BitDigest - Wednesday June 19, 2019
Global calls for a strong regulatory approach to Libra
House Financial Services Committee requests Facebook pause development of Libra
Libra threat to traditional financial infrastructure
News on Libra
I am starting this morning with some news and commentary on yesterday’s Libra announcement.
One point I would like to make is that I believe we should no longer refer to Libra as Facebook coin or a Facebook project by itself. Facebook will eventually address the Libra market with Calibra and regulators and Zuckerberg naysayers can then raise additional concerns about Facebook’s use of data – as of now they state that Calibra will be a regulated entity and that its financial data will not be linked ior commingled with Facebook’s social media platform.
Facebook was the initial force behind Libra and will be in a strong position to benefit from the store of value blockchain, but so are the other 27 founding partners of the Libra Association. Neither Facebook nor any of the founding partners will have any rights or claims above each other and the eventual 100 starting node runners (“validators”) will all hold an equal vote and control a maximum of 1% of the network. This will no longer be a Facebook network, they will simply be a major user of it from the beginning.
European Leaders Raise Concerns about Libra
European leaders were quick to respond to Libra with calls for tighter regulation against the social media giant.
French Finance Minister Bruno Le Maire said Libra should not be permitted to be viewed as a replacement for traditional currencies. “It is out of question’’ that Libra “become a sovereign currency…it can’t and it must not happen,” he said. Le Maire also called on the Group of Seven central bank governors to prepare a report on Libra for their July meeting.
Bank of England Governor Mark Carney warned Libra could “become instantly systemic and will have to be subject to the highest standards off regulation.” Carney stressed the “need to have an open mind” about the new blockchain but called on the G7, IMF, BIS, and FSB to take a coordinated approach to Libra.
German parliament member, Markus Ferber (CSU) cautioned that Libra’s use by Facebook’s 2.7 billion individual users [and 90 million businesses] could immediately make Libra a “shadow bank.”
Maxine Waters Asks Facebook to Halt Work on Libra
Representative Maxine Waters (D-CA), the chair of the House Financial Services Committee requested that Facebook pause its development of Libra. “Given the company’s troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action,” Waters said. Waters was requested to call the hearing by Representative Patrick McHenry (R-NC), the ranking Republican on the committee, had requested Waters to call the hearing earlier in the day. “We need to go beyond the rumors and speculations and provide a forum to assess this project and its potential unprecedented impact on the financial system,” he said. Senator Sherrod Brown (D-OH) also expressed skepticism, tweeting “We cannot allow Facebook to run a risky new cryptocurrency out of a Swiss bank account without oversight.”
Libra is an Attempt to Usurp Global Money Supply
The Financial Times FT Alphaville warns that Libra may not just be a “social-good venture,” but rather an attempt to gain control of the money supply by a group of incumbent elites and business tycoons. Libra may be “nothing more than a brazen attempt to override national monetary sovereignty by creating a global-scale Federal Reserve equivalent.”
Disenfranchised will Hail Zuckerberg 'as a Savior'
Jim Cramer calls Libra a “brilliant” effort recognizing it will boost the company across the emerging market. He added it will also be well-received in economically depressed areas of the United States. Cramer believes Libra will become a welcome tool for people in the U.S. and globally who cannot or will not use banks to store their money or make transactions. “The disenfranchised will welcome Mark Zuckerberg as a savior,” he declared.
Libra Will Threaten Current Financial Infrastructure
Tally’s Jason Brown said “people don’t understand how disruptive [Libra] could be…It literally threatens the governments that issue currency, the banks that store it and the actual transmission network. ” The CEO and co-founder of the automatic debt payment and financial savings app said he believes Libra could become a worldwide currency and disrupt governments control to funds. He is betting that within month of its release Libra will become “the primary way people get money out of first world countries to other places.” Brown sees the consumers’ willingness to trust Facebook and regulators “who are sharpening their knives…and [now] have a bigger steak to cut into” as significant headwinds against the currency’s roll out. He commented that there is no way China will allow Libra to operate within its borders.
Watch Out Stablecoins, Ripple and Stellar
Fundstrat identified potential winners and losers from next year’s release of Libra. The macro and crypto focused research firm suggests fintech payment processors, tech companies and bitcoin itself as the winners. Fundstrat believes Libra will devastate the recently growing stablecoin market “faster than the SEC” could and warns against the impact of Libra against ripple (XRP) and stellar (XLM).
