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IIF Report Predicts Global Debt Will Reach New All-Time High of $257T in 2020

15/01/2020 by Idelto Editor

Global debt records were broken in 2019, but that likely won’t be the end of such ominous economic milestones, the Institute of International Finance (IIF) predicts. The number could reach $257 trillion sometime in Q1 2020, according to a recent report by the group. Economies worldwide are struggling to address pressing issues such as stimulation near or below the zero bound, liquidity crisis, and the effects of negative rates on banks and their customers. Some experts believe the world may in fact be gearing up for a financial crisis of frightening proportions.

Also Read: Fed Officials Ponder Funding Hedge Funds and Private Brokers Directly

Global Debt Could Hit $257T Says IIF

According to the IIF, “The global debt-to-GDP ratio hit a new all-time high of over 322% in Q3 2019, with total debt reaching close to $253 trillion.” The pronounced trajectory into the red seems to be continuing unabated. It also appears to the IIF ready to set new records in early 2020, with the institute asserting:

Global debt is set to grow faster in 2020 and is estimated to exceed $257 trillion by the end of Q1 2020, driven mainly by non-financial sector debt.

https://edition.cnn.com/2020/01/13/economy/global-debt-record/index.html

According to the IIF’s Global Debt Monitor report, China leads the way in leverage, racking up the IOUs with a 310% debt-to-GDP ratio. Developed markets such as the U.S., Europe and Japan contribute to over half of the massive global minus sign, though emerging markets have shown a rapid acceleration in recent years. The report notes that most of the debt is non-financial sector in nature, with global government debt on path to pierce $70 trillion itself. As Reuters’ Marc Jones points out in a recent report:

The amount works out at around $32,500 for each of the 7.7 billion people on planet and more than 3.2 times the world’s annual economic output…

“Spurred by low interest rates and loose financial conditions, we estimate that total global debt will exceed $257 trillion in Q1 2020,” the IIF report asserts. It further notes that household debt-to-GDP is reaching record highs in multiple countries, largely in the EU, and that government debt-to-GDP has hit record highs in the U.S. and Australia.

Negative Rates and Unending Stimulation Result in Fewer Remedial Options

As news.Bitcoin.com’s Jamie Redman recently reported, concerns about a global economic bubble are growing, with some predicting a downturn of unprecedented proportions in light of exhausted options. Raphael Bostic, Federal Reserve Bank of Atlanta President, stated this week that “There’s not a lot that we have left to do to stimulate.” U.S. interest rates were chopped three times in the latter part of 2019, and massive printing of new money characterizes an ongoing Hail Mary-type bid to stimulate the economy.

In the EU the zero lower bound (ZLB) on interest rates has long since been broken, but the European Central Bank faces a similar lack of options. While associated publications suggest that as long as there’s confidence in the system, rates can continually go lower and lower, this type of economic “faith” has been broken many times, historically.

The advent of central bank digital currencies further presents the potential for central banks like the ECB to pin negative rates directly to currencies, making it impossible for small-time savers to preserve value by moving money out of banks.

Some interpret the current Shiller PE Ratio to signal a far overvalued stock market, with the ratio climbing back up into dot-com bubble territory. Source: https://www.multpl.com/shiller-pe

The Potential New Bubble and Bitcoin

If current alarming factors such as a potentially overvalued stock market, newly increased limits on home loans, low to negative interest rates, ongoing printing of new money and a soaring global debt continue unabated, a new recession could be on the way.

Economist Robert Shiller recently attributed market confidence to contempt for traditional economic wisdom, writing in a New York Times article: “High animal spirits in the stock market are often associated with the disparagement of traditional authority and expert opinion.” Shiller cited the “Make America Great Again” narrative of the Donald Trump presidency and its contribution to current fearlessness, writing:

The rise of an explicit belief in irrationality like this one is troubling on many levels.

With all this in view, the recurring narrative of decentralized, permissionless cryptocurrencies as hedge against economic uncertainty emerges powerfully once again, even in mainstream media.

I bought #Bitcoin because I don’t want all my savings in dollars. What if my government prints lots of dollars and they become worth… pennies?

But is owning bitcoin really a good idea? @NaomiBrockwell and @PeterSchiff debate: pic.twitter.com/TwEaGiiGSJ

— John Stossel (@JohnStossel) December 15, 2019

With the first month of 2020 already half over, and crypto markets moving dynamically against the uneasy backdrop of a debt-addled world economy, coming months promise to be eventful, if largely uncertain.

