Facebook takes crypto mainstream
Facebook's Mark Zuckerberg is lighting up a crypto revolution. David Rowe
Jun 21, 2019 — 3.51pm
As the week drew to an end, the magnitude of Facebook's bold assault on the global financial services industry became clearer as top regulators in the United Kingdom, Australia and Europe began to grasp the implications of the looming monetary revolution driven by some of the United States' largest technology companies.
Two days after Facebook unveiled its jaw-dropping plan to create a new digital currency with partners including Visa, Mastercard, PayPal, Uber and eBay, Bank of England governor Mark Carney said in London on Thursday he would approach Libra "with an open mind but not an open door".
Open mind, not open door ... Bank of England Governor Mark Carney AP
In Adelaide, Reserve Bank of Australia governor Philip Lowe also sounded a cautionary tone. "There's a lot of regulatory issues that need to be addressed," he said, questioning whether Australian consumers would embrace a cryptocurrency given they can already make payments in real-time.
In Paris, Greg Medcraft – who has been telegraphing the arrival of blockchain-powered cryptocurrencies at scale for several years now – was blunt in his assessment. He told AFR Weekend the cryptocurrency train is coming down the tracks and breaking down traditional regulatory silos in its wake, which will force regulators and governments across the world to think outside traditional boxes.
"We’re seeing technology companies beginning to function as banks, and banks as technology companies," says Medcraft, now director of financial affairs at the Organisation for Economic Co-operation and Development.
"Regulators, policymakers and stakeholders need to work together to harmonise our advice and responses to new market entrants in financial services due to technology."
As regulators and law makers scramble to assess Facebook's plan, customers all over the world are already embracing making payments outside traditional banking systems using smartphones. In this sense, the future has already arrived: regulators are being forced to play catch-up.
Voting with their thumbs
Smartphone payments are ubiquitous in many parts of Africa, where M-Pesa, which launched more than a decade ago, has tens of millions of users. In China, more than 90 per cent of people in urban centres use the two dominant mobile payments wallets, Alipay and WeChat. Each have around 1 billion users.
To incumbent banks, this is all very disruptive. Ant Financial, which owns Alipay, and Tencent, which owns WeChat, have created “a viable alternative payments model, where banks play a far less critical role, and in the extreme, possibly none”, the Brookings Institute said in a research paper China payments phenomenon, released this month.
While conditions in Africa and China were ripe for a payments revolution with the small number of credit cards and lack of payments infrastructure, some reckon Facebook will find it tougher to scale in Western markets where payments services are relatively well developed. Australians "can already move money around electronically between their bank accounts at no cost and very flexibly", Lowe says.
But even in Australia, Millennial customers have been embracing new ways to pay, illustrated by the impressive rise of Afterpay, which has more than 2 million customers. For in-store payments, it uses a QR code and digital wallet, the same combination of technology offered by the Chinese giants and Facebook's plans for its Calibra digital wallet.
Facebook's plans sent a chill through the Australian major banks this week. For some years they have had various fintech start-ups swarming around the edges of their big profit pools, but this week's announcement by Facebook – which has around 2.7 billion global users – is on an entirely different scale. The banks are fretting about losing some of the $8 billion in revenue they make from payments, and are more concerned about losing control of customer relationships, given payments services provides the fulcrum to offer other financial services.
US banks are likely to be thinking along similar lines; they make $80 billion in annual fees from merchants swiping credit and debit cards. It was noteworthy that out of the 28 foundation members of the Libra Association, which will govern the cryptocurrency and network, none are banks. Under Facebook's plan – just like the Alipay and WeChat Pay services – payments will be fee free for customers and merchants.
"Payments have historically existed within banking because banks had the technology, networks, knowledge of customers, and funding structure to most easily provide these services. The Chinese payment revolution is fundamentally changing that equation," said Aaron Klein, policy director at the Centre on Regulation and Markets at the Brookings Institution.
"Technology, particularly interconnections on social media, scale of digital e-commerce platforms, and adoption of modern bar codes, broadens the capability of new entrants into the system."
But regulators want to ensure consumers that turn to these new entrants are protected, and that they don't create excessive risks to the financial system. This will present a substantial challenge – as the comments over the past few days by Medcraft, Carney and Lowe illustrate. US legislators also have plenty of questions, and are planning to quiz Facebook executives in Senate hearings in mid-July. Their questions could reveal the expanding gap between technological capabilities and existing national laws.
