Once a month our team summarizes here the market movements and what we have been following for our client and ourselves. We have hand-selected what we believe to be must-reads of this month to ensure you are all caught up on the most recent developments. Articles are grouped per region to facilitate your pick based on interest. As per usual, we begin with our special topic of the month: Climate Change and Digital Assets.
CLIMATE CHANGE AND DIGITAL ASSETS: BEING PART OF THE SOLUTION
On April 4th, the Intergovernmental Panel on Climate Change (IPCC) released the second part of the Sixth Assessment Report, titled Climate Change 2022: Impacts, Adaptation and Vulnerability, the Working Group II Contribution - just in time for the annual Earth Day dedicated to environmental protection which took place on April 22, 2022. The report rather paints an alarming picture of what the Earth and its inhabitants are facing. One that clearly, and maybe for the first time, indicates that if not all measures available to us currently are not set in place now, on a global scale, such that the peak of carbon emission takes place before 2025, then the 1.5 degree celsius limit we did not want to cross due to the irreversible changes that would occur will effectively be out of reach. In other words, we are out of time… but didn’t we know this already?
The first part of this report issued in August 2021 already indicated as much, just as a number of reports from think tanks before then did. Last year, a McKinsey analysis indicated that based on latest CO2 emission projections, at least 500 million tonnes of CO2 would need to be removed (captured) from the atmosphere by 2025, representing a shortfall of 80% based on the current pipeline of projects at the time. Meaning, reducing emission is simply not enough - this is due to CO2 being the most abundant and importantly long-lived greenhouse gas, remaining in the atmosphere for 300 to 1,000 years.
Carbon capture: the hopes, challenges and controversies | FT Film
As such, at BlockZero we believe that Climate Change is a critical matter of all industries, not only the most emitting ones. While bitcoin and other cryptocurrencies, particularly those relying on proof-of-work have been argued to significantly contribute to climate change through their energy-intensive process (and electronic waste from mining machines), comparing their carbon footprint to that of small countries, these statements are actually misleading and do not paint a full picture nor explain the recent trends in ESG in the bitcoin / digital asset mining industry. The Bitcoin Mining Council actually issued on May 2nd (as we were drafting the April newsletter), a document that responds to the letter, dated April 20, 2022 signed by Representative Huffman and 22 members of Congress of the United States, in an attempt to address several of these common misconceptions about bitcoin and digital assets mining.
We effectively argue that digital assets and their mining activities can actually be part of the solution to sustainability, economic, social and environmental - not just the environment - and in fact ESG is at the heart of the leading bitcoin mining companies. Conscious of the environmental impact, large bitcoin mining operations are increasingly sourcing from cleaner energy sources such as hydro power and investing in projects that will allow them to reduce their carbon footprint, through liquid cooling and the use of flared gas for instance.
Thanks to the significant increase in mining equipment efficiency, with newer equipment consuming less power, and the adjustment of mining activities to the lifecycle of the equipment (Lifecycle mining), new operating models are emerging. Models of Supply-on-Demand and Demand-on-Demand that are increasingly being adopted by bitcoin miners effectively attest to the flexibility of the industry in terms of their demand of energy. At times of power scarcity, miners can slow-down operations on demand within seconds given the relatively short reward cycle for bitcoin. Miners can in turn support symbiotic grid operation by evolving the consumption needs to the grid stability for example, by increasing demand when necessary (demand-on-demand), or redirecting / releasing consumption in time of need (supply-on-demand). This contrasts with other commercial or industrial facilities that also require high load, but longer to curtail their operations. The idea is to think at the grid level, and not add stress to the grid during peak hours (which correlates with highest carbon density).
A recent example of this was when Bitcoin miners in Texas were able to power down their mining plants rapidly and help stabilize the grid during the recent Feb 2022 snows in Texas, thereby diverting much needed energy to Texan households and other industries and preventing a catastrophic collapse of the grid and the economy when similar snow storms hit Texas in 2021.