What do you think about the current global debt and the state of the global economy? Can bitcoin help people avoid the negative effects of a potential crisis? Let us know in the comments section below.

Disclaimer: This article is for informational purposes only. It is not an offer or solicitation of an offer to buy or sell, or a recommendation, endorsement, or sponsorship of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Images courtesy of Shutterstock, fair use.

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China Issues Digital Currency Guide for Party Cadres

14/01/2020 by Idelto Editor

Understanding a complex subject should be easier with access to educational materials. With blockchain and CBDC now part of Beijing’s political vocabulary, the Communist Party of China (CPC) has issued a guide to digital currencies meant to prepare party officials for upcoming changes in the country’s financial system.

Also read: China Saw $11.4 Billion in Crypto-Based Capital Flight Last Year

Handbook Educates Party Functionaries About the Impact of Digital Currencies

“Digital Currency: A Reader for Cadres” is part of a series of guides on various current topics, from artificial intelligence to blockchain technology, Bloomberg reported. The handbook has been released by the publishing house of the largest newspaper group in China, People’s Daily, and is now in printing for its second edition.

In 200 pages, the guide acquaints readers with important aspects of digital currencies. Its 23 articles cover not only the basics but also more sophisticated matters such as the impact these currencies could have on monetary systems and global finance, the publication details. Noting their goal is to assist CPC cadres in expanding their understanding of the underlying technology, the authors have stated on the cover:

Digital currency is inevitable in the course of history.

The guide comes out as China prepares to complete the development of its central bank issued digital currency (CBDC). The research into the matter started about five years ago but the People’s Bank of China (PBOC) stepped up its efforts after the announcement of Facebook’s Libra project last summer. Also, a Politburo meeting in October revealed that the Chinese leadership wants the country to gain an edge in the blockchain field.

No timetable has been released for the issuance of the sovereign coin yet but according to recent reports by Chinese media, the central bank has completed “top-level design, standard formulation, functional research and development” as well as “joint testing” of the digital yuan. PBOC is now focusing on establishing “stability, security, and control,” the bank’s Digital Currency Research Institute announced.

Launch Date of Digital Yuan Still Unknown

Despite the stated progress, a launch date was not announced. According to previously available information, the Digital Currency Electronic Payment (DCEP) system, as the project is also known, will be introduced with a two-tier approach. PBOC will first issue the currency to commercial banks, which will then distribute it to the public. In December, the 8btc crypto outlet reported that the digital currency will be piloted in Shenzhen, China’s tech hub, and the city of Suzhou.

The trials will be led by the People’s Bank of China and will be conducted with the help of four state-owned commercial banks: Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (ABC), Bank of China (BOC), and China Construction Bank (CCB). Three leading telecom operators, China Mobile, China Telecommunication and China Unicom, will also take part, the website detailed.

Parallel to the development of the digital yuan, Chinese authorities have been cracking down on platforms working with decentralized cryptocurrencies, with particular focus on exchanges and companies related to ICO projects. The government has also been busy dealing with serious issues in the traditional financial system, where a liquidity crisis is brewing on the interbank lending market with Beijing intervening to bail out several small banks. The debt-to-GDP ratio of China has reached 255% in the past decade. And the latest symptom of the hurting Chinese economy manifested itself in figures showing a 7.5% drop in passenger car sales last year, the second annual decline in a row.

What do you think about the digital currency guide issued by the Communist Party of China? Tell us in the comments section below.

Images courtesy of Shutterstock.

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China Saw $11.4 Billion in Crypto-Based Capital Flight Last Year

13/01/2020 by Idelto Editor

China Saw $11.4 Billion in Crypto-Based 'Capital Flight' Transactions Last Year

On January 8, China-based blockchain security firm Peckshield published its “2019 Global Digital Asset AML Research Report” noting a variety of crypto trends throughout the year. According to the study, cryptocurrency-based capital flight stemming from China was around $11.4 billion in 2019. Peckshield’s research recorded a number of illegal or otherwise unregulated transactions over the last few years.

