Taiwan Follows Japan’s Bitcoin-Friendly Move, Avoids Outright Ban

In a positive move for the cryptocurrency market, Taiwan has announced that it won’t be banning digital currencies like bitcoin.

News of what Taiwan intends to do avoids the harsher steps taken by China and, more recently, South Korea. Instead, Taiwan is copying the move by Japan by embracing the digital currency market.

The news was announced by Taiwan’s Financial Supervisory Commission chairman Wellington Koo. During a joint session of parliament and cabinet, Woo stated that Taiwan would not regulate against the industry. Instead, he pledged to leave the door open for development.

Kuomintang Party (KMT) congressman Jason Hsu questioned Woo on the country’s position. However, Woo agrees with Hsu and believes that the technology presents a huge economic opportunity for Taiwan. The political party has long held a pro-fintech stance.

Hsu said:

“Just because China and South Korea are banning, doesn’t mean that Taiwan should follow suit – there is a huge opportunity for growth in the future. We should emulate Japan, where they treat cryptocurrency as a highly regulated, highly monitored industry like securities.”

According to Hsu, this paves the way for the passing of the ‘Financial Technology Innovation Experimentation Act.’

If passed, it would establish a regulatory fintech sandbox for research into digital currencies and the blockchain.

A Long Way to Catch Up

Unlike Japan, Taiwan’s venture into the cryptocurrency market is relatively new. Despite this, though, it has a highly active crypto scene. This can be seen by the fact that MaiCoin, Taiwan’s only digital asset exchange platform, has around 25,000 users.

Yet, the country is eagerly working at building the market.

So much so, that AMIS, a Taipei-based blockchain consultancy, is attempting to get financial institutions to join a private blockchain consortium proposition. AMIS is a sister company of MaiCoin. At present, only Taipei Fubon Bank and Taishin International Bank have joined while Taiwan’s Industrial Technology Research Institute is an investor; however, it’s still early days.

Hsu knows that Taiwan has a long way to go before it can catch up with the likes of Japan.

Japan has been in the market since the early days with its first digital currency exchange originating in 2010. Not only that, but the yen is a free-floating currency, whereas the Taiwan dollar is tied to the U.S. currency.

Taiwan realises that that isn’t going to stop them embracing the industry. Compared to countries that are shutting down cryptocurrencies, like bitcoin, Taiwan is remaining competitive in a growing sector.

China Bans ICOs and Closes Domestic Bitcoin Trading

At the beginning of September, Chinese authorities announced they would be banning initial coin offerings (ICOs).

In a joint statement from seven of China’s regulators, it read:

“[ICOs are] a kind of non-approved illegal open fund raising behavior, suspected of illegal sale tokens, illegal securities issuance and illegal fund-raising, financial fraud, pyramid schemes and other criminal activities.”

This was shortly followed by the decision to halt domestic digital currency exchange trading. As a result, several prominent bitcoin exchanges – ViaBTC, BTCC, OKCoin, Huobi and Yunbi – announced they would be halting mainland services. ViaBTC and BTCC has since ceased operating. However, the remaining three aren’t expected to stop functioning until the end of October.

Naturally, news of this caused market prices to drop. On the 15th September, bitcoin was trading at $2,947. This was a significant fall considering it had achieved an historic high on the 2nd of September when it scaled $5,000. Since then, however, the market has steadily recovered.

At the time of publishing, on the 6th October, bitcoin’s price is trading at $4,364, a 1.13 percent rise in 24 hours. Over seven days its value has risen by 4.76 percent. It market cap is worth $72.4 billion.

Whether Chinese authorities lift the ban on domestic trading is not known. However, it signals the country’s determination to control money that is flowing in and out of the country.

South Korea Follows China

The announcement by South Korea to ban ICOs may not have been considered that surprising. Prior to stating its position, on the 4th September, South Korea’s digital currency task force had discussed increasing regulatory oversight on the trading of cryptocurrencies.

Kim Yong-beom, the secretary-general of the Financial Services Commission (FSC), said:

“At this point, digital currencies cannot be considered money and currency not financial products.”

The report added that authorities will ‘punish’ ICO fundraising platforms.

On the 29th September, the actual banning of ICOs in South Korea was made official. At a meeting the country’s financial regulator discussed digital currencies. One of the topics pertained to initial coin offerings.

Kim Yong-bum, the vice chairman of the FSC gave a speech and said that all ICOs were prohibited in all forms, including securities.

