Payments

EU regulators ban cross-border payments from Russian crypto accounts

In a statement on Oct. 6, regulators in the European Union banned all crypto-asset wallets, accounts and custody services from Russia.

In a statement released on Oct. 6, the European Union introduced another set of sanctions against Russia due to the prolonged and recently escalated conflict in Ukraine.

The new sanctions include a complete ban on cross-border crypto payments between Russians and the EU. This statement includes the prohibition of, “all crypto-asset wallets, accounts, or custody services, irrespective of the amount of the wallet.”

New sanctions were installed as a response to Russia’s annexation of Ukrainian territory as the result of what the EU calls a “sham” referendum, along with troop mobilization and threats of nuclear escalation.

The previous sanctions capped crypto payments from Russian to EU wallets at 10,000 euros (approximately $9,900).

However, this new total ban on cross-border crypto payments between the regions aligns with the EU’s desire to “further deprive the Kremlin’s military and industrial complex of key components and technologies.”

Related: Russia blocks OKX website for alleged unreliable financial information: Reports

This comes shortly after Russian officials’ approval of the usage of crypto for cross-border payments. In the policy, which approved such transactions, lawmakers described ways to acquire cryptocurrency and its uses.

The decision aligned with the Central Bank of Russia’s agreement to legalize crypto for cross-border payments a few weeks prior on Sept. 5. 

In its relations with China, Russia aims to use a central bank digital currency, which is currently in a pilot phase, for transaction settlements. Previously, in 2020, the country adopted a law that banned payments via digital assets.

However, proceeding with the latest tightening of sanctions from the EU, Russia faced additional blockages from the United States. On Sept. 15, the U.S. Treasury Department added 22 Russian individuals and two entities based in the country to its own list of sanctions as a result of neo-Nazi paramilitary activity. 

Is payments giant SWIFT preparing for a blockchain-bound future?

Are TradFi and DeFi converging, moving toward a middle ground that includes tokenized assets, interoperability and regulation?

SWIFT is a payments colossus. It operates across more than 200 countries, has 11,000-plus financial institution clients and transmits some 8.4 billion financial messages every year. It is the global leader in cross-border bank-to-bank payments and recently played a key role in the West’s economic sanctions on Russia. 

That doesn’t mean the Belgium-based cooperative is immune to disruption tremors, however. Critics have long maintained the interbank messaging system, founded in the 1970s, is “old, inflexible, slow, and increasingly prone to cyberattacks.” In May, Mastercard CEO Michael Miebach cast doubt upon SWIFT’s ability to survive the next five years. Meanwhile, it continues to be menaced by a rising tide of blockchain-based payment networks on one side and an expected torrent of central bank digital currencies (CBDCs) on the other.

But, last week, in a sign that even entrenched legacy financial networks can (possibly) change their stripes, SWIFT confirmed a proof-of-concept project with blockchain oracle provider Chainlink. If all goes well, SWIFT’s bank users could easily access and transfer digital assets on multiple blockchain platforms. Days earlier, SWIFT also announced it was using fintech-firm Symbiont’s enterprise blockchain platform to improve its messaging for corporate events like dividend payments and mergers.

These developments raise an intriguing question: Rather than engaging in a zero-sum struggle to the death, are traditional finance (TradFi) and decentralized finance (DeFi) firms actually converging — i.e., moving toward a common middle ground that includes tokenized assets, DeFi, interoperability and, yes, regulation?

Co-opting an existential threat?

“All financial goods will move across blockchain networks in the future,” Matthew Hougan, chief investment officer at Bitwise Asset Management, told Cointelegraph. “It’s not surprising to see legacy firms looking to adopt and/or co-opt a technology that represents a fundamental threat to their existence; in fact, it should be applauded.”

Of course, this is just a pilot program. Hougan added, “It’s not like SWIFT got blockchain religion overnight and is converting all their activities to DLT.” But, it’s a start, and for that, the network should be applauded, he suggested.