Also Read: Mining Report Highlights China’s ASIC Manufacturing Improvements and Dominance

International Unregulated Capital Flow Using Cryptocurrencies Surges in 2019, While China Saw $11.4 Billion in Capital Flight Crypto Transactions

In January 2017, the Chinese government and the People’s Bank of China (PBoC) banned domestic cryptocurrency exchange operations. However, despite the ban, Chinese citizens have been able to access digital assets via over-the-counter platforms and offshore exchanges. Peckshield, a blockchain research firm from China, published a report which shows Chinese residents are still leveraging cryptos on a regular basis.

According to the study, roughly $11.4 billion in capital flight crypto transactions derived from China. The number is less than 2018’s $17.9 billion but more than 2017’s $10.1 billion. 2019’s unregulated capital flows from China represent more than 1% of the country’s foreign exchange reserves. Peckshield’s study notes:

International unregulated capital flows: The flow of funds using digital assets as a carrier has been huge internationally, but the legal definition of digital assets such as bitcoin in different countries is still very vague, meaning that these liquid funds have not been reasonably regulatory compliance.

MLM Crypto Scams and Darknet Market Bitcoins

Peckshield’s research utilized full nodes from a variety of blockchains and parsed the public data storage files deriving from chains like BTC, ETH, EOS, and TRX in real-time. The study also highlighted the major multi-level-marketing crypto scams that plagued China and many other regions worldwide. Peckshield mentioned how the Ponzi Onecoin managed to siphon $4 billion before the scam ended. The study also emphasized the Plustoken project which managed to defraud Chinese and international investors by running away with more than 200,000 BTC, 780,000 ETH, and 26 million EOS. Peckshield’s research notes that 3 million people were scammed by Plustoken and “the impact is very wide and the damage is huge.”

In addition to detailing the capital flow from Chinese citizens using cryptocurrencies, Peckshield’s report discusses darknet market (DNM) bitcoin growth. Peckshield claims there are about 60,000 darknet websites running on the invisible web and DNM transactions spiked considerably in 2019. In 2018, Peckshield data shows that 334,329 BTC flowed into DNMs but the following year the number jumped to 546,825 BTC.

Peckshield’s deep web research stressed the firm analyzed DNM page structures, content, and discovered a large number of digital asset addresses used within the invisible web. Out of the 546,000 BTC, Peckshield discovered that the total number of BTC flowing directly from DNMs into major exchanges was 29,471 BTC. The study emphasizes that only a small fraction of DNM funds flows into major trading platforms but small amounts of DNM funds are sent to exchanges every single day.

Peckshield’s report has five separate chapters of comprehensive crypto data in regard to DNM money flow and capital flight from an array of countries like China. The researchers note that overall BTC circulation on the invisible web is growing but it’s a “relatively stable amount determined by market demand.” On the other hand, “the current unregulated asset flow has occupied a considerable market share.” In Peckshield’s opinion, “accelerating compliance has become an urgent matter” as far as the global digital asset environment is concerned.

What do you think about the capital flight leveraging cryptocurrencies in China? What do you think about Peckshield’s data in regard to DNM funds in 2019? Let us know what you think about these topics in the comments section below.

Disclaimer: This article is for informational purposes only. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any ideas, software, mining rigs, mining rig manufacturers, websites, concepts, content, goods or services mentioned in this article.

Image credits: Shutterstock, Peckshield’s research, Wiki Commons, Fair Use, and Pixabay.

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US and European Regulators Say Crypto a Priority This Year

12/01/2020 by Idelto Editor

Several regulators in the U.S. and Europe have made cryptocurrency among their top priorities this year. The Securities and Exchange Commission’s compliance office and the European Securities and Markets Authority, in collaboration with other regulators, have outlined their plans to focus on crypto oversight. Further, China’s central bank has made digital currency a priority.

Also read: Regs Roundup: SEC Actions, Crypto Tax-Free in Korea, New Chinese Laws

SEC Compliance Office Focused on Crypto

The Securities and Exchange Commission (SEC)’s Office of Compliance Inspections and Examinations (OCIE) announced its 2020 priorities on Tuesday. The office conducts the SEC’s national exam program, with a mission to protect investors, ensure market integrity, and support responsible capital formation. The exam results are used by the Commission to inform rule-making initiatives, identify and monitor risks, improve industry practices and pursue misconduct.

