Adoption

South African crypto landscape primed for TradFi growth after FSCA ruling

Industry insiders believe South Africa’s move to classify cryptocurrencies as financial products could drive the adoption and legitimacy of the sector.

South African financial service providers have been primed to offer cryptocurrency products and services to customers after regulatory amendments in the country.

This comes after South Africa’s Financial Sector Conduct Authority (FSCA) amended its financial advisory act from 2002 on Oct. 19 to define crypto assets in the country as financial products. Most importantly, the definition means that cryptocurrencies can now be offered by financial service providers, both domestic and international, given that they are licensed in South Africa.

South Africa already commands a growing number of retail cryptocurrency users, estimated to include as many as 6 million individuals. The South African Reserve Bank has also taken a measured approach in its regulatory stance on the sector in an effort to ensure investor protection without hampering innovation.

Cointelegraph touched base with two prominent cryptocurrency exchanges operating in the country, Luno and VALR, both of which have significant user bases. The companies are well placed to offer insights into the latest regulatory move, given that they cater to both retail and institutional clients.

VALR CEO Farzam Ehsani labeled the FSCA’s move as “good news for South Africa setting a path towards regulating crypto-asset service providers in the country” while ensuring “they are serving the public with integrity.”

Marius Reitz, Luno’s general manager for Africa, echoed these sentiments by highlighting the importance of regulatory clarity not only for investors but for financial service providers in the country:

“The licensing requirements that will flow from this classification will drive high standards in the industry, particularly in relation to consumer protection, with potential investors easily able to identify those providers that satisfy regulatory requirements.”

Reitz also flagged the key benefit, which now allows financial advisers to formally advise clients on cryptocurrency investments. Before the FSCA amended the definition of crypto assets, financial advisers were not permitted to give advice on unregulated investment opportunities.

“The regulatory framework paves the way for wider institutional adoption. How this plays out will depend on the ability of more traditional finance companies and even banks to be able to fully support this newly classified financial product.”

Chris Becker, cyber banking managing executive at Tyme Bank, also provided insights to Cointelegraph. The South African digital bank welcomed the move to regulate cryptocurrencies within existing frameworks as it looks to drive digital money services and payments.

Becker believes the move could bring some comfort to individuals who may have been cautious of interacting with crypto-asset service providers due to concerns of a lack of regulation, having worked for private wealth manager Investec as its blockchain lead in his previous role.

Becker also agreed that the regulatory move may support greater adoption in the long term if financial service providers use the new product category to offer crypto-asset products to their large customer bases.

Nevertheless, regulatory uncertainty has not stopped corporations and institutions from gaining exposure to cryptocurrencies in South Africa. Both exchanges already work with a number of institutional clients.

VALR serves more than 700 corporations and institutions, which includes a number of large traditional financial institutions in South Africa. Ehsani said the firm has been focused on building its infrastructure for the past five years to bridge traditional finance in the country to cryptocurrency markets. Luno also allows corporate customers to use its platform.

Meanwhile, Becker highlighted the reality that traditional financial service providers may not necessarily invest in cryptocurrencies as a result:

“Other regulations such as the Pension Funds Act and the Foreign Exchange Control Act do not yet make provision for crypto assets yet.”

VALR’s CEO also believes that the country could see cryptocurrency-related exchange-traded funds (ETFs) and similar financial products being developed and released in the next few months now that regulatory oversight is becoming clear:

“I think we’ll start seeing many more financial products related to crypto in the near future. Many people have been working on this for some time and now with the declaration, we should expect to see much of this work become visible to the public.”

Reitz offered a more measured take on the subject, highlighting the FSCA announcement as a first step in creating a broad regulatory framework for crypto assets in South Africa. He believes more clarity is needed around the wider application of the regulation with regard to permitted cryptocurrency financial products, highlighting America’s standpoint as an example:

“In the United States, Bitcoin ETFs can only hold BTC futures contracts or stocks of companies and other ETFs with exposure to cryptocurrencies as the SEC continues to evaluate the approval of ETFs that own BTC directly.”