Also Stronghold Digital Mining powers their mining operations through the reclamation of coal refuse sites across Pennsylvania. Coal refuse piles are problematic as they cause air pollution, fires, water pollution and are detrimental to the landscape, but by using this by-product of legacy coal mining miners have not only found another source of power but also are preventing toxic emissions from seeping into the environment. Another less recent example is Northern Italy hydropower producers have entered into mutually beneficial partnerships with Alps Blockchain, allowing the hydropower producers to avoid closing operations and generating additional revenues.
Lastly, and as a result, the energy sector is being transformed. In last month’s edition, we reported that Exxon Mobil announced it would be selling unused flared gas to bitcoin mines in North Dakota as part of its plan to slash emissions. Similarly, another large Oil and gas producer Conocophillips has been selling flared gas to bitcoin miners in North Dakota. By utilizing both renewable energy and otherwise wasted energy resources, the industry is leading the way by coming up with innovative solutions to reduce carbon emissions not only for Bitcoin but for some of the most carbon intensive industries like O&G and coal. Ultimately, by being part of the solution, the digital asset mining industry can help the world achieve their carbon neutral objectives more rapidly.
Below we present a summary of some of the key initiatives from leading bitcoin miners. However, this is only the tip of the iceberg in our opinion. At scale, and thanks to revenues they can generate - for themselves but also constituents - bitcoin mining is driving innovation in this field and provides the financial means for states, provinces and countries to achieve their carbon neutrality and broader sustainability goals. Simply for the province of Québec (home to BlockZero), a 100 MW bitcoin mine has the potential to generate approximately CAD 56 million in electricity revenue and CAD 50 million in taxation revenue. Scaled to 1 GW, bitcoin mining activities could generate CAD 1.25 billion annual revenues for the province, enabling Quebec to make the necessary investments to be sustainable, while supporting the digital transformation of the financial industry, and job creation in the process.
https://www.ipcc.ch/report/sixth-assessment-report-working-group-ii/
https://www.mckinsey.com/business-functions/sustainability/our-insights/how-negative-emissions-can-help-organizations-meet-their-climate-goals
https://techcrunch.com/2022/02/11/how-texas-is-becoming-a-bitcoin-mining-hub/
https://www.coindesk.com/policy/2021/10/11/bitcoin-mining-is-reshaping-the-energy-sector-and-no-one-is-talking-about-it/
https://www.cnbc.com/2022/02/03/winter-storm-descends-on-texas-bitcoin-miners-shut-off-to-protect-ercot.html
https://bitcoinminingcouncil.com/wp-content/uploads/2022/05/Bitcoin_Letter_to_the_Environmental_Protection_Agency.pdf
Tesla, Blockstream, and Block to Mine Bitcoin Using Solar Power in Texas
"Bitcoin is not the question, bitcoin is the answer," said Blockstream CEO Adam Black referring to Bitcoin and especially the ability of bitcoin miners to help stabilize energy grids and also help increase investment in renewable energy projects by making them financially viable.
And Mr Black intends to prove that point. On April 6th, Blockstream announced a partnership with Block to build a 100% renewable energy bitcoin mine in Texas powered by Tesla’s solar arrays and batteries. The mine will operate completely off the grid and the intent is to publish the raw data so as to inform the debate with facts.
https://www.cnbc.com/2022/04/08/tesla-block-blockstream-to-mine-bitcoin-off-solar-power-in-texas.html
Polygon commits to going carbon neutral in 2022
As the Ethereum Blockchain prepares to transition from a Proof of Work (PoW) to Proof of Stake (PoS) system, which could help reduce network energy consumption by 99%, Polygon network announced that it will be going carbon neutral this year.
Polygon has released their “Green Manifesto” to eliminate all of the network’s carbon debt going back to inception and making the chain climate positive into the future. The network has partnered with KlimaDAO, a decentralized collective of environmentalists, developers, and entrepreneurs, and has pledged nearly USD 20 Million for various other initiatives in its drive to help track and reduce carbon emissions.
The network will also actively analyze and audit its carbon footprint and come up with mitigation strategies, the network aims to move beyond carbon neutral to a carbon negative status once Ethereum’s transition to PoS is complete.
