12/17 FAL Weekly Digest
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Nations across the world continue to assess and develop the capability of issuing government-backed digital currencies.
The Global Race for Government Issued Digital Currencies Continues
The race between nations to develop and issue a central bank digital currency (CBDC) prevails as China and others begin their trials of the new technology. The Digital Currency Institute of the People’s Bank of China has announced that China and Hong Kong are entering the second phase of testing cross-border currency transactions using the digital yuan. This second phase will include increased availability of locations accepting the digital currency along with a link between the digital yuan network and the Faster Payment System (FPS), the inter-bank digital payment system in Hong Kong.
While China is noticeably leading the charge in regards to testing and development of their digital yuan, others such as the Ukraine have been hard at work creating their own CBDC. Tascombank, one of Ukraine’s oldest commercial banks, is now planning to test a digital version of their national currency the “hryvnia”, which will be built and tested on the Stellar network. Stellar has long asserted that their blockchain network was “built precisely with this use case in mind,” and will be working alongside the bank and government officials in conducting the pilot program.
Russia has also continued development of their own digital ruble, a CBDC that the Russian central bank expects to test more in 2022. Although the Russian government has had generally beneficial regulations and laws regarding cryptocurrency mining compared to China, it recently has taken a more unfavorable stance towards cryptocurrency investments. The Bank of Russia has released an official statement prohibiting mutual funds from investing and purchasing public cryptocurrencies such as Bitcoin ($BTC), and is now aiming to limit future cryptocurrency purchases by citizens in the country.
U.S. Policy Makers Exchange Words Over Stablecoins
Stablecoin regulation has been topic of discussion in recent House and Senate committee hearings, where U.S. policy makers argued over the legitimacy and integrity of stablecoin issuers such as Circle and Tether. While some politicians argue that heavy handed regulation in the crypto space could stifle financial technological innovations in the U.S., others continue to highlight the risks that consumers could face when using stablecoins issued by companies that have not adequately proven the backing of their digital currency.
During a Senate Banking Committee hearing on Tuesday, Chairman Sherrod Brown (D-OH) stated that stablecoins were neither decentralized nor transparent, declaring that “if you put your money in stablecoins, there’s no guarantee you’re going to get it back. It’s not decentralized when one company controls when people can access their own money. And it’s certainly not transparent when critical information about stablecoins, and the companies that issue them, isn’t available to people who have their money tied up in these assets.”
Although it may seem that China and other nations may be further ahead of the U.S. in terms of developing a digital currency, Circle (USDC) CEO Jeremy Allaire has a different perspective of the situation. During the House Banking Committee hearing last week, Allaire proclaimed that the U.S. dollar is winning the digital currency space race today, where “dollar stablecoins are doing trillions of dollars of transactions whereas the experimental beta of the Chinese yuan is only doing billions. So the United States is winning, and this has the potential to grow at a very significant speed around the world and benefit the U.S. dollar and benefit American businesses.”
Market Update - Bitcoin
The overall cryptocurrency market capitalization is about $2.16 trillion USD, a 3.57% decrease from last week’s valuation of $2.24 trillion. At the time of publication, Bitcoin ($BTC) is valued at $46,593 per bitcoin with a market capitalization of $877 billion making up 40.5% of the overall market.
Global markets continue to reel as COVID fears, inflationary woes, and the on-going Evergrande financial crisis compound bearish sentiment in financial sectors. Bitcoin ($BTC) has proven to be no exception, where it has struggled to recapture the $50,000 price range for the time being. It currently is ranging between the $45k-49k price levels, with sporadic volatility found often in correlation with legacy markets such as the S&P and Dow Jones Industrial Average. For a more in-depth technical analysis, please see our article found here.
Bitcoin-Backed Mortgages Are On the Horizon
Toronto based crypto investment and lending firm Ledn is preparing the world’s first Bitcoin-backed mortgage offering after raising $70 million in a Series B funding round. Notable investors in the firm include Coinbase Ventures, Golden Tree Asset Management, and more. This new stream of capital increases Ledn’s market valuation to about $540 million.
Ledn co-founder and CEO Adam Reeds highlighted the disparities between the opportunities available to those who invest in digital assets compared to traditional assets, stating that “most people that hold extensive wealth in Bitcoin still can’t utilize their assets to qualify for a mortgage at a bank. Our clients want to diversify their portfolio in order to protect their wealth and then utilize that wealth for instances such as purchasing a home, but one should not come at the expense of the other.” For more information, please see our full article found here.
Nike Purchases NFT Studio as it Steps Into the Digital Realm
NIKE, Inc. has announced that it will acquire RTFKT, a digital art studio focused on creating non-fungible tokens (NFTs) and collectibles on the Ethereum network. John Donahoe, President and CEO of NIKE, Inc. stated that “this acquisition is another step that accelerates Nike’s digital transformation and allows us to serve athletes and creators at the intersection of sports, creativity, gaming, and culture. Our plan is to invest in the RTFKT brand, serve and grow their innovative and creative community and extend Nike’s digital footprint and capabilities.” For more information regarding Nike’s endeavors, see our full article found here.
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