Increasingly a number of countries are experimenting with the concept of state-backed cryptocurrencies or CBDCs to either counter the pressures of sanctions or improve the efficiency of the legacy financial infrastructure. The latest to join the CBDC bandwagon are Saudi Arabia and UAE. The countries today announced a joint initiative to create a cross-border cryptocurrency to facilitate inter-bank operations and transfers. The project is going to be a pilot implementation of private blockchain where only a handful of pre-approved authorities can function as nodes, and the major goal is to assess the benefits and costs of integrating cryptocurrencies into financial operations.
While nation states exploring blockchain technology is a welcome move, the private implementation of a blockchain architecture is still old wine in a new bottle; this still largely echoes the design of centralized institutions that are vulnerable to single-point-of-failure risks and control a majority, if not all, of the nodes in the network. Private blockchains can be viewed as an incremental change to running businesses, where the value captured by adopting the blockchain technology is largely confined to a ‘small delta’ from efficiency increases. It is 9 to 10, not 0 to 1. This is not to imply that these changes are not worth having. Even with private/semi-private implementations, there are a number of use cases in agriculture value chains, provenance tracking, direct transfer of benefits and many such use cases, especially in emerging markets that can have transformational impact, and can potentially lay the groundwork for more broad-based, truly decentralized blockchain adoption. Additionally, the jury is still very much out on if decentralization is truly a panacea for all situations.
“UN Calls Crypto a New Frontier” A new report from the UN, called the “World Economic and Social Survey 2018”, dives into the advantages of crypto, blockchain and distributed ledger technology. In the report, the United Nations calls cryptocurrency a “new frontier” in digital finance. The UN, which has expressed its interest in digital assets in the past as well, believes that crypto and blockchain technology at large have the potential to create new and revolutionary business models that cut red tape and dramatically increase efficiency.
“1confirmation to Raise New Round” 1confirmation, the crypto investment firm backed by Mark Cuban, is looking to launch a second fundand could raise $60 million for investments in early-stage cryptocurrency projects. The firm would invest in projects through traditional equity as well as token sales. The firm’s first fund, which raised $26 million in December 2017, was backed by Cuban, the billionaire investor of Shark Tank fame, as well as Thiel Capital, Runa Capital, and Real Ventures.
“CBOE’s Tilly on ETNs” In a recent interview, Edward Tilly, the chief executive of the Chicago Board Options Exchange noted that Bitcoin volume via CBOE’s vehicles hasn’t seen substantial growth due to a lack of ETFs. Tilly further noted that Bitcoin ETNs, unlike futures, could be a popular product for the average customer, specifically due to their “low barrier for entry”. Barriers for futures include account permissions due to which futures trading requires a significant amount of legwork.
“Maltese Exchanges Lead in Volumes”Maltese crypto exchanges have processed around $40 billion worth of cryptocurrencies till December 2018— a figure nearly that of the United States. Such a high volume is like due to Malta’s crypto-friendly regulatory atmosphere which has allowed a host of exchanges to thrive. Over the course of the past year or so, major exchanges such as Binance and OKEx have also signed agreements with the Maltese Stock Exchange (MSX) in order to develop regulated security token exchange platforms.
Whither the Price of Bitcoin? by David Andolfatto and Andrew Spewak