If successful, other networks could replicate Polygon’s actions and strategies to become carbon neutral/negative themselves thereby leveraging technology to help limit global warming to 1.5 degree Celsius.
https://blog.polygon.technology/polygon-is-going-carbon-negative-in-2022-with-a-20-million-pledge/
https://cointelegraph.com/news/polygon-commits-to-going-carbon-neutral-in-2022
New York State Assembly Passes Bitcoin Mining Moratorium
The NY state assembly has passed a bill, which will now go to the state senate, to place a 2 year ban or moratorium on cryptocurrency mining networks that use the Proof of Work system (essentially banning bitcoin mining).
The legislators argue that a PoW system uses high amounts of the electricity and with the current scenario of high fuel prices, increased energy demand and potential environmental impact PoW networks should be reduced. The bill will not affect existing operations, but mainly seeks to ban permits for any new operations or permit renewals.
Plus, the bill pertains only to permits for “an electric generating facility that utilizes a carbon-based fuel” thus all fully renewable energy powered mines should be effectively exempt from the bill. The bill may motivate miners to increase their reliance on renewable energy and invest more in this sector - a trend that has been observed. However, given that the bill fails to acknowledge the different models that could be mutually beneficial to both the state and the miners, miners may choose states with cheaper energy and less stringent regulations for their expansion, at least in the near term thereby potentially reducing jobs, tax revenues and other benefits for the state.
https://blockworks.co/crypto-mining-ban-will-hurt-new-york-and-our-environment/
https://observer.com/2022/04/breaking-new-york-state-assembly-passes-bitcoin-mining-moratorium/
REGION: NORTH AMERICA
KPMG: Rise of crypto asset adoption in Canada
Over the last couple years, the adoption of crypto has significantly increased. As the crypto ecosystem is maturing, more and more traditional financial institutions are beginning to explore the different use cases of digital assets in their services. This is mostly driven by the demand from institutional investors growing. 32% of the 75 institutional investor respondents to the KPMG poll indicated that they have made an allocation to cryptoassets, mostly through crypto ETFs (51%).
The adoption from financial services in Canada is not surprising given the fact that many financial institutions around the world have started to be highly invested into the digital asset space. In February, BlockZero published a thought leadership about financial institutions becoming active players of the crypto ecosystem. While there is some adoption by traditional Canadian players, we find that they are generally very conservative in their approach to digital assets - a point that is further reinforced in this KPMG poll.
Yet, the poll suggests a relatively conservative approach from institutional investors, with 71% reporting a less than 2% portfolio allocation to cryptoassets, largely following the insights from the CFA Institute issued late in 2021. Out of all institutional investor respondents, 32% reported that they have made an allocation to cryptoassets. Most of these allocations were relatively small: 71% reported allocating less than 2% of their portfolio to cryptoassets. The most common way to gain exposure (51%) was indirect, through regulated products such as ETFs and close-ended trusts. Other approaches to gain exposure to cryptoassets included public equities (36%), direct ownership (29%), and limited partnership through venture capital or hedge funds (29%).
KPMG: Proof of reserves | The State of Cryptoassets
https://home.kpmg/ca/en/home/insights/2022/03/the-rise-of-cryptoasset-adoption-in-canada.html
https://www.blockzero.ca/_files/ugd/4c1936_b51cd6fcdd994bd8936d85429e71fb2e.pdf
https://www.investmentexecutive.com/news/2022-could-see-widespread-crypto-adoption-by-financial-services-companies/
Citi Global Perspectives and Solution: Metaverse and Money
In its report on the metaverse, Citi - a think tank financial services - has estimated that the metaverse economy could be an $8 trillion to $13 trillion market by 2030 with up to 5 billion users. The metaverse concept is not new, but has gained tremendous interest from different stakeholders in 2021. To build the envisioned metaverse a new technological infrastructure will be needed, particularly an improved and faster connectivity speeds. Given that only 29% of the population globally currently has access to 5G network, this growth will require a number of investments. The regulatory environment has yet to be developed around the Metaverse.