In this rapidly evolving technological world, “there is no place for binary viewpoints that embrace an ‘I win, you lose’ mentality,” especially within its capital markets and finance sector, Mark Smith, CEO and co-founder of Symbiont, told Cointelegraph, further adding:

“Ultimately what ends up being the norm is usually a hybrid, and we definitely see a melding unfolding that will borrow from the best that TradFi and DeFi have to offer.” 

Jonathan Solé, strategy director at SWIFT, speaking at last week’s Smartcon 2022 convention in New York, acknowledged an “undeniable interest” on the part of institutional investors in digital assets “whether these are stablecoins, CBDCs or anything that you can tokenize on the capital markets space” including equities and bonds.

Banks and other TradFi institutions are looking to SWIFT to “bridge the gap” between their infrastructure servicers, like exchanges, custodians and clearing houses, “and all of these new blockchains that are going to provide these services” for tokenized assets, he added at a panel titled “Bridging Traditional Finance and DeFi.”

The session was moderated by Chainlink CEO Sergey Nazarov, who noted that SWIFT possessed the TradFi world’s “largest private key infrastructure,” adding:

“There is no reason to get rid of that private key infrastructure that already securely signs transactions to move around trillions of dollars in value. All of those standards can simply have an addition made to them that says: blockchain stuff.”

But, SWIFT “doesn’t necessarily want to build an integration with every single chain on the planet,” added Nazarov, which was why it was exploring Chainlink’s Cross-Chain Interoperability Protocol (CCIP) as a way for it “to become interoperable across all blockchain environments.”

Stephen Prosperi, head of product management and digital securities management of DTCC, which provides clearance and settlement services for U.S. securities markets — another TradFi heavyweight — seconded this point. Different digital currencies “will live across different chains,” and firms like DTCC don’t want to build separate infrastructure to connect to each of the 100 blockchains that host desirable digital assets. A central point of entry like CCIP could therefore be useful.

Are cross-chain bridges secure?

The Smartcon panelists didn’t really address some of the challenges associated with cross-chain bridges, however, including security concerns. “Yes, there are security risks with cross-chain projects,” commented Hougan, “which is why you need pilot projects like this.”

Cross-chain bridges are designed to solve the problem of interoperability between blockchain platforms. Blockchain networks today — Bitcoin, Ethereum, Solana and others — are like the railroad systems in the 19th century before track gauge sizes were standardized. Passengers and freight had to be offloaded to another train when incompatible rail lines met.

Cross-blockchain bridges are designed to solve these sorts of incompatibilities, but the problem is they appear to be vulnerable to hacks. Some $2 billion has been stolen from bridges in 13 separate heists, according to Chainalysis, most of it this year. Ethereum founder Vitalik Buterin, too, red-flagged cross-chain bridges recently, suggesting they can enable 51% network attacks.

A key problem seems to be that the “bridges” tend to accumulate large amounts of “locked assets” from different blockchains, some quite obscure and not always built with advanced security features, according to Elliptic’s Cross-Chain Report 2022 released Oct. 4, which noted:

“This has made bridges an attractive target for cybercriminals. […] From January to July 2022, $1.2 billion worth of cryptoassets were stolen across eight bridge compromise incidents.”

Chainlink presumably believes it will do a better job with security than cross-chain bridges have done in the past. Nazarov said as much in post-Smartcom interviews. “That is what CCIP seeks to solve. And I don’t think it’s an intractable problem. I think it’s a solvable problem,” he told Fortune.

Are traditional institutions ready for tokenization?

Apart from the need for interoperability, are there other commonalities that are bringing TradFi and blockchain providers closer together? Are the capital markets ready for tokenization, for instance, Nazarov asked panelists.

“Well, it’s definitely here. It is not going to go away,” answered Solé. “We have adopted all of our messaging standards so that we can make sure that we can cater for the information that is needed for tokenized assets.”

