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CES 2022: Cryptocurrency Leaders Press Benefits as Uncertain Over Regional Clampdowns Looms

Regional crackdowns raise questions about the stability of cryptocurrencies.

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From left: Michael Terpin, Tushar Nadkarni, Kristin Smith, and Clara Tsao

LAS VEGAS, January 11, 2022 – Cryptocurrency advocates at the Consumer Electronics Show last week tried calming fears that growing global uncertainty and clampdowns on coin mining would cast a shadow over the nascent space.

“Everybody talks about the volatility [of Bitcoin], but it has tended to go up,” said Michael Terpin, CEO of Transform Group, a company that does public relations for blockchain, on a panel Wednesday. “[2021] has been one of the least volatile years.”

Clara Tsao, founding officer and director at Filecoin Foundation, an organization that deals with certain cryptocurrency governance, added that “there are so many people from around the world who have benefited from blockchain. [Blockchain] touches everything today.”

And Tushar Nadkarni, chief growth officer at Celsius Network, a cryptocurrency earning and borrowing platform, said “this is not the first time that a technology has come in and essentially just railroaded through inefficiencies that were in the [pre-existing] system.

“We have seen this movie before,” Nadkarni added.

Experts argue that one of the most significant benefits to cryptocurrencies is that they decentralize finance. This means that “miners” and consumers from anywhere in the world, in theory, can mine and use Bitcoin regardless of their location, and they do not need to operate through a regulatable intermediary.

But the comments come against a backdrop of global events that are adding to concerns that the state of cryptocurrencies is too volatile.

Beginning on January 4, the government of Kazakhstan, which has been quelling protests in recent days, began implementing internet blackouts that led to a national blackout on January 5. Kazakhstan is the second largest miner of Bitcoin – after the U.S. – and accounts for approximately 18 percent of the mining power in the world.

The value of Bitcoin plummeted in the following days, and though it has since begun to stabilize, questions remain about how truly decentralized the currency is, given how drastically its value can be impacted by the goings-on in a single country.

At the same time, Kosovo joined the growing list of countries that has made cryptocurrency mining illegal, seizing mining devices. Cryptocurrency mining is a notoriously power-intensive process; as the network of miners grows, so to does the complexity of the cryptographic equations required to mine a coin. To combat this, miners rig matrices of graphics processing units, thereby reducing the time it takes to solve algorithms.

Kosovo, much like the rest of Europe, is in the midst of an energy crisis as Russia continues to withhold its glut of natural gas as leverage over European Union and NATO aligned countries, some of whom are largely dependent on Russia to meet their energy needs.

Because of this fuel scarcity, Kosovo, a small country with just under 2 million people, announced a ban on cryptocurrency mining on January 4. On January 6, police forces in Kosovo announced their first arrests for those who refused to comply with the new law.

Kosovo is only the most recent country to outlaw cryptocurrency mining. In September of 2021, China announced a complete ban on cryptocurrency after nearly a decade of cracking down on it. Cryptocurrency is even facing challenges from non-state actors, as it was declared haram – or forbidden – by the national council of Islamic scholars in Indonesia, home to the largest population of Muslims in the world.

Reporter Ben Kahn is a graduate of University of Baltimore and the National Journalism Center. His work has appeared in Washington Jewish Week and The Center Square, among other publications. He he covered almost every beat at Broadband Breakfast.

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Blockchain

Payment Stablecoins Should be Regulated for Safety, FDIC Chair Says

“The main benefit…of a payment stablecoin is the ability to offer cost-effective, real-time, around-the-clock retail and business payments.’

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Screenshot of Martin Gruenberg, acting chairman of the Federal Deposit Insurance Corporation.

WASHINGTON, October 20, 2022 – Martin Gruenberg, acting chairman of the Federal Deposit Insurance Corporation, on Thursday argued payment stablecoins would be safer if subjected to “prudential” – or risk-minimizing – regulation. 

Speaking at a web event hosted by the Brookings Institution, Gruenberg outlined risks associated with cryptocurrencies – including market volatility and fraudulent behavior – and floated the introduction of “payment stablecoins,” which he said could be used for retail transactions.

“There has been considerable discussion and public debate regarding the benefits and risks associated with the development of a payment stablecoin for both domestic and international, cross-border payment purposes that is subject to prudential regulation,” said Gruenberg. “The main benefit given for the development of a payment stablecoin is the ability to offer cost-effective, real-time, around-the-clock retail and business payments.”