"Regulators and governments are scrambling to understand this conceptually and to work out what the appropriate response is going to be," says Robert Milliner, chairman of the Australian Payments Council who is also advising the G20 on emerging issues facing global business.
"Whilst [Facebook's plans are] focused on the financial sector, the fact is most governments are not well set up to deal with whole-of-economy digitisation. Portfolios are siloed. But this is a whole-of-government issue and the rate of innovation is progressing at a pace that governments and regulators globally are struggling to keep up with.
"Non-financial institutions are looking to leverage their user reach and technology capability to drive into a range of services, including financial services, based on lower cost and easier accessibility. The key issue is the challenge created from a systemic and regulatory perspective around the potential impact on payment system resilience and stability.”
For several years, regulators have been preoccupied with bitcoin, which was never going to become mainstream given it was created to protect criminals and circumvent regulation. In contrast, Facebook and its consortium want to be regulated. The announcement this week was the start of a regulatory process that could culminate in the plan being overseen by the G20, as Carney suggested on Thursday.
"The big issue is to establish a global set of policy principles to guide governments in dealing with distributed ledger technology, competition, interoperabilty and access, privacy, cybersecurity, consumer protection and systemic risk," Medcraft says.
Facebook's Libra must be stopped
Facebook's Libra must be stopped
When they begin to look at the Libra technical white papers, regulators will see it has de-risked the bitcoin model in various ways. One is by tying the price of Libra to a basket of stable, major central bank currencies, along with government bonds and bank deposits, to reduce price volatility and ensuring there are real-world assets held in trust to allow Libra to be converted back to fiat money.
Libra also plans to tackle the know-your-client (KYC), anti-money-laundering (AML) issues. Visa and Mastercard, members of the consortium, stand ready to enforce standards. "Visa remains committed to engaging closely with the regulatory community in all our efforts to serve the payments ecosystem and remain compliant with all relevant regulation," says Julian Potter, Visa's group country manager for Australia, New Zealand and the South Pacific.
Richard Miller, the head of payments at Deloitte, says Libra has been created as "a business ecosystem that seems to have learnt from all the bitcoin mistakes".
"The consortium has a massive user base, with strong, trusted payments and global consumer brands like Uber, Spotify and eBay and this seems to fulfil a lot of the promise people thought blockchain might have in streamlining global financial infrastructure," Miller says.
"If the Libra Association engages productively with regulators and addresses potential concerns in a constructive manner, there's no reason regulators should seek to explicitly block this. As the Bank of England governor and others have said, there needs to be an open mind. After all, regulators have a mandate to engage with new, innovative concepts."
With Libra to be regulated in Switzerland, regulatory sources suggested this week that Facebook and the members of the consortium might push for the Swiss National Bank to co-ordinate a global oversight “college” to oversee the new currency and blockchain network. This a similar model to the global regulation of systemically important infrastructure such as the global interbank payments network SWIFT, and global securities and FX clearing houses. It would mean that Libra would be governed by international co-operative supervisory arrangements, and then be subjected to local consumer protection regulations relating to its own Calibra wallet.
As regulators determine how to deal with Libra, they are also coming to terms with emerging risks from growing decentralisation of financial services more broadly.
Under its presidency of the G20, Japan asked the Financial Stability Board, which coordinates global financial regulation, to examine the impact of distributed ledger technology and other decentralising technologies. Its report, published two weeks ago, points to the "move away from a single trusted financial intermediary or infrastructure towards systems in which a broad set of users is able to make decisions about whether and how to undertake financial transactions".
This will bring advantages and risks. Benefits include reducing the concentration of centralised, systemically-important players, and improved security inherent in decentralised, blockchain-based systems. But it could be tougher to take recovery actions when things go wrong, and regulators have new challenges monitoring technology companies given jurisdictional uncertainties, the FSB warned.
Facebook's move this week is likely to be the start of fundamental change to the governance of the global financial system, as new technologies reduce the need for financial flows to be intermediated.
The Financial Stability Board highlights the "tokenisation" of securities as further decentralising capital markets, P2P platforms further disintermediating traditional intermediaries and "smart contracts" automating settlement and custody. Artificial intelligence systems will use all this new data to make credit decisions.
One of the biggest questions raised by Facebook's plans this week is: are governments and regulators going to be able to keep up with the pace of change?
Bankers reckon with 'serious threat' of Facebook
IMHO it's too soon to say something solid about this. I strongly recommend to wait for a few months before taking any serious step on it.