“We’re actually looking at tokenizing all different types of assets internally,” Victor O’Laughlen, managing director and head of enterprise tokenization at Bank of New York Mellon (BNY), told the panel. BNY’s broker-dealer and investment manager clients “don’t want to segregate and manage their assets in different pools. They want to have one client experience.” Another attraction of blockchain-enabled tokenized assets is that they are accessible 24/7. O’Laughlen added:

“It’s the infrastructure that always stays up, right? The crypto markets have really pushed the financial markets to think about that. And, we need to be able to support our clients at any time zone, in any location.”

Beyond interoperability and tokenization, there was some interest among the TradFi representatives in DeFi projects proper — but with caveats. “If financial services want to go into DeFi mode, there needs to be some sort of regulated DeFi,” said Solé, though some might view that as a contradiction in terms. 

Prosperi echoed the need for a sort of “permissioned DeFi,” one that had compliance baked in. “At the end of the day, institutions need to feel like they’re not going to get busted on KYC, AML — that they know who they’re transacting with.”

BNY Mellon’s O’Laughlen saw some positives with DeFi protocols, though. “DeFi could benefit intraday liquidity, where liquidity is needed to sort of grease the wheels.” Institutions could begin with lending or borrowing assets or cash, as “some of the more vanilla types of [DeFi] transactions that take place between counterparties and financial institutions would be a great first step.”

A boost to crypto adoption

Finally, what, if anything, does all this have to do with crypto/blockchain adoption? Ecumenical panel discussions like what occurred at Smartcon are encouraging, but will partnerships like SWIFT-Chainlink really “accelerate the adoption of DLT blockchains and benefit various institutions all over the capital markets,” as Nazarov suggested?

“It’s positive news,” Hougan told Cointelegraph. “Every time an entrenched incumbent recognizes that it has to think about the implications of blockchain technology, it makes it easier for the next one to do so. This is another brick in the wall.”

“Chainlink has a strong competitive position in providing oracles and trustless data sources, and it grows by integrating those tools into more capital markets and payments networks,” Lex Sokolin, head economist at ConsenSys, told Cointelegraph. “The purposes of blockchains are different and varied. Generally, I do think more integration implies more paths to adoption.”

Smith, for his part, sees a “real maturation” of blockchain technology across financial services, viewing it as the “connective tissue” that will make both TradFi and DeFi successful. Blockchain technology was created originally to provide a better bank payment system, and 13 years later, it “continues to become more widely accepted and adopted among banks, asset managers and global markets,” Smith said.

1inch wallet users get domain names with Unstoppable Domains partnership

The DEX aggregator said the partnership would promote the wider adoption of DeFi and Web3 products and services.

Decentralized exchange aggregator 1inch has partnered with Unstoppable Domains to help users simplify cryptocurrency payments — a move the company says could strengthen the wider adoption of decentralized finance (DeFi) products and services. 

Under the partnership, 1inch wallet users can enter “human-readable domain names” when sending crypto payments using Unstoppable’s naming service. This allows users to use customizable domain names instead of lengthy alphameric crypto wallet addresses. Like all Unstoppable Domains addresses, the wallet address will be minted on the blockchain as a nonfungible token (NFT), with no additional minting or renewal fees.

Sergej Kunz, 1inch Network’s co-founder, said the Unstoppable Domains partnership could promote the wider adoption of Web3 products and tools. “The issues of user experience, security and identity are still holding back Web3 mainstream adoption,” he said, adding that the partnership “opens up opportunities for overcoming these barriers by making Web3 onboarding more fun and attractive.”

As of July, Unstoppable Domains had registered 2.5 million domains and integrated with over 150 Web3 applications. The 1inch integration adds to a growing list of over 80 wallets and exchanges supported by the NFT naming service.

Related: MoonPay to make Web3 payments with Unstoppable Domains partnership

Unstoppable’s valuation ballooned to $1 billion this year after the company raised $65 million in a Series A funding round. Unstoppable’s growth has occurred in lockstep with the NFT boom, highlighting the popularity of digital identity profiles. Ethereum Naming Services, an Unstoppable competitor, has also seen a surge in demand, with nearly 2 million domain registrations as of August. By the end of September, that figure had risen above 2.6 million.