The value of stablecoins, a type of cryptocurrency designed to reduce price volatility, is tied to a reserve asset, such as the U.S. dollar. Stablecoins were developed to trade between other cryptocurrencies without “the need for converting into and out of fiat currencies,” Gruenberg said. Panelists at previous events argued for stablecoins potential ability to increase financial inclusion in the country, and its importance in the technology race with China

Part of the criteria for such stablecoins, Gruenberg further said, is that they be backed dollar-for-dollar by high-quality, short-dated United States treasury assets, and for the transactions to be conducted on well-regulated permissioned ledger systems.

A permissioned ledger system allows moderators to regulate who can participate in the network.  In addition, participants are not anonymous, which, according to Gruenberg, is important for the safety of payment stablecoins. “The ability to know all the parties…that are engaging in payment stablecoin activities is critical to ensuring compliance with anti-money laundering and countering-the-financing-of-terrorism regulations and deterring sanction evasion,” he argued.

Because of the novel and complex nature of cryptocurrency, Gruenberg said, the FDIC should approach its regulation with thought and care. The FDIC issued a letter to its supervised banks that requested information on their cryptocurrency activities earlier this year, and Gruenberg said collaboration with banks would continue.

“There are important risks and policy concerns that will need to be taken into consideration before a payment stablecoin system is developed,” he said.

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Treasury to Release Three Reports on Digital Currencies in ‘Coming Weeks’

The reports will discuss digital asset implications on national security, financial inclusion, privacy and citizens.

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Photo of Treasury Secretary Janet Yellen

WASHINGTON, August 29, 2022 – The Treasury Department announced last week it will be releasing a series of reports about the security and state of digital currencies in the U.S. “in the coming weeks.”

The department said three reports will be released and will discuss the impact of digital assets on issues such as national security, financial inclusion, privacy and on consumers, businesses, and investors.

The department’s August 24 announcement will fulfill a commitment required by a March executive order from the Biden administration that mandates within 180 days the department produce a report about the future of money and payments systems, including adoption of digital assets, and the implications of technology and those assets on the country’s financial system.

The Biden administration has put “a high level of urgency towards research and development efforts into a potential U.S. central bank digital currency,” Julia Smearman, director of international financial markets at the Treasury Department, said Wednesday.

At an event earlier this year, experts pondered whether the U.S. was falling behind other nations, such as China, when it comes to developing their own digital currency.

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IBM Exec Touts Blockchain Technology as Economy Accelerator

Blockchain will be commonplace in the economy ‘within the decade,’ the IBM executive said.

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Screenshot of Jerry Cuomo, IBM vice president of blockchain technologies

WASHINGTON, August 23 – Blockchain technology will speed up the economy in the coming decade in part by making the process of verifying information – such as user identity – more safe, streamlined and efficient, said IBM’s vice president of blockchain technologies at a Tech Forward event on Tuesday.

Jerry Cuomo described blockchain as an “odd duck” type of database with a few defining features, explaining that each blockchain has several administrators, that each transaction must be vetted by the administrators before being recorded to the digital “ledger,” and that transactions, once recorded to the ledger, are essentially impossible to change or delete. Cuomo also explained that each data point – or “block” – in each blockchain is heavily encrypted, which creates high levels of security and user trust.

Although blockchain is most widely associated with the transactions of cryptocurrencies like Bitcoin, Cuomo said it can used for a wide variety of purposes – including identity verification, food safety and intra–supply chain communication. For example, Cuomo suggested that instead of making hundreds of accounts on various websites, a user may soon be able to have a single, blockchain-based identity that would be accessible whenever verification is necessary.

Cuomo said he believes food safety, for example, can be improved by using blockchain technology to document salient information about food conditions during transport. IBM Food Trust is a blockchain-based service that the company says allows participants to track a food product throughout a given supply chain and to ensure that it is safe, fresh, and sustainably sourced.

The company said it offers a wide variety of blockchain services. IBM’s supply chain service, for instance, promises “data integrity and faster reconciliation,” features that are made possible by the immutability of each blockchain record once it is entered into the ledger.

As for the timetable on blockchain technologies becoming commonplace in the economy? “I think its within the decade,” said Cuomo. “This is not an ‘if,’ this is a ‘when.’”

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