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Blockchain technology stands to boost the global economy by $1.7 trillion in the next decade with Asia seeing the most economic benefit, according to a new report by consulting company PricewaterhouseCoopers (PwC).

• PwC economists forecast a tipping point in 2025 if blockchain technologies are adopted at scale across the world, and expect blockchain applications to boost global gross domestic product (GDP) by $1.76 trillion, (1.4% of global GDP) by 2030.  
• According to the report, blockchain will make the biggest impact on Asia’s economy with China, India and Japan driving adoption in the region.
• China stands to gain the highest potential net benefit at $440 billion, with the U.S. following at $407 billion. 
• Germany, Japan, U.K., India and France are each estimated to benefit by more than $50 billion in the same period.
• The report identified five key application areas of blockchain with potential to generate economic value: product tracking and tracing ($962 billion), financial services and payments ($433 billion), identity security and credentials ($224 billion), contracts and dispute resolution ($73 billion), customer engagement and reward programs ($54 billion). 
• Public administration, education and health care sectors will benefit the most ($574 billion increase by 2030) by “capitalizing on the efficiencies blockchain brings to the world of identity and credentials,” the report said.
• A survey conducted as part of the report revealed 61% of CEOs across the world are placing digital transformation of core business operations and processes among their top three priorities.
• “Serious activity around blockchain is cutting through every industry across the globe right now,” Steve Davies, global Blockchain leader at PwC, said in the report. In a press statement he added that the acceleration of disruptive trends in the business world is driven by the COVID-19 pandemic. 

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Peer-to-peer crypto marketplace Paxful said it’s partnering with BiLira, the group behind the Turkish lira-backed stablecoin bilira (TYRB), and crypto trading platform Cointral as part of a push to trade cryptocurrencies in Eastern Europe. 

Paxful said the move follows strong growth in trading registrations by Turkish users over the past year. Both BiLira and Cointral are based in Turkey. 

In an emailed statement, Paxful said it recorded an average monthly trading volume of over $65,000 in Turkey.

• Paxful said under the partnership with BiLira, users will be able to and sell bitcoin (BTC) and tether (USDT) using the bilira stablecoin. “Bitcoin can be used to preserve wealth against instability surrounding the Turkish lira,” said Ray Youssef, CEO of Paxful, in an emailed statement. 
• Through its partnership with Cointral, Paxful said its web-based kiosk would be integrated with Cointral’s trading platform, allowing users to make payments with bank transfers and gift cards, among others.

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Bitcoin bounced close to $11,600 before retreating a bit while ether options traders are less active than they were in September.

• Bitcoin (BTC) trading around $11,552 as of 20:00 UTC (4 p.m. ET). Gaining 1.7% over the previous 24 hours.
• Bitcoin’s 24-hour range: $11,186-$11,598
• BTC is above its 10-day and 50-day moving averages, a bullish signal for market technicians.

After a flat weekend that saw the world’s oldest cryptocurrency stick to a tight $11,300-$11,400 range, bitcoin’s price jumped Monday as high as $11,598 before settling to $11,552 as of press time. 

Read More: Bitcoin and Ether Rally After Grayscale’s ETH Trust Becomes SEC-Reporting

Related: Monero Leads Rally in Privacy Coins, Rising to Two-Year Highs

In its weekly investor note, quant trading firm QCP Capital put bitcoin’s technical support at $10,500, with any point above positive for the overall market due to payments firm Square buying $50 million in bitcoin. It has stayed above that level comfortably since Oct. 2.

”Last week Square’s purchase put a nice floor in BTC right at the key trendline and 10,500 level, with their average purchase price being $10,617 for 4,709 BTC,” the QCP note read. “Square’s purchase and effective lobbying of other corporate treasury desks through their white paper will give people confidence that a five-digit BTC price will be sustainable.”

On the macroeconomic front, global stock markets are anxiously awaiting further economic stimulus in the face of an increasing number of coronavirus cases, said Rupert Douglas, head of institutional sales for broker Koine. Equities traders want another round of stimulus as well as a weaker dollar, which supports gold, silver and bitcoin, too, he added. 

Indeed, since Sept. 25, the U.S. Dollar Index, a measure of a basket of fiat currencies versus the greenback, has been flat, in the red 0.01% Monday at press time.

Related: Bitcoin and Ether Rally After Grayscale’s ETH Trust Becomes SEC-Reporting

“Macroeconomic news and markets have been mostly positive across the globe, with equities up 2%-3% last week,” said Jason Lau, chief operating officer for cryptocurrency exchange OKCoin. He also noted that funding rates have been mostly positive the past three days, indicating traders are mostly paying for margin to go long in the bitcoin market.

“Positive funding rates in the BTC futures markets and recent large corporate purchases, for example Square, have also increased short term bullish sentiment in line with traditional markets leading into year end,” Lau added. 

Ether options open interest lower in October

Ether (ETH), the second-largest cryptocurrency by market capitalization, was up Monday trading around $387 and climbing 4% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Prices jumped nearly 4% several hours after digital currency asset manager Grayscale announced its Ethereum Trust has become a Securities and Exchange Commission (SEC)-reporting company. Grayscale is owned by CoinDesk’s parent company, Digital Currency Group

Read More: DeFi Project Aave Raises $25M From Blockchain.com and Other Investors

In the options market, after a record September for open interest on derivatives venue Deribit, October’s volume is much lower. In the first 10 days of September, ether options open interest averaged $425 million. For the first 10 days of October, that average was down 18% to $346 million.

Despite a mostly bullish run for ether to start October, options traders are less interested in placing bets on Deribit, which is the largest ether options venue. Vishal Shah, an options trader and founder of derivatives exchange Alpha5, says a decline in DeFi interest this month may be the culprit for open interest dipping. “I think, without over-analyzing it, DeFi has fizzled a touch, naturally reducing the need for ETH optionality on the margin,” he said.

Other markets

Digital assets on the CoinDesk 20 are mostly green Monday. Notable winners as of 20:00 UTC (4:00 p.m. ET):

• chainlink (LINK) + 8.4%
• monero (XMR) + 7.2%
• tezos (XTZ) + 4.1%

One notable loser as of 20:00 UTC (4:00 p.m. ET):

• bitcoin sv (BSV) – 0.20%

Read More: UK Crypto Derivatives Ban Seen Having Limited Effect on Small Market

Equities:

• Asia’s Nikkei 225 closed in the red 0.26% as the People’s Bank of China announced rule changes making it more cost effective to short the renminbi. 
• Europe’s FTSE 100 ended the day slipping 0.25% as the U.K. government announced fresh coronavirus-relation restrictions Monday.
• In the United States the S&P 500 climbed 1.7% as investors were optimistic for a stimulus deal and tech stocks pushed higher.

