In this issue
- U.S. lawmakers propose creation of digital dollar and wallet to deliver stimulus
- Coinbase legal chief tapped for U.S. Treasury regulatory post
- Bitcoin-Red Cross fundraiser for Italy
- Is Covid-19 universal basic income’s moment in the sun?
- Steem’s hard fork into Hive
- In China: blockchain reopens a nation in recovery, and more
Listen to the podcast
Listen to Forkast.News Editor-in-Chief Angie Lau and Senior Editor Sam Reynolds discuss the top blockchain news from around the world.
From the Editor’s Desk
We focus on the markets now. With this incessant downpour of Covid-19 news and coronavirus-triggered sell-offs across all asset classes, there’s now increased talk of how to combat market contagion. And that’s where we see a silver lining emerging for cryptocurrency — blockchain-backed digital money — amidst these dark clouds, and perhaps blockchain being used to deliver the next-generation of emergency fiscal stimulus. Is this the (second) black swan event that ushers in usage of a new technology-backed fiat?
In 2009, bitcoin emerged from the rubbles of the global financial crisis. Eleven years later, Coinbase — one of the biggest digital currency exchanges in the world — sees its Chief Legal Officer, Brian Brooks shift into the U.S. Treasury to become its new COO of the Office of the Comptroller of the Currency. If that’s not a bridge embodied by one man from cryptocurrency markets directly to the U.S. government, well, then I don’t know what is. Are we seeing a race emerge in real time between the U.S. and China now to launch the world’s first government-backed digital currency?
The “Take Responsibility for Workers and Families Act” proposed by the Democrats would create a “digital dollar” with all the hallmarks of a central bank digital currency. Keep in mind that there are many legislative hurdles to pass through before this becomes a reality. But, it shows that the concept has a serious audience within the halls of power.
Alternative thinking is now mainstream. In Italy, Banca Sella, challenger to incumbent banks, has opened up bitcoin trading following the fast fundraise by Italy’s Red Cross asking for donations in bitcoin to help the battle against Covid-19. The U.S. is taking steps to deliver direct financial aid into the hands of Americans, and our Forkast.News piece on universal basic income outlines in detail some of the math and thinking that needs to go into it. In China, blockchain may also play a role to authenticate the healthcare supply chain as it aims to thwart off a second wave or re-emergency of contagion.
It’s innovation that will be part of the answer to what will become the new normal — whatever “normal” means anymore. But that doesn’t mean we don’t keep thinking our way to a solution. Indeed, that’s all we can do — and thank goodness for technology giving us all the continued decentralized ability to work together. We keep moving forward along with you. Stay well, stay safe.
Until the next time,
Angie Lau,
Founder & Editor-in-Chief
#1 Is U.S. now leading digital currency race?
Digital dollar: over 5,000% increase in Google search volume
Congresswoman Maxine Waters, Chairwoman of the House Committee on Financial Services, released the “Financial Protections and Assistance for America’s Consumers, States, Businesses, and Vulnerable Populations Act.” The legislation proposes monthly direct payments through digital wallets.
- The bill defines a digital dollar as “a balance expressed as a dollar value consisting of digital ledger entries that are recorded as liabilities in accounts of any Federal reserve bank; or … an electronic unit of value, redeemable by an eligible financial institution.”
- However, not all of the initial stimulus would likely be delivered by digital dollar. The bill states that the deadline for creating a digital dollar would be Jan. 1, 2021.
- The situation is fluid, and specifics about the bill are changing as it gets negotiated in the house. Multiple members of Congress are presenting revised versions of the bill for review.
- On March 25, Senator Sherrod Brown introduced a bill to the Senate that would create “pass-through digital dollar wallets” in order to distribute aid.
- As of this publication, provisions about a “digital dollar” as a potential vehicle of aid distribution are still in proposed legislation.
Forkast.Insights | What does it mean?
This is an exciting development in the race between the U.S. and China to create a central bank digital currency (CBDC). If done correctly, it would be far more efficient than firing up the check printing plant to create hundreds of millions of checks and then mail them out. Now, to be sure, like China’s digital currency electronic payment system, which is likely to be released soon, this is not a cryptocurrency per se, nor does it necessarily use blockchain, but rather a non-distributed digital ledger.