The OCIE stated that advancements in financial technologies, including digital assets, “warrant ongoing attention and review.” Noting that “The digital assets market has grown rapidly and presents various risks, including for retail investors who may not adequately understand the differences between these assets and more traditional products,” the document confirms:

OCIE also will continue to identify and examine SEC-registered firms engaged in the digital asset space.

The examinations will assess six key areas: investment suitability, portfolio management and trading practices, safety of client funds and assets, pricing and valuation, effectiveness of compliance programs and controls, and supervision of employees outside of business activities.

The OCIE oversight also covers robo-advisors, which are registered investment advisors that provide services to clients through automated investment tools and platforms. The compliance office will also focus examinations on the Financial Industry Regulatory Authority (FINRA), its operations, regulatory programs, and the quality of FINRA’s examinations of broker-dealers and municipal advisors. FINRA has approved several crypto investments. In October, it approved shares of Grayscale Digital Large Cap Fund for public quotation.

Europe Focused on Creating ‘Sound Legal Framework’ for Crypto

Over in Europe, the European Securities and Markets Authority (ESMA) released its Strategic Orientation 2020-22 on Thursday, highlighting its priorities for the year. Located in Paris, ESMA is a European Union financial regulatory agency and European Supervisory Authority.

According to the document, ESMA requires the “EU market participants to acknowledge the risks that may stem from digitalization by ensuring business continuity and the use of adequate and up-to-date technology, as well as adequate protection against cyberthreats, and through proper data protection and data quality management.” The regulator described:

The dangers of cyberthreats to the financial system as a whole and a sound legal framework for crypto assets are increasingly becoming areas of focus for ESMA together with the other European Supervisory Authorities, the European Systemic Risk Board, the European Central Bank and the European Commission.

Emphasizing that fintech can contribute to well-functioning financial markets and investor protection, ESMA says it “will therefore actively examine the new opportunities technology might bring especially for investor protection and share expertise and know-how with national authorities.” The regulator will collaborate with national regulators to achieve its goals.

China Prioritizes Digital Currency

In Asia, the People’s Bank of China (PBOC) announced its seven key policy priorities for 2020 on Jan. 5, following an annual conference it held last week in Beijing.

China’s central bank will “strengthen research and development and application of financial technology,” the announcement details. The PBOC specifically stated that it will “continue to steadily advance research and development of a legal digital currency.”

While cracking down on crypto and initial coin offering activities in the country, the PBOC has been working on issuing its own digital yuan. Local media reported on Friday that the bank has completed the digital currency’s top-level design and preliminary testing.

What do you think of the U.S. and European regulators making cryptocurrency a priority this year? Let us know in the comments section below.

Images courtesy of Shutterstock, SEC, ESMA, and PBOC.

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Mining Report Highlights China’s ASIC Manufacturing Improvements and Dominance

11/01/2020 by Idelto Editor

During the first month of the new year, the research firm Tokeninsight published its “Mining Industry Annual Research Report,” which covers the competitive bitcoin mining sector. Tokeninsight’s study highlights the fact that BTC’s hashrate increased by 80% in 2019, even though BTC’s year-over-year average price dipped by 1.9%. Tokeninsight’s report also notes that more than 73% of the market share of ASIC mining hardware stems from China.

Also Read: Mining Report Shows 65% of Bitcoin’s Hashpower Stems From China

SHA-256 Hashrate Grows 80%, ASIC Hardware Improves, and 70% of the Mining Industry Leverages Renewable Energy

Tokeninsight is an independent organization “dedicated toward providing accurate data, ratings, and analytics” when it comes to the cryptocurrency ecosystem. The researchers have recently published the company’s annual mining industry report that discloses a range of figures from 2019. It also details the firm’s predictive outlooks for certain aspects of the mining ecosystem in 2020. The report is based on public sources and data as well as information from industry heavyweights like Antpool, Viabtc, and Poolin. The study shows how BTC’s hashrate surpassed 100 exahash last year and continues to climb.

Mining Report Highlight's China's ASIC Manufacturing Improvements and Dominance — “[BTC’s] network hashrate increased significantly, yearly average up 79.3% from 2018,” says Tokeninsight’s 25-page mining report.

Tokeninsight’s report indicates that the BTC’s yearly average hashrate spiked by more than 80% in 2019. Transaction fees on the BTC network were lower and during the course of 2019, miners only accrued $160 million in fees as opposed to 2018’s $280 million. Tokeninsight emphasizes the fact that single unit mining rigs produced by the world’s top ASIC manufacturers became far more efficient last year.