If these market estimates possibly appear aggressive at first, recall that the use cases for the metaverse are multiplying, across a number of sectors. In a post-pandemic world where remote work has gained in popularity, we could envision the metaverse being adopted in multiple scenarios. Recall that earlier this year, JP Morgan and HSBC also began to have a presence in the metaverse. For the financial sector, it’s not only a potential opportunity for investment, it’s a means to innovate.
Source: Citibank (TungCheung/Shutterstock)
https://www.citivelocity.com/citigps/metaverse-and-money/
Top US Lawmaker Proposes Sweeping Stablecoin Regulation Framework
After the introduction of a bill aiming to bring greater transparency for stablecoins by Two US lawmakers, Rep. Trey Hollingsworth (R-Indiana) and Sen. Bill Hagerty (R-Tenn.), another bill has been introduced in April. This bill aims to introduce a regulatory framework based on three regulatory regimes, such as: a traditional bank charter, a new federal license designed specially for payment stablecoin issuer, and a state-based money transmitter or similar license under state law.
Those two bills reflect the growing interest from the US senate into digital assets, particularly into stablecoin. This discussion draft of the bill will help the US lawmakers gain feedback and establish further regulation around stablecoin. Stablecoins can be used in various use cases, including settlement or even as a form of accepted payment. However, they are a distinct instrument from a central bank digital currency (CBDC), which, if made a legal tender and depending on the underlying constructs, offers more robust functionalities while effectively acting as a digital version of the US currency.
https://www.banking.senate.gov/imo/media/doc/the_stablecoin_trust_act_-_section-by-section.pdf
Stablecorp Closes Pre-Series A Funding Round Including Major Cryptocurrency Industry Leaders
Meanwhile in Canada, Stablecorp has raised an additional USD 1.5 million from new equity partners Circle Ventures, Genesis, and Stellar Development Foundation, to support the commercial development and launch of VCAD, the country's first Canadian dollar Digital Deposit Receipt (DDR), which would be minted by the digital banking leader VersaBank and backed 1:1. The VCAD is to be used to facilitate “secure and transparent payments, transfers, and settlements in CAD-equivalent tokens, expanding FX options for companies and consumers around the world while introducing a new standard for volatility protection.” Its predecessor QCAD having had little success, this 2.0 version of the canadian stablecoin is likely to offer more promising results, with delineated purposes for the VCAD. This will likely offer the regulator good grounds for evaluating how to best regulate stablecoins while promoting financial innovation in Canada.
https://www.newswire.ca/news-releases/stablecorp-closes-pre-series-a-funding-round-including-major-cryptocurrency-industry-leaders-881471836.html
REGION: SOUTH AMERICA
Bitcoin Now Legal Tender in Special Economic Zone of Honduras
Próspera ZEDE, an enhanced Special Economic Zone legally similar to Hong Kong (SAR) and located on the Island of Roatan in the Western Caribbean and the Northern Corridor of Honduras, announced on the April 7, 2022 that Bitcoin and other cryptocurrencies can effectively operate as legal tender within its jurisdiction. The move follows the lead of neighboring country El Salvador, which sanctioned bitcoin as legal tender on September 7, 2021. The Próspera ZEDE also announced that municipalities, local governments, and international firms can issue Bitcoin Bonds from the Próspera ZEDE jurisdiction with world class KYC and AML standards, creating a new and accessible tool for attracting FDI (foreign direct investment) and driving economic development in Honduras. The announcement could position Próspera as one of the leading jurisdictions in the world for financial innovation and investment, at least in digital assets and digital infrastructure in the financial sector - although it will certainly compete with advanced economies like the United Kingdom (see Europe section), that have a strong financial and fintech ecosystem.