Other Headlines
Former FDIC Chair Shares Reasoning for 'Fedcoin'
Sheila Blair, the former Chair of the FDIC, believes the Fed should issue its own digital currency. She said it would help democratize monetary policy by making it more efficient and allowing consumers to monitor the reserve accounts banks hold. It would also give individuals a quicker and safer way to make payments. Regarding monetary policy, Blair suggested a ‘Fedcoin’ would reduce the risk that a private entity could create an unregulated shadow system that could weaken the Fed’s control over the money supply.
Italian Banks to Begin Using Blockchain for Reconciliations
Banks in Italy will begin to use a blockchain to run reconciliations beginning in March 2020 The Italian Banking Association made this announcement stating it hopes the migration to a distributed ledger will result in improved communication between the banks and the full visibility of daily transactions, an improvement of the current month process.
HSBC Digitizing AR Process in India
HSBC has launched its Digital Accounts Receivable Tool which will automate the accounts receivable process for HSBC’s corporate customers in India. The system tokenizes the entire network of buyers and sellers delivering a secured communication and digital information exchange channel. This will “solve a key pain point in receivables by digitizing the client experience and creating an ecosystem where our clients and their customers connect to improve efficiency through the secure exchange of information,” explained Nicholas Soo, Head of Payment Products, Asia-Pacific, HSBC.
Euroclear Piloting Blockchain for Commercial Paper Market
Euroclear announced plans to pilot the use of blockchain technology for issuing and settling commercial paper transactions. The Belgium-based securities house, hopes the technology can replace time-consuming bilateral processing between multiple market participants with one consolidated hub. “Other key benefits of this blockchain solution would be full transparency and traceability of ECP issuance related activities… in making ECP same day issuance a new market standard,” Euroclear added.
Judge Seals Documents in Kleiman vs. Wright Case
The judge in the case brought by the estate of Dave Kleiman against Craig Wright agreed to seal the list of bitcoin holdings he demanded that Wright provide. According to the Kleiman lawsuit, Wright used fake signatures on documents to take Kleiman’s share of 1.1 million bitcoin. It is not known if and when the documents will be made available to the public.
Exchange and Product News
Crescent Crypto Launches New Indexes
Crescent Crypto Asset Management has launched three new cryptocurrency indexes the Crescent Crypto Smart Contract Platform Index (CCSMART), Crescent Crypto Anonymity Index (CCDARK), and Crescent Crypto Alt Index (CCALT). CCSMART tracks the performance of a market capitalization weighted basket of the largest liquid smart contract platform assets, CCDARK tracks the largest liquid privacy tokens, and CCALT tracks the top liquid digital assets excluding bitcoin.
IBM Releases New Version of Enterprise Blockchain
IBM has launched a new version of its enterprise blockchain that allows it to run in virtually any computing infrastructure. The new release will allow the Hyperledger blockchain to be deployed on private clouds or public ones like IBM’s, AWS, or Azure.
Bancor Restricts Service to US Customers
Bancor, a decentralized cross-chain liquidity network, announced that as of July 8th, US citizens and users of US IPs will no longer be able to use its web application, bancor.network, to convert tokens. That said, US users will still ve avle to use the Bancor walled to store and transfer tokens. The company explained, “this decision has been made in light of increased regulatory uncertainty; [Bancor] believe[s] this is the most judicious decision for all the members of our ecosystem.”
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BitDigest is a weekday news update on digital currencies and blockchain technology for friends and partners of Parsons & Whittemore, a single family office based in Rye Brook, New York. Receipt of BitDigest is by approval of the Author. The commentary, analysis, opinions and recommendations in this newsletter represent the personal and subjective views of the Author, and are subject to change at any time without notice. The information provided in this newsletter is obtained from sources which the Author believes to be reliable. However, the Author has not independently verified or otherwise investigated all such information. Neither the Author nor any of the Author's affiliates make any guarantee or other promise as to any results that may be obtained from reading this newsletter. While past performance may be analyzed in this newsletter, past performance should not be considered indicative of future performance. No reader should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence. The Author is not making a solicitation or offer to buy or sell any securities of any kind.