Russia unlikely to choose Bitcoin for cross-border crypto payments: Analysis

Bitcoin looks suitable for Russia’s crypto cross-border payments at first glance, but there are many reasons why such a choice is highly questionable.

Despite Russia pushing the idea of using cryptocurrencies for cross-border payments, the specific digital asset the government plans to adopt for such transactions still remains unclear.

Russian authorities are quite unlikely to approve the use of cryptocurrencies like Bitcoin (BTC) for cross-border transactions, according to local lawyers and fintech executives.

Bank of Russia needs to control cross-border transactions

That Russia would allow Bitcoin or any other similar cryptocurrency to be usefor cross-border payments is “highly questionable” because such assets are “hard to control,” according to Elena Klyuchareva, the senior associate at the local law firm KKMP.

Klyuchareva emphasized that the draft amendments to the legislation on cross-border crypto payments are not available yet, while reports only state that the Bank of Russia and the Ministry of Finance have agreed upon a common approach to the issue.

The lawyer told Cointelegraph that the cryptocurrency used by Russia for cross-border payments will most likely be local, so Russian regulators can properly monitor and control such transactions. She also suggested that only major institutional players — like banks — will be able to comply with the requirements for making cross-border payments.

USDT and USDC are questionable as the stablecoins are issued in the US

Russia should be choosing a cryptocurrency for cross-border settlement while eliminating all possible pressure from other countries, according to Eduard Davydov, the senior partner at Emet Law Firm. As such, cryptocurrencies issued in the United States, including major stablecoins like Tether (USDT) or USD Coin (USDC), will “not meet such requirements,” Davydov assumed.

As the world’s most decentralized cryptocurrency, Bitcoin might look more suitable in such a context, but BTC is also associated with a number of issues like high volatility, limited scalability as well as a vulnerability to global sanctions. “Whole arrays of addresses may fall under the sanctions when interacting with which the coins will be considered “dirty” and counterparties may choose not to make transactions with such addresses or coins,” Davydov noted.

Bitcoin looks suitable due to its decentralized nature, but volatility is too high

Sergey Mendeleev, CEO and co-founder of InDeFi Smart Bank, also believes that decentralized cryptocurrencies like Bitcoin would only make a good choice for Russia’s crypto cross-border payments if they were less volatile.

​​Mendeleev also said that it’s hard to imagine a situation where foreign businesses would accept payments in a Russian ruble-pegged cryptocurrency. “In any case, businesses would be able to convert any currency into Bitcoin, or into Tether in one click,” he added.

The CEO also expressed hope that Russian regulators would have enough courage to allow foreign economic activity with the participation of “at least U.S. dollar stablecoins on major blockchains.” ​​Mendeleev stressed that InDeFi Smart Bank announced in September 2022 the creation of a decentralized crypto ruble project exactly for the sake of simplifying this idea.

Iran is one of few countries with similar experience worldwide

Russia is among the few countries in the world to authorize cross-border crypto payments while banning local crypto payments alongside local crypto exchanges. However, there are a few countries that can serve as an example of a government taking a similar approach to crypto.

A good example might be Iran, which is under United States sanctions, Davydov suggested, referring to Iran’s Industry, Mines and Trade Ministry approving the use of crypto for imports in late August. The Iranian authority said that the new measures aim to help Iran mitigate global trade sanctions that essentially cut the country out of the global banking system.

In August, Iran placed its first international import order using $10 million worth of cryptocurrency, a senior government trade official reported. The official did not specify the precise digital currency used for the transaction.

In the meantime, Iran still doesn’t officially allow its residents to pay using cryptocurrencies like Bitcoin. Iran’s central bank first prohibited the use of crypto for payments inside the country in draft crypto regulations from 2019. As is the case with Russia, cryptocurrency investment remains illegal in Iran.

“Domestic payments in cryptocurrency are still banned in Iran. The local government has repeatedly claimed that it implemented crypto for international transactions,” Davydov stated.

