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Stone Ridge’s Open-End Mutual Fund to Invest in Bitcoin — SEC Filing Opens the Door for Other Mutual Funds to Add BTC

28/02/2021 by Idelto Editor

Stone Ridge's Open-End Mutual Fund to Invest in Bitcoin — SEC Filing Opens the Door for Other Mutual Funds to Add BTC

Asset management firm Stone Ridge has filed with the U.S. Securities and Exchange Commission (SEC) for its open-end mutual fund to invest in bitcoin. “This is a big deal. Stone Ridge filing opens the door for every mutual fund to add bitcoin,” said a fellow asset manager.

Stone Ridge Wants Its Mutual Fund to Invest in Bitcoin

Stone Ridge Trust filed Form N-1A with the U.S. Securities and Exchange Commission (SEC) last week. The filing, which is expected to become effective on April 26, relates to the Stone Ridge Diversified Alternatives Fund.

The fund “seeks to generate total returns from diverse investment strategies that we believe have the potential for attractive returns and are diversifying from stocks and bonds,” the filing details. “These strategies include reinsurance, market risk transfer, style premium investing, alternative lending, single-family real estate, healthcare royalties, and bitcoin.”

For the bitcoin investment strategy, the filing explains:

[The fund] seeks to generate returns by gaining exposure to the price of bitcoin by selling put options on bitcoin futures contracts. This strategy may also invest in pooled investment vehicles, such as registered or private funds, that themselves invest in bitcoin.

Anthony Scaramucci, founder of another asset management firm Skybridge Capital, which itself has about half a billion dollars worth of bitcoin in its bitcoin fund, commented on the filing last week. “Important development in bitcoin. Stone Ridge filed with the SEC to become the first open-ended mutual fund to buy bitcoin,” he wrote. Scaramucci also sees heavy demand for bitcoin from his clients and expects the BTC price to reach $100K by year-end.

Noting that “Stone Ridge will be able to start buying bitcoin on April 26 (when their prospectus goes effective),” he opined:

This is a big deal. Stone Ridge filing opens the door for every mutual fund to add bitcoin (if they want to).

Stone Ridge founder Ross Stevens also founded the New York Digital Investment Group (NYDIG), a bitcoin-only financial services firm. Early this month, the firm filed for a bitcoin exchange-traded fund (ETF) with the SEC. Stevens recently said that he sees “a wall of money” coming into the asset class. NYDIG already has over $6 billion in bitcoin and the firm expects to have over $25 billion in the cryptocurrency by the end of the year.

What do you think about mutual funds investing in bitcoin? Let us know in the comments section below.

Filed Under: bitcoin fund, English, investment management, investment manager, mutual fund, News Bitcoin, nydig, open-end mutual fund, open-ended mutual fund, Regulation, SEC, Skybridge, Stone Ridge

Harvard Professor Kenneth Rogoff Warns Central Banks Will Never Allow Bitcoin to Go Mainstream

27/02/2021 by Idelto Editor

Harvard Professor Kenneth Rogoff Warns Central Banks Will Never Allow Bitcoin to Go Mainstream

Harvard Professor of Economics and former chief economist at the International Monetary Fund (IMF) Kenneth Rogoff says that central banks won’t allow bitcoin and other cryptocurrencies to become mainstream. “Eventually over the long course of history, the government first regulates and then it appropriates, and I think we can see that happening here,” he warned.

Harvard Professor’s Warning About Bitcoin

American economist Kenneth Rogoff shared his views on the future of bitcoin, its regulation, and the recent bull run in an interview with CNBC TV18 last week. Rogoff is the Thomas D. Cabot Professor of Public Policy and a professor of economics at Harvard University. He also served as chief economist at the International Monetary Fund (IMF) from 2001–2003.

“Zero interest rates can produce a lot of funny asset valuations. So that is certainly part of it,” he responded to a question about the rise in popularity of bitcoin and its recent bull run. “Clearly, there are a lot of wealthy people and well-known financiers, often very senior, who publically said they are investing in it [bitcoin] and that has given confidence.”

Nonetheless, the professor of economics cautioned: “But I have to say, regulation is in its early innings – if there is no final use case for bitcoins, [and] I don’t think it’s going to be, [then] ultimately this bubble will pop, but it could take a decade.”

Given the recent BTC price surge and the subsequent spike in its market capitalization, Rogoff was asked why central banks and governments have not passed strict regulations to control its trading or even banned it. “I think they are all over it,” the professor replied, pointing out that the Bank for International Settlements (BIS), the G7, and the G20 are all closely watching the cryptocurrency. “Every central bank is looking at this and trying to decide what to do,” he emphasized.

