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Jerome Powell promotes CBDC digital dollar, warns against stablecoins

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Federal Reserve Chairman Jerome Powell testified on Capitol Hill this week, and it’s pretty clear he’s not a fan of digital coins – especially stablecoins.

During a two-day hearing in Congress, the Fed chief said the main incentive for the US to launch its own central bank digital currency (CBDC) would be to eliminate the crypto coin use case in America.

“You wouldn’t need stablecoins; you wouldn’t need cryptocurrencies if you had US digital currency,” Powell said. “I think that’s one of the stronger arguments for it.”

Central bankers and U.S. lawmakers have been lamenting the rise of stablecoins, a specific subset of cryptocurrencies whose value is tied to a real asset like a fiat currency like the US dollar or a commodity like gold, for years.

These nongovernmental digital tokens are increasingly being used in domestic and international transactions, which is scary for central banks as they have no say in regulating this area.

“I understand why they fear stablecoins,” said Nic Carter, founding partner of Castle Island Ventures. “I can understand why they are concerned that much of the commercial banking activity is moving into this largely unregulated world.”

But Powell is also not necessarily interested in the US launching its own digital token. There are already nearly 11,000 cryptocurrencies out there, so a digital dollar would enter a very crowded field.

In response to a question from Senator Pat Toomey, R-Pa., Powell replied Thursday that he was undecided whether the benefits of a digital dollar outweigh the costs.

What is clear, however, is that the Fed is done with running stablecoins amok.

“We have a tradition in this country where public money is held in what is supposedly a very safe asset,” Powell said.

“That doesn’t exist for stablecoins, and if they are going to be a significant part of the payments universe … then we need an appropriate framework, which we honestly don’t have.”

Stablecoins vs. CBDC vs. electronic USD

There are currently several types of digital US dollars.

Commercial bank accounts across the country hold electronic US dollars, partially backed by reserves, under a system known as partial reserve banking. As the name suggests, the bank holds a fraction of the bank’s deposit liabilities in its reserves. The transfer of this form of money from one bank to another or from one country to another takes place on old financial lines.

There is also a deluge of USD-linked stablecoins, including Tether and USD Coin. Although critics have questioned whether Tether has enough dollar reserves to support its currency, it remains the largest stablecoin in the world. USD Coin is backed by fully reserved assets, redeemable 1: 1 for US dollars and managed by Center, a consortium of regulated financial institutions. It’s also relatively easy to use no matter where you are.

Then there is the hypothetical digital dollar that would be the Fed assumption of a CBDC. This would be essentially just a digital twin of the US dollar: fully regulated, under a central authority, and with the full trust and support of the country’s central bank.

“A dollar in CBDC form is a central bank liability. The Federal Reserve has to pay you back, ”said Ronit Ghose, who leads FinTech and digital assets at Citi Global Insights.

All of these forms have relative advantages and disadvantages. But Powell’s claim that CBDCs are a rival to stablecoins misses the bigger reason cryptocurrencies are popular – and not just because they’re digital.

“[They’re] popular because it is money that is independent of politicians and bankers, ”said Mati Greenspan, portfolio manager and founder of Quantum Economics. “People want the state and money to be separated. They clearly don’t understand. “

Some argue that a CBDC in the US would be technically more secure than privately issued stablecoins, as it would represent a direct claim on a central bank, similar to the US dollar.

But a lot of the people who trade stablecoins don’t necessarily want to be sure. You want an easier way of doing business, especially internationally.

“It’s just an alternate payment network built on top of the commercial banking system,” Carter said. “It’s like open banking on steroids. It’s very interoperable, it’s relatively transparent and theoretically you can get faster processing and faster cross-border processing because it is not encumbered.”

According to Carter, stablecoins were originally created to meet demand for dollar exposure overseas and abroad. Tether, the third largest cryptocurrency in the world and the largest of the stablecoins, is mainly settled outside of the United States

Alyse Killeen, founder and managing partner of Bitcoin-focused venture company Stillmark, believes that the presence of a digital currency issued by the Fed in no way diminishes the value of the cryptocurrency.

