Stablecoins

Fed’s Vice Chair for Supervision Calls on Bank Regulators to Pay More Attention to Cryptocurrency

04/05/2021 by Idelto Editor

Fed’s Supervisor Calls on Bank Regulators to Pay More Attention to Cryptocurrency

The Federal Reserve’s top supervisory official has called on bank regulators to pay more attention to cryptocurrencies and stablecoins. His comments followed a number of major banks announcing that they will be offering products based on cryptocurrencies, particularly bitcoin, to their clients.

Bank Regulators Should Focus More on Cryptocurrency, Says Fed Supervisor

The Federal Reserve’s vice chairman for supervision, Randal Quarles, talked about cryptocurrency last week at a conference hosted by the Options Clearing Corporation. He urged bank regulators to pay more attention to stablecoins and cryptocurrencies.

Quarles took office as a member of the Board of Governors of the Federal Reserve System in 2017 and was sworn in as Vice Chair for Supervision on Oct. 13 that year. He is also chair of the Financial Stability Board (FSB).

His comments followed several banks in the U.S., such as Morgan Stanley and Goldman Sachs, announcing that they will offer their wealthy clients access to investment products based on cryptocurrencies, particularly bitcoin.

Quarles said that the rise of cryptocurrencies and stablecoins has been “one of the more interesting developments” in the financial markets. However, he noted:

I think the depth of consideration that has been given to a lot of policy talk around those issues hasn’t been as robust as I would like it to be.

“The inexorable march of technology is a huge opportunity but also a supervisory challenge for the financial system,” he emphasized.

The Federal Reserve’s top supervisory official acknowledged that policymakers spent much of last year on the Covid-19 pandemic response and did not have much time to dive into cryptocurrency regulation.

“People have had a lot of other things to think about over the course of last year as these issues have been rising in salience and so I understand why,” he opined, elaborating:

I think over the course of the next year or two, [we should be] really thinking carefully about the issues that are presented by stablecoins.

Do you think the Fed should pay more attention to cryptocurrencies? Let us know in the comments section below.

VC Backed Billion-Dollar Stablecoin Project Fei Protocol Falls Below the USD Peg

08/04/2021 by Idelto Editor

The new decentralized finance (defi) stablecoin project called Fei had some issues this week after the 1:1 USD pegged token dropped well below its targeted $1 value. The Fei project was supposed to be similar to Maker DAO’s algorithmic DAI stablecoin and it was backed by major venture capital firms.

Fei Protocol Market Price Drops to $0.73 and the Stablecoin Fei’s Bid Slides to $0.136

On social media and forums, crypto advocates have been discussing the defi project called Fei after it lost its peg with the U.S. dollar this week. Currently, a single fei (FEI) is exchanging hands for $0.76 per unit but the price sunk lower than current exchange rates. Coingecko data shows a single FEI dropped to a market price low of $0.73 per token on April 7, 2021.

1 FEI = $0.136, @rleshner is down 80% from his bullish buying price. I think one takeaway is big names mean nothing. pic.twitter.com/xGiwKqUUON

— banteg (@bantg) April 7, 2021

However, the Fei protocol’s bid hit $0.136 and crypto supporters started talking about the situation. Avalanche executive Emin Gün Sirer noticed the coin lost considerable value and spoke about the concept a great deal.

“FEI dropped down to $0.136. In the process, it should have taught everyone a few lessons about stablecoin design and, perhaps, crypto investing,” Emin Gün Sirer tweeted. FEI/TRIBE was a two-coin algorithmic stablecoin, with a twist. The twist was flawed from the start and it should have been possible to predict that this idea would not work,” he added.

The Avalanche founder and CEO continued:

In a typical two-coin algorithmic stablecoin, you have one coin, FEI, trying to maintain the peg, while the other one is used [to] absorb the volatility. Algorithmic stablecoins work very well when the demand for the coin is so high to be over the peg: you just mint more FEI to bring the price down to the peg. The actual challenge lies in what to do when demand is lagging and price is low.

Not the First Stablecoin to Drop the Peg

A stablecoin’s biggest job is to maintain its peg and if it doesn’t then it can be a disaster in the marketplace. In the spring of 2019, Bitcoin.com reported on how the algorithmic stablecoin DAI struggled with its peg. Other popular stablecoins like tether (USDT) and USDC fluctuate but only by a couple of pennies or so either above or below depending on demand.

There have been other stablecoin failures in the past like when investors lost money with nubits (USNBT). The token remained pegged to the USD for quite some time after launch, until June 9, 2016 when it dropped well below the dollar peg. Today the so-called stablecoin nubits (USNBT) is only worth $0.22 per unit.

In more recent times, in November 2020, the OUSD stablecoin issuer, Origin Protocol suffered from a flash loan attack and the coin lost its peg. At press time, Coingecko stats show fei (FEI) has a fully diluted valuation of around $1.8 billion. Fei supporters and investors are confident the $1 target will be fixed in time.

What do you think about the issues with the Fei protocol stablecoin and how it lost its peg with the USD? Let us know what you think about this subject in the comments section below.

South African Companies Convert Cash Holdings Into BTC— Crypto Asset Is Hedge Against Devaluation

30/03/2021 by Idelto Editor

New reports emerging from South Africa suggest privately held firms are converting a portion of their cash holdings into bitcoin as they seek to hedge against currency devaluation. According to one report, an open-source software specialist firm, LSD Open, could well be the first South African company to make the bold step after it reportedly acquired $134,000 worth of bitcoin.