“The real issue is that for the moment it is not really used for a lot of meaningful transactions, except in war-torn states, where I think people use it to get money in and out. That’s certainly a good use,” Rogoff opined.

The economist proceeded to predict: “As it really starts to compete with ordinary, fiat currencies, government currencies, I think they’ll clamp down on it like a ton of bricks. They are not going to allow that to happen.” Comparing bitcoin to modern art, the economist elaborated:

Right now it is an asset class and I suppose in the way modern art is, but it doesn’t necessarily mean that it is in the mainstream. I think that is extremely misleading. Central bankers will never ever allow that.

A growing number of companies are investing in bitcoin, such as Elon Musk’s Tesla, which recently put $1.5 billion in the cryptocurrency, and Jack Dorsey’s Square, which invested $170 million more in BTC. Tesla will also be accepting bitcoin as a means of payment in the near future. Citing bitcoin’s rising adoption and a growing acceptance as a legitimate means of payment, such as what is happening in the U.S. city of Miami, Rogoff was asked if regulating bitcoin would become more difficult for governments.

“I don’t think regulating it is all that difficult,” he replied. “I think that there has been a hesitation to move too quickly because there has been a lot of innovation in the cryptocurrency space and governments want to allow that to proceed.”

In conclusion, professor Rogoff warned:

But make no mistake, the governments need to retain control over taxation, controlling crime, etc. They need to maintain control over the unit of account — the currency. Yes, private innovation can come out for a while, but eventually over the long course of history, the government first regulates and then it appropriates, and I think we can see that happening here.

What do you think about professor Rogoff’s bitcoin warning? Let us know in the comments section below.

Filed Under: English, harvard professor, IMF, Kenneth Rogoff, Kenneth Rogoff bitcoin, Kenneth Rogoff btc, Kenneth Rogoff crypto, Kenneth Rogoff cryptocurrency, mainstream, News Bitcoin, Regulation

The Utter Futility Of A Bitcoin Ban

25/02/2021 by Idelto Editor

In recent days and weeks, U.S. Treasury Secretary Janet Yellen has been raising the alarm about what she perceives to be a rising “misuse” of cryptocurrencies, which she argues are used mainly “for illicit financing” by unsavory groups. During her confirmation hearing, Yellen provided some ominous foreshadowing, saying, “I think we really need to examine ways in which we can curtail their use and make sure that money laundering doesn’t occur through those channels.” Back in December 2020, former Acting Comptroller of the Currency Brian P. Brooks warned consumers to expect more crypto regulations before the end of former President Donald Trump’s term. 

Those regulations never came to pass, but Yellen’s interest in curtailing cryptocurrencies proves that the government’s fascination with the heretofore unregulated monetary system has not faded with the change in presidential administrations. Elsewhere in the world, full and partial restrictions have recently been placed on Bitcoin and crypto usage. 

Bolivia attempted a total ban on Bitcoin as well, and here’s how that’s going. 

From partial to full bans, the record is not especially encouraging for would-be crypto prohibitionists. The historical record bears repeat, indeed virtually constant, witness to this. 

Bans Beget Workarounds

In July 2020, the popular short-form video app TikTok announced that it would be suspending operations in Hong Kong following China’s imposition of a new security law on the city-state. The announcement was followed by three frantic days for the Hongkongers of the platform, until the app was eventually removed from the app store. But clever consumers quickly found workarounds to continue using TikTok. They made use of virtual private networks (VPNs), which gave Hongkongers foreign IP addresses to “trick” the app into operating within the city-state’s borders (much the same way that people circumvent the Great Firewall of China). They also began using non-Hong Kong SIM cards, once again masquerading their activity as taking place elsewhere in the world. 

The failure of the War on Drugs is apparent. But the staunchless flow of not only drugs but weapons (including guns), cell phones and other restricted items into prisons bears simultaneous testament to both human inventiveness and state ineptitude. 

(A fascinating side element to these stories of prisoners circumventing bans is the periodic appearance of cats. Presumably, inmates being held at a prison in Brazil trained a cat to smuggle escape tools into the facility. Officers reported that the cat was seen walking in and out of the prison gates, and on New Year’s Eve in 2012, it was caught by a guard with “two saws, two drills for concrete, a headset, a memory card, a cell phone, three batteries and a mobile phone charger” strapped to its body. Oddly, this happened in Russia too — a cat was smuggling cell phones and chargers into a prison there. And an even better twist involves a prisoner-assisting cat in Sri Lanka which, after being captured, “released itself” — presumably on its own recognizance.)