Meanwhile, the FSCA delivered a more sobering message in a press conference that accompanied the Oct. 19 announcement. As Reuters initially reported, FSCA Regulatory Frameworks Department head Eugene Du Toit made it clear that cryptocurrencies are not recognized as legal tender in South Africa.

The regulator also stressed the importance of being able to grapple with scams and fraudulent activities in the space in an effort to protect local investors.

From neglecting security to bad tokenomics, DeFi has played a hand in its own decline

Tokenomics aimed at financing worthless models, rampant hacks, and a lack of real-world utility have played a role in the beleaguered crypto market’s decline.

Decentralized finance (DeFi) led cryptocurrency’s rapid growth in early 2021, but the crypto market has since plummeted in value. Global markets have played a role, but so has recklessness among developers when it comes to both cybersecurity and (often self-serving) inflationary token models.

Too much DeFi has been based on tokens minted from nothing or tokens that finance other tokens at high interest rates, with no part of the entire activity having any real underlying economic activity to back the yields offered.

Secondly, security issues, hacks and exploits of DeFi contracts and bridges have been widespread, and most notable DeFi platforms have suffered some form of exploit.

Lastly, the lack of a uniform standard for defining DeFi contracts has limited DeFi to native smart contract platforms and tools, which also limits potential for growth, universal clients and, ultimately, adoption.

Despite these failures, DeFi is likely here to stay. But it will need to see changes and improvements to have true utility.

Too many unsustainable yields and too much ‘minting’

The DeFi summer of 2021 gave rise to several projects that promised yields that were not undergirded by any real economic activity. Some of the yields were at rates as high as 200%, and many were paid for by minting more of the same arbitrarily created tokens.

*DeFi sometimes promises very high yields. Source: Trader Joe’s*

This arrangement essentially created a system that required an ever-increasing number of new users to create demand. The promised yields could only be sustained as long as new users were forthcoming. Eventually, several DeFi operations offering tokens with high yields suffered catastrophic failures (Terra, Voyager, Celsius and 3AC, to list a few). The future of DeFi will likely not lie in tokens that promise yields that are not sustained by true economic activity outside of minting tokens.

Cybersecurity has not been a priority

Another feature of the DeFi summer was the large number of projects that suffered from external and internal hacks of their reserves or users. Examples include the Ronin network, Polygon, Blizzard, Wormhole, Meter Bridge and, most recently, Binance Smart Chain (BSC). Some of the hacks illustrated weak security practices, to put it mildly.

Some projects lost a good portion of their reserves, and it took days or weeks before anyone noticed or disclosed a breach. And there were examples of protocols that were coded to move value without checking account balances. There were also examples of protocols undermined by developers that the operators apparently hired without fully validating their identities. These unfortunate incidents could prove to be learning experiences for the community.

Resorting to fundamental security practices such as independent system monitoring and alerts would be beneficial, in addition to more rigorous and careful vetting and development. DeFi projects that will prove successful in the future will be those that approach security in a more fundamental and principled way while learning from the issues and events of DeFi’s early days.

Redefine DeFi to finance real economic activity

One of the touted and expected benefits of blockchain technology is its potential to bring more of the unbanked and underbanked into the financial system. This represents a huge potential for the growth and upliftment of communities.

However, it has been a missed opportunity thus far. Much of DeFi has simply focused on financial products for those already in the crypto community by building those products around the borrowing, lending and shuffling of crypto tokens. DeFi’s maturation would be bolstered by addressing the aspirations of the underbanked in the real world.

Taking advantage of the ability to tokenize real-world items using similar standards as ERC-721 for nonfungible tokens (NFTs), “buy now, pay later” (BNPL) DeFi products are beginning to emerge. Some of these products are based on lending to finance tokenized real-world items such as smartphones as a work tool, and recently even mortgage financing.

The DeFi products are secured by those real-world items, able to accommodate a decentralized set of agents and customers, and are based on the actual yields achievable for such financial transactions. More products designed to underwrite real-world financial aspirations and address underbanked communities are likely to continue to emerge.

Develop a standard for representing DeFi contracts

Standards can be a significant catalyst for growth. The ERC-20 standard, for instance, helped the development of fungible tokens by making them easier to interpret across different applications and platforms. For instance, an ERC-20 token can be defined on Ethereum, BSC or Avalanche, and a user can manage them with clients developed by teams independent of those projects.