He said:

“ICOs are being increased worldwide by issuing digital tokens and investing in virtual currencies.”

Adding:

“There is concern about the adverse effects such as the increase in the risk of fraudulent receipt.”

According to the financial regulator, ICOs are a ‘violation of the capital market law.’ Consequently, it said that an ‘intensive crackdown’ will take place. Additionally, ‘penalties’ will increase for ‘illegal acts.’

Other countries that have issued guidelines on ICOs include the U.S. and Singapore. In July, the U.S. Securities and Exchanges Commission (SEC) applied securities laws to the issuance of ICO tokens. Whereas, the Monetary Authority of Singapore (MAS) clarified its position on ICOs in August.

Criminal Use with ICOs

For many authorities there is the risk that ICOs are being employed for illegal activities.

The Swiss regulator is concerned about this. So much so, that it believes that some are being used for ‘terrorist financing.’

In a report, the Swiss Financial Market Supervisory Authority (FINMA) said that it was investigating a number of ICOs. This was to determine whether they had breached ‘regulatory provisions.’

One of its concerns relates to ‘provisions on combating money laundering and terrorist financing’ and other areas.

Whereas, the chief executive of the Hong Kong Monetary Authority (HKMA) believes that digital currencies are linked to money laundering. This is an opinion shared by Larry Fink, chairman and CEO of BlackRock, the world’s largest investment management corporation.

Recently, he said:

“When I think about most of the cryptocurrencies, it just identifies how much money laundering is being done in the world.”

Featured image from Shutterstock.

Ripple CEO: ‘Blockchain Tourists’ Aren’t Creating Real World Use Cases

Ripple’s CEO has said that there are too many people using blockchain as ‘a buzzword,’ who aren’t developing real world use cases.

During a Q&A session on Quora, Brad Garlinghouse, Ripple CEO, said:

“Blockchain is like the new big data or AI – too many people are using it as a buzzword and not focused [on] solving a real problem.”

He added:

“We like to call them blockchain tourists! There are many applications that are nothing more than science experiments.”

According to Garlinghouse, the uses being implemented through the distributed ledger could be better applied via a database. He didn’t give names as to these use cases.

As he explains:

“That is why Ripple is focused on a real world use case, solving a real (and very large) customer problem, which has converted into commercial traction that is unmatched in the enterprise blockchain space.”

Ripple’s digital asset, XRP, functions similarly to bitcoin on the blockchain. At the time of publishing, on the 4th October, Ripple is the third most valuable digital currency in the market. One token is currently worth $0.211993, which is a 5.43 percent rise in 24 hours. Over seven days its value has increased by 4.32 percent. Its market value is currently worth $8.1 billion, pushing it ahead of bitcoin cash.

Revolutionising the Financial World

One of the main and first uses of the blockchain technology was within finance. Since its early days, however, the technology is being employed in a variety of sectors. These include healthcare, education, supply chain management, energy and humanitarian to name a few.

According to Garlinghouse, Ripple has the potential to change the finance sector.

He questions that if we can connect to people instantly and for free, why can’t we do the same for payments? He said that:

“Payments were never designed for the Internet, so we’re focused on the unsolved problem – the underlying infrastructure.”

Today, the world sends over $155 trillion across borders. Yet, the market opportunity is bigger than simply moving those payments more efficiently. Garlinghouse claims that if they can solve the problem, ‘we’ll enable an Internet of Value that:’

  • Connects billions of people around the world to transact – instantly

  • Gives rise to entirely new businesses and industries

  • And increases financial inclusion

It’s clear the market has the potential to change the financial industry. This is being realised through use cases every day. This can be seen through IBM’s endeavor with the technology.

IBM Builds a DLT

In June, it was reported that the global technology company was creating a blockchain that will be used by seven of Europe’s largest banks, called the Digital Trade Chain. The consortium will include Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Societe Generale and Unicredit. This is to aid international aid for small- and medium-sized businesses.

As a result, it will mark one of the first real world use cases involving the technology. Even though the banking sector has been researching into the blockchain for years, it’s only now that applications are beginning to emerge.

At the time, Wiebe Draijer, chairman of the executive board at Rabobank, said:

“We take care of the payment that’s still the old payment technology, but the whole infrastructure, the administration is done on the blockchain.”

He added:

“Ultimately we will also move the payment into that blockchain solution, when the payment in blockchain is ready to be robust for large-scale application.”