More similar to the case of Bitcoin is the example of the East German mark and the black market that emerged around currency in a divided Germany. Formally known as the Mark der DDR — the mark of the German Democratic Republic — the East German currency could be exchanged with West German notes at a rate of five to one through official channels (and up to 20 to one on the black market). The German Democrtic Republic (GDR) strictly forbade the import of other currencies, fearing the rise of a parallel currency. Such efforts were futile; East Germans who were desperate for the strong West German mark found ways to acquire it. By 1979, up to a quarter of East Germans had received money from their friends and relatives in West Germany.

The very idea that the government would even attempt to prohibit the development or use of something as sophisticated and ephemeral as a virtual, peer-to-peer currency is beyond ludicrous. It is only in an Orwellian security state that such a thing could be attempted, and even then, it’s unlikely to succeed over time. 

The SOES Wars

Now largely forgotten, the Small Order Execution System (SOES, rhymes with “Moe’s”) Wars exemplify the one-upmanship cycles that arise in regulatory attempts to quash certain activities: often, as the case was here, worthy of the old Mad “Spy vs. Spy” comics.

SOES was an electronic stock trading system created in 1984 by Nasdaq, and one which attained particular importance after the 1987 financial crash. It was introduced in response to the assertion that during the severe plunge in stock prices, certain stock dealers “backed away” from their trading responsibilities, which include providing firm (non negotiable) quotations even when prices are collapsing. SOES permitted execution of up to 1,000 shares of a given stock from any dealer at the inside market (highest bid or lowest offer) at a given time. 

Not long after its introduction, a handful of traders discovered that SOES was useful for “picking off” other traders not paying close attention to their markets, thus delivering fast and sometimes profitable transactions. The dealers on the receiving end complained to the regulators, saying that SOES was created for use in emergency market conditions, not for everyday use. 

In response to a regulatory mandate that SOES only be used for retail customer orders, traders adept at using SOES — some of whom began opening brokerage firms dedicated to the activity — solicited individual client accounts, arranging to split the profits with them. In response to the restriction that orders be limited to trading on one side (buy or sell) per individual stock per day, SOES traders opened hundreds of accounts: buying in one, selling in another throughout the day, rearranging trades before sending them to their clearing firm after the market closed. And when, in 1997, the Order Handling Rules seemed to defang the SOES system by making the maximum automatic execution size 100 shares, it hardly had an impact. By that time, SOES trading firms had morphed into proprietary trading firms, bringing a wide variety of other electronic trading systems in-house: SelectNet, Electronic Communication Networks (ECNs), crossing networks and even, in some cases, Instinet.

Why, an inquiring reader might want to know, didn’t the securities regulators simply ban the Small Order Execution System outright at some point? It’s difficult to say, but likely because in the event of a market crash or crisis, the optics of having eliminated a method for retail traders and brokers to get out of positions quickly would have been decidedly negative. 

A common expression at that time was that the SOES traders were “bandits,” taking advantage of systems intended for other, more proscribed uses for profit. Others held that with a history of not honoring their own quotations during periods of duress in markets, the Nasdaq dealers had brought the headaches of SOES upon themselves. The same can be said of the global orchestrators of monetary and banking policies of their attempts to decry Bitcoin as an instrument of criminals. 

One would expect at least the same tit-for-tat dynamic to follow a Bitcoin ban. And who can say what will take the place of Bitcoin if a partial or full ban were effective, even temporarily? It seems likely that a new cryptocurrency, improving upon the handful of small problems Nakamoto’s design has, would quickly fill the gap.

Conclusion

As the overplayed adage goes, “where there’s a will, there’s a way.” Throughout history, governments have identified emerging threats and sought to eliminate them through heavy-handed bans, or regulations so stringent that they are effectively bans themselves. But the only thing that is guaranteed through these actions is certainly not the eradication of the “undesirable” product or behavior — it’s the human tendency to find new and innovative workarounds in the face of obstacles. Not least of which have been solutions to government intrusions upon individual liberty. 

This is a guest post by Peter C. Earle. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

The post The Utter Futility Of A Bitcoin Ban appeared first on Bitcoin Magazine.

Filed Under: banning bitcoin, Bitcoin Magazine, English, Regulation

Nigerians Need Bitcoin, So Where Will The Restrictions Lead?