Nonetheless, in Próspera, Bitcoin can be used as a form of payment for individuals and businesses. Unlike most other jurisdictions, transactions in Bitcoin and other cryptocurrencies are not subject to capital gains taxes. The drawback or risk associated with Bitcoin as legal tender and as a form of payment is the price volatility. It may be difficult for users to predict the exchange rate of the asset for transactions. Although bitcoin is a deflationary asset with capped supply, the argument of store of wealth and similarity to gold remain to be seen. Hence using bitcoin and other cryptocurrencies for payments will not be without its challenges.
https://blockworks.co/bitcoin-now-legal-tender-in-special-economic-zone-of-honduras/
AERIAL SHOT OF BEACH RESORT IN ROATAN BAY, HONDURAS | CREDIT: SHUTTERSTOCK
REGION: EUROPE
UK government sets out plan to make UK a global cryptoasset technology hub
On April 4th, 2022, the United Kingdom government announced a plan to make the UK a global hub for crypto asset technology. The announcement comes with significant concrete measures, such as the recognition of stablecoins as a form of payment, the introduction of a sandbox for financial market infrastructure, the creation of a crypto asset taskforce, tax measures to enhance competitiveness, the Royal Mint to work on NFT, and more.
These decisions are a big step for the promising future of cryptoassets in the UK. The announcement will provide better clarity for the crypto community in the UK - currently a major drawback to digital asset innovation in most advanced economies and mass adoption. It could also be an inspiration and lead the way in terms of best practice for other developed countries. Recall that last month, US president Bidden’s Executive Order reaffirmed its intention of ensuring the United States’ leadership in terms of innovation in the financial services sector remains, while also stressing the importance of global coordination and alignment to avoid loopholes and minimize risks.
Picture source: UK Government (2022)
https://www.gov.uk/government/news/government-sets-out-plan-to-make-uk-a-global-cryptoasset-technology-hub
Ukraine Readies NFT Sales as Crypto Donations Top $60 Million
Ukraine is currently working on launching a web page where people could buy non fungible tokens that were received as donations to help the nation.
Many use cases of NFTs are still yet to be determined. However, we’ve seen great benefits in using NFTs for donations. The digital asset, very much like cryptocurrencies that were discussed in April’s newsletter, allows full transparency on all donations, ensuring funds are sent to the right entities/organizations.
https://www.bloomberg.com/news/articles/2022-04-05/ukraine-readies-nft-sales-as-crypto-donations-top-60-million
Russian Finance Ministry Amends Bill ‘On Digital Currency,’ Adds Crypto Mining Provisions
Meanwhile, Russia’s war in Ukraine is lasting longer and as such cost more than what President Putin had expected and planned for… which might just be the reason why the country is becoming more crypto-friendly, and may attempt to attract the bitcoin mining industry, which the country had effectively been hostile to up until now. On April 10th, 2022, the Russian finance ministry amended a bill to implement better comprehensive rules for the cryptocurrency sector in Russia. Many Russian officials have stated the need to consider mining as an economic activity, while President Putin wants to make the country a mining destination for miners around the world. Now, the question is: will miners actually move and associate with a non-clean energy and geo-politically unstable region, which could impede their image?
Meanwhile, it seems like the Central Bank of Russia will still move forward with its CBDC project. The trial of the digital ruble started in mid-february with successful transactions between two individual wallets. There are at least a dozen Russian financial institutions taking part in this project, however not all participating banks are technically ready to join the test. With the sanctions from many countries in the world, there was a rumor to make the digital ruble a reserve currency, which could make Russia more independent from the US dollar.
https://bitcoinethereumnews.com/bitcoin/russian-finance-ministry-amends-bill-on-digital-currency-adds-crypto-mining-provisions-mining-bitcoin-news/?utm_source=rss&utm_medium=rss&utm_campaign=russian-finance-ministry-amends-bill-on-digital-currency-adds-crypto-mining-provisions-mining-bitcoin-news
https://news.bitcoin.com/digital-ruble-much-needed-russias-central-bank-says-wont-delay-testing/
REGION: MIDDLE EAST & AFRICA
With the eNaira ranking first in the world, app downloads have reached 756,000
Nigeria has been ranked number one in the world for retail CBDC projects, ahead of nine other countries that are taking similar initiatives. Even though it accounts for only 0.31% of its total population of 210 million, Nigeria is still leading the world in terms of the highest number of CBDC account holders. The International Monetary Fund has predicted that eNaira would be adopted by 90% of Nigeria’s population. It makes a compelling argument that it will help a large number of people who do not have a bank account (38 million people, 36% of the population). Even though it seems a long way to reach adoption scales, the new features of Unstructured Supplementary Service Data (USSD) and offline payment options planned in the future releases of eNaira, may help drive up adoption. Bitt is the technology provider to the Central Bank of Nigeria for the application for most of the ecosystem players.
