CIS Gazette 22/Feb/2021 A summary of the weeks news & events in the Crypto / Blockchain world
CRYPTO INDEX SERIES
Small Steps - Big Dreams
Crypto criminals stole $1.9B in 2020, down to 57% from $4.5B in 2019. In 2018, cryptocurrency crimes hit $1.7B value which soared by almost 165% year-over-year to $4.5B in 2019.
The average value taken by criminal actors was 160% higher in 2019 than in 2020, despite the similar number of crypto frauds, showing the maturity in the crypto space and strong precaution measures against threats.
Statistics show fraud was the leading crypto crime last year, followed by theft and ransomware. Although the total value of crypto crime dropped in 2020, crypto theft jumped by 40% YoY and hit $513 million, still far below the record of $950 million from 2018.
The survey revealed that Decentralised Finance (DeFi)- related hacks and scams added $129 million to the combined value of crypto thefts in 2020, turning it into the next major threat vector for fraud and money laundering.1
The world’s oldest central bank, Sweden’s Riksbank, is to extend its pilot project for a potential central bank digital currency (CBDC) for another 12 months. The project, which is being carried out with assistance from professional services firm Accenture, will run until February 2022.
The Riksbank specified that it would continue developing a technical solution for a central bank-issued E-Krona “as a complement to cash,” with the primary objective being for the bank to increase its knowledge around the technology. For 2021, the institution will continue developing its potential digital currency offering with a focus on performance and scalability. Testing offline functions and bringing external participants into the test environment is also possible.
The project has raised some concerns from Sweden’s commercial banking sector over the viability of a sovereign CBDC and how that would impact the entire banking system. There is no final decision over the issuance of the e-krona despite strong lobbying from the central bank to the government last year. But with traditional cash seeing falling use, even more so during the coronavirus pandemic, Sweden has been mulling a switch to the CBDC.2
Under a new program from Mastercard and Island Pay, the Bahamas Sand Dollar prepaid card gives people the option to instantly convert the digital currency to traditional Bahamian dollars and pay for goods and services anywhere Mastercard is accepted on the Islands and around the world.
The digital Sand Dollar is issued by the Central Bank of The Bahamas and carries the same value and consumer protections as a traditional Bahamian dollar. The digital currency can be used to facilitate government disbursements, offer additional payment choices and build a more inclusive economy.
In The Bahamas, there are 700 small islands and more than 5000 square miles of water. Cash money movement becomes costly, which makes a central bank digital currency (CBDC) a preferred digital payment in the region. In the future, the Sand Dollar will be offered to tourists as well.
Originally piloted in 2019, the Sand Dollar became the first fully- deployed digital version of a country’s fiat currency in October 2020. At that time, the Sand Dollar was exclusively accessed by registered users through a digital app at select merchants. Island Pay mobile wallet users can decide if they want to transact in Sand Dollars or Bahamian dollars at merchants using the mobile app.
Mastercard’s innovative work with CBDCs supports governments around the world as they explore, test and deploy real-life use cases across existing payment rails. Its virtual testing environment enables the simulation of issuance, distribution, and exchange of CBDCs between banks, financial service providers and people. Island Pay’s technology platform, combined with Mastercard technology and wide merchant acceptance, has the potential to help reduce the operational distribution costs of cash and modernize the overall payments system in The Bahamas.
Central Bank of The Bahamas Governor, John Rolle, said: “We welcome this approach to combining digital currency use with access to foreign currency and other payment outlets. The Central Bank of The Bahamas will continue to encourage fintech developments that tie into the Sand Dollar infrastructure, while allowing us to satisfy the best global practices for the regulation of the space.”
Richard Douglas, co-founder of Island Pay, said: “By working closely with the Central Bank of The Bahamas and Mastercard, we are able to issue a prepaid card unlike any other in the world. We are now able to bring immediate, critical benefits to our customers at a time when they are looking to find new, innovative ways to pay. The Bahamas is leading innovation in CBDCs, and we’re thrilled to be able to play an important role in helping to democratize access to currency, especially in areas that are currently underserved.”
As part of its long-term strategy to enable all types of payments – card, ACH, and blockchain-based – Mastercard has invested in the technology to be ready to explore and enable both CBDCs and privately issued stablecoins in partnership with governments, banks and fintechs. With 89 blockchain patents globally, and an additional 285 blockchain applications pending worldwide, Mastercard already has one of the payment industry’s largest blockchain patent portfolios to draw from.
The company recently announced that it plans to support select digital currencies directly on its network, giving choice and flexibility to people and merchants. Each program will be evaluated against the principles Mastercard has established to guide its activities in this space.
