Stablecoin Adoption Can Impact Economy, Warn Senior US Regulators

A panel of senior financial regulators in the United States has warned the public about the purported risks of stablecoins and cryptocurrencies

A report issued on Dec. 4 by the Financial Stability Oversight Council (FSOC) highlighted potential problems resulting from stablecoins gaining wider recognition.

The FSOC was set up in 2008 to combat risks to the financial sector after the financial crisis. The panel is headed by United States Secretary of the Treasury Steven Mnuchin. Its voting members include Jay Clayton, the chairman of the Securities and Exchange Commission (SEC), as well as Heath Tarbert, who recently took over as chairman of the Commodity Futures Trading Commission (CFTC).

FSOC: stablecoins “could affect wider economy”

In its annual report for 2019, the regulators stated, “If a stablecoin became widely adopted as a means of payment or store of value, disruptions to the stablecoin system could affect the wider economy. Financial regulators should review existing and planned digital asset arrangements and their risks, as appropriate.” 

The FSOC additionally mentioned Bitcoin (BTC) and other cryptocurrencies as part of its coverage. It appeared unable to draw concrete conclusions about the phenomenon, acknowledging that trading data was “sparse and may be unreliable.”

The panel also expressed doubts over so-called distributed ledger technology (DLT) — a byword for digital currency projects notionally related to blockchain

“The ultimate success of the technology, including applications in the financial sector, is not yet certain,” the report stated. The FSOC continued: 

“Some early efforts have not resulted in the anticipated efficiency gains and other promised benefits, and as a result, have been scaled back, refocused, or abandoned.”

Cryptocurrency suspicions continue

As Cointelegraph reported, Mnuchin has been vocal as a critic of Bitcoin, alluding that the seminal cryptocurrency is likely a passing fad. In a July interview he said:

“I won’t be talking about Bitcoin in 10 years, I can assure you that […] I would bet even in 5 or 6 years I’m no longer talking about Bitcoin as Treasury Secretary. I’ll have other priorities […] I can assure you I will personally not be loaded up on Bitcoin.”

U.S. lawmakers continue to focus on the perceived risks stemming from the cryptocurrency sector, including associated schemes such as Facebook’s unlaunched Libra digital currency.

Bakkt CEO Kelly Loeffler Appointed to US Senate Seat

Georgia Governor Brian Kemp has appointed Kelly Loeffler, CEO of institutional Bitcoin (BTC) futures platform Bakkt, to a United States Senate seat.

With the appointment, Loeffler will replace Sen. Johnny Isakson (R-GA), who plans to retire at the end of the year, the Washington Post reported on Dec. 4. A person familiar with the matter, shared Loeffler’s remarks with the publication, in which she ostensibly said:

“I haven’t spent my life trying to get to Washington. But here’s what folks are gonna find out about me: I’m a lifelong conservative. Pro-Second Amendment. Pro-military. Pro-wall. And pro-Trump. I make no apologies for my conservative values, and will proudly support President Trump’s conservative judges.”

As previously reported by Cointelegraph, various party leaders, including President Donald Trump, reportedly pressed Kemp to choose U.S. representative Doug Collins instead, purportedly given his strong support for Trump, gun rights and anti-abortion efforts.

The President and many among his followers are not sold on Loeffler, viewing her as too moderate. Previously, Kemp reportedly met with the President and Loeffler in a bid to obtain Trump’s approval of his pick for the Senate seat but to no avail.

Bakkt’s recent developments

In the meantime, Bitcoin futures open interest on the Bakkt platform hit a new all-time high of $6.5 million on Dec. 3. The reported open interest was a 42% increase from the previous day, which had been an all-time high as well.

Also, Bakkt is planning to launch the first regulated options contract for Bitcoin futures on Dec. 9. The new options product is based on customer feedback, explained Loeffler, and is designed to hedge or gain bitcoin exposure. Bakkt added:

“ICE Futures U.S. has self-certified the contract with the CFTC and we’re excited to leverage the benchmark futures prices and institutional-grade custody to meet the needs for a regulated options contract.”

Kazakhstan Won’t Tax Cryptocurrency Mining: Report

Kazakhstan’s lawmakers won’t be taxing cryptocurrency mining until the mined crypto is exchanged for fiat money. According to a legislative analyst at a local blockchain association, cryptocurrency mining will not be treated as entrepreneurial activity but rather a “purely technological progress,” local business publication Kursiv reports Dec. 4.

Madi Saken, legislative analyst at the National Association for the Development of the Blockchain and the Industry of Data Centers of the Republic of Kazakhstan, reportedly announced the news at a local blockchain event “Blockchain Day” on Dec. 4.

Cointelegraph has contacted the association for comment on the report by Kursiv but the organization hadn’t replied as of press time.

Tax liabilities only apply to income in “real money”

According to the report, Kazakhstan’s lawmakers have finalized a draft law on crypto taxation. The bill is currently under consideration with the presidential administration. The bill will reportedly be sent to the Mazhilis, the lower house of the bicameral Parliament of Kazakhstan, in December 2019.