25/02/2021 by Idelto Editor

The massive rally in bitcoin prices has created a lot of buzz around cryptocurrencies lately, but Nigeria is one of the countries where bitcoin has been widely accepted for some time. The West African country has the highest bitcoin trading volume in Africa and recently ranked second globally of any country after the United States. According to Bitcoin.com, Nigerians have traded more than 60,200 BTC (worth more than $566 million) since 2015 through Paxful’s P2P exchange. 

Why Has Bitcoin Risen In Nigeria?

Numerous factors have contributed to the tremendous rise of Bitcoin adoption in Nigeria. One of the major reasons is stringent forex policies by the Central Bank of Nigeria (CBN). Also, a decline of the naira (the country’s fiat money) has made bitcoin appealing to Nigerians. For instance, on December 18, 2020, a communique from CBN directed deposit money banks to close all naira accounts for international money transfers operators to “ensure that all diaspora remittances are received by beneficiaries in foreign currency only.”

Nigerians have resorted to seeking alternative currencies due to dollar scarcity caused by the stringent banking laws. In fact, bitcoin adoption has grown significantly in other countries that have experienced diminishing confidence in national fiat currency and rising inflation, such as Zimbabwe. 

In Nigeria, the bitcoin trade has increased by 19 percent annually from 2017 to 2020, with 2020 recording the highest volume (20,504.50 BTC). During the lockdown, the bitcoin trade increased by 30 percent, with the peak of the pandemic recording the highest volume. According to CoinDesk, new account registrations for Paxful increased by 137 percent  between January and September 2020. The increased popularity of BTC is also evidenced in the gambling industry, with many bitcoin casino sites operating in Nigeria that are often located overseas.

A Looming Bitcoin Ban

While bitcoin and some other cryptocurrencies are decentralized, CBN is cracking down on their trade. On February 5, 2020, cryptocurrency enthusiasts in Nigeria received shocking news. CBN issued a reminder to all regulated financial entities that they were prohibited from facilitating businesses involved in cryptocurrency transactions. Therefore, transacting bitcoin is essentially prohibited. 

CBN initially banned the provision of financial services to cryptocurrency exchanges in 2017. However, it allowed banks to facilitate customer exchange, provided they met certain requirements. The latest directive seems to make facilitation completely illegal. By regulating cryptocurrency transactions, the central bank aims to take more control of the international payment system.

The young and tech-savvy generation of Nigerians are using bitcoin to maneuver around the restrictive monetary and banking system. As such, P2P exchanges are the most popular methods of trading bitcoin. These decentralized platforms connect buyers and sellers without the need for third parties. This means that bitcoin traders can circumvent government regulation. 

Niara Instability

Meanwhile, the Nigerian naira has experienced divergent exchange rates leading to increased instability and uncertainty. As a result, the financial authorities are now putting in measures to shield the naira and micromanage foreign exchange supply. Due to these restrictions, bitcoin is considered a suitable alternative for international transactions. 

Numerous, easy-to-use bitcoin exchange platforms have accelerated the adoption of bitcoin in Nigeria. The most popular platforms include Binance, Paxful and Luno. As per Bitcoinke, Paxful is currently the leading P2P exchange platform in the world, controlling about 52 percent of the global market share. Local platforms such as BuyCoins, Busha and Quidax are also quite popular. Besides these platforms, some people transact using informal channels such as WeChat, WhatsApp and Telegram.

With about 1.3 million accounts, Nigeria forms about a quarter of all registered accounts on Paxful. According to Nne Nwachukwu, the Paxful Nigeria regional manager, Nigerians mostly use the platform for peer-to-peer and arbitrage trading. A significant number also use local platforms for remittances.

Local apps such as BuyCoins allow Nigerians to buy and sell bitcoin using Nigerian debit cards. Many freelancers and expat Nigerians use BuyCoins, which processed transactions worth $140 million last year.

The central bank has not clearly defined the reason for the ban, listing only vague concerns about cryptocurrencies’ use in illegal activities. However, the ban may be due to the asset class’ dominance over the country’s fiat economy. Currently, assets worth about $4 billion are embedded in cryptocurrencies in Nigeria.

#EndSARS Protests And Bitcoin

According to CBN, the ban was instituted in good faith. To be specific, the central bank claimed that it wants to protect Nigerians from the speculative market. However, critics believe that the ban is associated with the recent #EndSARS protests against police brutality. Also, the government may believe that digital currencies are used to fund terrorist groups such as Boko Haram.

The protestors and aid groups resorted to accepting donations in bitcoin because the government restricted their access to financial services.