Related: Russia aims to use CBDC for international settlements with China: Report

As previously reported, the Russian government became increasingly interested in adopting cross-border payments in crypto amid Western economic sanctions following Russia’s invasion of Ukraine. The Bank of Russia and the Ministry of Finance have been collaborating on policies and rules for allowing such payments, while the central bank stressed that domestic crypto payments and crypto exchanges would not be legalized.

According to Anatoly Aksakov, the head of the finance committee in Russia’s lower house of parliament, Russia might start cross-border payments in crypto in 2023. He reportedly suggested that businesses themselves will be able to choose the cryptocurrency for cross-border settlements, whether it would be Ether (ETH) or Bitcoin, or another digital currency.

Israel, Norway and Sweden central banks partner with BIS to explore CBDC payments

The Project Icebreaker initiative aimed to improve cross-border payments by reducing costs and increasing speed and transparency, with a final report expected in Q1 2023.

The Bank for International Settlements, or BIS, has reported it will be partnering with the central banks of Israel, Norway and Sweden to explore international retail and remittance payments use cases for central bank digital currencies, or CBDCs.

In a Sept. 28 announcement, the BIS said the collaboration — named Project Icebreaker — will involve the bank’s Innovation Hub Nordic Centre testing key functions and the technological feasibility of interlinking domestic CBDC systems. The central banks will develop a new hub in which the Central Bank of Norway, the Bank of Israel, and Sveriges Riksbank can connect their proof-of-concept CBDC systems.

Beju Shah, the head of the Innovation Hub Nordic Centre, said the experiment will explore CBDC designs and architecture, as well as related policy concerns. The project aimed to improve cross-border payments using CBDCs by reducing costs and increasing speed and transparency, with a final report expected in the first quarter of 2023.

“Efficient and accessible cross-border payments are of extreme importance for a small and open economy like Israel and this was identified as one of the main motivations for a potential issuance of a digital shekel,” said Bank of Israel deputy governor Andrew Abir. “The results of the project will be very important in guiding our future work on the digital shekel.”

The BIS reported on Sept. 27 that a CBDC pilot involving the central banks of Hong Kong, Thailand, China and the United Arab Emirates was “successful” after a month-long test facilitating $22 million worth of cross-border transactions. Other countries’ central banks have launched similar initiatives related to improving cross-border settlements, as institutions in Australia, Singapore, Malaysia and South Africa announced in September 2021.

Related: Australian pilot CBDC test for eAUD to commence mid-2023: RBA White Paper

The Central Bank of Norway, the Bank of Israel and Sveriges Riksbank have all been considering the benefits of rolling out their respective CBDCs, while China reportedly expanded the trials of its digital yuan to larger swaths of the country in September. In the United States, lawmakers and regulators have taken different approaches to explore the digital dollar, while a March executive order from President Joe Biden had government departments and agencies research the benefits and risks of a CBDC.

Crypto Biz: DID you see what Africa is doing with Web3?

Decentralized identity services could play a vital role in promoting Web3 payments in emerging markets like Africa. This week’s Crypto Biz has the latest.

If you’ve spent any time reading about blockchain and Web3, you know that this industry is filled with big buzzwords and half-baked concepts. But, concepts such as decentralized identity services, or DIDs, bring real meaning and utility to Web3. If you haven’t yet wrapped your mind around DID, it refers to a self-owned, independent identity that enables trusted data exchange. In other words, it puts digital identity management and administration directly in your hands instead of some third party’s. 

In this week’s Crypto Biz, we take a look at a Web3 partnership designed to bring DID-powered payment solutions to Africa. We also chronicle Maple Finance, the European Central Bank and Nasdaq.

Payments platform Fuse integrates ChromePay to bring DID services to Africa

Is Web3 even possible without decentralized identity services, or DIDs? It depends on who you ask. For Web3 payment solutions Fuse and ChromePay, DIDs will play an essential role in expanding access to the decentralized internet, especially in places like Africa. This week, the companies announced a new partnership to bring a suite of DID-powered Web3 payment products to the African continent. Specifically, ChromePay will integrate the Fuse blockchain, allowing users to access both traditional and blockchain-based payments directly on their mobile devices.