Examples of such clients include MetaMask, Brave or, indeed, any client implementing the ERC-20 standard. There are many developments that this has enabled, including the bridging of tokens across platforms. Similarly, the ERC-721 standard has been a catalyst for the growth of nonfungible tokens, allowing users to utilize different platforms and clients for managing NFTs.

A standard for representing decentralized financing for end users will likely have similar effects. For one thing, it will allow various development teams and projects to represent DeFi products in a consistent manner, which would reduce a lot of ad hoc interpretations and coding of DeFi contracts and aspirations. It will allow users to manage their DeFi products on different clients and browsers that support the standard. This would include automatic payment for DeFi loans or lines of credit, as well as potentially providing portability for DeFi products across platforms.

Define a standard for DeFi contracts

A DeFi standard would necessarily need to be encompassing enough to be able to define various types of DeFi products. This would include secured and unsecured DeFi loans, lines of credit, BNPL contracts, DeFi mortgages, and even crypto yield products currently prevalent in the crypto community.

*Illustration of the components for a potential DeFi standard. Source: Ken Alabi*

This standard is defined such that it could be utilized for any DeFi contract, and would be based on a generalized form of DeFi consisting of a lender or asset provider, a borrower, and a potential repayment structure. For instance, a BNPL contract would be similar to a secured loan, having a principal amount, collateral, duration and terms, but where the interest rate would typically be 0%. Overall, the standard would define such broad and general ways to successfully define DeFi contracts. The standard would improve on existing DeFi and traditional finance contracts by allowing such contracts to be more portable, potentially transferable, and more easily tradable as collaterals by having a consistent form utilized by all users of the standard.

The future of DeFi

Assets need to have utility. They also need to provide rewards for those who deploy them. When these constructs work correctly in identifying and pairing those with funding with those in need of funding (who are also able to deploy resources efficiently and repay resource providers), they have been an important driver of growth and development in human societies.

These constructs drive enterprise and small businesses; fund commerce, mortgages and provisions of shelter; and touch every part of any economy. Societies that have developed more successful ways of identifying borrowers with lower default rates, utilizing credit scoring and other algorithmic means, including even AI, have tended to be more successful at lifting more members out of poverty than those that have not.

Decentralized finance has the promise and ability to reach millions not served by the traditional banking and finance system. This potential has a greater chance of being realized if DeFi shakes off its initial incarnations that focused more on products with bogus yields that were not underlined by any real value creation by borrowers and relied more on simply printing unbacked tokens.

Developing and utilizing standards in the creation of DeFi contracts would be a catalyst for leading the growth of DeFi when applied to responsible and well-grounded contracts and products.

Ken Alabi has a doctorate in engineering from Stony Brook University, a master’s in computer-aided engineering from University of Strathclyde, and is an IT professional, programmer and published researcher with several peer-reviewed publications in various fields of technology. The author has also published articles related to blockchains, decentralization of business processes similar to blockchain technology, and the interoperability of blockchains.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Mass adoption will be terrible for crypto

From reversible transactions to increased regulation and a rising tide of censorship, mass adoption is going to make crypto look more like the systems we’re trying to escape.

For years, mass adoption has been pitched as the endgame of crypto. We’re supposed to envision a world where we can pay for our morning coffee with stablecoins and put mortgages on-chain to be used as collateral in decentralized finance (DeFi). In a world in which crypto has become mainstream, prices would likely reach all-time highs, but at what cost?

Concessions inevitably would be made to meet consumer expectations to realize this future.

Though the proliferation of online banking may seem like it set the stage for a seamless transition to DeFi, traditional finance (TradFi) customers are accustomed to a level of inherent security absent in DeFi. Unlike in traditional finance, where charges can be declared fraudulent and bad actors are prohibited from listing exchange-traded funds, there is no centralized authority to file a complaint with or review initial coin offerings in crypto. Though this may seem intimidating, it’s precisely what makes the space unique; users are given complete, sovereign control over their finances, and teams are able to build products permissionlessly.