Who are the trend traders here?
Same with gold......
It's BTC vs gold
Short term sell at the 10k mark......
Bitcoin following gold price soaring up due to the tension in the Markets :
Bitcoin surges higher thanks to Facebook currency plans
A technician in a bitcoin mining farm in Canada. Picture: AFP
A technician in a bitcoin mining farm in Canada. Picture: AFP
6:35AM JUNE 25, 2019
Bitcoin has surged to a near 16-month high above $US11,000, overshadowing stock, foreign exchange and commodity markets and breathing new life into a sector that many had declared moribund.
Bitcoin reached $US11,280 at one point after powering through $US10,000 for the first time since March last year, propelled by a huge boost from Facebook’s unveiling of its own digital unit Libra, analysts said.
“The strong resurgence in the bitcoin price is mainly due to the renewed mainstreaming interest in cryptocurrencies and the technology which underlines them,” Naeem Aslam, analyst at trading group ThinkMarkets, said.
‘Could Folau speak at a uni?’
“Projects like Facebook’s Libra have provided much needed tailwind for this space.”
The social network plans to launch Libra next year, and plans to back it with a basket of real-world currencies and a consortium of companies including Visa, MasterCard, PayPal and Uber.
Calling bitcoin’s rise a “blast from the past”, OANDA analyst Craig Erlam said the Facebook cryptocurrency launch seemed to be “legitimising the industry” which had come under scrutiny after the coin fell 80 per cent from its peaks.
“Bitcoin is very much back in the headlines, as the cryptocurrency surged through $US10,000 for the first time in more than a year and reminded us all of the good old days of late-2017,” Mr Erlam said.
Bitcoin has risen about 20 per cent this month alone but is still well off record levels near $US20,000 seen at the end of 2017.
Expectations that G7 countries will introduce stringent rules concerning investor identities did little to dampen the new-found enthusiasm for bitcoin, noted Gary McFarlane, a cryptocurrency analyst at interactive investor.
But the rally was almost entirely focused on bitcoin with other crypto coins “struggling today”, he said.
One factor for bitcoin’s successovernight, Mr McFarlane suggested, could be its role as a conduit to effect capital flight by some Chinese investors prompted by the China-US trade war.
There was now talk, he said, that bitcoin could hit $US20,000 again, and even go much beyond, with some punters predicting $US40,000or even $US100,000 by the end of the year.
“That might sound fanciful in the extreme but on past form it is a possibility - and so is a crash from wherever any potential new all-time high might form,” Mr McFarlane said.
There’s another reason behind bitcoin’s 200% rise this year — it’s got nothing to do with Facebook
PUBLISHED TUE, JUN 25 2019 8:51 AM EDTUPDATED 5 HOURS AGO
Bitcoin traders are anticipating an event known as “the halvening,” where the rewards to so-called bitcoin miners are cut in half.
Currently, the number of bitcoins rewarded to miners stands at 12.5. By May 2020, the reward will be cut in half to 6.25 bitcoins.
Traders see the potential for upside with such an event, as it causes supply to dampen, bumping up the price of the digital asset.
GP: Bitcoin Cryptocurrency Value : Illustration
In this photo illustration, a visual representation of the digital Cryptocurrency, Bitcoin is displayed on April 03, 2019 in Paris, France.
Chesnot | Getty Images
Bitcoin has been on a tear this year, rising almost 200% since the start of the year. There are multiple theories as to why, and one in particular is gaining traction.
It’s being called “the halvening”, an event where the rewards to so-called bitcoin miners are cut in half. To understand what that means, it’s important to know how bitcoin’s underlying technology — the blockchain — works.
Miners with high-powered computers compete to solve complex math problems to validate bitcoin transactions. Whoever wins that race gets rewarded in bitcoin.
Currently, the number of bitcoins miners are rewarded in stands at 12.5. The rewards are halved every few years to keep a lid on inflation. By May 2020, experts say, the reward per miner will be cut in half again, to 6.25 new bitcoins.
“Bitcoin’s current inflation rate is approximately 3.76%,” Mati Greenspan, senior market analyst at social trading platform eToro, told CNBC by email. “In May of next year, it’s scheduled to be reduced to 1.8%.”
Why does this happen?
This process takes place roughly every four years. That’s due to a rule encompassed in bitcoin’s software, which was established by Satoshi Nakamoto, the unknown person or people that created bitcoin.
