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Chris Giancarlo: U.S. risks becoming ‘backwater’ without central bank digital currency

One of the few high-profile public officials to have served under both the Obama and Trump administrations, Chris Giancarlo is a former Wall Street executive-turn-regulator who is widely-respected by nearly all parties on Capitol Hill. As the former Chairman of the Commodities Futures Trading Commission, however, his latest venture, the Digital Dollar Foundation, might well test his soft touch with politicians.

The former regulator is now leading the Foundation towards five pilot programs set to launch this year, part of a broader effort to help the United States regain the lead in a race against China towards a functioning CBDC.

According to Giancarlo, however, the US’s priorities when it comes to a CBDC shouldn’t merely be jingoistic:

“What’s very clear, [is] that China intends their digital yuan to be an instrument of state surveillance. […] And this is why it’s one of the reasons why the digital dollar project, we’re so animated, because we feel that our new mission is to make sure central banks wake up to this and the US Fed wakes up to this, that these social values that got us here, the rule of law, a free capital markets, free enterprise, zones of individual economic privacy, are ingrained in a new digital future of the US dollar, and that we don’t allow ourselves to be taken in by what China’s doing and match that state surveillance approach.”

However, the race to a CBDC isn’t merely about maintaining current US values, but also potnetially about unlocking new forms of smart contract-based value for the wider population. 

“The notion of a digital currency, whether it be sovereign and non-sovereign, tied to smart contracts, allows money to solve the old problem of being able to move it in place, i.e. moving around the globe as easily as you could send a text message, but also move it in time. Heretofore, money was a temporal thing, but with a smart contract you can say, I want to program my money today to go to my one grandchild in the future once they graduate college and all of those contingencies can be programmed in. […] With a programmable digital currency, you can program it today to move around the globe in space, but move around the globe in time. And that is such, I think, such a powerful construct.”

Ultimately, this work is part of an effort to ensure that America maintains technological supremacy. 

“You can’t stop the march of technology in time, and if you do, you become a backwater. We in the United States have always been open to innovation and we must be open to this innovation as well. In a prudent way, in a way that’s in correspondence with our society that expects investor protections and a role for government. […] And it’s one that I’m very excited to be involved in.”

Watch the full interview here:

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Chris Giancarlo: U.S. risks becoming \’backwater\’ without central bank digital currency

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Shanghai Man: Economist says El Salvador ‘on road to death’, salaries paid in e-CNY …

Our Man in Shanghai has refused to let recent regulations slow down the news coming from China. Enterprise blockchain, central bank digital currencies and start up projects continue to make a positive impact in a region hoping to grow economic value through technology.

Death march for El Salvador

The debate around El Salvador continued this week as media and officials tried to digest the adoption of Bitcoin as a national currency. JPMorgan stated that there was little economic benefit, and John Hopkins University professor Steve Hanke warned that the move could “completely collapse the economy” of the small nation. The former Bank of China deputy governor Wang Yongli took a very hardline approach, by stating that volatility and a lack of regulation or controls would put the economy on a “road to death.” This quote, appearing in state run media The Paper June 9, was an unusually direct and colorful statement on the issue.

Crypto innovation can be productive

Zhou Xiaoquan, a former governor of the People’s Bank of China, had a few positive things to say about cryptocurrency as a technology on June 11. He spoke at an economic summit in Shanghai and noted the cryptocurrency innovation in China can be productive when it serves the real economy. He also took some shots at other countries, stating that people would be mistaken if they thought other countries were taking the same approach towards building financial services. Zhou, who is one of the most often-quoted economists in the country, felt there was little emphasis on the relationship between financial services and economic value elsewhere in the world. Based on the wild displays at the Miami Bitcoin conference a few weeks ago, his position might be more sound than others would care to admit.

Paid in e-CNY

China’s e-CNY tests continued with the first reported mass payment of salaries in Xiong’an, a district near the capital Beijing. According to Cointelegraph, the pilot received support from a number of national banks and saw subcontractors paying workers their salaries from a digital wallet.

Industrial blockchain worth $22.6B

On June 3, a government organization issued a report entitled the China Industrial Blockchain Development Status and Trend Report. According to the report, in 2020, 222 industrial blockchain policies were issued, 12,059 new blockchain-related patent applications were approved, and 776 new blockchain enterprises were established. The report also claimed that the current market size of the industrial blockchain sector was around $22.6 billion U.S. dollars. Industrial blockchain is an area that China is eager to grab control in, leading to this explosive growth in recent years.