The average consumer would expect to be protected from hacks and exploits and be offered chargeback protection in order to make the transition from TradFi. The measures required to match consumer expectations would derail future innovation and greatly diminish the immutability and decentralization of DeFi, one of its core principles. Though there are already plans to create opt-in reversible transactions to mitigate the damage of future hacks and exploits, consumer pressure would likely spark a top-down approach, which would almost certainly be implemented with far less finesse and care for the industry than current prospects.

Increased consumer pressure would mean regulators would play a leading role in dictating crypto’s future, ensuring that on-chain activity meets their compliance and Know Your Customer standards. These moves would have an outsized impact on smaller teams, as large companies would be able to bring on new teams focused specifically on compliance or simply pay their way through the fines. But crypto is what it is today because of small teams; Ethereum was founded by a group of eight individuals. Small teams can innovate and make decisions at a far greater rate than larger organizations, which may be hampered by bureaucracy or various stakeholders. By increasing the barrier to entry for smaller teams, mass regulation would impede the very innovation DeFi is known for and effectively put an end to permissionless operations.

The recent sanctions against Tornado Cash are a great example of how quickly regulation can shift the industry. Following the sanctions, remote procedure calls, relayors and apps all moved quickly to comply — and understandably so, builders can’t be expected to face jail time in the name of upholding crypto’s principles. This instance demonstrates regulators’ ability to hamstring even the most immutable and decentralized projects. If we follow the precedent set in this example, it seems impossible that crypto could scale to mass adoption without losing its core principles.

Cryptocurrencies, Decentralization, KYC, Payments, Technology, United States, USA, Finance

While one of the central selling points of crypto is the censorship-resistant, permissionless and decentralized values that permeate throughout the industry, mass adoption would undoubtedly impede, if not outright halt, such principles. We’d likely see consolidations and concessions as companies face the reality of regulation. Soon, DeFi would appear eerily similar to the TradFi industry that users and developers were attempting to escape.

It doesn’t have to be this way.

One of the main reasons regulators are keen on going after crypto is that it’s been marketed to the average consumer. The fallout from Anchor and Celsius would have been far less if the damage had been limited to smaller groups of informed users who understood the risks.

For this reason, focusing on improving crypto UX without first building antifragile systems is a recipe for disaster. If the user interface is intuitive enough, many will overlook the underlying mechanics and assume they’re safe and sound. On the other hand, crypto wouldn’t need to meet the expectations of the average consumer (reversibility, rollbacks, etc.) if it were built for a user base that prioritized its principles.

Crypto can be the future of finance, or it can be permissionless, decentralized and censorship-resistant, but it likely can’t be both. While the idea of mass adoption as the end game has been taken for granted, perhaps we should be building for a future that preserves crypto’s core principles for those who want it, while accepting that this might be at the cost of mass adoption.

Sam Forman is the founder of Sturdy, a DeFi lending protocol. He became passionate about cryptography in high school before studying math and computer science at Stanford. When he’s not working on Sturdy, Sam practices Brazilian Jiu-Jitsu and roots for the New York Giants.

More than 30% of Canadians plan to purchase crypto by 2024, says OSC head

Ontario Securities Commission CEO Grant Vingoe said the regulator planned to release a report in October which included crypto adoption rates in Canada.

Grant Vingoe, chief executive officer of the Ontario Securities Commission, reiterated the regulator’s technology-neutral stance on crypto while saying many Canadians planned to become HODLers in the near future.

In a keynote address before the Economic Club of Canada on Oct. 6, Vingoe said the regulatory fundamentals of stocks and bonds were equally applicable to crypto contracts, with the “vast majority of crypto-based entities” falling within the OSC’s jurisdiction. According to the OSC head, the regulator largely considered Bitcoin (BTC) and Ether (ETH) to be commodities, while “arrangements that trading platforms have with investors” constituted securities.

“As securities regulators, none of the characteristics of crypto assets or their underlying technology, either positive or negative, drives our regulatory approach,” said Vingoe. “We are not here to pick winners and losers among investments. We take a careful and technology-neutral approach to all new products that come into our market, and we apply the same reasoning in assessing them.”