Specifically, the proposed law will establish the legal status of crypto mining as well as rules for its taxation. According to Saken, digital assets and cryptos won’t be considered as subject to taxation because tax liabilities only apply to the income made in “real money.” As such, taxes will only be applicable when cryptocurrency is exchanged for fiat money. Saken elaborated:

“Tax liabilities only emerge when there is an income in the form of real money, particularly when a cryptocurrency is exchanged for real money, which means it is sold on an exchange. Then, this income in the form of classic money will be subject to taxation.”

Mining farms would be taxed by analogy with data centers

However, crypto mining will still be deemed entrepreneurial activity in cases when entities offer services to use their crypto mining hardware, the executive reportedly stated. Mining farms would reportedly be taxed by analogy with typical data centers, the report notes.

Kazakhstan’s government has taken a positive stance towards crypto and blockchain so far.

In 2018, the governor of Kazakhstan’s main financial hub, the Astana International Financial Center (AIFC), claimed that crypto and blockchain innovation will be supported despite the need to regulate cryptocurrencies. In May 2019, the AIFC partnered with blockchain tech giant Bitfury to cooperate on blockchain applications across a number of industries.

No Demand for a State Digital Currency in Japan: Central Bank Governor

Bank of Japan (BOJ) Governor Haruhiko Kuroda said that there is no public demand for a central bank digital currency (CBDC) in the country.

During his speech at the symposium for the 35th anniversary of the Center for Financial Industry Information Systems on Dec. 4, Kuroda addressed the challenges posed by private global stablecoins and CBDCs. He concluded that at present there is no reason to issue a CBDC in Japan:

“In Japan, the amount of cash outstanding is still increasing, and it does not seem that there is a demand for CBDC from the public at present. Nevertheless, the Bank of Japan has been conducting technical and legal research on this matter in order to stand ready when the need for CBDC 13 may arise in the future. The Bank also needs to study the impact of CBDCs on financial intermediation.”

BOJ promotes private digital currencies

While the central bank governor does not currently see a reason to issue its own digital currency, he admits that “there is a wide variety of private digital money denominated in Japanese yen.” The bank encourages the use of such private digital currencies and their improvement, aiming to make their features closer to what is expected from a CBDC.

One strategy that the bank is adopting to promote such systems is increasing the number of cashless payment users and ensuring interoperability among multiple payment service providers. In October, the institution has introduced a point reward program for customers using cashless payments to improve the productivity of relevant businesses.

No stablecoins until risks are addressed

Still, when it comes to global stablecoins such as Facebook’s Libra, Kuroda said the bank would take a more cautious approach. He said:

“Global stablecoins (GSCs), such as Libra, may offer convenient payment services to many users, if legal certainty and technical stability are ensured. However, users cannot continuously appreciate the benefits of GSCs unless various challenges and risks related to money-laundering, cyber-security, data protection, and consumer and investor protection are properly addressed.”

Kuroda also said that no GSC should begin its operations until legal, regulatory and oversight challenges and risks are addressed. He noted that it is essential for authorities worldwide to cooperate and maintain financial stability with free capital mobility in a world with stablecoins.

Meanwhile, countries worldwide are increasingly researching public and private digital currencies and stablecoins. As Cointelegraph reported yesterday, blockchain startup LifeLabs announced that it is developing a dollar-backed stablecoin dubbed BVI~LIFE in partnership with the British Virgin Islands.

China's Great Firewall Blocks Popular ETH Block Browser Etherscan

China’s Great Firewall, a tool used to ban Chinese citizens from using sites like Google and Facebook, has listed a major explorer for Ethereum’s (ETH) blockchain.

According to data from non-profit monitoring organization GreatFire, China allegedly blocked one of the most popular ETH block browsers, Etherscan, in October 2019. As of Dec. 3, Etherscan’s domain remained inaccessible from IP addresses inside mainland China, as reported by crypto publication Coindesk on Dec. 3.

Etherscan is aware of the block, firm’s CEO says

While the Etherscan’s blockage was largely unnoticed, the firm’s CEO Matthew Tan reportedly said that Etherscan noticed the action “within the last 3 months,” Coindesk reports. Cointelegraph contacted Etherscan’s team to confirm the information but the firm hadn’t responded as of publication.

The block’s timeline

According to GreatFire, which collects a database of websites blocked by the Great Firewall, Etherscan was purportedly still intact with “no censorship detected” as of Aug. 17, 2019.

The Ethereum block browser was fully blocked by Oct. 29, 2019, while the exact time of the block is not reported by GreatFire.

Other ETH blockchain explorers still accessible in China

Meanwhile, other Ethereum block explorers are still intact in China. As reported by Coindesk, a localized version of the browser, cn.etherscan.com, is accessible to Chinese users as of press time.

A block explorer is a website or a tool that allows users to track blocks, wallet addresses, network hashrate, transaction data and other key data on a certain blockchain, like the Bitcoin (BTC) blockchain, the Litecoin (LTC) blockchain, or the Ethereum blockchain. For Bitcoin, there are a number of block explorers, including Blockchain.com, Blockexplorer.com, or Btc.com

Meanwhile, Etherscan is just one of a number of block explorers such as Etherchain.org and Ethplorer.io. In March 2019, major Ethereum wallet supplier MyEtherWallet announced the launch of the alpha version of its new open-source Ethereum blockchain explorer, EthVM.

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