Anonymous is the name of bitcoin’s game. But Europe might like to make it less so. The European Commission would like to create a central database of digital currency users to prevent terrorist financing and money laundering – for the obvious reasons.
The regulators there would like to establish a central database by June 2019 whereby, “obliged entities need to collect, process and record personal data, and sometimes to share such data with public authorities (such as FIUs) or with private entities within the same group.”
The challenges for this ambitious plan include personal data violations and insufficient cybersecurity, the darknet being a screaming example. More importantly, cash is actually the preferred currency of illegal transactions and terrorist financing; so while the effect of this proposal may not do much for terrorism or money laundering, it is likely to increase the friction associated with bitcoin transactions.
Scotland Considering Cryptocurrency and Independence … Again
Scotland might be considering a new currency in the event that the Scots vote again on independence. Brexit has increased the fervor for independence among the northern cousins, some of whom blame currency issues for the failure of the referendum in 2014. A national currency is appealing, and Dr. Craig Dalzell, a laser physics and photonics expert, suggests in a paper that the issue of currency should lead a refreshed campaign for independence.
Tying the new currency to the British pound is the favored option to provide some semblance of continuity during the initial turbulence of the independence process, but cryptocurrency is also an option. Those who favor this option would like to remove banks and large unaccountable corporations from being in control of the transactions so that there is more transparency in the creation of new money.
The challenges of cryptocurrency relate to public acceptance and a lack of confidence in the verification system, not to mention challenges with exchange rates and interest rates, all of which affect the value of the money. Also, transaction processing can be slower that other electronic systems. There is also the possibility of additional compensation demands from miners in the form of transaction fees, which could also discourage cryptocurrency use.
Is The Bank of Japan Helping Bitcoin?
The devaluation of the Chinese yuan and Brexit has caused the price of bitcoin to rise over 50 percent during the last six months. On the other side of the world, some observers are also predicting that The Bank of Japan might also have an effect on bitcoin’s rise if it decides to continue its easing policy. If the BOJ does employ additional stimulus, economists suggest that the pressure on the Chinese yen could bring its value down, motivating market players to buy bitcoin. Most economists expect further easing following the BOJ meetings on the 28th and 29th of July.
Experts believe that the BOJ is sensing a need for substantial increases in government spending to ensure the success of the easing policy. According to Chris Burniske of ARK Invest, Japan’s strategy of quantitative easing and interest rate manipulation is not working, and aggressive government spending is one of few remaining options. The fallout could be inflation, reducing the buying power of the yen. However, although this could be good news for bitcoin, the markets are already moving to prevent or minimize any benefit to bitcoin.
And although Abenomics are clearly laid out, the effects are not. Oana Aristide, a senior economist at Dun Bradstreet UK, confirmed additional easing and a fiscal stimulus package is expected from the Japanese government, but she also noted that the BOJ’s last move on interest rates increased the value of the yen. The value of the yen will also depend on the reaction of other central banks such as the Federal Reserve. Suffice it to say that the need for additional stimulus in Japan indicates a weakening yen, and market players will be looking for alternative safer assets.
Under The Watchful Eye Of The FSB
Digital currencies and the implications of FinTech continue to be under the watchful eye of the Financial Stability Board (FSB), an internal group of central bank and finance regulation representatives. Chairman Mark Carney, governor of the Bank of England, outlines in the annual report’s Message from the Chairman the areas that the board is investigating, broadly, the risks and opportunities associated with FinTech.
Carney also discloses the board’s interest in blockchain technology in earlier reports.
Coinbase Introduces Bitcoin in Australia
Digital currency users in Australia can now trade in bitcoin through Coinbase. The platform allows bitcoins to be bought using credit or debit cards, but bitcoin cannot be sold; this function is to be added at a later date, according to Ankar Nandwani, product manager for Coinbase. Although the Australian dollar is only traded on two exchanges and both are low in bitcoin volume, less than 2,000. But as they say, that only leaves room for growth. Maybe.
Economic Volatility Is Bitcoin’s Gain?
Where there’s uncertainty, there’s bitcoin.
Marc Faber, a veteran investor, recently told Bloomberg that as a global currency, bitcoin’s independence could enable its value to stand firm and even increase when other countries’ economies are failing. Faber said that we saw it when Greece collapsed, he said, and bitcoin was the only way for money to move outside of the country. And that we are seeing it in the midst of the devaluation of the yuan in China, combined with the difficulty of moving money outside of China. He suggested that we’ll see it again in the face of Brexit.
Maybe not. Unlike bitcoin, cash is both liquid and accepted everywhere. And unlike Greece and China, the issue isn’t moving money out of a country, it’s preserving its value. And that’s anything but something that bitcoin can offer.
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