Draijer stated that many tests with banks and fintechs are underway experimenting with the blockchain. However, this venture with IBM demonstrates how far the financial world has come with its experiments.

“We are moving a step further with seven banks, putting together an application based on blockchain where we facilitate small-and-medium-sized enterprises when they export. And the blockchain technology is very powerful and supports that proposition.”

Tracking Meat

Of course, while Garlinghouse claims too many people are using the blockchain as a buzzword, there are plenty of real use cases for it.

For instance, in tracking food to improve consumer confidence.

China is one country that is using the DLT to track China’s pork and chicken. Last year, Walmart teamed up with IBM and the Tsinghua University in Beijing. By putting Chinese pork on the blockchain it’s hoped it will prevent food disasters occurring.

The success of this venture has meant that Chinese web insurer ZhongAn Technology is using a blockchain-based platform to track the entire chicken farming process. It’s hoped this will improve China’s food safety concerns.

More recently, Japan’s government has revealed that it too is using the technology for its wild game meat. By using a NEM-based blockchain it will build and store its transaction records.

Through the Mijin blockchain consumers will be able to trace the meat from the hunting grounds to the restaurant. It’s also hoped that it will help with the country’s overpopulation of wild game meat. This is through the dwindling numbers of licensed hunters in the country.

Tracking Humanitarian Aid

Another real world use of the technology can be seen through tracking aid.

In 2012, Ban Ki-Moon, the 80th secretary-general of the UN, said that corruption in 2011 had meant that 30 percent of all development assistance had been prevented from reaching those who needed it.

He said:

“This translates into bridges, hospitals and schools that were never built, and people living without the benefit of these services,” he said. “This is a failure of accountability and transparency.”

For many a solution was required, but finding it wasn’t easy. That was until the blockchain entered the scene. As a result, it’s now being used in many humanitarian situations ensuring aid gets to those who need it.

The UN is one agency that is embracing the technology. So much so, that it’s reported that there are seven UN organisations experimenting with the technology.

The UN Office for Project Services (UNOPS) has organised a working group of agencies looking into it. These include the WFP, the UN Development Programme (UNDP), the UN Children’s Fund (UNICEF), UN Women, the UN High Commissioner for Refugees (UNHCR) and the UN Development Group (UNDG).

Featured image from Shutterstock.

UBS: European Banks Interested in Cryptocurrencies, but Not Bitcoin

European banks are interested in cryptocurrencies like bitcoin, but they don’t believe the currency is likely to become accepted, according to the chairman of UBS.

The head of the Swiss global financial services said that bitcoin’s use to banks is limited. This was due to its volatility and lack of control over its supply.

Speaking in Zurich, Axel Weber, chairman of UBS, explained:

“For money to be a generally accepted means of payment, and a means to store value, it is essential that a central bank limits its supply. This isn’t the case with bitcoin. This might change one day, if a central bank would issue a digital currency.”

He added that the bank doesn’t use or trade in bitcoin. However, it’s interested in the blockchain.

“We have several pilot projects where we are analysing the potential benefits of this technology.”

‘Utility Settlement Coin’

UBS is reportedly discussing with other central banks about the possibility of creating a ‘utility settlement coin.’ Apparently, this would be a collateralised cryptocurrency that banks could use to pay one another or purchase securities.

Expected to launch next year, subject to support from central banks, other financial establishments such as HSBC, Deutsche Bank and Barclays have demonstrated an interest in the project.

Improving Efficiency and Cutting Costs

For many banks, though, cryptocurrencies are a convenient way to do settlements. That’s certainly the thinking of Francisco Fernandez, founder and chief executive of Avaloq, which provides cloud-based software and services to banks.

He said:

“It is transparent and can enhance settlement efficiency.”

Yet, he added that bitcoin is still very new and is used in a speculative way, adding:

“Of course regulation must be addressed to make sure a digital currency is not used for money laundering or other fraudulent activities.”

He claims that there is no value ‘in prohibiting it from trading.’

‘Run for Their Money’

Interestingly, these comments from UBS come at a time when the International Monetary Fund (IMF) chief said that it would be ‘unwise‘ for banks to dismiss cryptocurrencies.

Speaking at a Bank of England conference at the end of September, Christine Lagarde, the managing director of the IMF, said:

“For now, virtual currencies such as bitcoin pose little or no challenge to the existing order of fiat currencies and central banks.”

She explained this was because they are ‘too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable.’

However, she claimed that:

“Many of these are technological challenges that could be addressed over time.”