Commodities:

• Oil was down 2.6%. Price per barrel of West Texas Intermediate crude: $39.49.
• Gold was in the red 0.32% and at $1,923 as of press time.

Treasurys:

• U.S. Treasury bond yields were flat or slightly in the red Monday. Yields, which move in the opposite direction as price, were down most on the 10-year, dipping to 0.775 and slipping 0.63%.

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For Coinbase users who don’t want to keep their funds on an exchange, the buying and storing crypto just became a lot easier. 

On Monday afternoon, the company announced Coinbase Wallet users would now have a fiat on-ramp within the wallet itself. 

Previously, users holding their crypto in the self-custodial wallet would have to buy crypto on the Coinbase app (or elsewhere) and then send funds to Coinbase Wallet. This meant people trying to use, say, a DeFi protocol would have to install two separate apps to get started.

Related: Securitize Is Taking Ethereum-Based Securities Into the DeFi Realm

Now users can buy crypto from within Coinbase Wallet without directly touching the Coinbase.com exchange. Users will now see a “buy or transfer” option on their Wallet home screen:

“Wallet allows users in every part of the world to store their own crypto and use popular dapps like Compound and Uniswap,” Coinbase wrote in a blog post. “However, until now, anyone new to crypto had to buy their first cryptocurrency from an exchange, and then transfer it over manually to their Wallet apps.”

For decentralized app creators, the development means they “can build dapps with just one easy app install for their users,” Coinbase wrote.

Read more: Coinbase Now Allows You to Access Dapps on Desktop Browsers

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The Digital Dollar Project ratcheted up its calls for the U.S. to get serious about a central bank digital currency (CBDC) Monday with the release of nine “pilot” scenarios that it said would put a CBDC to the test.

• Accounting for wide swaths of fundamentally different potential digital currency end users (from the rural unbanked to Wall Street’s financial giants), the proposal seeks to game out every use case for a U.S. CBDC.
• For example, one pilot envisions the Depository Trust & Clearing Corporation, which oversees the trillion-dollar plumbing undergirding U.S capital markets, testing atomic settlement procedures for tokenized cash and tokenized securities.
• Another proposal would seek to “technologically” prove that mobile wallets could comply with stringent federal banking laws even in rural and unbanked communities. Additionally, it would attempt to “functionally” prove that digital wallets are better alternatives to those communities’ existing financial infrastructure.
• Each situation gets a “current state,” a hypothetical “future state” and an accompanying CBDC pilot proposal to highlight specific considerations.
• None of the proposals are actually in motion yet. Such a move would come from the U.S. Federal Reserve. Stakeholders there have made clear that while a digital dollar is being discussed, it is far from a done deal.
• Nonetheless, digital dollar proponents said the CBDC pilots will help prompt more nuanced discussions about digital currency’s specific challenges.
• Christopher Giancarlo, former head of the Commodity Futures Trading Commission, leads the project, a collaboration of his Digital Dollar Foundation and the U.S. consultancy Accenture.

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Dozens of historically Black colleges and universities (HBCUs) are exploring the next phase of decentralized technologies in a bid to put Black students at the forefront of new blockchain protocols. 

“These schools see it as a way to participate in Web 3.0,” said Tonya Evans, chairperson of the MakerDAO Foundation and visiting professor at Penn State’s Dickinson Law School. “We were not participating in the dot-com era. Most of the Black community didn’t know about it at the time.”

This story is part of the CoinDesk U series about blockchain at universities. See our ranking of U.S. universities here.

Related: Looking for a Job in Crypto? Here Are 5 Skills You Need

With many programs being only a couple years old, few schools have dedicated blockchain courses, even as students from blockchain groups have started to teach themselves. But efforts are mounting, according to educators contacted by CoinDesk, with many universities looking to deepen their relationships with the crypto industry.

“On the East Coast, certain majority-white colleges do this with their spare time anyway,” said Ryan Cooper, a graduate of Bowie State University who started the blockchain group at Bowie. “At HBCUs, you have to incentivize this.”

For instance, blockchain will likely remain just a part of courses at Howard University and not become a full-blown major “until there is a killer research rationale for doing so,” said Todd Shurn, a professor of computer science at Howard University. 

Read more: Looking for a Job in Crypto? Here Are 5 Skills You Need

Related: Blockchain Goes to College

Morgan State’s FinTech Center started a blockchain group in 2019 and had a multimillion-dollar investment from Ripple in February of that year. The school teaches a blockchain fundamentals course but is still a few years away from a certification program, said Judith Schnidman, the FinTech Center’s program coordinator. Morgan State has taught the course three times, and students at the end of the course have to create a decentralized application on Ethereum.

“We’d like every university to have a blockchain major,” Schnidman said. “We want students to graduate with enough skills to break into this field.” The university is also in the process of creating a post-secondary certification, which can be done as a minor or a focus in the school’s MBA program.

Inter-campus efforts

Several universities are talking about collaborating to create a major, Schnidman added.

“The whole world is different because of online,” she said. “Even before the whole COVID thing, we were talking about doing a multi-university, multi-disciplinary blockchain major.”

Last year at the HBCU Blockchain Curriculum Development Institute, Morgan State brought 45 faculty from roughly 30 universities who had to submit course proposals to teach new courses or modify a course to include blockchain education. The winners were invited to New Orleans for a three-day working conference to turn their proposals into courses, one of whom was a genetics professor who wanted to incorporate blockchain into his genome projects, Schnidman said. 

While Morgan State already offers a class, the university would have to make many decisions about which blockchains to include before creating a blockchain major, said Ali Emdad, associate dean of the Graves Business School at Morgan State. At the moment, the market is fragmented. 

Corporate engagement

Morgan State’s most recent endeavor is a partnership with Binance US, enrolling 42 students in a crypto trading program where the exchange gave each student $200 in crypto to trade. The students started the challenge on Sept. 14 and it will end on Nov. 8, and the student who makes the most from trading will give a presentation at the end of the challenge about his or her strategies.  

“You can be anywhere you want and work at any hour you want,” Emdad said. “The goal is to inform and educate our students on an area of fintech that is changing very fast.”

Emdad said he sees the project serving as a focus group for Binance US and an opportunity for students to learn crypto trading and maybe join a crypto exchange or crypto startup in the future. Since the trading resembles what goes on in traditional markets, Emdad also said the challenge may be wrapped into future finance courses at Morgan State.