The need to rapidly deploy stimulus funds aside, a U.S. CBDC is necessary to preserve the American hegemony within the global financial market in an era where Facebook — a non-state actor — is proposing a global currency that would likely have the liquidity of a G8 country, and China is poised to roll out its DCEP to solidify its dominance in the sphere of influence known as “One Belt One Road.” China needs to make the RMB more liquid; it’s of great annoyance to Beijing that countries in its sphere of influence in the region still prefer to settle transactions in USD. The same goes for other central bankers. They would not mind the further internationalization of their respective currencies as a method of transaction settlement — hence the regional race for CBDCs.
As discussed in the previous Current Forkast, digital currencies are perhaps a last weapon in the arsenal of central banks to deploy stimulus. The Bank of England is a proponent of the idea simply because it would be an infusion of cash without the requisite interest attached to it. “A CBDC that could be remunerated at a negative rate could be used to relax that constraint, to the extent that the constraint was caused by the fact that cash pays zero interest…. This could, theoretically, widen the policy options available and avoid the economic costs of having monetary policy hit the effective lower bound, potentially improving economic outcomes,” said BoE in a policy paper.
The U.S. push for a CBDC currently exists only as a policy proposal. A tweet from the House Financial Services Committee said that there are a “few ideas floating on how to provide stimulus to people.” It is exciting that this is even being considered, and its execution at such a scale would provide a phenomenal case study for CBDC efficiencies, but we are still in wait-and-see mode.
#2 Treasury hires crypto lawyer for regulatory post
Brian Brooks: over 5,000% increase in Google search volume
Coinbase Chief Legal Officer Brian P. Brooks is appointed the new Chief Operating Officer of the Office of the Comptroller of the Currency (OCC). The designation was made by Treasury Secretary Steve Mnuchin and will be effective April 1, 2020.
- In November 2019, Brooks authored a commentary for Fortune detailing his belief that the private sector is best positioned to develop a digital dollar.
- “In short: the private sector should build the technology, and the public sector should set monetary policy,” he wrote.
Forkast.Insights | What does it mean?
The Office of the Comptroller of the Currency is a lesser-known regulator within the U.S. government, but still an important one that many Americans invisibly interact with as they bank. Although many Americans associate banking regulations with the Federal Deposit Insurance Corporation (FDIC), that’s only one of the regulators that supervises the banking sector to ensure its integrity and soundness. The role the OCC plays is creating policy to ensure that the asset mixes held by banks can survive economic stress, and also to guide the implementation of “know your customer/anti-money laundering” (KYC/AML) policy that ensures compliance with the law while also minimally inconveniencing customers.
All this comes as the US announces the possibility of delivering stimulus via a digital dollar. A bill introduced by the House Financial Services Committee would see FDIC member banks creating the infrastructure required for this to happen. The first step would be a pass-through digital dollar wallet to all customers eligible for the stimulus. Critical to all of this working would be banks working hand-in-hand with policy makers and stakeholders to ensure that this is seamless integration into the broader financial ecosystem and eventual launch. This is where Brooks’ expertise will come in handy.
Historically, the blockchain/crypto industry has had trouble getting buy-in from most banks as they get nervous dealing with companies that are backed by assets they might not understand, and perhaps don’t have as stringent of a KYC/AML policy — although this has changed. Most big exchanges have implemented the latter, but there’s still the understanding gap. Although Brooks’ position at OCC doesn’t specifically mention blockchain nor crypto, given the growing institutional interest in the field and his experience at Coinbase, it’s likely that acting as a liaison between the industry and OCC would be where he spends part of his time.
This should be seen as a win for the industry. A big barrier for blockchain/crypto companies doing business in the United States has been access to the banking sector; many big banks will just do a blanket refusal when they see the name blockchain, crypto or bitcoin attached to a company’s name. Brooks will no doubt be working to craft policy to help banks overcome this phobia, while at the same time not enacting such a high regulatory burden on business to keep the U.S. market competitive.
#3 Bitcoin in Italy
Bitcoin Italy: 1,900% increase in Google search volume.
Coronavirus death toll in Italy and Spain has surged the past week, pushing Italian challenger bank Banca Sella to open bitcoin trading through the bank’s Hype platform. The bitcoin wallet is provided in partnership with Milan-based startup Conio to allow customers to buy and sell bitcoin without associating with a crypto exchange. Hype already hosts 1.2 million Italian users in lockdown.
- Due to lack of information, the Twitter community has been looking for confirmation from bitcoiners currently locked down in Italy.
- @btcbenbee
- Hi @mir_btc did you see this? Actually true and confirmed in Italy?