“One of the key features of bitcoin is predictability around the new supply that’s being released,” Garrick Hileman, head of research at cryptocurrency services firm Blockchain, told CNBC over the phone.
Here’s why bitcoin is on the rise this year
Bitcoin is often referred to as “digital gold,” because of its supply and liquidity dynamics. Experts say the cryptocurrency’s value is underpinned by the scarcity of the total number of bitcoins in existence.
The total number of bitcoins that will ever be minted is capped at 21 million. Roughly 80% of that amount has already been mined, Hileman said, adding that the hard cap won’t be reached for another 120 years.
How could it affect prices?
Traders see the potential for upside with such an event, as it ultimately causes supply to dampen, bumping up the price of the digital asset.
“It’s the tightening of supply that forces the price upwards and the anticipation of less liquidity coming onto the market,” Charles Hayter, CEO of digital currency comparison site CryptoCompare, told CNBC. The digital currency recently reached a 15-month high.
Hayter said the event could be an uncertain one for bitcoin miners, though, as there would be a “clean out” of less competitive mining gear, “on which the price is correlated.”
But the ultimate expectation in the market is for “a shift in demand for the newly minted bitcoins,” Hayter said, “and with less coming onto the market, the price per bitcoin could be expected to rise.”
As previously mentioned, there are a number of other theories as to why bitcoin’s price is on the rise this year, all the way from investors using it as a hedge amid the U.S.-China trade war to Facebook forming its own cryptocurrency.
Now back above a price of $11,000, bitcoin has been getting more love from investors this year. But the picture was less rosy last year, with the virtual currency plummeting over 70%. That came on the back of a near-$20,000 record high for bitcoin in late 2017.
Test old 20k high some time this year imo
13400 .. ripple still my pick
big picture weekly has plenty of room to move..
Bitcoin soars past $US13,000 as Libra fuels demand
Gertrude Chavez-Dreyfuss and Olga Cotaga
Jun 27, 2019 — 5.44am
New York | Bitcoin jumped to an 18-month high, as investors looked for safety in alternative investments amid geopolitical tension, and cheered prospects that Facebook's Libra token could push cryptocurrencies into the mainstream.
The world's biggest cryptocurrency has surged in value since April and on Wednesday hit a peak of $US13,666.02 on the Bitstamp exchange, the highest level since January 2018.
Investors have flocked back in to digital currencies after a bruising 2018. Bitcoin has risen for eight consecutive days. Bloomberg
So far this year, bitcoin has risen more than 260 per cent, although it remains below its all-time high of nearly $US20,000 hit in December 2017.
Bitcoin last traded up 14.7 per cent at $US13,475.
Investors have flocked back in to digital currencies after a bruising 2018. Bitcoin has risen for eight consecutive days. And now Facebook has said it would offer its own cryptocurrency, the Libra coin, by end of June 2020.
Analysts say Facebook's announcement this month has revived interest in digital currencies, while investors seeking safety have also pushed up bitcoin's price.
"Cryptocurrency traders were reinvigorated by Facebook's launch of their own digital coin and momentum appears to be stirring up fresh new investors," said Edward Moya, senior market analyst, at online FX broker OANDA in New York.
"Bitcoin sceptics are cautious in trying to stop this surge and may look for the next key resistance level which is $US15,000," he added.
European watchdogs demand detail on Facebook's Libra
European watchdogs demand detail on Facebook's Libra
With major central banks keeping interest rates near all-time lows, investors have been looking for ways to diversify their portfolios, including through cryptocurrenies, analysts said.
Bitcoin CME futures volumes have also increased in the past few days, as investors look for ways to get their hands on the coin via the derivatives market.
Traders, who have access to both spot and futures markets have been buying the spot and selling the futures, arbitraging the two prices, said Michael Moro, chief executive officer at Genesis Global Trading, which provides over-the-counter digital currency trading for institutional investors.
The cryptocurrency has rocketed 150 per cent since early May, along with big rises in other smaller digital currencies such as Ethereum's ether and Ripple's XRP.
"It should be noted that this a very different market today than it was in 2017," said Moro.
"2017 saw an overwhelming number of ICOs (initial coin offerings), which was very distracting. 2019 has less distractions. It's also a different space because the CME bitcoin futures product wasn't available until December 2017."
ICOs refer to a fundraising scheme that bypasses banks and venture capital firms and involves startups creating their own tokens and selling them to the public.