He added that the growing crypto market becoming interconnected to the financial system potentially posed a concern, citing the collapse of digital asset exchange QuadrigaCX:

“We know from our own research (being published later this month) that more than 30 per cent of Canadians plan to buy crypto assets in the next year […] It is a challenge to bar non-compliant firms from offering services in Canada. With a limited budget and finite Enforcement staff to cover our entire capital markets, there is only so much we can do. But we are making progress.”

“We are not here to pick winners and losers…We take a careful and technology neutral approach to all new products that come into our market” – OSC CEO @GrantVingoe on the approach to bringing the crypto industry into the OSC’s regulatory regime pic.twitter.com/eSlAH0QomR

— OSC News (@OSC_News) October 6, 2022

The Canada-based regulator has taken enforcement actions against crypto firms Bybit and KuCoin, largely claiming violation of securities laws and operating unregistered crypto asset trading platforms. As of Aug. 15, 9 companies are listed as registered crypto businesses under the OSC, including Fidelity Digital Assets, Newton Crypto, and Bitbuy.

More than 30% of Canadians plan to purchase crypto by 2024 — OSC head

Ontario Securities Commission CEO Grant Vingoe said the regulator planned to release a report in October which included crypto adoption rates in Canada.

Grant Vingoe, CEO of the Ontario Securities Commission, reiterated the regulator’s technology-neutral stance on crypto while saying many Canadians planned to become hodlers in the near future.

He added that the growing crypto market becoming interconnected to the financial system potentially posed a concern, citing the collapse of digital asset exchange QuadrigaCX:

“We know from our own research (being published later this month) that more than 30 per cent of Canadians plan to buy crypto assets in the next year […] It is a challenge to bar non-compliant firms from offering services in Canada. With a limited budget and finite Enforcement staff to cover our entire capital markets, there is only so much we can do. But we are making progress.”

“We are not here to pick winners and losers…We take a careful and technology neutral approach to all new products that come into our market” – OSC CEO @GrantVingoe on the approach to bringing the crypto industry into the OSC’s regulatory regime pic.twitter.com/eSlAH0QomR

— OSC News (@OSC_News) October 6, 2022

The Canada-based regulator has taken enforcement actions against crypto firms Bybit and KuCoin, largely claiming violation of securities laws and operating unregistered crypto asset trading platforms. As of Aug. 15, nine companies are listed as registered crypto businesses under the OSC, including Fidelity Digital Assets, Newton Crypto and Bitbuy.

Global Bitcoin adoption is ‘still in its infancy,’ but here’s how it might accelerate

Rome wasn’t built in a day, and it will also take some time for every country on Earth to adopt BTC.

Bitcoin (BTC) adoption by governments and companies remains a dubious question, and the “digital gold” thesis proposed by advocates faced harsh critics after Tesla sold 75% of its holdings in the second quarter of 2022.

Larger entities buying or selling Bitcoin have always moved the needle on how close countries are to using cryptocurrencies as a store of value. Currently, the average purchase price of El Salvador’s Bitcoin holdings stands at $45,000, making it a rather unprofitable investment.

Regardless of how long adoption by the large institutional holders will take and its subsequent impact on price expectations, it is possible to roughly estimate a minimum price per BTC based on each country’s foreign currency and gold reserves.

El Salvador might have been the first country to adopt Bitcoin as legal tender, but its 2,381 BTC position represents less than 2% of the country’s total reserves. More importantly, the South American republic does not rank among the top 100 countries in terms of its gross domestic product.

Jamaica, on the other hand, has a population that is 56% smaller than El Salvador and its international reserves are 30% higher at $4 trillion. Even Trinidad and Tobago, a tiny island country in the Caribbean with the same population size as San Diego, California, holds $6.9 trillion in reserves.

What becomes clear is how tiny (economically) El Salvador is in comparison with the aggregate $15 trillion held by the 160 countries included in World Bank data.

Would it be possible for other economies to buy their reserves at Bitcoin’s current $20,000 price, and how many coins could each country potentially acquire depending on the price of BTC?

Could every government match its reserves with BTC?

*Countries’ total reserves, including gold, in USD. Source: statisticsanddata.org*

For starters, $15 trillion is 39 times larger than Bitcoin’s $385 billion market capitalization at the current $20,000 per coin. Theoretically, 750 million BTC would be required for every country to replace their gold and foreign currency holdings. Even a conservative 3% allocation would represent 22.5 million BTC, which exceeds the total number of coins in circulation.