- @mir_btc
- Absolutely true and beautiful!
- @btcbenbee
- The announcement follows last week’s fundraiser by Italian Red Cross, which raised donations in bitcoin, to help the country battle the ongoing pandemic.
- The project’s target goal of € 10,000 was met and used to purchase advanced medical post (AMP) for pre-triage.
- A new goal has been set and the fundraiser is still active.
Forkast.Insights | What does it mean?
The economic fallout from Covid-19 will be intense, and unlike anything else seen before in modern history.
The debate rages on if bitcoin is considered a safe haven asset. Historically in other banking crises, it has been; one of bitcoin’s first big jumps in value was during the Crypriot financial crisis of 2012 to 2013. When the country’s big banks announced that depositors would need to take a haircut on their assets to cover the banks’ losses, people made a run on the banks and bought up bitcoin in an effort to preserve what capital they had.
Fast forward to 2020 and this thesis has yet to hold true. As discussed in a prior edition of The Current Forkast, the initial decline of the S&P 500 did not trigger a converse rise in the price of bitcoin. In fact, the price declined much more than the market. But after a few days of gyration, the price is back up in the $5,000s, low $6,000s, putting the weekly losses at much less than the equities market.
Even before this crisis, Italy had myriad economic issues. The dust is nowhere close to settling, but the end result will be nothing short of a calamity for the Italian economy and financial sector. This uptick in Google queries means that Italians are looking for a safe haven and alternative investment to shield themselves from the fallout. Will bitcoin provide the same safe haven as it once did? The initial data says no, but that doesn’t mean that it’s not possible in the long term. Between 2013 and 2020, much has changed; there’s now a mature digital assets sector to complement bitcoin, and time will tell if all of this will provide a safe haven asset class for investors to ride out the storm.
#4 Governments reconsider UBI
Universal basic income: over 5,000% increase in Google search volume.
The global workforce is immobilized by coronavirus-driven lockdowns, as small and medium enterprises (SMEs) struggle to keep businesses alive and workers employed. Governments around the world, including the U.S., Hong Kong, Britain and Australia recently announced stimulus packages and cash handouts to cushion the economic collapse.
- As an idea, UBI was recently popularized by former Democratic U.S. presidential hopeful, Andrew Yang, who proposed giving $1,000 a month to every American adult not already on government assistance.
UBI, or some form of it, is also now advocated by prominent Republicans such as U.S. Senator Mitt Romney.
Forkast.Insights | What does it mean?
Universal basic income is an idea that now has support on both the left and the right. Andrew Yang popularized the idea, but former Republican presidential hopeful and current Senator Mitt Romney might be the one who powers the idea into legislation. We are in such extraordinary times that the candidate who was once the face of the Republican establishment is now the legislative champion of an idea that was central to a Democratic candidate’s campaign.
Should such a system be implemented, blockchain would no doubt play a role in its execution. As Forkast.News contributor Geoff Bell points out, 10.6% of all welfare payments are improper, costing $77.3 billion in 2017, thus the need for a verifiable payment system that can’t be tampered with is obvious. This would also be a good use case for stablecoins, as the process of printing hundreds of millions of checks to execute any form of UBI would be time-consuming and inefficient while putting postal workers at greater risk of catching the virus. At a time when China is leading the race to create a central bank digital currency, having this trillion-dollar stimulus package being delivered by stablecoins would solidify America’s place as a robust competitor to China in this field.
But don’t expect UBI to be permanent. Aside from the temporary coronavirus-related payments proposed by the White House, it’s simply too expensive to continue long term. But this year will be a time of uncharted territory as the world experiences the most severe economic contraction in recent history. Economic restructuring will be happening out of necessity, and perhaps a form of UBI will have a place in this new economic order.
#5 More steam over Steem
Hive: over 5,000% increase in Google search volume.
Binance and Huobi support the hard fork of the Steem blockchain, Hive, as the Steem community successfully isolates from Justin Sun’s alleged takeover.
- TRON’s CEO is accused of attempting to censor contents relating to Steem’s hard fork on Steemit.
- @girlgone_crypto: “Well, it finally happened. I had my content censored. I just always figured it would happen on Youtube… not Steemit.”
- Despite Justin Sun’s frequent activity on social media, he has not released a statement on this issue.
Forkast.Insights | What does it mean?
