| Welcome to Chain Letter! Great to have you. Here’s what’s new in the world of blockchains and cryptocurrencies. | Libra’s terrible week is no cause for pessimism (says Facebook). Six more of the digital currency project’s members—Visa, Mastercard, Stripe, eBay, Booking Holdings (which owns Booking.com and other travel sites), and popular Latin American payment platform Mercado Pago—have followed PayPal’s example and withdrawn from the group. This is fine, says Facebook’s blockchain lead David Marcus. “The pressure has been intense,” Marcus said in a tweet last Friday after saying he respected the decisions by Visa and Mastercard to “wait until there’s regulatory clarity for Libra to proceed.” He continued: “I would caution against reading the fate of Libra into this update.”
Facebook’s plan to launch a global digital currency has received a chilly reception from policymakers and central bankers around the world. Most recently, letters sent by two US senators to the CEOs of Mastercard, Visa, and Stripe expressed “deep concerns” about Libra, and warned that their companies may see more regulatory scrutiny because of their involvement with the project. In a television interview this week on CNBC, Treasury Secretary Steve Mnuchin said he thinks the defections happened because Libra is not yet “up to par” with respect to anti-money-laundering regulations. “And I assume some of the partners got concerned and dropped out until they meet those standards,” he said. The Libra Association is marching on, however. On Monday, the 21 remaining organizations met in Geneva to sign a charter for the organization and name a board of directors. Marcus will sit on the board along with Katie Haun from Andreessen Horowitz, Bitcoin wallet provider Xapo’s CEO Wences Cesares, general counsel for PayU Patrick Ellis, and Kiva chief of strategy Matthew Davie. Meanwhile, Bertrand Perez, COO and interim managing director for the Libra Association, told CNBC that he remains “confident” there will be 100 members by the time the currency launches, and that other firms, including banks and financial institutions, have expressed interest in signing on. (Meme by KC Green) | | China might fill the global digital currency void: If regulators in the US don’t let Facebook launch Libra, China’s much-anticipated digital renminbi “may be strategically positioned to become the de facto global digital currency in emerging economies,” according to global investment bank RBC Capital Markets. That’s because people will be able to access the currency via popular Chinese payment apps like Alipay and WeChat, argue analysts Zachary Schwartzman and Mark Mahaney in a new research note. Based on recent research and conversations in China, the authors believe that Alipay and WeChat are beefing up their anti-money-laundering safeguards—including the ability to use passport photos and facial recognition software to confirm the identities of foreigners—in preparation for the new digital currency, which the central bank could launch as early as next year.
| | Two former financial regulators say the US should digitize its dollar. In a forceful new opinion piece in the Wall Street Journal, J. Christopher Giancarlo, the former head of the Commodity Futures Trading Commission (CFTC), and Daniel Gorfine, the CFTC’s former chief technology officer, warn that a global digital currency issued by big tech company or a rival central bank could “eventually erode the dollar’s status as the most popular currency for international exchange.”
“Complacency in the face of this threat risks lasting damage to the US economy,” write Gorfine and Giancarlo, who say the solution is to issue a digital dollar. They propose a “government sanctioned blockchain protocol, created and maintained by an independent nongovernmental group but administered by banks and other trusted payment organizations.” Such a system would lower payment transaction costs for business and consumers and usher in “new economic models based on real-time transactions and microtransactions,” Giancarlo and Gorfine write. They add that it would also “extend the central role of the US dollar in global finance and allow it to compete confidently in the new digital era.” | Loose change Fill your pockets with these newsy tidbits. - Facing a lawsuit from the US Securities and Exchange Commission, Telegram might be forced to put its global cryptocurrency plans on ice. (TR) +Telegram’s ICO: Give us $2 billion and we’ll solve all of blockchain’s problems (TR)
- Bermuda residents can now pay their taxes and for government services using USD Coin, a dollar-backed digital currency created by Circle in collaboration with Coinbase. (CoinDesk)
- Bitcoin surveillance helped feds take down a massive child sexual abuse site. (TR)
- Venezuelan officials say that nearly 100 retail stores now accept the nation’s sovereign cryptocurrency, the petro. (Decrypt)
- Over-the-counter cryptocurrency trading has exploded in China, fueled in part by the controversial dollar-backed stablecoin Tether. (Bloomberg)
- The heads of three US financial regulators with jurisdiction over cryptocurrency have issued a joint statement to “remind” crypto companies of their obligations related to anti-money-laundering and countering terrorist financing under a law called the Bank Secrecy Act. (CFTC) +The US government has a hidden weapon it could deploy against Bitcoin (TR)
- Blockchain analytics firm CipherTrace says its new service makes searchable the transactions of more than 700 cryptocurrencies. (CoinDesk)
| | "Now we have an elephant in the sandbox." —Benoit Coeure, European Central Bank board member, speaking with Bloomberg in advance of the release of a new report from Group of Seven (G-7) on stablecoins. The “sandbox approach,” in which new financial technology products are piloted in limited settings with light-touch regulatory constraints, is no longer appropriate in the age of Libra, he said. | | | | | |