Maple Finance launches $300M lending pool for Bitcoin mining firms

Crypto lending platform Maple Finance is showing no signs of slowing down amid the bear market. The company announced this week that it would provide up to $300 million worth of secure debt financing to Bitcoin (BTC) mining firms. Why is this important? Well, for starters, the loan could help miners stay afloat during one of Bitcoin’s most severe downturns. The loan will be secured by physical and intellectual assets owned by the mining firms, including their BTC mining rigs.

European Central Bank chooses Amazon and 4 other firms to prototype digital euro app

The European Central Bank, or ECB, will prototype its digital euro app with five e-commerce and fintech companies led by Amazon. Nexi, EPI, Worldline and CaxaBank round out the list of partners the ECB has chosen to develop specific functions for the digital euro prototype. Although the ECB has been vague about its intent to release a central bank digital currency, the monetary authority appears to be laying the groundwork for its implementation. I’m no fan of CBDCs, so make of this what you will.

Nasdaq reportedly preparing crypto custody services for institutions

The bear market might be a perfect opportunity for institutional investors to learn about crypto and, by extension, begin investing in the digital asset class. (Regulatory clarity will also help.) It was reported this week that financial services firm Nasdaq is preparing to offer digital asset custody services — a move that could make buying and holding BTC and other cryptocurrencies more palatable for institutional investors. In my view, it’s only a matter of time before banks, hedge funds and family offices begin dabbling in crypto. At this stage, not considering Bitcoin is a major career risk for investors. Ignore BTC at your peril!

Before you go: Why did the crypto market dump after the Ethereum Merge?

Ethereum’s highly anticipated Merge was completed successfully last week, but even that didn’t prevent crypto prices from crashing again. In this week’s Market Report, I sat down with Marcel Pechman, Benton Yaun and Ray Salmond to discuss the factors impacting crypto markets. I also shared my thoughts on when Bitcoin could reach its definitive cycle bottom. You can watch the full replay below.

Crypto Biz is your weekly pulse of the business behind blockchain and crypto delivered directly to your inbox every Thursday.

Russian officials approve use of crypto for cross-border payments: Report

Deputy Finance Minister Alexei Moiseev said the policy describes “how to acquire cryptocurrency, what can be done with it” and its use in cross-border settlements.

The Bank of Russia and the country’s Ministry of Finance have reportedly reached an agreement allowing cross-border settlements in cryptocurrencies.

According to a Thursday report from the Russia-based publication Kommersant, Russia’s Deputy Finance Minister Alexei Moiseev said the government department has agreed “on the whole” with the central bank over a rule that would let residents send cross-border payments using cryptocurrencies. The proposed policy change was reportedly aimed at allowing Russian nationals access to digital wallets.

“[The policy] generally describes how to acquire cryptocurrency, what can be done with it, and how it can or cannot be settled with it in the first place in cross-border settlements,” said Moiseev, according to the report.

Russian news agencies had been reporting that the central bank had been discussing the issue of cross-border crypto payments with government officials. However, the Bank of Russia reportedly opposed allowing crypto exchanges to operate legally and not accepting cryptocurrency as legal tender.

On Sept. 5, Moiseev said:

“Now that people are opening crypto wallets outside the Russian Federation, it is necessary to do this in Russia with entities supervised by the central bank, which are required to comply with Anti-Money Laundering and Know Your Customer requirements.”

Russia has had a mixed relationship with crypto. In 2020, the country passed legislation prohibiting the use of cryptocurrencies including Bitcoin (BTC) for payments. President Vladimir Putin also signed a bill into law in July banning digital financial assets as payments. In May, Trade Minister Denis Manturov suggested Russia would legalize crypto payments “sooner or later.”