Blockchain, cyber or robotics? 

One of the current barriers to creating blockchain programs at HBCUs is a lack of funding. 

“There are so many technologies that have the potential for impact and they’re competing for space in these student’s heads,” said Shurn, the professor at Howard. “It’s tough particularly in COVID times because budgets are even tighter than they were. … Do you add a blockchain course or a cybersecurity course?”

At Howard, blockchain plays a large role in the intro to engineering class and is a part of the senior project for computer science majors at the school, Shurn said. The program is split between computer science and business at Howard, with the computer science department focusing more on coding and consensus algorithms while the business department focuses more on blockchain workflows and crypto trading.

Read more: The Best Blockchain University Programs Actually Pay Students to Learn

“We’re more interested in blockchain and blockchain applications then we are in crypto,” Shurn said. “That isn’t as relevant to us as writing code behind a smart contract.”

Howard was in the middle of applying for grants from fintech companies and fintech accelerators before the pandemic hit, Shurn said, and the university was going to put on a blockchain event that would have involved stakeholders who could have helped fund the blockchain program at the school.

“Momentum for blockchain at Howard won’t really occur until there is some investment by a third party in a collaborative project,” Shurn said. “It could be IBM, it could be a startup, but it would have to be some major collaboration between some funded source and the university.”

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Despite the markets for both secondary cryptocurrencies and conventional assets buckling under various market upheavals in October, the price of BTC has remained remarkably steady and actually risen in price relative to the U.S. dollar.

Hedge fund Numerai is offering $50 million of its numeraire (NMR) token to quants, researchers and even fellow funds that provide original stock market “signals” into its data clearinghouse, Numerai Signals.

• The startup said its new system will allow anyone to monetize novel market intelligence by sharing it with Numerai, whose data scientists have long crowdsourced trading strategies.
• This can yield higher returns than if the individual personally traded on the stock market signals, Numerai claims.
• One caveat: While anyone can input signals, only those who stake NMR can earn the payout.
• That’s not a risk-free endeavor. A Numerai representative told CoinDesk that up to 25% of staked tokens can be earned or burned per round.
• NMR was trading 8% higher on Monday, according to CoinGecko, however the day’s largest pop preceded the public unveiling of Numerai Signals.

UPDATE (10/12/20 19:32 UTC): This article has been updated to reflect who can utilize Numerai and how the payout mechanism works.

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In the seven months since India’s top court allowed banks to legally service crypto platforms, users and trade volumes at local exchanges have increased. But regulators have said little about the rules for crypto trading. 

Confusion can be detrimental to market growth. So to introduce more clarity, some in the Indian crypto community are pitching a way to let platforms stay active but in a cordoned part of the market, supervised by the regulators – otherwise known as a sandbox approach.

Initiated by crypto exchange BuyUCoin, the sandbox proposes a regulatory framework to bring crypto assets under existing regulations while also setting up a supervised space for startups to develop in the sector. The proposal also involves developing  an open-source interface to track crypto transactions and manage anti-money laundering (AML) and know-your-customer (KYC) compliance.

Related: Crypto Long & Short: A UK Ban on Crypto Derivatives Will Hurt, Not Protect, Investors

The proposed interface would pool information from exchanges and providers, and funnel it to regulators and governing councils via an application programming interface, or API.   

The draft policy and API white paper released on Oct. 10 draws parallels to approaches used by the Financial Conduct Authority (FCA) in the U.K. and the Monetary Authority of Singapore (MAS). The framework document notes that even though the Indian central bank has operational sandboxes for retail payments and fintech platforms, cryptocurrencies have been kept off the playground. 

Roller-coaster regulations

India’s crypto regulation has been a bit of a roller coaster. Amid a fledgling market in 2018, the central bank, Reserve Bank of India, banned banks from servicing crypto businesses. After almost two years of restrictions and protracted legal  proceedings, the nation’s Supreme Court overturned the restriction in March this year. 

Rumors of another crypto trading ban made the rounds in September, but no such policy was announced. 

Related: Tim Draper Leads Targeted $5M Series A for India Crypto Exchange Unocoin

Shivam Thakral, CEO of BuyUCoin, said the idea for a sandbox became relevant after the RBI ban was overturned. According to Thakral, regulations are crucial for the Indian crypto market to protect users from recurring instances of fraudulent activity. 

Read more: Investors Flock to India’s DeFi Scene Months After Central Bank Ban Overturned

Compared to the international market, Indian users “still lack in data security as well as personal wallet security,” said Thakral. BuyUCoin’s document also notes that a missing regulatory framework keeps users from reporting legitimate crypto earnings for tax purposes and limits investor protections, discouraging money from flowing into the market. 

The proposed regulations hope to address this by involving banks in the customer vetting process, creating a supervised sandbox for startups in the sector and convincing the government to create a dedicated regulatory body for digital assets. 

‘Helping guide’

Ashish Bansal, director of global application and development tech at GSK, is one of the contributors to the proposal.  

“Though the government is still quite skeptical about all these technologies, they need some organization, some private players or some association to kind of come up with these kinds of documents,” such as research reports or forums,  he said. 

The proposed sandbox approach could help bring some clarity to India’s regulatory space. The transaction-reporting framework proposed in the white paper also said that crypto exchanges and service providers could use the API to examine and report suspicious transactions to authorities in real-time. 

Even though most crypto exchanges claim to follow KYC guidelines similar to the banks, blockchain analytics and tracing services like Chainalaysis and Elliptic have not yet gained traction. 

Read more: India May Be Starting Its Biggest Bitcoin Bull Run Yet

“They are not popular among the Indian crypto industry, and also among the regulators on the other side,” said Sathvik Vishwanath, CEO of UnoCoin, a crypto exchange based in Bengaluru. 

While he expects these services to grow in popularity in the coming years, he said the requests exchanges currently receive from law enforcement haven’t yet required the use of sophisticated blockchain tracing. 

Even though UnoCoin, among other exchanges, reported a jump in users and trade volumes after the banking restrictions were relaxed, Vishwanath said a comparison of leading global exchanges and Indian exchanges shows local volumes remain small overall.

“Uncertainty is … actually the reason why we see [less volume] from India,” said Vishwanath, alluding to the lack of a clear regulatory roadmap from the authorities. 

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Since January, over $1.5 billion worth of bitcoin has been tokenized into ERC-20 tokens to use in the emerging decentralized finance (DeFi) ecosystem on Ethereum. These DeFi applications offer an increasingly large array of potential use cases for bitcoin investors looking for alternative ways to issue loans or make trades on new exchange platforms. 