Source: PwC global CBDC index and stablecoin overview 2022
https://www.pwc.com/gx/en/new-ventures/cryptocurrency-assets/pwc-global-cbdc-index-stablecoin-overview-2022.pdf
https://cbdcinsider.com/2022/04/26/enaira-magic-bullet-for-nigerias-financial-evolution/
https://brandspurng.com/2022/04/18/with-the-enaira-ranking-first-in-the-world-app-downloads-have-reached-756000/
https://www.imf.org/en/News/Articles/2021/11/15/na111621-five-observations-on-nigerias-central-bank-digital-currency
Kenya Central Bank Governor: Low Smartphone Penetration Working Against Plan to Launch CBDC
The governor of the Central Bank of Kenya (CBK), Patrick Njoroge, has suggested the lack of access to smartphones of more than 50% of Kenya's mobile phone users is working against its plan to launch a CBDC. He warned the Central Bank may be forced to delay its rollout of the CBDC as a result. Most economies want to allow CBDC to be universally accessible as a Central Bank may not want to exclude anyone of the monetary instrument because they do not own a particular device or do not have access to the internet. Kenya’s smartphone penetration rate is 53% while that of feature phones is 64%. CBDC solution providers may need to innovate quickly to provide solutions for such types of users. China is the only country in the world that has publicly shown its pilot live working model of an offline CBDC card.
https://www.cryptocurrencynews.ml/2022/04/kenya-central-bank-governor-low.html
https://www.standardmedia.co.ke/business/news/article/2001432023/half-of-kenyans-own-smartphones-new-report-shows
Central African Republic (CAR) makes cryptocurrency legal tender
CAR is the second country to make bitcoin an official currency, after El Salvador. Though this move may help strengthen and create a more robust payment system within the country, CAR is one of the poorest countries with very low internet usage, with around 11% of the population using the internet, and a high unbanked population.
As technologies such as bitcoin and blockchain would require internet and some financial literacy it is yet to be seen how this move may play out for the country domestically and in making international remittances. The resource rich country may be looking to reduce its dependence on the US dollar for exports and imports and help increase financial inclusion amongst its citizens.
https://www.centralbanking.com/fintech/crypto-assets/7946976/central-african-republic-makes-cryptocurrency-legal-tender
https://www.cnbc.com/2022/04/28/central-african-republic-adopts-bitcoin-as-legal-tender.html#:~:text=Central%20African%20Republic%20lawmakers%20voted,Salvador%20did%20so%20last%20year.
https://www.ndtv.com/business/central-african-republics-bitcoin-adoption-will-be-a-real-test-case-heres-why-2927618#:~:text=According%20to%20a%20Datareportal%20report,of%20the%20population%20is%20unbanked.
REGION: Asia-Pacific
Coinbase Pauses Cryptocurrency Payment Services in India just 3 Days after Launching in the Country
Three days after Coinbase launched its service in India, it ceased all cryptocurrency transactions. National Payments Corporation of India (NPCI, a body set up by the Central Bank of India for managing payments) gave a verbal instruction not to process cryptocurrency transactions through a national payment rail. No written communication has been issued by the national body on the stoppage of transactions. A similar ban by the Central Bank earlier in 2020 was uplifted by the Supreme Court of India and helped the crypto community. This court ruling might be motivating the NPCI from issuing any written statement on this ban. This is after the recent announcement in the finance budget in March 2022, that digital assets transactions are going to be taxed. The government and the Central Bank seem to be divided in their stance on legitimizing cryptocurrencies in India.