Furthermore, not every Bitcoin is available for sale and an estimated 3.7 million BTC coins have been lost since 2009, according to blockchain forensics firm Chainalysis.

This brings the current supply closer to 15.5 million coins, making the 3% allocation using foreign reserves even more impossible at the current $20,000 price.

Assuming that every holder is willing to sell their coins, the minimum average price needed would be $29,000 for a 3% allocation, equivalent to $450 billion.

*Bitcoin UTXO age distribution. Source: Unchained Capital*

However, a more realistic approach is needed since 3.8 million BTC coins have not moved over the past three years, meaning the owner held during the sub-$4,000 crash in March 2020 and the $69,000 peak in November 2021. Thus, the adjusted liquid coins currently in circulation is 11.7 million, meaning the minimum average price for a $450 billion allocation would reach $38,500 per Bitcoin.

Here is why $38,500 per BTC would be a “good deal”

The Prisoner’s dilemma is a typical example of the game theory study that demonstrates why two rational actors may refuse to cooperate even though it appears to be in their best interest. Betrayal is the dominating strategy for both sides, which is the most likely reaction in all scenarios.

For example, Switzerland alone holds $1.1 trillion in foreign and gold reserves, meaning their 3% allocation would amount to $33.3 billion. It is unthinkable that some entity would be able to grab over 1 million coins without raising alerts. The remaining countries would have a harder time finding large quantities at similar price levels.

For example, on Oct. 8, 2020, Bitcoin price rallied close to $11,000 after Square announced a $50 million BTC purchase. More recently, on Feb. 8, 2021, Bitcoin jumped by almost $3,000 in minutes as reports emerged that Tesla had bought $1.5 billion worth of BTC.

Moreover, the Prisoner’s dilemma theory indicates incentives to suppress coordination efforts in terms of a price or allocation cap. Either a country would front-run others by buying ahead of the group or exceeding the proposed 3% allocation to further protect their balance sheet.

Assuming that countries respect the $38,500 price limit and every Bitcoin coin that has moved in the past three years is offered for sale, the holdings — considering foreign and gold reserves — per country would total 2.67 million BTC to China and 1.1 million BTC to Japan. Switzerland would hold 864,800 BTC and the United States would be in possession of 558,000 coins.

Note that the United States’s currency holdings have not been included in the World Bank data, but the Federal Reserve currently holds $8.8 trillion of assets on its balance sheet.

Ultimately, El Salvador’s investment was a drop in the bucket and Bitcoin adoption as a global store of value is still in its infancy.

Furthermore, game theory would present incentives for countries to surpass any agreed limit and not observe price caps, making the theoretical $38,500 estimate way too conservative.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

South Carolina treasurer goes on Bitcoin ’fact-finding trip’ to El Salvador

The state official reportedly used his own funds to pay for the trip, which included discussing Bitcoin with government officials and exploring financial literacy programs.

Curtis Loftis, the treasurer for the U.S. state of South Carolina, spent five days in El Salvador as part of an “exploratory trip” focusing on cryptocurrencies.

According to an Oct. 5 announcement, Loftis was part of a delegation including South Carolina business leaders, rural health officials and individuals “interested in the expansion of cryptocurrency and blockchain technologies” who met with officials from El Salvador’s government in an effort to understand the country’s efforts to adopt Bitcoin (BTC). The cryptocurrency has been legal tender alongside the U.S. dollar in the Central American nation since El Salvador’s Bitcoin Law went into effect in September 2021.

Loftis reportedly used his own funds to pay for the trip, which included discussing Bitcoin with government officials and exploring the country’s financial literacy educational programs. According to the treasurer, the visit to El Salvador was prompted by South Carolina’s legislature exploring ways to support the adoption of crypto and blockchain in the state.

Speaking to Cointelegraph, Loftis, a self-described Luddite, said he was neither a “proponent nor opponent” of crypto but wanted to learn how South Carolina’s government could use the technology effectively in addition to promoting financial literacy among residents. The treasurer said the group tried to use Bitcoin “maybe four times” during the El Salvador trip, as payments to street vendors and local businesses.