As a result, digital currencies may become a viable alternative for countries that have weak economies. Furthermore, they present an ideal avenue for acceptance rather than taking on the U.S dollar or the British pound.

Lagarde said:

“Instead, citizens may one day prefer virtual currencies, since they potentially offer the same cost and convenience as cash—no settlement risks, no clearing delays, no central registration, no intermediary to check accounts and identities.”

Adding:

“So in many ways, virtual currencies might just give existing currencies and monetary policy a run for their money. The best response by central bankers is to continue running effective monetary policy, while being open to fresh ideas and new demands, as economies evolve.”

Regulating Cryptocurrencies

The digital currency market has expanded exponentially. So much so, that at the time of publishing, on the 3rd October, it is now worth $143.6 billion, according to CoinMarketCap.

Yet, the highest recorded value was when it within touching distance of $180 billion at the beginning of September. This was pushed alone by bitcoin’s rise to above $5,000 for the first time.

However, it’s because of the rapid rise that many are calling for the market to be regulated.

This can be seen by the fact that Japan’s Financial Services Agency (FSA) is to monitor bitcoin exchanges from this month.

In a report, this move is being undertaken to ensure the exchanges have the correct internal systems in place. If customer assets aren’t protected then on-site inspections will be carried out by the FSA.

An FSA executive said on the decision:

“We pursue both market fostering and regulation enforcement. We aim for sound market development.”

The volatility of market prices are of particular concern to a former commissioner of the Commodity Futures Trading Commission (CFTC).

Last month, Bart Chilton said that bitcoin’s price changes so much because of two things: it’s not like a stock and it’s not regulated.

He explained:

“Unlike oil, gold or corn, with digital currencies, there’s no “there” there—no physical stuff, or even made-up stuff backed by anyone or anything.”

Regarding regulation, he added:

“There’s no sure-footed surveillance to ensure trading is taking place in an orderly and appropriate fashion.”

However, according to him it’s not too late for solutions to be found. He claims that ‘visionary leadership is needed,’ to stop governments from banning or over-regulating the market.

Market Prices

At the time of publishing, the prices of cryptocurrencies are experiencing a drop in values.

This could be down to the fact that Switzerland’s regulator announced it was investigating some ICOs. According to the Financial Market Supervisory Authority (FINMA), ICOs are violating the country’s laws against ‘terrorist financing.’

Bitcoin’s price is currently valued at $4,262, a 3.39 percent drop in 24 hours. It does, however, retain a 8.46 percent rise over seven days.

However, industry insiders claim that bitcoin is heading for $6,000 by the end of the year. In a recent report, experts claim that investors should prepare themselves for further volatility.

Thomas Glucksmann, head of APAC business development at Gatecoin, said:

“Throughout the year we’ve been predicting the bitcoin price will surpass $5,000 and creep closer to $6,000 by year’s end. That prediction is looking more in line with market sentiment these days.”

In November, the community is expected to see another fork to the network through the creation of SegWit2x. Just like when bitcoin cash was created there may be some volatility as traders weigh the impact.

Ethereum is trading at $290, a 2.67 percent drop over 24 hours. It continues to evade the $300 mark and is currently valued at $27.5 billion.

Of the top 10 cryptocurrencies, the biggest 24-hour can be seen from 9th-placed IOTA. As can be seen from the graph below it saw a drop of nearly 11 percent.

Featured image from Shutterstock.

IMF Chief: Cryptocurrencies Will Give Banks ‘a Run for Their Money’

The head of the International Monetary Fund (IMF) has said cryptocurrencies may eventually give traditional banking systems ‘a run for their money.’

Speaking at a Bank of England conference at the end of September, Christine Lagarde, the managing director of the IMF, said that ‘it may not be wise to dismiss virtual currencies.’

She added, however, that:

“For now, virtual currencies such as bitcoin pose little or no challenge to the existing order of fiat currencies and central banks.”

The reason this is is because cryptocurrencies are ‘too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable.’

Yet, she states:

“Many of these are technological challenges that could be addressed over time.”

She cites the fact that experts once believed that personal computers would not catch on and that tablets would simply be regarded as ‘expensive coffee trays.’

Adopting Cryptocurrencies

Notably, Lagarde outlines how countries with weak economies and unstable national currencies might embrace digital currencies instead of another country’s currency such as the U.S. dollar or the British pound.

Furthermore, it might provide them with better value for money by doing so.