“Many people recognize the loss of autonomy that occurs when permission to spend is implicitly associated with the use of a currency,” says Killeen. “It’s a fairly common experience that a wire transfer, debit card, or credit card transaction is blocked if the transaction is attempted outside of bank opening hours or outside of your personal spending habits identified by the bank,” she said.

“A Fed-issued digital currency … would likely have the same points of friction as trying to initiate a transfer on a Sunday.”

Why stablecoins are scary

There are many reasons for the Fed to be concerned about the rise in stablecoins.

On the one hand, there is concern about losing monetary control.

Facebook plans to launch its own stablecoin, diem, later this year, and if it “succeeded in displacing central bank money in the public purse, it would make it more difficult for the Fed to control or more generally manage the money supply” . Monetary policy, “says Rutgers University economist Michael Bordo.

There is also the problem of dwindling monetary sovereignty.

“If this or even a Chinese CBDC were accepted by many other countries, the US dollar would lose its dominance,” continued Bordo.

Central banks like the Fed also criticize the fact that stablecoins look like they are tied to a fiat currency, even though they are not covered by the state but by financial assets. Ghose says it’s similar to a money market fund.

“Stablecoins are like watching a dubbed movie – you don’t watch the original movie,” said Ghose.

This really gets under the Fed’s skin. Decentralized cryptocurrencies like Bitcoin don’t pretend to be the same as fiat, but “Stablecoins can create the impression that you are using something with a fixed value for fiat,” he said.

Carter believes the Fed’s hostility could stem from its own plans for a CBDC, which it can use to make monetary policy more granular and direct.

Carter envisions the CBDC as “a programmable coupon that the Fed could control at the flick of a button, that has complete visibility and control over money speed, that expires your money if not spent within 60 days, and poor use of cash completely eliminated – it is the holy grail for central bankers because it gives them complete discretion. “

Nowhere to go

Like it or not, central bankers agree that stablecoins will stay here.

Data from The Block shows a total stablecoin supply of nearly $ 110 billion, and it remains on a rapid rise.

Unlike his central bank counterparts, Fed Governor Randal Quarles believes there is no need to fear stablecoins. Nor does he really understand that the US is introducing its own central bank-backed digital dollar.

In remarks to the Utah Bankers Association in Sun Valley, Idaho, Quarles argued in June that stablecoins could indeed advance the role of the US dollar internationally.

“A global US dollar stablecoin network could encourage the use of the dollar by making cross-border payments faster and cheaper, and it could potentially be deployed much faster and with fewer drawbacks than a CBDC,” he said.

Assuming certain regulatory issues can be addressed, Quarles argued that “instead of trying to find ways to say ‘no'”, the Fed should say “yes” to these products.

“In fact, the combination of upcoming improvements to the existing payment system such as various instant payment initiatives combined with the cross-border efficiency of properly structured stablecoins could make any effort to develop a CBDC superfluous,” continued Quarles.

President Biden will have to decide in October whether to extend Quarles’ tenure as vice chairman of the central bank, which may indicate where the White House is on digital currency.

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1 in every 10 Irish investors hold cryptocurrency: Competition and Consumer Protection Commission survey

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The Irish Competition and Consumer Protection Commission (CCPC) poll, published on September 16, revealed important facets of investment trends among the masses. CCPC is the legal body for promoting compliance and enforcement of consumer competition and protection laws in Ireland.
The survey came to the following results:
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  • Information medium:
    • 62 percent of the 1,000 people surveyed used the Internet to obtain information about investments. The resources used by these people include online banking or investment websites, financial news websites, blogs, and social media platforms.
    • 38 percent sought advice from a bank or a financial advisor.