Through a dedicated crypto card program, Mastercard helps its digital currency partners accelerate their development efforts, from design and market entry to growth and global expansion. As a result, the jointly-created solutions have an ability to enable a more inclusive economy. If a consumer wants to spend their holdings, Mastercard enables this through our crypto partnerships including Wirex, Uphold, BitPay, and most recently, LVL.
Raj Dhamodharan, executive vice president of Digital Asset & Blockchain Products & Partnerships at Mastercard, said: “This partnership is an example of how the private and public sector can rethink what’s possible, while delivering the strongest levels of consumer protection and regulatory compliance. We’re creating a lot more possibilities for governments, shoppers, and merchants, allowing them to transact in an entirely new form of payment."3
A new research had specified the Crypto Rich List – the 25 people who have earned the most from the digital currency boom. Unsurprisingly, mysterious Bitcoin dynamo Satoshi Nakamoto tops the list with a staggering $50 billion estimated fortune. The true identity of Satoshi Nakamoto is unknown, but they’re credited as the person who first developed Bitcoin. The latest estimates predict that Nakamoto has 1 million Bitcoin, which in today’s money translates to about $50 billion, making Nakamoto by far the richest person in crypto.
Another billionaire in the list, MicreeZhan, also known as Zhan Ketuan, is the co-founder of Bitmain - the world’s largest cryptocurrency mining company. He was ousted in 2019 but has since bought shares from other shareholders to claim back his CEO status. The Chinese businessman’s estimated net worth is $3.2 billion.
Another name on the list, Chris Larsen has co-founded several successful Silicon Valley startups, most notable being Ripple which allows for international payments using blockchain technology. Ripple technology is used by some of the world’s biggest banks such as American Express and Santander.
Changpeng Zhao, abbreviated to CZ, is the founder and CEO of Binance. Binance claims to have 25% market share and is the largest crypto exchange in the world with $22B in daily trading volume as of Feb 2021. CZ is only 34 years old and his estimated net worth is $1,8 billion.
The Winklevoss twins (Cameron & Tyler Winklevoss- 39) are known for accusing Mark Zuckerberg of stealing their idea for Facebook. They used some of their $65m settlement from this dispute to buy Bitcoin since 2012 and own an estimated 91,000 Bitcoin today - approximately $4.5B as of Feb 2021.
Mingxing Xu (China) is the founder of OKCoin.com, a globally-oriented BitCoin trading platform. He was arrested in October last year for matters relating to his business and released in November, but did not publicise why. His estimated net worth is $1,4 billion.
Matthew Roszak (U.S.A. - 48) is the Co-founder and Chairman of Bloq, a Chicago blockchain technology startup, and has been collecting crypto since 2012 as a long-standing advocate. His estimated net worth is $1,1 billion.
Li Lin (China) is the founder of one of the three major exchanges in China and the world’s leading digital currency trading platform, Huobi – a Seychelles-based cryptocurrency exchange. His estimated net worth is $1,1 billion.
Tim Draper (62) is the founding partner of venture capital firms Draper Associates and Threshold. Another early advocate, he bought $250,000 worth of Bitcoin when the price of a single Bitcoin was $6. His estimated net worth is $2.1 billion.4
BlackRock’s managing director Rick Rieder specified that the world’s largest asset manager has begun entering the bitcoin space. The remarks from Rieder, who is BlackRock’s chief investment officer of global fixed income, came on the same day bitcoin broke above $51,000 for the first time.
“Today the volatility of it is extraordinary, but listen, people are looking for storehouses of value,” Rieder said on “Squawk Box.” “People are looking for places that could appreciate under the assumption that inflation moves higher and that debts are building, so we’ve started to dabble a bit into it.” In January, BlackRock added bitcoin futures as an potential investment for two of its funds, according to filings with the Securities and Exchange Commission. The funds are BlackRock Strategic Income Opportunities and BlackRock Global Allocation Fund.
A number of other financial institutions, such as BNY Mellon and Mastercard, have made entrances into the crypto space in recent days. BNY Mellon, the nation’s oldest bank, will launch a digital assets unit later this year, while Mastercard intends to support certain cryptocurrencies on its formal network.
The price of bitcoin has risen more than 70% this year, adding to a major rally that began in the fall. “My sense is the technology has evolved and the regulation has evolved to the point where a number of people find it should be part of the portfolio, so that’s what’s driving the price up,” Rieder said.
Despite bitcoin’s growing respectability as an asset class, Rieder said that how much exposure an investor should have “depends on what the rest of your portfolio looks like.” “We’re holding a lot more cash than we’ve held historically,” he said. “It’s because duration doesn’t work, interest rates don’t work as a hedge and so diversifying into other assets makes some sense. Holding some portion of what you hold in cash in things like crypto seems to make some sense to me, but I wouldn’t espouse a certain allocation or target holding.” New York-based BlackRock had $8.68 trillion of assets under management at the end of the fourth quarter.5
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