Cryptocurrencies

Kenyan Insurance Executive Calls Cryptocurrencies Ponzi Schemes, Warns Users This Will ‘End in Tears’

02/08/2021 by Idelto Editor

A Kenyan insurance executive, Julius Kipng’etich has compared cryptocurrencies like bitcoin to Ponzi schemes and has urged his countrymen not “touch this.” In addition, Kipng’etich warned those already involved in crypto trading to be prepared for the consequences as this always “ends in tears.”

Bitcoin as a Medium of Exchange

Interestingly, when addressing attendees of a business seminar, Kipng’etich does acknowledge that bitcoin already meets one of the conditions for it to be treated as currency. He said:

Currency represents two primary things; it is a medium of exchange and a store of value. So any currency is medium, I give you so that you give something.

Kipng’etich’s view of cryptocurrencies appears to be consistent with that of some central banks. For instance, in its 2019 consultation paper on crypto assets, the South African Reserve Bank (SARB) similarly acknowledges that “crypto-assets have the ability to be used for payments (exchange of such value) and for investment purposes by crypto-asset users.”

Cryptocurrency Not a Store of Value

However, in terms of bitcoin being a store of value, Kipng’etich argues that since this is not backed by governments it, therefore, cannot be seen as a true store of value. According to the executive, only governments are mandated to issue currency by virtue of their positions. The executive explained:

Government is the custodian to regulate how much value has been given. That’s why they issue currency because it represents an output…Then the central bank represents that output in currency.

Therefore, when measured against this standard, cryptocurrencies like bitcoin are valueless or “hot air” as Kipng’etich puts it.

Do you agree with Kipng’etich’s characterization of cryptocurrencies as Ponzi schemes? Tell us what you think in the comments section below.

Central Bank Governor: South Africa’s Digital Currency Study Ongoing

31/07/2021 by Idelto Editor

South African Reserve Bank (SARB) governor, Lesetja Kganyago, has once again confirmed that the central bank is presently studying the feasibility of issuing a digital currency. In his remarks at the SARB’s annual general meeting, governor Kganyago suggested his organization has embarked on this study to keep abreast with the growing trend of central banks that are studying CBDCs.

Retail CBDC

In the past few years, several central banks including a few in Africa have similarly announced their CBDC studies. Already, the central banks of Ghana and Nigeria have both revealed they will start piloting their respective digital currencies in the second half of 2021.

However, as the recent Mybroadband report quotes Kganyago explaining, the SARB’s e-rand study will also seek to understand the feasibility of issuing the CBDC for retail purposes. Kganyago explained:

The objective of the study is to investigate if it would be feasible, appropriate and desirable for the SARB to issue a CBDC to be used for retail purposes, complementary to cash, in South Africa.

Crypto Regulation Imminent

Kganyago’s confirmation of SARB’s study of the CBDC comes as South Africa readies to regulate digital currencies. As reported by Bitcoin.com News, a working group known as the Intergovernmental Fintech Working Group (IFWG) recently published a position paper that recommended the regulation of crypto service providers.

Already, several South African banks are blocking clients from using buying cryptocurrencies on overseas platforms. According to reports, this action by banks is being made at the behest of regulators who want the country’s exchange control rules to be extended to include cryptocurrencies.

Meanwhile, no date has been given as to when SARB is expected to complete its study and when the central bank expects to start piloting this.

What is your view on this revelation by the SARB governor? You can tell us what you think in the comments section below.

Fed Governor Lael Brainard Can’t Imagine Future Without Digital Dollar

31/07/2021 by Idelto Editor

Pointing to a number of reasons why a digital version of the U.S. dollar should be created, Federal Reserve Governor Lael Brainard insisted that not having one wouldn’t lead to a sustainable future. The central bank official believes a digital dollar will have both international and domestic applications.

US Fed’s Lael Brainard Can’t Wrap Head Around Not Issuing CBDC

With other nations, most notably China, moving forward with their own digital currency projects, Lael Brainard, member of the U.S. Federal Reserve Board of Governors, has highlighted the urgency around the development of a digital dollar. Speaking to the Aspen Institute Economic Strategy Group on Friday, Brainard stated:

The dollar is very dominant in international payments, and if you have the other major jurisdictions in the world with a digital currency, a CBDC offering, and the U.S. doesn’t have one, I just, I can’t wrap my head around that.

“That just doesn’t sound like a sustainable future to me,” Lael Brainard added, quoted by Reuters. Her statement comes as the Fed is gathering public feedback on the potential costs and benefits of issuing a U.S. central bank digital currency (CBDC). A discussion paper, that will also cover design aspects, is expected in early September.

Brainard went on to list various reasons why a digital dollar is needed. “One of the most compelling use cases is in the international realm, where intermediation chains are opaque and long and costly,” she said. On the domestic front, the Fed governor turned attention to the rise of cryptocurrencies backed by fiat money, but not by a government or so-called stablecoins.

Stablecoins could proliferate and fragment the payment system, Lael Brainard warned, also noting that one or two of them could achieve a certain level of dominance. The Federal Reserve representative further elaborated:

In a world of stablecoins you could imagine that households and businesses, if the migration away from currency is really very intense, they would simply lose access to a safe government backed settlement asset, which is of course what currency has always provided.