  • Investment form:
    • More than half, 56 percent of investors, prefer online investments.
    • Online investment options are more popular among those under 35.
      • In the under 35 age group, 36 percent preferred to use a trading platform or a mobile app such as XTB or Etoro
      • 29 percent of this age group use an online financial service provider like Revoult.
      • 22 percent of them preferred to invest through a bank or investment company.
      • 10 percent preferred brokers or agents.
  • Popular investment options:
    • For 1 in 5 people, stocks are the most popular investment option.
    • The second most popular investment option is government or corporate bonds, which are preferred by 12 percent of Irish investors.
    • 11 percent of investors held digital assets and a quarter of young Irish citizens speculated in cryptocurrencies.
      • The survey shows that more than 1 in 10 Irish investors have invested in one or more crypto assets.
      • Cryptocurrency investors in the 25 to 34 age bracket have grown to 25 percent. This group of investors is most open to savings in bitcoins or other digital coins.
  • Investment motivation:
    • 79 percent invested in order to achieve better returns for their money in the long term
    • 46 percent invested due to the current low interest rates.
      • In this 46 percent, 51 percent men invested more than 38 percent women because of low interest rates.
    • 26 percent invested in personal satisfaction
      • 47 percent of them were under 35 who invested in experiments.

Based on the results of the survey, Gráinne Griffin, Director of Communications at CCPC, concluded that Irish citizens switch online both when it comes to investing and looking for information about investing. The survey clearly indicates a transition to digitized investment, especially among the younger Irish population, Griffin said.
For the latest crypto news, investment tips, and real-time price updates, follow our Cryptocurrency page.

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Cryptocurrency: Here’s How the Top 5 Coins Have Performed Since April 2021

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Cryptocurrencies have got off to a slow start this year, largely due to an order from the Reserve Bank of India (RBI) to banks telling them not to trade crypto. Cryptocurrency trading accelerated after the Supreme Court lifted the RBI ban in March and allowed coins such as Bitcoin, Ethereum, Dogecoin, and others to be traded. Since then, several online exchanges such as CoinSwitch Kuber and CoinDCX have flourished. But investing in these virtual assets requires due diligence given the extreme volatility of most cryptocurrencies. One way to do this is to look at the historical dates of these coins.

How cryptocurrencies have behaved in the past few weeks and months can give an idea of ​​their potential in the near future and whether a person should invest now or wait.

This is how the top 5 digital coins have behaved since the beginning of this financial year (as of April 1):

Bitcoin

Bitcoin is the oldest cryptocurrency in the world. Since its introduction in 2009, it has remained an undisputed leader in the cryptocurrency market. It was Rs. 42 lakh on April 1st of that year, but by the end of May, when the market collapsed massively due to a Chinese crackdown on mining, it had hit a low of Rs. 22 lakh. However, Bitcoin has recovered. On September 17th it was Rs. 37 lakhs.

ether

Experts say this is the only virtual currency that has a chance to challenge Bitcoin’s dominance, but it is far from realizing its true potential. At the beginning of this fiscal year, Ethereum was trading at Rs. 1.40 lakh. It broke the Rs. 2 lakh barrier by early August. This was the time when the Ethereum blockchain had the big London upgrade. Since then, it has grown in value continuously. As of September 17, at the time of writing, it was Rs. 2.76 lakhs.

Cardano

Launched in 2017, Cardano is a relatively new cryptocurrency coin that has skipped the line to find its place in the top 5. Billed as a third-generation blockchain (Bitcoin and Ethereum are the first and second generation, respectively), Cardano achieved a return of almost 150 percent in just one month. On July 20, it was trading at Rs. 79.71 but by August it had peaked at Rs. 191.41. It saw further gains over the next few weeks, hitting an all-time high of Rs. 227 earlier this month. But profits have since started to decline. On September 17, at the time of writing, it was Rs. 187.82.

