payments. If these companies began using the Lightning Network, they would dramatically reduce the costs of these transactions.

However, while there’s more autonomy regarding your payments strategy, this comes with more responsibility. You are basically your own bank, securing funds independently and doing the underwriting for your transactions. This is why large enterprises are still concerned about the Network from a regulatory perspective. 

Real-time settlements

If you want to settle Bitcoin directly, it is easy; you can send it over the Lightning Network using the channels to reach a wallet or merchant. But if you wanted to settle in fiat, not Bitcoin, there’s a solution to convert the fiat into Bitcoin in real-time and send it to a merchant.

In the past, investors had to go through a transfer wire, and the money could potentially take days to land in an account. Traditional financial institutions still can’t do real-time settlements due to siloed approaches. But with the Lightning Network, you can settle a fiat transaction in real-time, meaning instant liquidity. You can convert Bitcoin to fiat at any hour of the day on a fully functional cross-border platform, which has never existed before. The funds are fungible, and the movement is logged on the ledger, so there is proof the money has been sent; no follow-ups, delays, or closures on bank holidays.

Less energy usage

Let’s admit that the narrative around Bitcoin’s energy consumption hurt the movement – but the Lightning Network fixes this. It scales non-proportionally to energy usage and is designed to work on a peer-to-peer network, leveraging other people’s existing connections.

Essentially, as the second layer, it supports off-chain transactions and does not use the computational power necessary to confirm blocks on-chain or upload transactions to the blockchain (the first layer).

In 2021, Galaxy digital estimated the total annual energy consumption of the existing banking system to be  263.72 TWh usage. Bitcoin’s energy usage may seem large at face value, even on a purely transactional level, but the carbon emissions are even lower than some everyday activities that few describe as excessive energy use – and The Lightning Network is behind this.

What the future holds

The Lightning Network is still susceptible to fraud or malicious attacks as there aren’t as many safety measures in place as there are with card networks. If someone stole your account and used your funds over the Network to pay for goods and services, you wouldn’t be able to get it back. You have to protect your credentials, educate yourself, and take responsibility for your own safety. That can often be seen as a hurdle for small businesses and startups who have their fingers in many pies.

At Bleu, a payments technology solutions company, we are passionate about providing some of the security layers for these transactions through device identification and biometric authentication. Device authentication when making payments could prevent hackers from taking someone’s funds or wallet and spending at a participating merchant’s location.

Combining the Lightning Network with Bluetooth technology can also confirm and facilitate transactions offline, without the need to connect to the internet via TCP/IP. If you are ever in a country where it is difficult to access certain platforms or technologies on specific servers, such as the Lightning Network, you need an offline consensus.

The Lightning Network can handle potentially infinite transactions per second cheaply and efficiently while avoiding overburdening the blockchain. It is still fairly new but it is also key to the success of the future of crypto payments.

The post The Lightning Network: What Is It and What Are the Benefits? appeared first on PaymentsJournal.

SAN FRANCISCO — DECEMBER 08, 2021 – Visa (NYSE: V), the world’s leader in digital payments, today announced the launch of Visa’s Global Crypto Advisory Practice, an offering within Visa Consulting & Analytics (VCA) designed to help clients and partners advance their own crypto journey. This comes at a moment when digital currencies are taking greater hold in the popular consciousness – according to research released today from Visa, awareness of crypto among financial decision makers surveyed is near universal at 94% around the world.

For financial institutions eager to attract or retain customers with a crypto offering, retailers looking to delve into NFTs, or central banks exploring digital currencies, understanding the crypto ecosystem is a vital first step. Through their work with more than 60 crypto platforms, Visa’s global network of consultants and product experts have deep expertise to help financial institutions evaluate the crypto opportunity, develop concrete strategies, and pilot new user experiences and innovations like crypto rewards programs and CBDC-integrated consumer wallets.

“We’ve seen a material shift in our clients’ mindset in the last year, from a desire to explore and experiment with crypto, to actually building a strategy and product roadmap,” said Claudio Di Nella, Head, Visa Consulting & Analytics, Europe.

VISA STUDY EXPLORES CONSUMER ATTITUDES AND ADOPTION OF CRYPTO

Client interest in building crypto solutions comes as new Visa research shows significant awareness and adoption among consumers globally. In a new global study, “The Crypto Phenomenon: Consumer Attitudes & Usage,” Visa found that nearly one-third of respondents have directly engaged with crypto – either as an investment vehicle or as a medium of exchange. And globally, nearly 40% of crypto owners surveyed report they would be likely or very likely to switch their primary bank to one that offers crypto-related products in the next 12 months.