“We were in a nicer restaurant, and the tab was about $300 to $400 — a bunch of us — and they paid with Bitcoin,” said Loftis. “I signed up for Lightning beforehand. […] It was interesting […] people living really close to the ground using Bitcoin and some of them really enjoy it — they were really pleased to have done it.”

The South Carolina treasurer added:

”That’s our mandate: not to make a world with Bitcoin or Ethereum, or not make that world — it’s just to understand what’s going on, set up a system where we […] make sure people have good resources to understand what’s happening.”

S.C. Columbia Treasurer and Bitcoin supporter, Curtis M. Loftis, visited El Salvador and witnessed the positive and transformational impact of BTC – El Salvador in English https://t.co/NddUO4HyIp

— Bitcoin Beach (@Bitcoinbeach) October 4, 2022

Reports have suggested that roughly 20% of Salvadorans use BTC through Chivo Wallets, while El Salvador’s president, Nayib Bukele, announced that the government held 2,381 BTC as of July. With the crypto market down, the value of the country’s total Bitcoin investment has dropped more than 55% since September 2021 — worth roughly $48 million at the time of publication.

Bitcoin think tank: Reject CBDCs and look to BTC and stablecoins instead

The paper’s authors say Central Bank Digital Currencies are problematic for the future of individual and economic freedom, but crypto is a viable alternative.

United States think tank Bitcoin Policy Institute is calling for the United States to reject central bank digital currencies (CBDCs) and look to Bitcoin (BTC) and stablecoins as alternatives.

In a white paper shared on Tuesday, authors including Texas Bitcoin Foundation executive director Natalie Smolenski and former Kraken growth lead Dan Held argue that CBDCs would strip the public of financial control, privacy and freedom.

#CBDCs don’t solve any problem.

They do extend state control to the last remaining free areas of individual economic life.

My latest white paper for the #Bitcoin Policy Institute. ⬇️ https://t.co/PS4rOlvcOw

— Natalie Smolenski (@NSmolenski) September 27, 2022

Smolenski and Held argued that CBDCs would essentially “provide governments with direct access to every transaction […] conducted by any individual anywhere in the world,” adding that this could then become available for “global perusal,” as government infrastructure is a “target of constant and escalating cyberattacks.”

The pair also argued that CBDCs would enable governments to “prohibit, require, disincentivize, incentivize, or reverse transactions, making them tools of financial censorship and control:”

“As a direct liability of central banks, CBDCs become a new vanguard for the imposition of monetary policy directly on consumers: such policies include, but are not limited to, negative interest rates, penalties for saving, tax increases, and currency confiscation.”

Smolenski and Held suggest this greater focus on surveillance will mimic “the Chinese government’s surveillance efforts” in bringing state visibility to all financial transactions not already observed through the digital banking system.

“As the world goes the way of China in the 21st century, the United States should stand for something different,” they argued.

The authors said many of the functions CBDCs provide can already be solved with a combination of Bitcoin, privately-issued stablecoins, and even the U.S. dollar, noting:

“For most people, a combination of physical cash, bitcoin, digital dollars and well collateralized stablecoins will cover virtually all monetary use cases.”

Smolenski argued that Bitcoin and private stablecoins will allow instant, low-cost digital transactions both domestically and across borders, while digital dollars and stablecoins will continue to be subject to Anti-Money Laundering and Know Your Customer compliance by “the platforms that facilitate transacting with them,” adding:

“The creation of CBDCs is, quite simply, unnecessary.”

The white paper also argued that governments are often out of depth with new technology, pointing to an incident earlier this year when the Eastern Caribbean Central Bank’s CBDC, DCash, went offline.

“In effect, where governments lead the implementation of CBDCs, serious stability and reliability issues will arise,” they wrote.

CBDCs are already well on their way to development in some countries such as China, but earlier this month, President Joe Biden signaled that the U.S. is considering following suit after directing the Office of Science and Technology Policy (OSTP) to submit a report analyzing 18 CBDC systems.