https://crypto.news/coinbase-cryptocurrency-payment-services-india/
https://www.coinbase.com/places/#asia
https://economictimes.indiatimes.com/tech/technology/top-banks-ask-npci-to-clarify-its-stance-on-upi-for-crypto/articleshow/91056087.cms
Image source: https://www.financialexpress.com/digital-currency/chalo-shuru-karein-whats-driving-coinbase-india-game/2485983/
Chief Economic Advisor Nageswaran says CBDC won't eliminate cryptos, stablecoin
India’s Chief Economic Adviser Anantha Nageswaran said that the introduction of a Central Bank Digital Currency (CBDC) will not lead to the elimination of cryptocurrencies and stablecoins as they satisfy different objectives and one will not obviate the need for the other. Nageswaran was speaking at a webinar organized by the Indian Council for Research on International Economic Relations. Often we get asked whether a CBDC is going to replace cryptocurrency and this may not be a case where the winner takes all.
https://www.moneycontrol.com/news/business/cryptocurrency/chief-economic-adviser-nageswaran-says-cbdc-wont-eliminate-cryptos-stablecoins-8330921.html
China expands digital yuan trial to cover tax, social security, toll gates
China’s central bank digital currency, known as the digital yuan or e-CNY, started trials in Shenzhen in October 2020 and recorded the equivalent of US$11.24 billion worth of transactions by the end of 2021. In April 2022, China broadened the range of public services and the number of cities included in its digital yuan pilot projects. Six cities in Zhejiang province have begun experimenting with digital currency payments for personal income tax, property tax and social security premiums. In addition, 72 toll collection points in Fujian province have started accepting digital yuan payments since Tuesday, April 26th. Citizens have expressed that it was a smooth transition for them, no different from Wechat Pay or Alipay they are currently using.
On one hand, this expansion of the digital yuan to cover more public services shows the versatility that digital currency offers. On the other, it places China in an interesting Fintech leadership position. Whereas the US is normally considered to be at the forefront of financial development, this extension on usability of a CBDC by the Chinese government naturally places pressure on the US government to make some developmental moves sooner rather than later. It would be interesting to see how the US government reacts to these development advancements made by the Chinese government, especially since on March 9th, 2022, the White House just issued the Executive Order (EO) on Ensuring Responsible Development of Digital Assets that reinforced intentions to play a leadership role on that front. (Please refer to our March publication for thorough review of the EO and its potential implications for next steps.)
https://forkast.news/headlines/china-expands-digital-yuan-public-service
https://www.reuters.com/world/china/china-central-bank-expands-digital-yuan-pilot-scheme-more-cities-2022-04-02/
https://www.chinanews.com.cn/cj/2022/04-25/9739030.shtml
REGION: Global
Miami Bitcoin conference
One of the largest Bitcoin conferences in the world was held in Miami, Florida between April 6th to April 9th. The 4 day event had speeches and interviews from some of the biggest names in the industry including Michael Saylor (CEO of Microstrategy), Peter Theil (Co-founder Paypal and Palantir), Jack Mallers (CEO and founder Strike), Investment manager Catherine Woods (Founder and CEO ARK), US Senator Cynthia Lummis and celebrities such as Serena Williams, Odell Beckham Jr. , etc.
Some of the key themes discussed during the events included presentations and interviews regarding the current macroeconomic scenario and inflation’s effect on the crypto markets and how cryptocurrencies could help mitigate some of these risks, the growing institutional adoption and its effect bringing world wide crypto regulations, and ESG implications of Bitcoin Mining highlighting the industry’s investments in renewable energy. On the latter, while more can be done, one can’t certainly argue about the fact that the industry has been rather innovative and has the means to do so.
With around 30,000 attendees and a growing list of endorsements from various industry participants (Fidelity is offering 401(k) investors access to bitcoin, the first retirement plan provider to do so) and celebrities, BTC miami has become a testament to the growing crypto adoption worldwide cementing crypto as not just speculative investment but an asset class of its own. While one can debate on the price of bitcoin over the next 2, 5, or even 10 years, and even though its correlation with the S&P 500 has increased over the last year, current data suggests bitcoin could further diversify a portfolio of otherwise traditional assets.