“Crypto represents a technological shift for money movement and digital ownership,” said Antony Cahill, Deputy CEO, Visa, Europe. “As consumers change their approach to investing, where they bank, and their views on the future of money, every financial institution will need a crypto strategy.”

Surveying more than 6,000 financial decision makers across eight markets (Argentina, Australia, Brazil, Germany, Hong Kong, South Africa, the U.K. and U.S.), the Visa study uncovered the following insights:

• The crypto headlines are having an impact. Awareness of crypto is almost universal at 94% globally among survey participants with discretion over their household finances.
• A significant segment is using or investing with crypto: Nearly one in three crypto-aware adults already own or use cryptocurrency, and the majority of that group (62%) say their use has increased in the past year.
• Engagement is higher in emerging markets. 37% of crypto-aware consumers in emerging markets use or own crypto compared to 29% in developed markets.

• Key motivators include wealth-building and belief in crypto as the future of financial services. The biggest drivers of owning and using cryptocurrency are to take part in the “financial way of the future” (42%) and to build wealth (41%) – both forward looking motivators. 
• Crypto-linked cards and crypto rewards are attractive. Among current crypto owners, 81% express interest in crypto-linked cards, which allow you to convert and spend crypto at the retailers where you shop in the same way you can use a debit or credit card. 84% are interested in crypto rewards, which allow you to earn crypto as a reward for your card spending.
• Consumers are willing to switch banks in search of crypto products.

Globally, 18% of survey participants say they would be likely or very likely to switch their primary bank to one that offers crypto-related products in the next 12 months. This is particularly true for emerging markets, which jumps to 24%. Among consumers who already own cryptocurrency, nearly 40% are willing to make the switch.

To download “The Crypto Phenomenon: Consumer Attitudes & Usage” and learn more, click here.

About Visa Inc.
Visa Inc. (NYSE: V) is the world’s leader in digital payments. Our mission is to connect the world through the most innovative, reliable and secure payment network – enabling individuals, businesses and economies to thrive. Our advanced global processing network, VisaNet, provides secure and reliable payments around the world, and is capable of handling more than 65,000 transaction messages a second. The company’s relentless focus on innovation is a catalyst for the rapid growth of digital commerce on any device for everyone, everywhere. As the world moves from analog to digital, Visa is applying our brand, products, people, network and scale to reshape the future of commerce. For more information, visit About Visa, visa.com/blog and @VisaNews.

About Visa Consulting & Analytics
Visa Consulting & Analytics (VCA) is the payments consulting advisory arm of Visa. This group is a client-facing global team of more than 700 payments consultants, data scientists and economists in more than 75 cities. The combination of our deep payments expertise, our breadth of data and our economic intelligence allows us to identify actionable insights, recommendations and solutions that drive better business decisions and measurable outcomes for clients.

VCA is ideally positioned to work with clients to help formulate a digital currencies strategy, capabilities assessment, business case, and go-to-market approach, including build-partner-buy considerations. Similarly, subject matter experts can assist in areas such as product development, innovation and design, and marketing strategy and execution.

The post Visa Introduces Crypto Advisory Services to Help Partners Navigate a New Era of Money Movement appeared first on PaymentsJournal.

Between October 2020 and April 2021, Americans lost more than $80 million in cryptocurrency scams, the U.S. Federal Trade Commission reported. This is a major PR problem for the cryptocurrency industry. But what can the industry do to help users stay safe and pave the way for mass adoption?

Preventing successful attacks starts with acknowledging that cryptocurrencies are fundamentally different from traditional, or fiat, currencies. Although blockchains are designed to incentivize sound transactions by rewarding good actors, blockchain addresses don’t have the same recourse or guarantees as bank or credit card accounts.  There’s no authority to bail the holder out — no FDIC guarantee. While someone can dispute a fraudulent credit card transaction, a validated blockchain transaction can’t be undone.

Most veteran cryptocurrency holders however have managed to keep their cryptocurrency assets secure. Often for many years. Three relatively simple access control tools are responsible for that protection: private and public keys, software wallets and backup codes and hardware wallets. Here is a breakdown of how these tools operate and best practices.