“The performance improvement of the mining hardware is part of the reasons, and the profitability of the Bitcoin mining segment is another contributing factor,” Tokeninsight’s report notes. “The average ROI of the mining industry is about 1 year, and the profitability is incomparable with the traditional industry.”

Similar to the last Coinshares H2 mining report, the Tokeninsight mining study highlights that China is the most dominant region of bitcoin miners. “Geographically, the Bitcoin network hashrate is mainly distributed in the following regions: China, the United States, Canada, Northern Europe, Russia, and Georgia,” the report highlights. Additionally, most of the electrical consumption used for mining is renewable energy sources, as 70% of the mining industry levies renewables Tokeninsight notes. Another discussion brought up in the mining study is the future of BTC’s third halving. “After the 3rd halving, the Bitcoin inflation rate will decrease to ~ 1.7%, which is much lower than 4.8% – 6.2% (Gold) and 5% (M1) issue rate,” the researchers stress.

China Dominates the ASIC Manufacturing Game, Competing for Next-Gen Chips, and the Growth of Cloud Mining and Comprehensive Service Providers

Other insights from the report show that China accounts for 73% of ASIC manufacturing worldwide, and alongside this, the future of the cloud mining market “is outside of China.” By conducting several interviews and market surveys, the firm believes that it’s able to predict the market share of the top five ASIC manufacturers. Tokeninsight thinks Bitmain will capture 63% of 2020’s market share followed by Microbt (10%), Canaan (18%), Ebang (7%), and others (2%). “The distribution of SHA-256 ASIC mining hardware manufacturers is concentrated, and the top four manufacturers in 2019 accounted for more than 95% of the total market,” the report asserts.

“The distribution of SHA-256 ASIC mining hardware manufacturers is concentrated, and the top 4 manufacturers in 2019 are accounted for more than 95% of the total market,” Tokeninsight’s report notes. (#4 is spelled incorrectly and should be ‘Ebang’ and the company Microbt is the manufacturer of the Whatsminer series brand.)

Similar to news.Bitcoin.com’s recent reports on next-generation semiconductors, Tokeninsight says that “the support of chip makers will largely determine the success or failure of mining hardware manufacturers.” The study notes that Samsung and Taiwan Semiconductor Manufacturing Company (TSMC) are the main suppliers of these chips. And because firms like Apple and Samsung need the best chips for new smartphones, there’s a shortage when it comes to next-generation chips. “At present, 5nm chips are already in the tape-out stage, and 5nm mining hardware may be released early next year,” the study explains. Tokeninsight’s report adds:

Whether it is TSMC’s 5nm, 7nm chips or Samsung’s 8nm chips, the chip supply is relatively in shortage, and at the same time, mining hardware manufacturers also have to compete with mobile phones for chips supply.

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The remainder of the report explains how mining pools are not “well structured,” and in the future they will likely partner with independent third-party agencies Tokeninsight predicts. Right now, altcoins that don’t leverage the SHA-256 algorithm are still dominated by GPU and CPU miners mainly from Europe and the U.S. The study’s 2020 outlook predicts that in the future, mining pools will start integrating more types of altcoin mining and GPU/CPU to FPGA “could be occupied by ASIC mining in the long run.” Tokeninsight expects cloud mining products will grow and reach a “broader market,” while 2020 will possibly see “mining farms located outside of China” growing at a faster pace.

More than 70% of the mining industry leverages renewable energy.

The biggest takeaway from Tokeninsight’s 2020 annual mining report shows the firm believes comprehensive service providers dedicated to the mining industry will grow exponentially. “Problems in the cryptocurrency mining industry have spawned a series of comprehensive mining service providers and they are trying to provide one-stop solutions for the industry,” Tokeninsight’s research notes. Tokeninsight’s study shows that mainstream assistance may bolster this trend with benefits like the Nasdaq-listed Canaan Creative stock. Overall, the 25-page report shows that the cryptocurrency mining industry looks unlikely to slow any time soon.

What do you think about Tokeninsight’s annual mining report? How do you envision the mining ecosystem growing in 2020? Let us know what you think about this subject in the comments section below.

Image credits: Shutterstock, Pixabay, Wiki Commons, Fair Use, Tokeninsight’s mining report.

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