Tokenizing bitcoin serves as a bridge between these two leading cryptocurrency communities and an important step forward for traders and investors taking advantage of the features offered by both blockchains. Through tokenized bitcoin projects, the powerful monetary properties of bitcoin can be leveraged in the ever-growing collection of Ethereum-based cryptocurrency applications.

CoinDesk is preparing for the invest: ethereum economy virtual event on Oct. 14 with a special series of newsletters focused on Ethereum’s past, present and future. Every day until the event the team behind Blockchain Bites will dive into an aspect of Ethereum that excites or confuses us. Today’s intro is written by CoinDesk reporter Zack Voell.

Related: First Mover: Bitcoin’s Best Week Since July Shows Limited Toll of UK Retail Crypto Futures Ban

Tokenized bitcoin also revives an age-old discussion on the merits of decentralization versus convenience. Some projects like Thesis’ tBTC project prioritizes decentralization while others, like the industry-leading wrapped bitcoin (WBTC) project by BitGo emphasizes convenience through a central custodian for all tokenized coins.

To date, seven different projects offer bitcoin tokenization services, and that list is likely to grow along with demand for more bitcoin-backed ERC-20 tokens. As the amount of tokenized bitcoin grows, the importance of each project’s security and reliability becomes even more important as does the continued development of Ethereum-based applications that pique the interest of tokenized bitcoin holders. 

It’s a topic of conversation likely to be covered by CoinList and BitGo representatives when speaking on the virtual panel Unlocked: BTC on Eth: Having Your Cake and Eating It, Too at invest: ethereum economy this coming Wednesday.

Featured panel

The Fees Are Too Damn High: DeFi Pushes Ethereum to Its Limit
Ethereum has delivered many mind-boggling innovations – some by design, others out of necessity. With DeFi pushing the ecosystem, existing infrastructure is being maxed out. Can Eth 2.0 address these pain points? Is this the opportunity for so-called “Eth Killers”?

Related: Crypto Long & Short: A UK Ban on Crypto Derivatives Will Hurt, Not Protect, Investors

MakerDAO’s Rune Christensen will assess this critical fork in the road along with representatives from NEAR Protocol and Framework Ventures at invest: ethereum economy. Tune into “The Fees Are Too Damn High: DeFi Pushes Ethereum to Its Limit,” on Oct. 14 starting at 9:30 a.m. ET.

Ethereum 101

To the surprise of many, bitcoin has been a breakout star in Ethereum’s decentralized finance (DeFi) moment. Taking the form of wrapped or tokenized bitcoin, the digital asset takes the best of both blockchains – bitcoin’s price value and brand along with Ethereum’s programmability – into one highly in-demand token. 

CoinDesk tech reporter Will Foxley breaks down the mechanics behind these tokenized versions as well as the reasons investors would want to trade representations of BTC on a competing blockchain. 

Why use tokenized BTC?

What bitcoin on Ethereum does is simple: It provides liquidity for growing decentralized exchanges (DEX), such as Uniswap. Bitcoin’s current market cap is five times larger than the second largest cryptocurrency, ether (ETH). That money can be put to use making more money.

Tokenized bitcoin allows investors to bring large amounts of value over to the Ethereum network and its young DEX market in a few clicks. 

DeFi is considered vastly immature when compared to traditional or centralized exchange (CEX) markets. This can be seen in the large price spreads between orders on exchange books between different DeFi markets. 

Price differences on markets can be exploited by traders in what is called arbitrage opportunities.

Wrapped bitcoin is often the asset of choice for investors seeking arbitrage. Bitcoin packs a large punch in terms of price value. More money on DeFi trading platforms makes the markets themselves stronger as additional buying and selling options are presented. 

But tokenizing bitcoin isn’t without risks, particularly software risk. Investors who want exposure to bitcoin’s liquidity pay higher interest rates to cover the risk of losing an asset in addition to getting exposure to the first cryptocurrencies liquidity.

Security of bitcoin investments
For tokenized bitcoin, security boils down to the type of custodianship and if the investment is collateralized. Three major models exist: a centralized firm like BitGo; a smart contract system with collateral, such as tBTC; or a complete, synthetic-asset backing employed by sBTC.

BitGo’s centralized model requires users to give the custodian BTC to receive an ERC-20 token-equivalent of BTC in return. That ERC-20 can then be sold on secondary markets or plugged into a DeFi application to earn yield.

Keep Network’s tBTC, which launched last month, is similar to WBTC but replaces the centralized BitGo model with a network of nodes, wallets and smart contracts. This network aims at bringing more decentralization to BitGo’s process by allowing both parties – the bitcoin depositor and custodian – to interact trustlessly through software.

A few features make this possible, such as the bitcoin depositors being able to choose who holds their bitcoin and a 150% security bond (held in ETH) pledged by the custodians on the off-chance they run to the hills with the deposits.

Ren’s rBTC works in a similar manner to tBTC’s node network by having the Ren Virtual Machine, RenVM, act as a trustless agent between the Bitcoin and Ethereum blockchains.

Lastly, sBTC is an ERC-20 version of bitcoin. But this time it’s backed by another token, the Synthetix Network Token (SNX). Each sBTC is not backed by BTC, but 800% of a BTC’s value in SNX, the token for minting synthetic assets (Syns) on the Synthetix DEX.

The future of tokenized assets
The wild success of BitGo’s WBTC and WETH (wrapped ether) may lead to more constructions of other coin holdings. Ben Chan, CTO at WBTC co-creator BitGo, told Coindesk in August that the firm was looking at wrapping other cryptocurrencies.

WBTC’s 2020 success has largely been thanks to DeFi, he said.

“What we’ve seen this year is that WBTC traction has been largely thanks to the highly composable DeFi industry,” Chan said.

The ledger

CoinDesk Chief Content Officer Michael Casey took on the theme of wrapped bitcoin in his weekly newsletter, Money Reimagined, last June. According to Casey, tokenized bitcoins bring not only value and legitimacy to a burgeoning decentralized financial ecosystem, but also security. 

Likewise, Ethereum provides a clear path towards returns for tokenized bitcoin users, willing to take on extra risk. 

DeFi double act

Tensions between the Bitcoin and Ethereum tribes have been stirred by a trend outsiders might see as a sign of harmony. Beneath the rivalry that plays out primarily on Crypto Twitter, the bitcoin-on-Ethereum trend says more about complementarity than competition. 