1.   Private and public keys

Blockchain-based cryptocurrencies come with public and private key pairs which are the bedrock of cryptographic security.

Keys are strings of characters, most often numbers and letters, that are longer than passwords and keys for mobile phones and online accounts. For example, in Bitcoin a private key is a 256-bit number, which is 64 characters long. 

Private keys allow the holder to prove, cryptographically, that they are the owner of an account. They grant one full access to and complete authority over a cryptocurrency account in the same way a physical house key would to a home, or credit card number, expiration date and security code would to a credit card account. With a private key, the user has license to control their account, let others pay into it, sign transactions and send value to other accounts.

Sharing a private key with someone else is like giving them your bank card and PIN number, or the code to your safe. If someone has the private key, they can clear out that account. That’s why private keys are rarely, if ever, safe to share with anyone else. Similarly, don’t store or paste private keys in unencrypted text. It doesn’t matter whether they are saved on a device, website, in the cloud or otherwise. If a hacker found this information, the whole portfolio would be at risk.

In contrast to private keys, public keysare meant to be shared with the world, without risk. They resemble physical addresses.  Anyone can send funds to that address using that public key, similar to a mailing address or bank account number. Public keys are generated from and correspond to users’ private keys.  Public keys are safe to share because one cannot issue outgoing transactions with a public key —and it is impossible to determine someone’s private key from a public key. 

2. Software wallets & backup codes

Software wallets are applications that let the user store and manage their cryptocurrency and can either be installed locally or accessed via the cloud. They can be used to store private keys, generate public keys and carry out transactions. They often store only part of the blockchain, meaning they require less space than a full node.

Some cryptocurrency wallets allow the user to export a backup code, or a sequence of 12-14 words, derived from a private key, that lets them access their wallet and private keys from anywhere.

The combined power of software wallets and backup codes contribute to both convenience and security. Here’s a practical example:  Let’s say one has a backup code associated with a wallet on a laptop that you’ve recorded and saved. That person could throw their phone into the ocean and never see it again, go home and completely restore the wallet using a backup code — all without relying on any central party to re-issue the funds or access their personal information.

3. Hardware wallets

Hardware wallets are secure physical devices that store and manage a user’s cryptocurrency.

When enabled, they connect with online applications to make transactions without revealing private key data. When not in use, they are offline – a feature that makes them less accessible or vulnerable to hackers than other wallet solutions.  Like software wallets, hardware wallets use backup codes.

The negative of choosing a hardware wallet is a certain degree of inconvenience. They’re not ideal for making frequent transfers .  However, this is often seen as a feature, rather than a flaw.

The cryptocurrency industry needs to spread the word about these safekeeping measures if they want users and regulators alike to become more comfortable with mass adoption.

The post Keeping Cryptocurrency Secure — It’s Time to Educate Users to Pave the Way for Mass Adoption appeared first on PaymentsJournal.

The expression “time and tide wait for none” needs to be changed to “time, tide and financial markets wait for none”. Trading is considered to be difficult and the volatile nature of cryptocurrency makes the research, gathering data, and investment painstaking. You need to come up with a secure, trustworthy and cautiously curated trading strategy. 

Cryptocurrency trading differs from the conventional stock markets, such that it never sleeps. This makes it next to impossible for the private traders to diversify risks, track market swings, decrease mistakes, and maintain trading discipline 24 hours a day, 7 days a week, 365 days a year.

Enter crypto trading bots. These come into play in such scenarios where you can stay on top of your trading game without having to lose your good night’s sleep or staying on the edge of your seat all day long. So let’s dive right into the what, why and how of crypto trading bots and how you can choose the appropriate one for maximum benefits.

Crypto bots: The appealing solution

The crypto bots are a collection of codes created to automate your cryptocurrency trading. The bots are programmed to accomplish repetitive tasks more efficiently than humans using Artificial Intelligence. They collect trading and market data through pre-established parameters and trade on your behalf through algorithmic rules.

The decisiveness of crypto bots is based on the fluctuations of price, orders, volume, and time. They can be fine-tuned by the users to make the best out of a coherent trading strategy with the algorithm. To sum up the definition, these bots are computer programs that buy and sell different cryptocurrencies automatically, at the appropriate time to generate maximum profit.

Now that you are aware of what a crypto trading bot is, you should know how to evaluate its effectiveness. You can consider the following elements while doing so and create a well-thought-out rubric for choosing the crypto bot for your trading.