Related: 72% of Russians say they have never bought Bitcoin: Survey

Since Russia’s invasion of Ukraine in February, the government, businesses, and certain individuals within the country have been the target of comprehensive economic sanctions. On Sept. 15, the United States Treasury Department added 22 individuals and two Russia-based entities to its sanctions list, claiming they had furthered the government’s objectives in Ukraine.

Regulated fintech in Bahrain enables crypto payments with Binance

The Central Bank of Bahrain gives the nod to EazyPay, launching crypto payments for more than 5,000 payment gateways in the country.

Cryptocurrency adoption continues growing in the Kingdom of Bahrain, with local companies enabling payments in crypto like Bitcoin (BTC).

EazyPay, an online payment platform regulated by the Central Bank of Bahrain (CBB), has partnered with Binance Pay to enable crypto payments in the country, EazyPay CEO and founder Nayef Tawfiq Al Alawi announced on Wednesday.

The newly launched crypto payment option will be available in more than 5,000 point-of-sale (POS) terminals and online payment gateway across Bahrain, the CEO said.

Major local merchants and firms, including Lulu Hypermarket, Sharaf DG, Al Zain Jewelry and Jasmi’s, will be able to accept more than 70 cryptocurrencies as payment by scanning the QR code from Eazy’s POS using Binance App.

Al Alawi emphasized that ‎‏Eazy Financial Services is licensed and regulated by Bahrain’s central bank as the fifth POS and online payment gateway acquirer and payment services provider.

“Special thanks go to the Central Bank of Bahrain, Binance and Eazy Financial Services,” he noted. Khalid Hamad Al Hamad, executive director of the banking supervision at the CBB, also congratulated Eazy on rolling out the new crypto payment service.

Binance CEO Changpeng Zhao noted that EazyPay’s crypto payment feature would be the “first regulated and approved crypto payments service offering” in the Middle East and North Africa region. As previously reported, Binance received several regulatory approvals in Bahrain, including a crypto service provider license and the Category 4 license.

The third-smallest country in Asia, Bahrain, has been actively adopting cryptocurrency over the past few years. In 2019, the CBB issued a framework for a range of crypto-related activities, officially establishing rules for licensing, governance, risk management, Anti-Money Laundering standards, reporting, security and other rules for crypto-asset services.

Related: OpenNode sets up BTC payment infrastructure in Bank of Bahrain regulatory sandbox

Bahrain has been actively experimenting with crypto and blockchain technology since adopting crypto regulations. In January 2022, The CBB completed a digital payments trial in collaboration with JPMorgan’s blockchain and cryptocurrency unit Onyx. CoinMENA, a major local crypto exchange regulated by the CBB, in June announced plans to expand its crypto trading services into Egypt.

Hearing: Alternative payments’ threat to national security goes far beyond crypto

Crypto is just the tip of the iceberg, experts tell a U.S. House Financial Service subcommittee in testimony on payment systems and national security.

Non-crypto alternative payment systems pose a serious threat to United States security, according to testimony presented at a U.S. House Financial Services Committee Subcommittee on National Security, International Development, and Monetary Policy hearing Tuesday. The alternative payments ecosystem should be seen as a whole, and crypto can enhance national security, speakers said. 

Wilson Center fellow Scott Dueweke told the U.S. House Financial Services subcommittee in written testimony, “By focusing only on cryptocurrencies we risk missing the forest for the trees.”

Money services businesses are heavily regulated in the United States, but those based outside the country may be unwilling to conform to U.S. requirements, including Know Your Customer/Anti-Money Laundering, and they may be outside of the U.S. and other Western countries’ reporting requirements, Dueweke said.

Dueweke recommended instituting greater financial open source intelligence efforts as a means of counteracting the threat posed SWIFT network alternatives being created by Russia and China and other threats. He said:

“The U.S. needs to follow our private sector’s global technology leadership by setting the standards for the APE in the international arena. Regardless of whichever direction the U.S. government takes the digital dollar, […] it cannot wait to engage the world through international organizations.”