The growth of tokenized representations of BTC highlights that bitcoin is the crypto universe’s reserve asset and that Ethereum’s burgeoning “DeFi” ecosystem is crypto’s go-to platform for generating credit and facilitating fluid exchange. 

Real-world parallels
This trend captures the early beginnings of a new, decentralized global financial system. An analogy: Bitcoin is the dollar, and Ethereum is SWIFT, the international network that coordinates cross-border payments among banks. (Since Ethereum is trying to do much more than payments, we could also cite a number of other organizations in this analogy, such as the International Swaps and Derivatives Association or the Depository Trust and Clearing Corporation.) 

So, let’s dismiss claims like those of Ethhub.io co-founder Anthony Sassano. He argued that because bitcoin token transactions on Ethereum deny miners fees they would otherwise receive on the bitcoin chain, bitcoin is becoming a “second-class citizen” to ether. You’d hardly expect people in countries where dollars are preferred to the local currency to think of the former as second class. And just as the U.S. benefits from overseas demand for dollars – via seigniorage or interest-free loans – bitcoin holders benefit from its sought-after liquidity and collateral value in the Ethereum ecosystem, where it lets them extract premium interest. 

Still, to declare bitcoin the winner based on its appeal as a reserve asset is to compare apples to oranges. Ether is increasingly viewed not as a payment or store-of-value currency but for what it was intended: as a commodity that fuels the decentralized computing network orchestrating its smart contracts. 

That network now sustains its financial system, a decentralized microcosm of the massive traditional one. It takes tokenized versions of the underlying currencies that users most value (whether bitcoin or fiat) and provides disintermediated mechanisms for lending or borrowing them or for creating decentralized derivative or insurance contracts. What’s emerging, albeit in a form too volatile for traditional institutions, is a multifaceted, market for managing and trading in risk.  

This system is being fueled by a global innovation and development pool bigger than Bitcoin’s. As of June of last year, there were 1,243 full-time developers working on Ethereum compared with 319 working on Bitcoin Core, according to a report by Electric Capital. While that work is spread across multiple projects, the size of its community gives Ethereum the advantage of network effects.

Whether DeFi can shed its Wild West feel and mature sufficiently for mainstream adoption, the code and ideas generated by these engineers are laying the foundation for whatever regulated or unregulated blockchain-based finance models emerge in the future. 

Complexity vs. simplicity
There are legitimate concerns about security on Ethereum. With such a complex system, and so many different programs running on it, the attack surface is large. And given the challenges the community faces in migrating to Ethereum 2.0, including a new proof-of-stake consensus mechanism and a sharding solution for scaling transactions, it’s still not assured it will ever be ready for prime time. 

Indeed, the relative lack of complexity is one reason why many feel more comfortable with Bitcoin Core’s security. Bitcoin is a one-trick pony, but it does that trick – keeping track of unspent transaction outputs, or UTXOs – very well and very securely. Its proven security is a key reason why bitcoin is crypto’s reserve asset. 

Toward anti-fragility
The inclusion of bitcoin in Ethereum smart contracts is inherently strengthening the DeFi system. 

Decentralized exchanges (DEXs), which allow peer-to-peer crypto trading without centralized exchange (CEX) taking custody of your assets, have integrated WBTC into their markets to boost the liquidity needed to make them viable. 

Meanwhile, the move by leading DeFi platform MakerDAO to include WBTC last spring in its accepted collateral has meant it has a bigger pool of value to generate loans against. 

This expansion in DeFi’s user base and market offerings is in itself a boost to security. That’s not just because more developers means more code vulnerabilities are discovered and fixed. It’s because the combinations of investors’ short and long positions, and of insurance and derivative products, will ultimately get closer to Nassim Taleb’s ideal of an “antifragile” system.

That’s not to say there aren’t risks in DeFi. Many are worried that the frenzy around speculative activities such as “yield farming” and interconnected leverage could set off a systemic crisis. 

If that happens, maybe Bitcoin can offer an alternative, more stable architecture for it. Either way, ideas to improve DeFi are coming all the time – whether for better system-wide data or for a more trustworthy legal framework. 

Out of this hurly-burly, something transformative will emerge. Whether it’s dominated by Ethereum or spread across different blockchains, the end result will show more cross-protocol synergy than the chains’ warring communities would suggest.

At stake

Matt Luongo, founder of cryptocurrency venture production studio Thesis, wrote an op-ed discussing the similarities between “stacking sats” and decentralized finance. While hardnose bitcoiners may see DeFi as a distraction, Luongo thinks they should rethink their assertions. 

The article, published Oct. 1, is excerpted below.

Staking sats?

Bitcoin’s usefulness and grounding as hard money set it apart from most of the crypto froth from the past several years. The ocean of Ethereum white papers produced has yielded comparatively few working projects, and even fewer that anyone outside the crypto world would call usable.

Regardless of Bitcoin’s advantages, I am on record saying that I am a monetary maximalist, not a Bitcoin maximalist. I believe finance is a human right, just like speech and assembly, and that we need a fair and transparent financial system that empowers individuals, not powerful middlemen. So while I believe in the soundness of Bitcoin and its ability to help reshape finance, I will support any project that furthers this ultimate vision for a new economic system.

The fact that Ethereum is not Bitcoin, that it has consistently driven hype and bubbles, and that it still has not found a workable long-term solution for scalability, does not mean it offers nothing of value. In fact, Ethereum’s top DeFi platforms are doing some truly exciting and innovative work, and they have the promise to further the cause of a decentralized future of money.

MakerDAO operates like a credit facility, driving liquidity and encouraging more lending when interest rates are low. Compound, with its developer-focused interest rate protocols, enables the savings and loan functions of traditional banks. In more arcane spheres, projects like Synthetix offer a version of derivatives trading. Together, these platforms represent the germ of a new financial system.

Projects with names like $YAM and $TENDIES do not inspire confidence, I know. But dig a little into what DeFi is and does, and the foundations that have been laid, and you’ll be pleasantly surprised. DeFi is very real, and it’s worth exploring and explaining.

Stacking sats is about steadily, gradually, doggedly accumulating wealth over time. And DeFi is in the same spirit when properly implemented (never a sure thing in the Ethereum community). It’s basic finance: DeFi lets people do things they already do through banks, mutual funds and other financial institutions. But done right, it offers these services in a way that’s fairer, more transparent and more rewarding. So it’s not an exaggeration to say that DeFi is an ally in achieving a vision it shares with Bitcoin: a trustless world of democratized, self-sovereign finance.