Tether

Tether is a stablecoin pegged to the US dollar. As the first coin, it is the most popular stablecoin. Since it is pegged to the dollar, meaning that each Tether coin should be backed by actual dollars in Tether Limited’s reserves, it is very stable compared to other cryptocurrencies. If this stability is predictable, it also limits the ability to grow wealth quickly. It stayed within the Rs. 73–75 this fiscal year. It was about Rs. 77 on 09/17.

Ripple

It is the fifth ranked cryptocurrency in terms of market capitalization. Technically, Ripple is not a cryptocurrency. It facilitates open source payments and XRP is the cryptocurrency that runs on this network. The price has doubled from Rs since April 1st. 41 to Rs. 80 now. But it hasn’t seen a rally similar to what it did in late 2017, which hit its all-time high of Rs 242 in early January 2018. At the time of writing, it was Rs. 84.

Interested in cryptocurrency? We discuss everything about crypto with WazirX CEO Nischal Shetty and WeekendInvesting founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music, and anywhere you get your podcasts.

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financial: Cryptocurrency Hyper Fund under government scanner

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NEW DELHI: The government is closely monitoring the cryptocurrency in the market based outside of the country after alerting that the authorities responsible for investigating financial fraud are watching a company called Hyper Fund.

Sources said Hyper Fund, a DEFI from the Hyper Tech Group, recently got under the radar. The group claims to have launched the Hyperfonds to provide a decentralized financial infrastructure. Hyper Fund was announced in mid-2020.

However, according to the company’s website, it is run by Ryan Xu, however, using the Multi-Level Marketing (MLM) model, Hyper Fund has attracted investors with higher returns and such offers, a common practice with Ponzi programs that have alerted authorities first place.

According to sources, complaints against such funds are piling up in several states. In India, the RBI, the Union Finance Ministry and SEBI had warned against trading in cryptocurrencies. The RBI plans to launch India’s official digital currency – E rupee – shortly.

The Treasury Department has made it clear that virtual currencies are not legal tender either. Therefore, VCs are not currencies. The RBI has also made it clear that it has not granted any company / company a license / authorization to operate or trade in Bitcoin or a virtual currency.

In June 2018, Amit Bhardwaj and his brother Vivek Bhardwaj were arrested by Pune police at Delhi Airport in connection with an alleged pyramid scheme. Bhardwaj, started his own Bitcoin mining operation and reportedly defrauded more than 8,000 people across the country for Rs 2,000 crore.

He has filed a complaint with the Delhi Police Department’s special cell alleging that he received a blackmail call and was asked to pay protection money on September 6, 2021 in exchange for promised higher returns.

UK regulators have issued warnings about such funds, and the Financial Conduct Authority (FCA) has issued warnings for both hyper-funds and fund advisers.

On its website, first published March 23, 2021 and later updated on August 31, the FCA said, “We believe this company may offer, advertise or sell financial services or products in the UK without our approval Any financial service or product required in the UK must be authorized or registered by us. This company is not authorized by us and is aimed at individuals in the UK. ”

She warns investors against such a fund and goes on to say, “You do not have access to the Financial Ombudsman Service or are protected by the Financial Services Compensation Scheme (FSCS), so you are unlikely to get your money back if something goes wrong . ”

The website used by these companies under the FCA is http://thehyperfund.online, https://thehyperfund.com/

Decentralized finance offering (DEFI) via blockchain technology from HyperTech Group, which is said to be based in Hong Kong, sources said Indian regulators and agencies have started monitoring the situation.

Following actions by financial regulators such as the US Security and Exchange Commission and the UK Financial Conduct Authority, Indian regulators and enforcement agencies have started overseeing investments in Hyper Fund – a decentralized financial offering powered by blockchain technology from the HyperTech Group.

Financial regulators around the world recognize the fact that Ponzi program organizers often use the latest innovations, technologies, products, or growth industries to attract investors and promise high returns on their program. Potential investors are often less skeptical of an investment opportunity when they judge something new, new or “current”. On its website, Hyper Fund claims to be “the strongest rocket in blockchain funding”.

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