Brainard is convinced that a U.S. digital currency could be instrumental in solving other important problems as well. A digital dollar could, for example, help to overcome difficulties with government payments reaching people that don’t have bank accounts during a crisis like the Covid-19 pandemic, she suggested. The unbanked are usually those who need these payments the most, the Fed official stressed.

Do you expect the U.S. to catch up with China in the development of a central bank digital currency? Share your thoughts on the subject in the comments section below.

Central Bank of Ireland Governor Talks Crypto, Praises ‘Secure, Decentralized’ Technology

31/07/2021 by Idelto Editor

Gabriel Makhlouf, the governor of the Central Bank of Ireland (CBI), has published a blog post in which he shares his views on the digitalization of finance. While echoing concerns expressed by his counterparts regarding cryptocurrencies, the official has also highlighted some of their positives.

Don’t Ignore the Positive Elements of Crypto Technology, Central Bank Governor Says

The article titled “Digital Money” was published on the bank’s website on Thursday. In the post, Gabriel Makhlouf discusses the project to issue a digital version of the common European currency. The European Central Bank (ECB) recently launched its “Investigation Phase” and although a final decision is yet to be taken, the governor believes that it is not a question of “if” but rather “how and when” a digital euro will be introduced.

Besides central bank digital currencies (CBDCs), Makhlouf devotes attention to the rise of decentralized money as a factor in the increasing digitalization of finance. Avoiding the “misleading descriptor” “crypto-currencies” and the “less inaccurate” “crypto-assets,” the banker refers to coins, stablecoins, and tokens simply as “crypto.”

“Risks are increasing as individuals consider putting some of their money into crypto,” Gabriel Makhlouf says, listing the lack of transparency, price volatility, high energy consumption, and exposure to fraud among the threats investors and governments are facing. “As things stand today, the negatives surrounding crypto far outweigh any benefits,” the Irish official concludes. However, he also insists that authorities should not ignore the positive elements of cryptocurrency’s underlying technology. The CBI governor notes:

Distributed Ledger Technology (DLT) is essentially a secure, decentralised record of information stored across a network and is a key piece of architecture for some types of crypto.

Makhlouf emphasizes that DLT can reduce the costs of financial transactions and eliminate intermediaries in certain cases while also praising the opportunity to issue smart contracts. “The use of DLT has increased in recent years – it certainly has potential – although it remains to be seen how widespread that will be,” the governor adds.

The importance of DLT is likely to increase as governments around the world examine options to employ blockchain technology in the design of their digital currencies. A recently conducted experiment with the participation of several central banks from the Eurozone and the ECB has indicated that a blockchain-based digital euro would be highly scalable. The tested CBDC system was able to simultaneously process over 300,000 transactions a second, the central bank of Estonia revealed earlier this week.

Do you expect most central bank digital currencies to be based on digital ledger technologies? Let us know in the comments section below.

Russian ‘Time Capsule’ to Facilitate Inheritance of Crypto Assets

29/07/2021 by Idelto Editor

Researchers in Moscow are developing a new service that will allow users to transfer digital data to their heirs, including crypto keys. The Russian “time capsule” will be capable of storing and relaying other private information as well such as a record of the whereabouts of valuable items.

Russian Universities to Provide Service Allowing Crypto Investors to Secure the Future of Their Coins

Experts from three Russian universities – Lomonosov Moscow State University, National Research Nuclear University, and Moscow State Institute of International Relations – are working to give crypto holders the peace of mind that their digital assets will not be lost after their death. The service will be based on blockchain technology, RIA Novosti reported quoting Russia’s National Technology Initiative Platform.

The joint team is now creating a website through which people will be able to store the precious information, encrypted and ready to be transferred to the possession of specified persons, the project manager Dmitry Izvekov explained. This can happen only after certain conditions are met and not earlier than six months after the data has been uploaded. The report further details:

[The service] will allow you to securely store digital data and assets – from passwords for social networks to keys to bitcoin wallets.

Subscribers will be able to use the Russian time capsule to also keep photographs, text files, video messages, and even location details for valuable items that can be passed on to heirs in case of an unexpected death, for example. A user will have to send a link to a chosen recipient who must set up their own account in order to gain access to the information. The time capsule will open only on a pre-specified date in the future.

The encrypted data will be stored on Sbercloud, a cloud service developed by one of Russia’s largest banks, Sberbank, and backed up on Dropbox and other platforms. Each user will be allowed to send two capsules free of charge. The creators hope to raise up to 3 million rubles (around $40,000) to finance the project, monetize the service as soon as it gains popularity and offer additional services.

According to a survey conducted last year by the Cremation Institute in the U.S., which has been quoted by the Russian business news portal RBC, 89% of crypto investors worry about what will happen to their assets after they die. Yet, despite concerns that the coins can be lost forever, only 23% of cryptocurrency holders have a plan for their digital money after they pass away.

What do you think about the time capsule service for crypto holders that’s under development in Russia? Share your thoughts on the subject in the comments section below.