Only 5X the fun

Leading exchange Huobi surprised futures traders by limiting them to only 5x leverage on perpetual swaps and blocking new users from accessing the feature altogether. Futures trading, particularly highly-leveraged futures trading, had always been popular features on exchanges like OKEx and Huobi. It will be interesting to see whether these new decisions to limit risk will be damaging to these large exchanges that still somewhat adhere to regulator rules. It’s also possible that it’s a short-term solution in order to avoid scrutiny during periods of tighter control.

Futures of Singapore

While Huobi was tightening controls on futures traders, Singapore-based platform SynFutures was completing a Series A for $14 million. The round was led by Polychain Capital and included names like Framework Capital, Pantera Capital, Bybit, Kronos Research, WOO Ventures, Wintermute, and IOSG Ventures. SynFutures is creating a trustless derivatives market where users can take positions on assets or anything that has an accurate feed, including Bitcoin, the price of gold, or even the Bitcoin hashrate. What many people don’t know is that the SynFutures team is composed of members from Matrixport, a financial service app that was an offshoot of massive Chinese mining conglomerate Bitmain. Now you know the whole story!

This weekly roundup of news from Mainland China, Taiwan, and Hong Kong attempts to curate the industry’s most important news, including influential projects, changes in the regulatory landscape, and enterprise blockchain integrations.

Shanghai Man: Economist says El Salvador \’on road to death\’, salaries paid in e-CNY …

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CABEI Lends assistance to EL Salvador for Bitcoin Adoption

On Monday, 14th June, the head of the multinational development bank, CABEI (Central American Bank for Economic Integration), announced that the bank would provide technical assistance for the implementation of Bitcoin as legal tender in El Salvador.

In the Monday press conference, The executive President of the Central American Bank For Economic Integration, Dante Mossi, said the development bank is looking forward to collaborating with the finance ministry of EL Salvador for the selection of a technical team to carry out a successful bitcoin implementation process.

Mossi admitted at the Monday press conference that the Government of El Salvador was actively looking for assistance from the financial institution to allow a proper enactment of Bitcoin as a legal tender in the country. 

Mossi seemed pleased while delivering the message to EL Salvador’s government and the President that how proud he feels that the Central American Bank for Economic Integration came out to be the first choice of President Bukele and the Government authorities of El Salvador. Further, Mossi brought up the point that there is no other country in the world that has adopted Bitcoin cryptocurrency as widely as this country has done. He said, protecting public privacy is a big challenge today, and to overcome this, we must choose the most efficient method.

Mossi gave out some details about the formation of the technical advisory team of the bank that would involve CABEI members, the ministry of finance and central bank officials from EL Salvador. 

The development bank also aims at helping in project planning and providing navigation assistance regarding the legal aspects of Bitcoin implementation as the legal currency of El Salvador.

Challenges in Bitcoin Adoption 

Last week, El Salvador turned into the first country to receive Bitcoin as a legal tender after Congress authorized President Nayib Bukele’s recommendation to accept the cryptocurrency.

Early this month, after El Salvador collaborated with digital wallet company “Strike” to foster the country’s advanced financial framework utilizing Bitcoin technology, President Bukele presented the bill to Congress.

After a couple of days, El Salvador’s President Bukele reported that bitcoin mining would be carried out under the nation’s state-run geothermal energy utility by employing power produced from volcanoes. The declaration was made only a few hours later, the Central American country’s CongressCongress cast a ballot to make the crypto a plausible legal tender.

Still, the International Monetary Fund (IMF) cautioned El Salvador about the dangers of utilizing cryptocurrency for everyday exchanges. An IMF group planned to meet with the President of El Salvador as the worldwide association reflected upon another aid package for the country during its recuperation from the Covid-19 pandemic. 

Meanwhile, El Salvador’s President disclosed that he was in touch with the IMF and expressed that he would clarify the operations comprehensively and the situation with the economy regarding how the currency functions as a legal tender in the country.

Conclusion 

President Bukele promises a robust selection of experts from CABEI would be made for effective risk assessment, investment plan, financial education, and regulation. CABEI, on the other hand, seems to be equally invested.

CABEI Lends assistance to EL Salvador for Bitcoin Adoption

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Mexico lawmakers aim to follow the example of neighboring countries with proposed Bitcoin legislation

Eduardo Murat Hinojosa, a senator of the federal government of Mexico, has said he will be submitting a proposal to lawmakers seemingly aimed at crypto adoption in the country.

