| Welcome to Chain Letter! Great to have you. Here’s what’s new in the world of blockchains and cryptocurrencies. | “Controllable anonymity”—whatever that means. The digital currency that the People’s Bank of China says it is close to issuing will give the government unprecedented visibility into how its citizens spend money. But authorities seem especially eager to assure the public that the new system will preserve the anonymity of physical cash—as long as they don’t commit any crimes. It’s not known exactly when it will be released, but China is widely expected to become the first major economy to issue a digital version of its sovereign currency. An explicit aim of the project is to replace physical cash, which has drawn speculation that the government will use it as a surveillance tool. Mu Changchun, head of the PBOC’s digital currency research institute, seemed to push back on this notion while addressing a conference in Singapore this week. “We know the demand from the general public is to keep anonymity by using paper money and coins … we will give those people who demand it anonymity in their transactions,” Mu said, according to Reuters. “We are not seeking full control of the information of the general public.” Chinese officials have taken to a confusing term to describe the new system’s privacy capabilities: “controllable anonymity.” Mu said it again this week: “We will keep the balance between ‘controllable anonymity’ and anti-money laundering, CFT [counterterrorism financing], and also tax issues, online gambling, and any electronic criminal activities.” His comments echo something the New York Times quoted him as saying last month: “As long as you aren’t committing any crimes and you want to make purchases that you don’t want others to know about, we still want to protect this kind of privacy.” How they will do that? Well, it’s hard to know what “controllable anonymity” means at all, much less what it means technologically, or for user experience. Though very few details have been revealed regarding how the currency system will work, it will apparently be based at least partly on blockchain technology. Blockchains by themselves, even the most decentralized ones (China’s will presumably be controlled by the government), are not anonymous. Generally, they generate a permanent record of every transaction, including information about the sender, recipient, and amount. Some cryptocurrencies, like Zcash and Monero, have employed cutting-edge cryptographic approaches to hide transaction-related information. One thing is for sure: financial policy makers across the world are eager to learn exactly what China has up its sleeve. | | Now Google wants to get into banking too. Google will soon let users open checking accounts, joining a number of other tech firms that want to get further into financial services. The project, code-named Cache, is slated to launch next year, according to a report from the Wall Street Journal. Google has partnered with Citigroup and a credit union at Stanford University, which will administer the accounts, according to the report. Users will be able to access their accounts through Google’s digital payment platform, Google Pay. Technology companies apparently see financial services as a way to gain new users and collect valuable information about them. Last year, Amazon said it was in talks with banks to allow its users to have checking accounts. Apple recently partnered with Goldman Sachs to launch its own credit card. PayPal is expanding its services by launching a Venmo credit card. Perhaps most ambitious is Facebook, which wants to launch its own digital currency and blockchain network, called Libra, that could offer a number of services in addition to payments. But consumers are rightly skeptical of technology companies’ ability to keep their data private and secure. This could make it difficult for Google and others. Big banks and their lobbyists in Washington, DC, may also be an obstacle if they fear losing business. Policymakers, already concerned about the dominance of firms like Google, Facebook, Apple, and Amazon, may also try to slow or hinder Big Tech’s foray into finance. Google’s approach is nowhere near as ambitious as Facebook’s, and that may be for a reason. “Our approach is going to be to partner deeply with banks and the financial system,” Google executive Caesar Sengupta told the Wall Street Journal. “It may be the slightly longer path, but it’s more sustainable.” | | Loose change Fill your pockets with these newsy tidbits. - Tether has responded to a new academic paper that suggests that a single big player is using the stablecoin to manipulate the Bitcoin market. The company said the paper’s conclusions “are built on a house of cards that suffers from the absence of a complete dataset.” (The Block)
- Heath Tarbert, chair of the US Commodity Futures Trading Commission, has said previously that Ethereum tokens should be classified as commodities, not securities. But now he says that if and when the network shifts from its proof-of-work consensus mechanism to proof-of-stake, that could change. (Decrypt)
- Alibaba affiliate company Ant Financial has begun pre-launch testing of its business-focused blockchain network. (CoinDesk)
- Former US Federal Reserve chairman Alan Greenspan says “there’s no point” in central banks issuing digital currencies. (CNBC)
- Changpeng Zhao, CEO of Binance, the world’s most popular crypto exchange, says he wants to make it possible to trade all 180 fiat currencies directly for cryptocurrency using Binance. The exchange currently supports Nigerian naira, Russian rubles, euros, Ukranian hryvnia, and Kazakhstani tenge. (The Block)
- Roughly $100 million worth of the Ethereum-based stablecoin Dai has been created, hitting a predetermined limit on how much could be issued. (Here’s a primer on how stablecoins work.) Now the Maker Foundation, the nonprofit behind the stablecoin, has proposed to raise the limit to $120 million. (Coindesk)
- A Chinese military newspaper has suggested that a cryptocurrency reward-based system for soldiers would drive innovation within the People’s Liberation Army. (South China Morning Post)
| | “For us, cryptocurrency is already a significant issue and we can project out pretty easily that it’s going to become a bigger and bigger one.” —Christopher Wray, director of the US Federal Bureau of Investigation, testifying last week before the Senate Homeland Security Committee. (Finance Magnates) | | | | | |