It would be myopic and self-defeating to ignore the potential of DeFi to advance a goal that is, after all, shared by all of us. It would be even more self-defeating to ignore real opportunities to put money to work, like when there’s a way for BTC holders to earn through cross-chain bridges like tBTC.

As Bitcoiners, we will always believe in the importance of sound money and in the Bitcoin blockchain as the best technology to facilitate it. There is plenty of risk in Ethereum and in DeFi. Potential investors must always do their due diligence. But I’m here to tell you that DeFi is for real. It’s a bubble, but it’s not just another bubble. And although there absolutely are “DeFi” platforms that will crash and burn, many of the concepts are sound. There are real opportunities for people to earn by putting their money to work – and where that’s true, investment and growth will follow. 

Top shelf

Extortion claims
Local government premises in Japan have been hit by a flood of extortion attempts demanding bitcoin. According to a report by Japan Today on Monday, such threats have been received in at least 18 prefectures since July. The extortionists reportedly demand a payment in bitcoin to avoid the detonation of an explosive device in various public buildings, from schools to hospitals, though none of the Japanese victims have paid the extortionists, per Japan Today. Austria has also suffered a spate of similar bomb threats.

Compliance hire
BitMEX, the cryptocurrency derivatives exchange recently charged by U.S. authorities, has hired an industry veteran to lead its compliance efforts going forward. In a blog post Monday, the exchange’s operator 100x announced that experienced compliance officer Malcolm Wright will come aboard, reporting to the firm’s interim CEO and COO Vivien Khoo. This follows after news broke of a dual agency investigation into the firm for allegedly operating an unlicensed trading services. 

Musk denies
Elon Musk has thrown doubt on a claimed sighting of a bitcoin ATM at the Tesla Gigafactory in Nevada. Twitter user Will Reeves claimed on Sunday that he had “just passed by and saw @elonmusk has a bitcoin ATM at the Gigafactory.” The tweet was accompanied by a Google maps image revealing the location of the ATM on the northern side of the factory complex. Tesla founder and CEO Elon Musk said he didn’t believe the claim was “accurate” in a tweet on Monday. Bitcoin ATM firm LibertyX confirmed with CoinDesk it has installed three “traditional ATMs” on site “so employees can use their debit cards and buy bitcoin.”

Little impact
The U.K. Financial Conduct Authority’s decision to ban individual investors from speculating on bitcoin and other cryptocurrencies is likely to have a minimal impact, partly because the market is so small, according to analysts and industry executives who track the trading business. Some U.K.-based brokerages that had offered the crypto derivative products to retail traders could see a drop-off in revenue, though big cryptocurrency exchanges including Kraken say the impact is likely to be minimal. While U.K. individuals can still trade the actual cryptocurrencies.

Digital yuan
Chen Yulu, deputy governor of China’s central bank, said in an article at the weekend that the digital yuan project should form an “independent” and “high-quality” element of the nation’s financial infrastructure, South China Morning Post reports. Chen added that R&D for the digital yuan should proceed at a faster pace, while pilots should show the CBDC is “controllable and safeguards the security of payments.” Last week, the city of Shenzhen, together with the central bank, launched a kind of lottery allowing local residents to apply for some of 10 million digital yuan that will be handed out.

Quick bites

• A UK Ban on Crypto Derivatives Will Hurt, Not Protect Investors (Noelle Acheson/CoinDesk)
• Jill Carlson, Emily Parker: Coinbase’s ‘Apolitical’ Mission Is Hypocritical and Unhelpful (Opinionated podcast/CoinDesk)
• It’s Time to Launch the Ethereum 2.0 Beacon Chain (Ben Edgington/CoinDesk)
• Central Banks Haven’t Made a Convincing Case for Digital Currencies (Jon Sindreu/WSJ)
• Grayscale Ethereum Trust Becomes SEC Reporting Company (Scott Chipolina/Decrypt)

Who won #CryptoTwitter? Related Stories

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The Organisation for Economic Co-operation and Development (OECD) said Monday it plans to pitch leaders of the world’s largest economies on a framework for cryptocurrency tax reporting in 2021. 

• The guidelines will offer tax authorities guardrails for clarifying their local treatment of cryptocurrencies while also accounting for “international [exchanges],” OECD said.
• Thus, the framework will “reflect” crypto’s “dynamic and highly mobile nature,” OECD said.
• It will address technical issues, too. OECD said questions surrounding wallet providers, as well as crypto income not derived from sales (staking rewards, perhaps) may feature in the report. 
• The OECD said it plans for G20 members to review the framework in 2021.
• The OECD first called for international agreement on cryptocurrency taxation in 2018. 

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Major privacy-focused cryptocurrencies jumped on Monday, with monero (XMR), the biggest of the lot, extending its impressive recent run to two-year highs. The move came after a group of countries jointly called for “back doors” into encryption software. That backdoor access potentially diminishes the privacy-safeguarding utility of such software and is driving increased interest in the privacy coins.

• Monero traded at $135 during early U.S. hours, the highest level since September 2018, according to CoinDesk 20.
• The 15th largest cryptocurrency by market value has gained 23% this month alone and is up nearly 80% from lows below $75 observed in early September.
• On a 24-hour basis, monero is currently up 7.6%, while bitcoin (BTC), the number one cryptocurrency, is up 0.75%.
• Zcash (ZEC), also a privacy coin, is changing hands near $75 at press time, representing a 6.7% gain on the day.
• Other cryptocurrencies with anonymity features such as zcoin, horizen and harmony are also flashing green, according to data source Messari.
• These coins are gaining ground in the wake of a demand by the countries of the Five Eyes Alliance plus India and Japan for access to encrypted apps.
• On Sunday, officials from the alliance – the U.S., U.K., Australia, Canada and New Zealand – signed, with India and Japan, a joint statement supporting strong encryption but with backdoor access that would help lawmakers protect vulnerable sections of society.
• The statement escalates an ongoing battle between those favoring stronger encryption and companies building security protocols into their apps.
• Lawmakers worldwide may eventually target privacy coins because they facilitate the hiding of user identity via encryption.
• Recently, the U.S. Internal Revenue Service hired the blockchain intelligence firm Chainalysis and data forensics company Integra Fec to develop transaction tracing tools for XMR.

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Connecting the worlds of security tokens and decentralized finance (DeFi) is the next logical step for Securitize, a kind of regulatory-compliant fixer when it comes to tracking and trading blockchain-based securities.

Announced Monday, Securitize is teaming up with a protocol called Tinlake from Centrifuge, which uses a clever system of non-fungible tokens (NFTs) to enable real-world assets to participate in DeFi.