As noted above, last year, CBN issued a directive instructing banks to close all accounts that receive money in foreign currencies. This has affected people living in the diaspora, sending money home, as well as freelance workers who accept payments in foreign currencies. 

Diaspora remittances are restricted only to domiciliary accounts. This type of account limits Nigerians to receiving payment in foreign currencies and exchanging them for naira. However, operating these accounts comes with strict measures, such as $100 minimum deposits and the requirement of multiple references. 

But, that is not all. Since mid-2020, banks have limited the amount of money that Nigerian people can spend using their debit cards. Typically, banks are limiting withdrawals to $100. The reduction was necessitated by the shortage of dollars caused by a decline in oil prices, the country’s main export. People who want to import items or buy dollars have resorted to using bitcoin. 

Where Things Will Go

A group of senators has already opposed the CBN order. In fact, they have summoned the central bank to expound on the latest development. However, some senators support the CBN directive, claiming cryptocurrencies have rendered the naira almost useless. Also, the Nigerian securities and exchange commission has endorsed the CBN directive.  

CBN has taken issue with cryptocurrencies’ volatility and opaqueness. Other countries, like the U.S. and UK, also appear to be clamping down on cryptocurrencies. The Financial Conduct Authority (FCA) has banned the sale of cryptocurrency derivatives to retail investors to protect rookie investors from sudden and unexpected losses. 

Many African countries, including Kenya and Ghana, do not recognize cryptocurrencies as a form of currency because they are hard to regulate. After Nigeria’s ban on cryptocurrencies, many African countries — such as South Africa, where bitcoin is widely accepted — are probably monitoring the development closely. Other central banks in these countries will most likely move into action to protect local fiat currencies by banning cryptocurrencies as well.

This is a guest post by Michael. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

The post Nigerians Need Bitcoin, So Where Will The Restrictions Lead? appeared first on Bitcoin Magazine.

Filed Under: Bitcoin Magazine, English, Nigeria, Regulation

New Crypto Rules in Thailand Could Require Traders to Show Income Before Opening Trading Accounts

25/02/2021 by Idelto Editor

New Crypto Rules in Thailand Could Require Traders to Show Income Before Opening Trading Accounts

Thailand seeks to introduce a new set of rules for retail crypto investors, specifically targeting those who want to open accounts. The Thai financial watchdog could require domestic crypto exchanges to ask traders for proof of income.

Thai SEC Could Also Ask Crypto Investors to Prove Their Knowledge of the Market

According to a Bloomberg report, the Securities and Exchange Commission (SEC) of Thailand is likely preparing the ground to require investors to show their income or assets before opening accounts.

Ruenvadee Suwanmongkol, the secretary general of the country’s financial watchdog, pointed out that anyone who isn’t allowed to trade cryptocurrencies via their accounts can invest through licensed managers. She added:

It’s a big concern as most crypto investors on domestic exchanges are very young, such as students and teenagers. We realize those people love innovations and technology, but investments in these assets have enormous risk.

Moreover, the general secretary said that non-qualified crypto traders could invest via financial advisers only if they’re licensed by the SEC.

The watchdog is set to unveil its new rules on crypto trading over the week, ahead of a public hearing scheduled for March. Officials involved in the meetings are expected to evaluate recommendations from local exchanges and brokerages.

Although it’s not confirmed, the general secretary suggested that investors have to prove some knowledge of the market before being allowed to open crypto accounts for trading.

Six Licensed Crypto Exchanges Operating in Thailand so far

The rhetoric from the Thai SEC is now shifting to a cautious one towards the cryptocurrencies’ risks. However, they keep granting licenses to crypto businesses in the nation. So far, in terms of digital asset exchanges approved, there are only six operating legally in Thailand.

They are Bitkub, BX, Satang Pro, Huobi Thailand, ERX, and Zipmex. All six licensed crypto exchanges are approved for both cryptocurrencies and digital tokens, except for ERX, which is only approved for the latter.

The SEC distinguishes cryptocurrencies as “created for the purpose of being a medium of exchange for the acquisition of goods, services, or other rights.”

On the other hand, digital tokens are created “for the purpose of specifying the right of a person to participate in an investment in any project or business, or to acquire specific goods, services, or other rights under an agreement between the issuer and the holder,” said the financial watchdog.

What do you think about the words from the Thai SEC general secretary? Let us know in the comments section below.

Filed Under: Asia, English, News Bitcoin, Regulation, thai sec, thailand, thailand crypto, thailand crypto regulation, thailand exchanges, thailand license

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