Picture source: Cointelegraph (2022)
https://cointelegraph.com/news/bitcoin-2022-miami-conference-recap-and-major-themes
https://b.tc/conference/
https://www.cnbc.com/2022/04/26/fidelity-offers-401k-investors-access-to-bitcoin-a-retirement-plan-first.html
LIST OF PUBLIC CONSULTATIONS ON DIGITAL ASSETS
The Federal Reserve: Pros and cons of a potential US central bank digital currency (CBDC)
Australia Government: Cryptoasset secondary service providers: Licensing and custody requirements
Riksbank: Request For Information (RFI) within the framework of the e-krona project
European Central Bank: Targeted Consultation on a Digital Euro
PULSE CHECK OF THE MONTH
OTHER READS
The Economist - The complicated politics of crypto and web3: https://www.economist.com/finance-and-economics/2022/04/16/the-complicated-politics-of-crypto-and-web3
Deloitte - Central Bank Digital Currencies - Building Block of the Future of Value Transfer: https://www2.deloitte.com/au/en/pages/financial-services/articles/central-bank-digital-currencies.html
IMF - Crypto, Corruption, and Capital Controls: Cross-Country Correlations: https://www.imf.org/en/Publications/WP/Issues/2022/03/25/Crypto-Corruption-and-Capital-Controls-Cross-Country-Correlations-515676
Reuters - Crypto Regulations report: https://www.thomsonreuters.com/en-us/posts/wp-content/uploads/sites/20/2022/04/Cryptos-Report-Compendium-2022.pdf
Deloitte - DeFi deciphered: Navigating disruption within financial services: https://www2.deloitte.com/content/dam/Deloitte/us/Documents/risk/us-financial-advisory-defi-march-2022.pdf
Bank of Canada - Bitcoin Awareness, Ownership and Use: 2016–20: https://www.bankofcanada.ca/wp-content/uploads/2022/04/sdp2022-10.pdf
CoinDesk - Panama Legislature Passes Bill Regulating Crypto: https://www.coindesk.com/policy/2022/04/28/panama-legislature-passes-bill-regulating-crypto/
Reuters - Panama passes bill to permit use of crypto assets: https://www.reuters.com/world/americas/panama-lawmakers-pass-bill-regulate-use-crypto-assets-2022-04-28/
PWC - Global CBDC index: https://www.pwc.com/gx/en/news-room/press-releases/2022/pwc-cbdc-global-index-2022.htmlhttps://www.linkedin.com/posts/turrin_pwc-global-cbdc-index-and-stablecoin-overview-activity-6917088665538093056-S4HO/?utm_source=linkedin_share&utm_medium=member_desktop_web
CoinDesk - Dubai Real Estate Developer to Accept Crypto Payments Amid UAE Push for Crypto Hub Status: https://www.coindesk.com/business/2022/04/28/dubai-real-estate-developer-to-accept-crypto-payments-amid-uae-push-for-crypto-hub-status/
CoinDesk - Intel Doubles Down on ESG With Launch of Second-Gen Bitcoin Mining Chips: https://www.coindesk.com/business/2022/04/04/intel-doubles-down-on-esg-with-launch-of-second-gen-bitcoin-mining-chips/
IPCC - Climate Change 2022: Impacts, Adaptation and Vulnerability: https://www.ipcc.ch/report/sixth-assessment-report-working-group-ii/
IPCC -Climate Change 2021: The Physical Science Basis: https://www.ipcc.ch/report/sixth-assessment-report-working-group-i/
BLOCKZERO IN THE COMMUNITY
Arun Balu Pazhayannur, Manager at BlockZero, had the opportunity to provide a presentation on Digital Assets to fellow and associate Chartered Accountants.
Overview of Digital Assets
Organized by: CECLA
Audience: 2200+ Chartered Accountants globally
Duration: 1 hour
Key message: Digital assets are here to stay and grow and it is time to embrace this ecosystem.
Objective: To provide an overview of the digital asset ecosystem, how it is evolving, and provide guidance on what type of services are required in the market.
WHO ARE WE:
BlockZero is a boutique consulting firm specializing in the evolution of the financial infrastructure through digital assets, digital currency, stablecoins and Central Bank Digital Currency (CBDC).
BlockZero advises global financial institutions, central banks and financial technology companies in the exploration, experimentation, technical implementation and rolling out of digital asset-based infrastructure.