Justin Sun has taken a beating during this fiasco, as the community of Steemit — which created value for the platform — has effectively abandoned the platform after turning against him and forking the blockchain over to HIVE after initiating an airdrop of tokens to incentivize the shift.
Consequently, the price of the STEEM token has declined dramatically over the past month, dropping over 60% between Feb. 14 and March 18.
This shows the value of community. Sun’s problem was that he didn’t fully engage stakeholders to keep them apprised of his plans, so when he bought up a controlling stake of the network’s tokens, it was met with hostility as content creators saw this as a threat to their community instead of a broader plan to augment it.
Sun’s investment is now a flop, but the community will live on. It will be looked back on as a lesson in poor community governance and relations.
#6 China blockchain news roundup
Beijing banking and insurance supervision bureau alerted consumers to financial fraud during the coronavirus pandemic as reported by people.cn on March 11, right before the World Consumer Rights Day.
- The report warns about four types of financial frauds, including low-interest loan fraud, gaining privacy information, illegal fund-raising and illegal investments. The concept of “blockchain” was being used by scammers, the report said, to attract people and “earn a great amount of money under quarantine.”
- “It claimed to raise money to build mask industries outside of China and promised to give high returns to investors,” the report said, citing the widely criticized CoronaCoin as an example.
Forkast.Insights | What does it mean?
Unfortunately, emergencies such as pandemics are often times when scammers emerge from the woodwork and try to profit during moments of chaos and uncertainty.
Although China is a leader in blockchain technology and research, its regulators are hesitant to allow for any sort of fundraising mechanism that’s blockchain-based, such as STOs, given the proliferation of scams during 2017’s ICO bull market. The ICO hysteria hit China hard, with the Beijing Internet Finance Association and other analysts estimating that ICOs raised just over $1.1 billion in China in the first nine months of 2017. Given that approximately 85% of ICOs were failures, according to an EY study, that’s a lot of retail investors that got wiped out.
Understandably, China takes a hard line on fraud, and given its history with ICOs, any investment scheme offering a combination of quick returns, blockchain, and a topical issue of the day will likely be met with a swift response from Chinese regulators and law enforcement.
PBOC Shanghai published a cartoon on its official Wechat account on the World Consumer Rights Day, saying that DC/EP is still under research, no exact publish date so far, and that any kind of organization that claims to use the concept of “DC/EP” is a fraud.
Forkast.Insights | What does it mean?
China’s digital currency electronic payment system is hotly anticipated, but has likely been delayed by the productivity losses of the last two months thanks to Covid-19.
But no doubt China is currently doubling down on its efforts to expedite the platform’s completion. As we noted in last week’s Current Forkast, round after round of quantitative easing and stimulus are definitely on the agenda, so why not use the DC/EP system in their issuance? Not just in China, but Central bankers around the world are going to have an eye on preventing a run on the banks as well as capital flight when they roll out their next rounds of stimulus. Using a central bank digital currency system would be the perfect way to avoid both.
With the announcement of gradual containment of the novel coronavirus in China, the attention is shifting towards reopening of industries. The digital version of People’s Daily, People.cn praised the role of blockchain in helping industries resume business.
- A central level example is “Enterprise Trust Code“(企信码), a research institution backed by the government, which provides enterprises with a unique digital ID. The Unique ID allows an enterprise to bind all kinds of business behavior and demands in one place, to achieve digital, online and intelligent business models and receive help and industry updates from the government.
- A local example comes from Northern China. Gansu Province built a blockchain-based SME one-stop service platform to update the resumption process around the province, manage epidemic-prevention supplies and also track the health status of people going back to work.
- Jinan, the capital of Shandong, also built a similar blockchain-based epidemic prevention and control platform within seven days.
Forkast.Insights | What does it mean?
China’s fight against Covid-19 has reached an important milestone: containment. But as the country reopens for business, the next step will be to ensure that this doesn’t trigger a second wave of infectious outbreak. To do this, China will need to lean on Big Data and AI to analyze the models created during the worst of the outbreak and figure out how to predict and prevent disease re-emergence.
Blockchain has a role to play here as well. The chapter of this war on Covid-19 will involve a lot of certification: certification that employees who all worked in a specific area were healthy and cleared to be there, certification that hospitals have sufficient supplies should a re-emergence occur, certification that the complex supply chain that’s necessary to produce consumer goods is ready to receive orders. This is where blockchain excels, and China’s relatively mature sector may be able to step up and accomplish this task.