In an ideal world, any elements within the Ethereum ecosystem should be able to be built into one another, sharing new and useful features like automated market-making or other functions. This concept, a core tenet of DeFi, is known as “composability” (the analogy often used is the omni-building capacity of Lego bricks). 

Related: DeFi Project Aave Raises $25M From Blockchain.com and Other Investors

But there’s a catch: Digital securities, like their traditional counterparts, are regulated and have several control mechanisms that must be enforced. All securities, whether private or public require know-your-customer (KYC) identification of the person buying them, as well as mandatory investor qualification to determine which type of investor they are (retail or accredited, depending on the rules of their local jurisdictions).

That’s where Securitize comes in. Focused on smoothing the fragmented world of private securities trading, the firm has been honing its approach to identifying the owners of assets and the regulated peer-to-peer transfer of private security tokens. As such, the system is already 90% of the way to DeFi composability, said Securitize CEO Carlos Domingo.

“A lot of DeFi protocols are designed for unregulated utility tokens or cryptocurrencies, so they are not really suitable for security tokens,” Domingo said in an interview. “We have a thesis about how to make this work in a legal way, and so allow for things that exist in traditional capital markets, like market making, or lending and borrowing, all in an automated way.”

Read more: MakerDAO Weighs Accepting Real-World Assets as Crypto Loan Collateral

Related: Yearn.Finance’s Creator Says He’s Quit DeFi, but Project Has Bench Strength

DeFi protocols often operate pseudonymous liquidity pools powered by automated smart contracts. The Securitize Tinlake integration, by contrast, will be strictly for wallets that are associated with Securitize ID, so that the person on either side of a trade is known, said Domingo.

Tinlake’s smart contracts pool together NFTs that represent real-world assets. For instance, one pool could be dedicated to invoices that might be used in a trade finance scenario, that are then used as collateral to finance loans in stablecoins like DAI or USDC. 

DeFi dive 

The current pools enabled by Tinlake are short-term loans that return the money to the investor within a short period of time, but the next step is exploring rolling pools that reinvest the dividends, and also receipt tokens that can be used by other investors to receive contributions from the pool (the latter is known in DeFi as liquidity provider, or LP, tokens).

Read more: SushiSwap Will Withdraw Up to $830M From Uniswap Today: Why It Matters for DeFi

But diving headlong into DeFi presents some interesting challenges, said Domingo. Keeping tabs on the ownership of securities contributed to a pool on some automated market-making protocol like Uniswap containing hundreds of securities, is very complex to implement, he added.

“It’s not impossible but it will take time to integrate with our protocol to control the transfer restrictions,” Domingo said. 

Another key question relates to who can actually publicize the trades of private securities since in the U.K. you need an MTF (multilateral trading facility) license, or, in the U.S., an ATS (alternative trading system) license. “So while we might be 90% there with the technology, there is still a bit of regulatory uncertainty,” Domingo said. 

Securitize is not considering adding governance tokens like Uniswap’s UNI, said Domingo, because it’s unclear whether those sorts of tokens are legal. But irrespective of that, he said there are still scenarios where it’s going to be more profitable to contribute securities against a liquidity pool rather than just waiting for them to appreciate over time.

“If you go and buy Apple shares on Robinhood, the only thing you can do is just to wait for them to appreciate over time. That’s it,” Domingo said. “But if these DeFi protocols become available over time for security tokens, as we think will happen, then suddenly there are other avenues for you to make money besides just holding on and waiting.”

Related Stories

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The technical firm behind privacy cryptocurrency zcash (ZEC) is transitioning to a non-profit, called the Bootstrap Project, after a majority of shareholders elected to donate their holdings in the company.

“A majority of the investors and owners have informed us of their generous willingness to do this in support of our shared mission to empower everyone with economic freedom,” the Electric Coin Company (ECC) said in a blog post.

The stockholders’ donation comes as international governments have looked increasingly askance at encryption-backed technologies such as privacy coins and wallets. 

Related: Pantera Capital’s First Venture Fund Did Pretty Well. Its Second Fund? Not So Much

The ECC will continue operating under the same business structure, with Bootstrap acting as an umbrella firm of sorts. Bootstrap will be helmed, at least initially, by the ECC’s board of directors, zcash creator and ECC CEO Zooko Wilcox said in a Friday phone interview. The Zcash network is maintained by the ECC, independent developers and the Zcash Foundation.

A date for the ECC’s donation to Bootstrap has not been specified, but is aimed for around the network’s November hardfork, Canopy. The ECC has 24 investors, including Paradigm Capital co-founder Fred Ehrsam and venture capital firm Pantera Capital.

Zchanges

Practically speaking, the donation will free up cash flows for the ECC, which has continued to operate in the red regardless of a 160% year-to-date increase in the price of ZEC.

Under the Zcash founders’ agreement, the ECC receives 5% of miner revenue for developing the encryption tech backing the cryptocurrency. The ECC’s portion of future mining revenues will increase to 7% under Canopy, as agreed upon in February’s Zcash Improvement Proposal (ZIP) 1014.

Related: Bitcoin Trump-Dumps to $10,500; MetaMask Hits 1 Million Users

Yet, at a higher level, the donation will allow the ECC to more fully embrace a central plank in ZIP 1014 – that of all future mining revenue furthering zcash’s potential as an asset, and not enriching founders or early investors. Those involved in the project’s 2016 launch garnered 15% of mining revenue under the old scheme.

Read more: Zcash Trademark Talks Were About More Than a Logo

Outside observers suggest the move may be in keeping with the progressive decentralization ethos designed to keep regulators at bay. Deal Ninja attorney Gabriel Shapiro told CoinDesk the ECC’s shift to non-profit status was “potentially preferable to the status quo muddle of having a non-U.S. ‘foundation’ and a U.S. ‘development company’ with unclear rules of engagement between them.”

Wilcox said the ECC transition to a non-profit was “in alignment” with the community’s stipulations.

Pantera Capital’s Franklin Bi told CoinDesk in a phone call that the firm opted to donate its ECC shares because it was in the best interest of the zcash community. “[It’s] less about the tax benefit, but more so about the community,” he said.

Bi further said Pantera has never sold any of its ZEC holdings.

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Bitcoin (BTC) advanced to fresh two-month highs on Monday while ether (ETH) clocked three-week highs after Grayscale reported that its Ethereum Trust has become an SEC reporting company.