She explains by saying:

“It may one day be easier and safer than obtaining paper bills, especially in remote regions. And because virtual currencies could actually become more stable.”

She went on to say that countries may increasingly turn their attention to new payment services through a decentralised economy. Rather than paying by credit card or e-money, which charge high fees for small transactions, particularly across borders, cryptocurrencies may flourish.

“Instead, citizens may one day prefer virtual currencies, since they potentially offer the same cost and convenience as cash—no settlement risks, no clearing delays, no central registration, no intermediary to check accounts and identities.”

Lagarde adds:

“So in many ways, virtual currencies might just give existing currencies and monetary policy a run for their money. The best response by central bankers is to continue running effective monetary policy, while being open to fresh ideas and new demands, as economies evolve.”

Cryptocurrencies Are ‘Unlikely’ to Weaken the Fed

At a time when Lagarde believes digital currencies will give banks a run for their money, the U.S. Federal Reserve chief doesn’t think they will weaken its influence on the U.S. economy.

Speaking at a fintech event, Patrick Harker, the president of the Federal Reserve Bank of Philadelphia, said that bitcoin has yet to be tested by a serious issue that will see its price drop.

Additionally, when one does take place, people are more likely to turn to a government-backed currency, Harker claims.

He said:

“The paper that’s in your pocket, that we call money, only has value because we believe it has value, because we believe the government stands behind it. It’s all trust issues.”

He added:

“And so, when cryptocurrencies and other forms of currency emerge, I think the basis of that has to be how do they create that trust?”

Despite the growth of the digital currency market, Harker appears unconcerned. So much so, that he doesn’t believe that it will weaken the Fed’s influence on the U.S. economy.

China Crackdowns on Domestic Exchanges

Both of these comments come at a time when the crypto market is experiencing a renewed surge in price. Bitcoin’s price in particular has rebounded since September.

On the 2nd September, its price was trading over the $5,000 mark for the first time. However, a few days later Chinese authorities announced they would be banning initial coin offerings (ICOs). This was shortly followed by a crackdown on domestic digital currency exchanges. As a result, the value of bitcoin fell to below the $3,000 mark on the 15th September, to $2,987.

As traders weighed China’s decision many sold their coins during a massive selloff. It wasn’t just bitcoin that was impacted; cryptocurrencies across the board saw their values drop in some way as a result.

Consequently, several prominent Chinese digital currency exchanges revealed that they would be closing their services. ViaBTC was the first domestic exchange to do so. However, questions remain as to whether the exchange will relaunch its operations overseas in light of Beijing’s ban.

BTCC is the latest digital currency exchange to cease operations, with its suspension taking place on the 30th September. On the 27th September, the exchange had stopped accepting deposits. In a tweet, BTCC claimed to have had the longest known lifespan of a digital currency exchange, having operated for ‘2,305 days.’

BTCC have said that they will continue operating their services outside of China. Additionally, the exchange has confirmed that its mining pool will operate normally. Yunbi, OKCoin and Huobi are expected to cease the operations at the end of October.

‘More than Just a Fad’

Interestingly, while most bank CEOs are staying away from the crypto market, not all think the same.

At a time, when Jamie Dimon, JPMorgan Chase CEO, called bitcoin ‘a fraud,’ Morgan Stanley’s CEO has come out in favour of it.

Shortly after Dimon made his comments, James Gorman, CEO of Morgan Stanley, is taking a measured view of the cryptocurrency.

At the end of September, he said that bitcoin is ‘certainly something more than just a fad.’

Speaking at an event held by the Wall Street Journal, he explained:

“The concept of anonymous currency is a very interesting concept – interesting for the privacy protections it gives people, interesting because what it says to the central banking system about controlling that.”

While Gorman said he hasn’t invested in the crypto market, these comments will no doubt be refreshing to hear.

He added:

“It’s obviously highly speculative but it’s not something that’s inherently bad. It’s a natural consequence of the whole blockchain technology.”

Bitcoin’s Value Increases

Despite September being a terrible month for the cryptocurrency market, it has rebounded in price.

At the time of publishing, on the 2nd October, bitcoin’s value has risen to $4,405, a 2.43 percent rise in 24 hours. In seven days it has increased by 13.83 percent. Its market value is currently worth $73.1 billion.

The combined crypto market is now worth $148.9 billion. This is still below its $180 billion record; however, the market is steadily recovering.

Featured image from Flickr via World Economic Forum.