Previous discussions around CBDCs in the U.S. have been marked with division and confusion , which is one of the author’s key issues with CBDCs — a lack of expertise by governments, along with potential privacy breaches and control.

CBDC’s are a threat to human freedom.

— Dan Held (@danheld) September 27, 2022

To combat what they see as concerns with CBDCs, Smolenski and Held propose cryptographic stablecoins pegged to fiat currencies and backed 1:1 with hard collateral that can be issued by private banks worldwide.

“This would provide all of the purported benefits of CBDCs for end users while precluding the levels of surveillance and control that CBDCs offer the state,” they said:

“The United States should stand for something different: it should stand for freedom. For this reason, the United States should reject central bank digital currencies.”

The Bitcoin Policy Institute describes itself as a nonpartisan, nonprofit organization researching the policy and societal implications of Bitcoin and emerging monetary networks.

NFTs ‘biggest on-ramp’ to crypto in Central, Southern Asia and Oceania — report

NFT-related websites accounted for the largest share of crypto-related web traffic in most CSAO countries over the last 12 months, according to Chainalysis.

Nonfungible tokens (NFTs) may be the biggest driver of crypto adoption in Central, Southern Asia, and Oceania (CSAO), a new report has found.

According to a Sept. 21 Chainalysis post titled “Crypto Adoption Steadies in South Asia, Soars in the Southeast,” NFT-related actions accounted for 58% of all web traffic going to cryptocurrency services from this region in the second quarter of 2022.

Meanwhile another 21% of traffic in the quarter went to websites of play-to-earn (P2E) blockchain games, with major titles including Axie Infinity, STEPN and Battle Infinity.

Chainalysis noted that P2E blockchain games are “intimately related” to NFTs, as most P2E games feature in-game items in the form of NFTs that can be sold on marketplaces like MagicEden and OpenSea, thus meaning:

“NFTs are perhaps the biggest on-ramp to cryptocurrency in CSAO today.”

CSAO countries include India, Thailand, Vietnam, Australia, Singapore, Philippines and Indonesia, among 25 others, and is home to seven of the top 20 countries in Chainalysis’ crypto adoption index.

According to a web traffic heatmap, NFT-related websites accounted for the majority of web traffic in almost every country in the CSAO region, though blockchain games and entertainment also saw a significant share of traffic.

*Web traffic heatmap in Central, Southern Asia and Oceania regions. Source: Chainalysis*

Chainalysis noted this is “not necessarily surprising: CSAO is a hub for innovation in blockchain-based entertainment,” adding:

“Game-centric blockchain developers Polygon and Immutable X are headquartered in India and Australia, for example, and Axie Infinity and STEPN, the two largest play-to-earn games, are operated in Vietnam and Australia, respectively.”

Vietnam topped the Chainalysis cryptocurrency adoption index for the second year in a row, but the Philippines made a surprise appearance at second after ranking 15th in the last report.

“Both of these countries have similar growth drivers: play-to-earn (P2E) games and remittances,” explained the blockchain analysis firm.

On the other hand traffic to websites related to other subjects, such as decentralized exchange contracts, have declined in recent quarters, according to Chainalysis — which it said is likely connected to the bear market and ongoing crypto winter.

The report also touched on crypto adoption in India and Pakistan, noting that while both ranked as second and third highest adopters of cryptocurrency worldwide in 2021, the two countries have fallen this year to fourth and sixth respectively.

Recent regulatory developments are listed as possible reasons for the change.

In January, Pakistan’s central bank and government recommended a crypto ban, while the Indian government implemented a 30% tax on all crypto gains in April and an additional 1% fee on every crypto transaction in July.

NFTs ‘biggest on-ramp’ to crypto in Central, Southern Asia and Oceania: Report

NFT-related websites accounted for the largest share of crypto-related web traffic in most CSAO countries over the last 12 months, according to Chainalysis.

Nonfungible tokens (NFTs) may be the biggest driver of crypto adoption in Central, Southern Asia and Oceania (CSAO), a new report has found.

According to a Wednesday Chainalysis post titled “Crypto Adoption Steadies in South Asia, Soars in the Southeast,” NFT-related actions accounted for 58% of all web traffic going to cryptocurrency services from this region in the second quarter of 2022.