Trading strategies

Every experienced trader has a plan for their transactions. Coherently, you need to pick the crypto trading bot that reflects your style in terms of purchasing and selling the currencies alongside effective risk management and portfolio diversification. Here are a few common strategies you can look for in crypto trading bots.

Momentum trading

The bot programmed with this strategy estimates the ebb and flow of the trading arena through its momentum. If you have a similar investing strategy wherein you ride the rising momentum wave with your assets and then promptly trade them off as the momentum overturns.

The investors understand that the timing of buy-in and sell-off needs to be immaculate while implementing this technique. The crux of this philosophy is that the cost of an asset will skyrocket over its average and then quickly lose momentum and fall.

Arbitrage trading

This one is an ideal strategy for those looking to invest in fairly low-risk trading and investment. Here, the bots do not rely on the performance of the cryptocurrency on the market, but rather cash in on the price difference between different exchanges before they close up. The bots functioning through arbitrage trading strategy make for a very handy tool in such cases wherein you need to conduct simultaneous trades at the speed of lightning.

Mean Reversion trading

If your style is more poised and stable wherein you believe that even if the price of a coin oscillates from its average, it will eventually come back to the average value. This trading technique is based on the buy low, sell a high concept and having an automated algorithm can aid in calculating the median and function as traders on your behalf. This leads to saving time, cost and decreasing the risks.

There are a few other strategies based on Machine Learning like Naïve Bayes and various Natural Language Processing implemented by the crypto bots. You can examine the ones that match your process to evaluate the effectiveness of the crypto bot you might choose.

User experience

This is something you should look at ardently while checking the efficiency of any crypto bot. These bots are designed to make the investor’s life easier, such that the technology can be used by both advanced and novice users.

Possessing an intuitive interface and straightforward user settings make for tell-tale signs of the best crypto trading bots. Ideal software provides you with an explanation behind their trading action at every step and has easy to follow operations.

Transparency

As discussed, an effective crypto bot makes all the transactions as democratic, distributed and transparent as possible. You should check that it has an open-source development process and an active support team. 

Having experienced seniors on the bot development team gives you a sound idea of the efficacy of the crypto trading bot itself. Transparency is critical when trading in the cryptocurrency market as having a trustworthy company history of automated bots can make it easier for you to make profits as well as seek help whenever needed.

Security

This one is a standard necessity for the kind of tech that has access to and can handle the flow of your funds. Reports indicate a median loss of $1.9 billion in the year 2020 due to illicit criminal activities. Though the number has decreased significantly from the record-making $4.5 billion in 2019, it is never a great strategy to neglect the security measures. Therefore, the reliability of the crypto trading bot is the make or break of your trading journey in the cryptocurrency market. 

They need to be dependable in terms of secure payment gateways and minimum or no downtime. This factor is an obvious indicator of any crypto bots efficacy. Lousy bots defeat the entire purpose of automation of your trading strategy. Make sure that you are not losing out on your investments or time due to the bot’s shortcomings.

Pricing

You can compare the different services of the shortlisted crypto bots to understand if you’re gaining the best value for your money. The bots have subscriptions of varying prices and you can get free demos of almost all the crypto trading bots. You should understand the functions, customizable, and profitability to evaluate the effectiveness of the automated software that you wish to engage with.

Wrapping up

A crypto trading bot makes for a worthwhile investment when it is easy to use and adapts itself to the ever-fluctuating market conditions. The bots are not a feasible solution unless you modify and program them according to your trading strategy. But it can be a much better alternative to the stressful crypto trading, repton of the tasks, and boredom of having to keep up with the numbers at all times.

The post Evaluating the Effectiveness of Crypto Bot Transactions appeared first on PaymentsJournal.

With the total market capitalization for digital assets now at $3 trillion, Mastercard has partnered with Hong Kong’s Amber Group, Thailand’s Bitkub, and Australia’s CoinJar to enable crypto-linked credit, debit, or pre-paid cards so crypto can be spent anywhere Mastercard is accepted. These three crypto exchanges will also apply to the Mastercard global Crypto Card Program and in doing so join Paxos Trust Company, Circle, Evolve Bank & Trust, Metropolitan Commercial Bank, Uphold, BitPay, i2c Inc., Apto Payments and Galileo Financial Technologies.

