| Welcome to Chain Letter! Great to have you. Here’s what’s new in the world of blockchains and cryptocurrencies. | China’s central bank on its digital currency plans: We’ll release it when we release it. Despite recent suggestions by the People’s Bank of China (PBOC) that it is on the verge of releasing its long-anticipated digital currency, the bank has no timetable for the launch, according to PBOC governor Yi Gang. Yi, speaking at a press conference in Beijing, said that more work is needed to work out lingering regulatory issues, in particular ones pertaining to anti-money-laundering, terrorism financing, and tax evasion. Perhaps Yi felt compelled to quell speculation, based on recent media reports, that China might issue the digital money as early as this year. But he did not specifically knock down the recent comment by Mu Changchun, deputy director of the PBOC’s payments department, that the currency is “ close to being out.” And whether or not there is a timetable, Facebook’s plan to launch its own currency, called Libra, in 2020 has accelerated the process. The PBOC has been studying digital currency since 2014. In July, after Facebook revealed its plans for Libra, the director of the PBOC’s research bureau, Wang Xin, said the bank was paying “high attention” to the project, adding: “We had an early start … but lots of work is needed to consolidate our lead.” It may still have the lead from a technical perspective, and there is little reason to doubt that China will be the first major economy to launch a sovereign digital currency. But it appears that China is still grappling with similar regulatory questions as those facing governments all over the world. That probably shouldn’t be surprising: creating digital money system is much more than a technical endeavor. | | The owner of the New York Stock Exchange is now in the Bitcoin business. Intercontinental Exchange (ICE) has finally opened the doors to its digital asset marketplace, called Bakkt, offering Bitcoin futures contracts. Many view the launch, which has been delayed for nearly nine months, as a crucial step toward mainstream adoption of digital assets. Futures contracts are legal agreements to buy or sell a given commodity at a specific price at a specific time in the future. Bitcoin futures trading, which in the US is regulated by the Commodity Futures Trading Commission (CFTC), may be more attractive to traditional financial institutions than investing directly in the asset. Investors can use futures to bet that the price will fall, an approach that can be used as a hedge, a bet that counterbalances other bets so as to protect against loss. ICE’s competitor, the CME Group, has been offering Bitcoin futures contracts since December 2017. According to the Wall Street Journal, more than $200 million worth of Bitcoin futures change hands on an average day. The new contracts will be the first to be “physically settled”—that is, when a contract expires, the bet will be settled with actual Bitcoin. In contrast, the CME Group’s contracts are settled in cash; the traders never actually deal with the digital currency. Crucial to Bakkt’s setup is its Bitcoin “warehouse,” which stores customers’ digital coins. In fact, the launch’s delay was in large part due to a drawn-out discussion between ICE and the CFTC about how best to do this. Crypto-assets pose unique challenges because ownership is tied to cryptographic keys, and transactions are irreversible. When ICE revealed its plans for Bakkt in August of 2018, it announced partnerships with Starbucks and Microsoft, among others, and promised “an integrated platform that enables consumers and institutions to buy, sell, store, and spend digital assets on a seamless global network.” And it stressed that the platform would be regulated and transparent. Bakkt wants to make mainstream institutions less skeptical of digital assets. And it is betting that this will open the door to a much larger future marketplace for them—one that serves consumers in addition to financial institutions. To that end, getting the CFTC’s blessing for its custody service is just as important as the new futures contracts. Either way, trading volume for Bakkt’s futures has been relatively low in the first few days, perhaps due to the continued reluctance of big banks to participate in the Bitcoin market. | | Loose change Fill your pockets with these newsy tidbits. - Kik is shutting down its messaging app and will now focus on keeping its Kin cryptocurrency alive. It blames the costs incurred in its fight with the SEC. (Decrypt)
- The US House of Representatives has passed a bill calling for the Financial Crimes Enforcement Network (FinCEN), the division of the Department of Treasury that polices illicit finance, to study “whether AI, digital identity technologies, blockchain technologies, and other innovative technologies can be further leveraged to make FinCEN’s data analysis more efficient and effective.” (CoinDesk)
- According to German news outlet Der Spiegel, which saw a letter that Facebook sent to a German legislator, Facebook’s plan is for the dollar to make up half of its digital currency's reserve basket, the euro 18%, the yen 14%, the British pound 11%, and the Singapore dollar 7%. (Reuters)
- Facebook has apparently acquired a chatbot startup for its wallet service, Calibra. (TechCrunch)
- According to a new study, more than 60% of Ethereum nodes are running in the cloud, as opposed to hosted independently, and 25% of those are using Amazon Web Services. (TNW)
- Filecoin, the decentralized file storage project that raised $257 million in a 2017 ICO, now aims to fully launch in March 2020. (Decrypt)
- Another popular South Korean cryptocurrency exchange, Upbit, has delisted privacy coins in response to new global anti-money-laundering rules. (CoinDesk)
- Bank of Japan Governor Haruhiko Kuroda says global cooperation will be crucial to regulating stablecoins like Libra. (Reuters)
| | "Would the Chinese like to be less vulnerable to American sanctions? Happier if they didn’t have to use the dollar for their imports and exports? The answer to that is unambiguously yes." —Eswar Prasad, Cornell economics professor and former head of the IMF’s China Division. Prasad told the Wall Street Journal that digitizing its currency is way to get out from under the thumb of the US in global trade. | | | | | |