While political aims inspire such moves as the formation of such projects as the Russia System for Transfer of Financial Messages, a SWIFT alternative, and that country’s MIR banking card system, Dueweke said poverty is the main driver in the expansion of the alternative payment ecosystem.

Dueweke said over 700 million people lack adequate banking services and the situation is made worse by the practice of de-risking, in which Western banks stop providing correspondent services for banks in poor regions. While security is the state motivation for that practice, a profit motive is often behind it, Dueweke said.

Related: Global inflation mounts: How stablecoins are helping protect savings

TRM Labs head of legal and government affairs Ari Redbord told the hearing that U.S. dollar-backed stablecoins could enhance U.S. national security. Due to the prestige and reliability of the U.S. fiat currency, Redbord said:

“One can imagine a world in which entrepreneurs create financial services products using a U.S. dollar-backed stablecoin even where those products otherwise have little to do with the United States.”

Bitcoin still dominates total payments on BitPay despite the bear market

Total crypto payments on BitPay remained stable despite the bear market, with monthly transactions surging from around 58,000 in 2021 to 67,000 in 2022.

The cryptocurrency bear market has had an impact on how people pay with crypto, but Bitcoin (BTC) remains a major payment tool despite huge volatility, according to data from BitPay.

The share of Bitcoin payments in the total BitPay transactions has been shrinking amid the ongoing cryptocurrency winter, but it’s still the most popular cryptocurrency for payments on the platform.

The sales volumes of Bitcoin-based payments on BitPay accounted for as much as 87% last year and dropped to 52% in the first quarter of 2022 amid the bear market, BitPay’s vice president of marketing Merrick Theobald told Cointelegraph. In contrast to the number of transactions, Bitcoin sales volumes on BitPay are associated with the total value of crypto payments processed in Bitcoin.

Theobald noted that BitPay observed a sales volume impact mainly among non-stablecoin purchases as stablecoin sales continued to occur regardless of crypto price fluctuations.

Theobald stressed that overall BitPay transactions remained stable despite the market decline, with monthly transactions surging from around 58,000 in 2021 to 67,000 transactions in 2022.

Crypto sales volumes and transactions on BitPay. Source: BitPay

In line with sales volumes, the amount of Bitcoin payment transactions has also been significantly falling this year. According to data from BitPay, the BTC transaction share dropped from 57% in March to 48% in July.

On the other hand, BitPay users have been increasingly paying in other cryptocurrencies like Litecoin (LTC), as LTC transactions surged from 14% in March to 22% in July.

Bitcoin dominance in crypto payments. Source: BitPay

Despite a massive drop in Bitcoin payments amid the bear market, BTC still remains the cryptocurrency most commonly used for transactions on BitPay and makes up more than 50% of all sales on the platform. According to Theobald, that is another evidence that Bitcoin’s payment utility use case — the one originally described by BTC creator Satoshi Nakamoto — is still relevant. The exec said:

“People still use BTC on BitPay more than other cryptocurrencies because it is the oldest and most well-known crypto, it has the largest market cap, and it has proven over the years to be a great digital payment tool.”

Theobald also suggested that some users might have preferred to pay with Bitcoin amid the bear market because it can be more expensive to sell BTC at an exchange and use it later to buy items online. “BitPay provides customers with a more direct and less expensive way to use their Bitcoin to buy everyday items,” he added.

Related: Bank of Russia agrees to legalize crypto for cross-border payments: Report

BitPay is one of the largest cryptocurrency payment companies in the world, allowing individuals and businesses to buy products and services with crypto or accept crypto as payment. BitPay provides crypto payment services to a wide number of companies in the United States, including Newegg, Verifone and Shop.com. The BitPay platform has also gained popularity for administrative payments and donation campaigns in the United States.

The news comes amid JPMorgan reporting on decreasing demand for cryptocurrencies as a payment method over the past six months. Takis Georgakopoulos, JPMorgan’s global head of payments, said that the bank has been handling significantly fewer crypto payments, reportedly stating that JPMorgan sees “very little” demand for such payments right now.