Given how rapidly Mastercard and Visa have enabled cryptocurrency-linked payments to operate with their extensive card base and acceptance footprint, it will likely be difficult for alternative solutions to achieve similar broad acceptance:

“Data from the Mastercard New Payments Index revealed that 45% of those surveyed in the Asia-Pacific region are likely to consider using crypto next year – a 12% jump from the previous year. The rate is also slightly higher than the global average of 40%.

Mastercard has been among the companies at the forefront of digital-asset integration. In July, the company upgraded its crypto card to allow customers to use stablecoins to make purchases. And in October, it partnered with digital asset platform Bakkt to enable consumers to buy, sell, and hold digital assets through custodial wallets.

Mastercard has also previously committed to helping central banks shape and develop their own digital currencies, which are digital tokens like cryptocurrencies but are not decentralized.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Mastercard Extends Cryptocurrency-Linked Payment Cards to Asia appeared first on PaymentsJournal.

Blockchain technology has existed since 1982 as a means of storing data in a trustless and decentralised way but was unknown outside the computer science world until in 2008 the whitepaper, ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ showed that blockchain could form the basis of an electronic ‘cryptocurrency’.

Since then Bitcoin and ‘altcoins’ have multiplied in their thousands and while some have been successful, others have been set up as exit scams and subject to data breaches and theft. Blockchains have also been used to power everything from Non-Fungible Tokens to refugee camps.

Although the blocks that make up a blockchain cannot be retroactively altered, this is not to say blockchain is impenetrable by bad actors. For example, recently the Poly Network, a major player in decentralised finance, or DeFi, was hacked and although the money was returned, this proves that blockchain technology is by no means safe.

Blockchains in many forms

Blockchain companies such as Coinbase are by definition FinTechs, and existing FinTechs, like the challenger bank Revolut, offer investment in cryptocurrency alongside other financial services. Other companies such as Citi Bank and JP Morgan are using blockchain to solve long-standing problems, trialling an application of blockchain technology to significantly speed up cross-border transactions, allowing money to be sent internationally almost instantaneously and with greater transparency.

In other areas, such as stock trading, which heavily relies on paperwork and shuts down over the weekend, blockchain technology can be adapted to systems where all participants can easily check and verify trades and execute them in real time, 24 hours a day, seven days a week.

Companies like Figure are also using blockchain technology to provide personal loans and mortgages, again at a much faster turnaround time than the standard industry turnaround. The reason for this is because blockchains allow for easier identity verification and immutable and accurate information, cutting down on the time it takes to approve loans.

Changing the crypto demographic

After nearly a decade since going mainstream, El Salvador is still the only country that considers cryptocurrency to be legal tender, and this has been met with protests. Therefore it makes sense that only 2.3 million people in the UK hold any form of cryptocurrency, compared to the one third of the country that own traditional investments like stocks and shares. Use of other blockchain applications is likely to be rare, and the most recent research on people’s attitudes showed that 70% of survey respondents (.pdf) either hadn’t heard of cryptocurrencies or didn’t know how to define one.

This clearly indicates that FinTech companies have a lot to do before the idea of services being blockchain-based becomes attractive to the wider community, rather than only attracting a wealthy, middle-aged, male and white demographic. Just as important as educating the public about the positive aspects of blockchain technology is reducing the negatives, namely security breaches.

Providing a secure blockchain

Blockchain security breaches can happen in one of two ways; first by editing the historical record itself – performing ‘double spend’ attacks in which the block that records a transaction is replaced with a block that does not. The security breach most commonly seen is the compromise of individual wallets, much the same as fraudsters compromise usernames and passwords on eCommerce sites. So-called ‘hot wallets’, those connected to the internet that contain the public and private keys that make blockchain transactions possible, can and have been hacked.

Therefore, strong cryptography provided by hardware security modules will be key for blockchain-based FinTechs; they store and protect the private and public keys, guaranteeing that both parties in a transaction are who they say they are. Because each node in a blockchain has access to part of the chain, there is no central location where data can be protected behind firewalls, but deploying hardware security modules (HSMs), companies handling sensitive financial data can be as assured as it is possible to be that their blockchain is secure.

Blockchain regulations are continuously evolving, making it difficult to predict what will be compliant in the future. However, HSMs have provided the backbone of security in so many industries and applications that there is no doubt that they will continue being a vital part of securing blockchains in FinTech.

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