In a tweet today, Hinojosa changed his profile picture to feature the senator speaking into a microphone with the iconic “laser eyes,” indicating support for crypto. The lawmaker said he would be “promoting and proposing a legal framework for crypto coins in Mexico’s lower house,” specifically mentioning Bitcoin (BTC).

Hinojosa was not the only Mexico lawmaker indicating their support for crypto. Indira Kempis Martinez, a senator representing the state of Nuevo León, has also switched her profile to show laser eyes, with Hinojosa referring to her as a friend to the cause.

“We are going to lead the shift to crypto and fintech in Mexico,” said Hinojosa.

The social media activity comes as countries in Latin America have seemingly been taking steps towards greater adoption of crypto. In a video announcement to attendees of the Bitcoin 2021 conference last week, El Salvador President Nayib Bukele said he would send a bill to the country’s legislature demanding that Bitcoin be made legal tender.

On Sunday, Paraguayan congressperson Carlitos Rejala hinted that crypto would be connected to “an important project to innovate Paraguay in front of the world” starting this week. Yesterday he added that he was working with local crypto figures “in order for Paraguay to become a hub for the crypto investors of the world.”

Though Mexico has many individual investors who back Bitcoin, authorities in the country reported last year that cartels had been increasing their use of crypto to launder funds. At the time, the head of the Mexican attorney general’s Cyber Investigations Unit said the country’s law enforcement lacked the resources needed to tackle money laundering when crypto was involved.

Mexico lawmakers aim to follow the example of neighboring countries with proposed Bitcoin legislation

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Bitcoin price is fragile, but on-chain data points to fresh accumulation

The May 19 crypto market sell-off saw $1.2 trillion in value erased from the total market capitalization as the froth and excess leverage of over-hyped markets was quickly eliminated.

But similar to a forest fire, whose destructive power is essential to the rejuvenation of a forest’s ecosystem, dramatic market shake-outs are a vital part of the full life cycle of a developing market, as excesses that have accumulated are burned away and cleared in order to set the stage for a new round of growth.

According to data from Glassnode, the past month saw a “historically large decline” in on-chain activity, “transitioning rapidly from booming on-chain economies at ATH prices, to almost completely clear mempools and waning demand for transactions and settlement.”

This clearing of congestion helped address the rising cost of fees on both the Ethereum (ETH) and Bitcoin (BTC) networks which have now “returned to mid-2020 levels of around $3.50 to $4.50” after experiencing short term spikes as high as $60 in April and May but given the lingering price action from BTC and Ether, traders are also worried whether the market has shifted from bullish to bearish.

Bitcoin vs. Ether average transaction fee. Source: Glassnode

The drop in activity has resulted in a 65% decline in the total USD denominated transfer volume settled by the Bitcoin network and a 60% decrease in value transferred on Ethereum, marking the second largest declines for the networks behind the 80% drop for Bitcoin in 2017 and the 95% drop for Ethereum in 2018.

Long term holders accumulate

Although the on-chain activity paints a grim picture for some, as short-term holders were the hardest hit by the downturn, a closer look shows that long-term holders (LTH) have started accumulating again, a sign that the worst of the shake-out may have passed.

Long-term holder net position change. Source: Glassnode

As seen in the chart above, the supply held by long-term BTC holders has begun to accelerate upward following a period of distribution that happened as the price rallied from $10,000 to $64,000. This rising figure indicates that the “LTH supply is now in a firm uptrend,” and is similar to the trend seen during the “late 2017 bull and early 2018 bear.”

Glassnode said:

“This fractal describes the inflection point where LTHs stop spending, start re-accumulating and hodling what are now considered cheap coins.”

Further bullishness can be found in the fact that the amount of BTC currently held by LTHs is 2.3 million more than at the peak of 2017, indicating that the long-term view of these token holders is that the market is headed higher.

One final indication that the market may be consolidating in preparation for its next move higher can be found looking at the change in the liquid and illiquid supply of BTC over the past 6 months.

Bitcoin liquid and highly liquid supply. Source: Glassnode

As seen in the chart above, 160,700 BTC went from an illiquid state back into liquid circulation during the month of May, representing just 22% of the total supply that moved from liquid to illiquid since March 2020.

This means that 78% of the BTC acquired since then remains unspent, indicating an overall positive outlook by long-term holders.

While it’s impossible to be certain about the next steps for the cryptocurrency market thanks to factors like unpredictable volatility, erratic tweets from influencers and the rumors of surprise government crackdowns, on-chain data indicates a positive long-term outlook that should resume once the current shake-out and consolidation periods subside.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, and you should conduct your own research when making a decision.

Bitcoin price is fragile, but on-chain data points to fresh accumulation

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