Bitcoin Philosophy

As a local report explains, LSD Open completed the purchase in two separate transactions and an average price of just over $34,200 per BTC was paid. At the time of writing, the value of LSD Open’s BTC holdings had grown by almost 70% in just “a matter of weeks.” Meanwhile, the report also discloses that LSD Open’s BTC acquisition had been facilitated by Bitfund, a local cryptocurrency exchange.

LSD Open CEO Stefan Lesicnik is quoted explaining how bitcoin’s attributes are aligned with the philosophy of his company. Lesicnik said:

Our vision is to make the world more open, and bitcoin supports our philosophy on how we believe the world works best.

The CEO adds that working in the open-source space seems to “attract many crypto enthusiasts for whom the decentralised, open nature of cryptocurrencies appeals.” Meanwhile, Lesicnik also discloses that LSD Open is also involved in a “broad spectrum of the ecosystem, including running and maintaining bitcoin full nodes.”

More Companies Planning to Buy

In the meantime, the same report also quotes Dean Joffe, co-founder of Bitfund, revealing how his organization “has helped seven or eight South African firms to buy cryptocurrencies – mainly bitcoin and stablecoins like USDC.” Joffe also adds that his company is already “in discussions with two Johannesburg Stock Exchange-listed companies about doing the same for them.”

However, the report explains that these companies “have not yet pulled the trigger on any cryptocurrency purchases.”

What are your thoughts on the move by South African companies to buy and hold BTC? You can tell us what you think in the comments section below.

BIS Chief Banker Criticizes Bitcoin as Inherently Risky, Says BTC Vulnerable to 51% Attack

29/01/2021 by Idelto Editor

Bank for International Settlements (BIS) general manager Agustin Carstens has criticized bitcoin saying the asset was inherently risky and “increasingly vulnerable” to a 51% attack.

A long time bitcoin (BTC) skeptic, Carstens stressed that only central banks should be issuing digital currencies.

“Investors must be cognizant that bitcoin may well break down altogether,” he opined, in a speech delivered at Hoover Institute on January 27, 2021. “Scarcity and cryptography alone do not suffice to guarantee exchange,” Carstens stressed.

Carstens, who runs the Basel-based central bank for central banks, speculated that the Bitcoin network becomes “increasingly vulnerable” to majority attacks as the cryptocurrency approaches its maximum supply of 21 million coins.

With fewer coins being produced, rewards to miners for processing transactions will also decline, he said, and confirmation wait times will increase. As a result, bitcoin’s vulnerability to majority attacks will go up.

Carstens described bitcoin as “a speculative asset” that lacks “the actual value backing” and as such, should be seen as a “community of online gamers.” He also cited mining using “more electricity than all of Switzerland” and alleged price manipulation as reasons for this impending breakdown.

“Bitcoin poses as its own unit of account, but fluctuations in value mean it is unrealistic to set prices in bitcoin. This also undermines its usefulness as a means of exchange, and makes it a poor store of value,” noted Carstens.

The BIS chief banker also took aim at stablecoins, such as the one proposed by Facebook originally known as Libra, but recently renamed Diem. He finds fault with private entities running a public monetary system by issuing coins that are backed by other assets such as fiat currencies.

“Private stablecoins cannot serve as the basis for a sound monetary system. They need to be heavily regulated and supervised,” Carstens thundered. In his book, governments should forever remain in control of issuing money.

“Clearly, if digital money is to exist, the central bank must play a pivotal role, guaranteeing the stability of value, ensuring the elasticity of the aggregate supply of such money, and overseeing the overall security of the system,” he explained.

What do you think about Agustin Carstens’ remarks on bitcoin risk and vulnerability? Share your thoughts in the comments section below.

Study: 60% of Digital Asset Holders Store Funds on Exchanges While Half Derive an Income From Crypto

29/01/2021 by Idelto Editor

Despite the risks that come with storing crypto assets with third parties, the findings of a new study suggest many cryptocurrency holders still trust exchanges with the safekeeping of their funds. Conducted by Binance Research, the study finds that 60% of “the general population store their cryptocurrencies on an exchange.” In contrast, 26% of the respondents use cold wallets and only 11% are using hot wallets.

Security of Funds Remain a Key User Concern

Dubbed the 2021 Global Crypto User Index, the study’s findings “are based on a global survey issued to over 61,000 crypto users across 178 countries and regions.” The study survey, which ran from September 15 to October 25, 2020, explored questions surrounding the respondents’ demographics. Researchers also sought to understand the crypto holders’ attitudes, preferences, adoption, and motivations  towards cryptocurrency investment.

Meanwhile, the study findings show that despite the high percentage of the respondents who prefer storing funds with an exchange, security of the same assets remains a key. As the findings show, 28% of respondents prioritize an exchange’s “reputation of being secure” when choosing the best platform to buy cryptocurrencies.

The concern receiving the next highest consideration is the “intuitive user experience and user interface.” On the other hand, only 3% of the respondents prioritize an exchange’s reputation for being compliant with regulations.

Crypto as a Source of Income

In terms of the number of users that derive their income from cryptocurrencies, the study findings show that 51% of respondents said yes. From this figure, about 15% say cryptos are a primary source of their income while for the remaining 36% these constitute a secondary income. Still, the findings show that 48% of the respondents still consider crypto a hobby.

Meanwhile, the other key findings of the study include the popularity of decentralized finance (Defi) in South East Asia where 52% said they use Dapps. Overall, 66% of all Dapps users are using Defi applications.

The findings also suggest that a majority of users have less confidence in stablecoins with 78% saying they “would rather use bank coins instead of stablecoins.” Furthermore, findings suggest “adoption is primarily driven by the expected future utility for crypto assets.”

Do you agree with the findings of this study? You can share your views in the comments section below.