Rehashed - #5 Blockchains, Banking and the Beehive
Digitisation of the Dollar
In a follow up to November’s report, the RBNZ issued a research note featuring the digital currencies. This month’s bulletin considers the kind of digital currency that a central bank could issue, parsing out the difference between cryptocurrencies that have variable exchange rates with fiat (most cryptocurrencies as we know them) versus digital currencies that are pegged to fiat. Many of these pegged cryptocurrencies, commonly known as stablecoins, already exist; issued by private enterprises in an attempt to bring stability to a volatile market.
It’s good to see the RBNZ putting out exploratory research on the subject. At the very least, it represents an open-mindedness that other jurisdictions lack. The tone to-date would suggest that there could potentially be bandwidth for a RBNZ-issued digital currency pegged to the NZD.
“ One question that central banks are asking themselves is whether they should issue a digital currency to the public and what such a currency might look like.” - RBNZ Bulletin Vol.81, No.3, April 2018
The hypothetical of a government-backed cryptocurrency issued by the RBNZ makes for an interesting thought experiment. The transfer of value within N.Z. could be frictionless; bank transfers would take seconds to clear rather than days. But, that could just be the tip of the iceberg. Becoming a cashless society could greatly diminish money laundering. If the government withdraw all cash in favour of a digital currency ecosystem, the underground economy might stall to a halt. Tax evasion would be near impossible and the transfer of funds for illicit purposes would be substantially more trackable.
While at face-value, a RBNZ issued digital currency might seem logical, it would not be a flightless endeavour for the government to undertake. The costs of implementing such a project would be non-trivial, as would the risks of ‘getting it wrong’. Whatever the case, it’s a fun scenario to hypothesise on, and one in which RBNZ may even be considering.
Market participants continue to ponder whether crypto is clawing its way out this bear market. We found ourselves 70% off peak prices, based on any number of reasons ranging from U.S./Japan tax-related selling (which I talked about in a prior Rehashed), regulatory FUD (fear, uncertainty and doubt, which continues to persist, particularly in the U.S.), the ICO bubble and weak hands capitulating. Despite all the despair, these large drawdowns are a common characteristic of the crypto markets (which I also previously discussed).
But lately the markets have shown a renewed vitality, suggesting, what I hope is, a slow and steady climb to sunnier shores. Bitcoin has showed incredible resilience, with only a brief jaunt below the USD $6000 level. Technicals indicate that Bitcoin is now eyeing the upside target of USD $9,750 (the 200 day moving average). All said, this bear market has only lasted 90 days and there is certainly room for further consolidation to the downside.
Regardless of the short-term chop, long-term market sentiment remains positive. In a survey directed at a group of industry experts (I can attest to this), predictions for end-of-year total market capitalisation averaged out at USD $734B (we currently sit at around USD $350B, peaking at over USD $800B in January). Although the sample size was small and concentrated (all of these people will benefit off a rise in crypto), such findings show optimism for the remainder of 2018.
Finally, forgetting the numbers, under the hood of the car, massive milestones are being achieved. A consolidation of project updates, straight from the horse’s mouth, can be found in this excellent newsletter. All the while, cryptocurrencies continue to gain exposure in the public eye. The future of crypto remains bright indeed.
In the News
The IMF has caught the crypto bug with IMF head, Christine Lagarde, championing the benefits of cryptocurrencies in a blog post. The organization’s April Global Financial Stability Report incorporated a significant feature on digital currencies (begins p.21).
Amazon has introduced AWS Blockchain Templates for Ethereum and Hyperledger Fabric. Furthermore, they won a patent for a streaming data marketplace that would allow users to receive real-time cryptocurrency transaction data.
Bloomberg showcased the gargantuan potential that blockchain has to revolutionise the shipping industry.
Coinbase continued it’s buying spree as it acquired earn.com for more than USD $100m.
Reddit has come alive with people posting photos of the most unexpected places in the world to accept bitcoin as payment.
Citigroup is hiring talent with a background in cryptocurrency to help with its anti-money laundering group.
New York based Messari has been producing free, open sourced, research reports on cryptocurrency projects.
April 26th - Presentation in Auckland on how IBM is leveraging Blockchain for it’s clients
April 29th - Discussion on the intersections of Blockchain, Automation and AI at the University of Auckland, grab a ticket if interested
Thanks for your company, stay tuned for next week’s edition of Rehashed.
View previous issue: Rehashed - #4 Aotearoa: Land of Flying Taxis and Blockchain
View next issue: Rehashed - #6 From Credit Cards to Cryptocurrencies
About the author:
Capital markets to crypto convert. From Christchurch → Boston → New York, Freddie became intrigued by the potential of the digital asset economy after randomly plucking a book on bitcoin off a New York library bookshelf in 2016. Her parents are thrilled that she is chasing magic money on the internet.
Disclaimer: The above references an opinion and is for informational purposes only. The opinions expressed by the author do not represent the opinion of BitPrime.