• BTC, the top cryptocurrency by market value, clocked a high of $11,524 at 13:45 UTC, the highest level since Sept. 2, and was trading at $11,480 at press time, gaining 0.95% over the past 24 hours, according to CoinDesk’s Bitcoin Price Index.
• Meanwhile, ETH, at the same time, was traded around $383.42 at press time, up 2.17% in the past 24 hours. That’s the highest level since Sept. 20.
• The rally came as digital currency asset manager Grayscale announced that its Ethereum Trust has become an Securities and Exchange Commission (SEC)-reporting company. 
• “This voluntary filing should not be confused as an effort to classify Grayscale Ethereum Trust as an exchange-traded fund (ETF),” Grayscale, which is owned by CoinDesk’ parent company Digital Currency Group, wrote in a press release on Monday.
• “The news will likely spur on another wave of Ethereum outperforming bitcoin, especially given the growing total value locked (TVL) across the DeFi universe,” Denis Vinokourov, head of research at the London-based prime brokerage Bequant told CoinDesk.
• Bitcoin has gained 59% this year while ether has rallied by nearly 200%. 
• Both cryptocurrencies added more than 6% last week following payments company Square’s disclosure of a $50 million BTC investment. 

Also read: First Mover: Bitcoin’s Best Week Since July Shows Limited Toll of UK Retail Crypto Futures Ban 

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With decentralized finance (or DeFi) having been the big success story in crypto this summer, investors look to be flocking to grab themselves a stake.

• Aave, one of the largest DeFi projects and provider of decentralized lending and borrowing, announced Monday that it has raised $25 million from investors Blockchain Capital, Standard Crypto and Blockchain.com Ventures.
• The project’s CEO, Stani Kulechov, said that the investment would go toward growing Aave’s team to better serve growing Asian markets and bringing DeFi “closer” to institutional investors.
• The investors in the strategic raise will take part in the protocol’s staking and governance, per a press release.
• According to data provider DeFi Pulse, Aave is currently the third largest DeFi protocol, with $1.15 billion in cryptocurrency locked in.
• Having seen explosive growth over the summer, the total value locked in all DeFi projects has plateaued somewhat in recent weeks and now stands at $10.79 billion.
• Per price data site CoinMarketCap, Aave’s LEND token is up 2.38% in 24 hours at time of writing.
• However, the protocol is in the process of migrating these over to a new AAVE token, as reported previously.
• The process will ultimately see ownership of the protocol shift over to a “genesis governance” built and approved by token holders.

Also read: Investors Flock to India’s DeFi Scene Months After Central Bank Ban Overturned

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Bank of Japan Governor Haruhiko Kuroda said Monday that the central bank will begin experiments on a central bank digital currency (CBDC) in the spring, Reuters reported.

• The experiments will seek to determine requirements and principles for the issuance of a potential digital yen.
• Kuroda also made clear his preparedness to impose added monetary easing steps, saying the BOJ still has tools at its disposal to fight the economic effects of the pandemic.
• Last week, South Korea’s central bank also said recently it will run trials of a CBDC during 2021, though it hasn’t decided if a launch will follow.
• China’s digital yuan is already in extensive testing, with the deputy governor of the People’s Bank calling this weekend for its launch to be accelerated.

Also read: Federal Reserve, 6 Other Central Banks Set Out Core Digital Currency Principles

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• Spate of Bitcoin Extortion Bomb Threats Hits Government, Schools in Japan

Grayscale Investments’ Ethereum Trust on Monday became a Securities and Exchange Commission (SEC) reporting company, a move that increases the trust’s transparency – and potentially its liquidity.

• The Ethereum Trust will begin regularly disclosing how much money is flowing through its passive ETH investment vehicle, according to SEC filings.
• Accredited investors who hold the trust will be able to sell after only a six-month lockup instead of the usual 12. 
• “We’re seeing interest from investors who have become more comfortable with digital currencies through bitcoin exposure, and are now looking at how else they can diversify within the asset class,” said Grayscale’s managing director, Michael Sonnenshein.
• The trust is Grayscale’s second crypto vehicle with shares registered under the Exchange Act of 1934, after its Bitcoin Trust became effective as a reporting company in January.
• Grayscale is part of Digital Currency Group, CoinDesk’s parent company.

Also read: Kraken Becomes First Crypto Exchange to Charter a US Bank

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While China has already taken the global lead in developing a central bank digital currency (CBDC), an official at the People’s Bank of China says the effort should be accelerated.

• Chen Yulu, deputy governor of the central bank, said in an article over the weekend that the digital yuan project should form an “independent” and “high-quality” element of the nation’s financial infrastructure, South China Morning Post reports.
• In comments published by the central bank’s own China Finance magazine, Chen added research and development for the digital yuan should proceed at faster pace, while pilots should show the CBDC is “controllable and safeguards the security of payments.”
• China recently announced a new focus on an economic strategy dubbed “dual circulation,” which would rely more on internal demand to buffer against international tensions, especially with the U.S.
• “We must serve dual circulation with fintech-led innovations,” Chen said about the digital yuan.
• The CBDC project is already thought to be closing in on a full launch, having been in testing in major cities with banks and commercial enterprises.
• Last week the city of Shenzhen, together with the central bank, launched a kind of lottery allowing local residents to apply for some of 10 million digital yuan that will be handed out.
• A report at the time suggested thousands of retailers are already set up to accept the digital currency.
• Other nations are still far behind, with many still at the investigation stage and a few others, such as South Korea and Japan, planning initial testing next year.

Also read: China Central Bank Official Reveals Results of First Digital Yuan Pilots

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Central banks are rushing into digital currencies without considering how the risks might outweigh any benefits, The Wall Street Journal said in its influential “Heard on the Street” column.

• The column, which is widely read on Wall Street and beyond, noted a survey by the Bank for International Settlements earlier this year that found one-fifth of central banks will likely issue some form of digital currency in the next six years. This rush might lead to some serious problems, the WSJ column said.
• Substantial risks to bank funding and financial stability should be weighed against trying to solve problems such as declining cash payments with a totally new, untested system instead of just trying to fix the existing structure.
• Why, the column asks, create digital currencies to address the shift to digital payments when mobile apps and cards are already filling that need?
• Digital currencies, with their security and anonymity, would make putting money in banks via deposits less attractive. This would reduce banks’ most stable source of funding, leaving them much more vulnerable, the WSJ column said.
• The only real benefit for digital currencies is security and privacy, and even that is against the interests of countries as it undermines their attempts to fight money laundering, according to the publication.

Also read: Federal Reserve, 6 Other Central Banks Set Out Core Digital Currency Principles

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