China’s Yuan Cryptocurrency Set to Roll. Is Dollar Ready For Digital Challenge?
KEY POINTS
An intensifying demand in the United States for developing a digital dollar is fuelled by reports of China’s advances in forging a digital yuan. There is a strengthening feeling that users of the US dollar are “underserved by an analog currency in a digital world,” Christopher Giancarlo, former chairman of the Commodity Futures Trading Commission (CFTC), said at an event at the World Economic Forum in the Swiss town of Davos.
“I think it’s very much worth considering,” Neha Narula, director of the Digital Currency Initiative at the Massachusetts Institute of Technology (MIT), told CNBC at Davos.
There have been reports that China is working on a digital yuan, which some believed could become available as early as this year, a report on the CNBC website said.
The People’s Bank of China (PBOC) recently announced that it was working on a digital version of the yuan, but had not given a timeline on when it would be operational.
Some experts said that a digital yuan could help China’s currency internationalize and challenge the dominance of the U.S. dollar.
Blockchain architecture
There is still some confusion about the nature of a digital currency that the U.S. central bank might issue. A preliminary assessment is that it could be built on the blockchain architecture that is the basis of various cryptocurrencies including bitcoin.
A major advantage of a central bank digital currency (CBDC) is reportedly easier cross-border movement of money and improved traceability to fight corruption or money laundering, according to Henri Arslanian, the global crypto leader at PwC. “The potential traceability features of CBDCs could, for the first time, give us a good fighting chance against corruption and money laundering. CBDCs also could allow policymakers to measure the impact of certain policies accurately and immediately,” CNBC quoted Arslanian as saying from Davos.
Nicknamed “Crypto Dad” for his open views to blockchain technology while at the CFTC, Giancarlo advocated the U.S. to issue a digital dollar. His Digital Dollar Foundation in partnership with Accenture works on the design and potential framework for a digital dollar. “If it (U.S. dollar) remains an analog currency the challenges of using it in a digital world are very complex,” he added.
“What we are proposing is a digital form (of that dollar) that would be minted by the central bank ... And it would be made available to users through the traditional banking system and other banking enterprises.”
MIT’s Narula said the U.S. Federal Reserve needed to boost its knowledge of digital currencies. “I think the Fed needs to gain expertise in this space. They cannot rely on the private sector for expertise, they need to build their own in-house expertise,” Narula said.
Costs and benefits
Federal Reserve Chairman Jerome Powell acknowledged that the central bank was looking into the possibilities of a CBDC. While the Fed had not developed its own digital currency, it was analyzing “the costs and benefits of pursuing such an initiative in the U.S.,” Powell said in a letter to lawmakers in November.
The digital dollar could be 10 to 15 years away, according to Jeff Schumacher, CEO of 55 Foundry, a company incubator, and investor. “The advantaged position of the dollar as the global reserve currency is very powerful and the Fed wants to protect that position. A digital dollar may introduce volatility to the dollar which is undesirable in the short term,” the report quotes Schumacher as saying.
“Ultimately I expect the digital yuan to play an important strategic role in China’s ongoing efforts to become a global financial superpower and compete with the U.S. dollar as the world’s number one reserve currency,” Garrick Hileman, head of research at Blockchain and researcher at the London School of Economics, told CNBC in a recent interview.
Why Facebook's Libra Is not a Cryptocurrency, and Why It Is Doomed to Fail
In June 2019, social networking giant Facebook announced plans to develop its own cryptocurrency for use in online transactions, the Libra. The Libra was structured as a partnership between Facebook and leading payments providers like Visa, Mastercard, and Paypal. It was supposed to become the world's first truly respectable cryptocurrency.
Less than a year later, Visa, Mastercard, and Paypal have all ditched the project. The only non-Facebook tech heavyweights remaining in the Libra Association are Uber, Lyft, and Spotify, and the reason is obvious: they all sell on Facebook. Expect them to take Libra, but don't expect them to promote it.
With the cryptocurrency craze on its last legs (thank God), it's surprising that Facebook jumped into the game at all. Except that it hasn't. Libra isn't a currency at all, and the only thing "crypto" about it is its database structure. Libra plans to use an encrypted blockchain ledger for record-keeping and transaction processing, but the currency itself will be run more like an exchange-traded fund (ETF).
Blockchain is the database technology behind cryptocurrencies like Bitcoin and Etherium, but at heart it's just an alternative accounting system.
Traditional accounting systems are based on balance statements: if you want to know how much money you have right now, just ask your bank. If your balance isn't what you expect, you have to go through the record of your expenses and receipts to figure out what happened. But it's your balance that determines how much money you have available right now, not the historical record.
Blockchain reverses that. In a blockchain database, everyone starts at zero and the database certifies all transactions going into or out of your account. Your balance is never recorded. If you want to know how much money you have, you (or more likely, your digital wallet) will have to add up all your historical transactions.
The point is that in a blockchain database, it's not your balance that is certified. It's the transactions. This has the potential to make banking more private and secure. And though blockchain ledgers require many more calculations than traditional ledgers, advances in computing power and storage capacity have made them feasible.
True cryptocurrencies use blockchain because it eliminates the need for a trusted central authority to certify people's balances. As a result, they can operate as truly independent currencies, fluctuating against other currencies based on supply and demand.
Libra isn't designed to be a currency at all. It is structured like an ETF without an exchange. Libra's managers have promised to hold a basket of currencies to support the value of each Libra in circulation. They call the idea "stablecoin." The value of the Libra won't rise and fall based on the supply and demand for Libras. It will be pegged to the value of the assets in the Libra's currency basket.
Which makes the Libra essentially useless. Facebook touts the Libra as a digital currency that will serve "billions" of unbanked people in the developing world. But why would a poor African or Indian want to speculate on global currency markets by investing in a basket of global currencies? And what American or European would want the price of an Uber or Lyft to depend on the daily exchange rate?
The only way forward for Facebook is to convert the Libra into a simple in-app token pegged to local currencies, or to the U.S. Dollar. That would undermine all of its cryptocurrency hype about serving the poor, but the cryptocurrency craze is over, and no one really believes that Mark Zuckerberg wants to serve the poor. Anyway the poor have better things to do with their money than invest in Libra.
Salvatore Babones is an adjunct scholar at the Centre for Independent Studies and an associate professor at the University of Sydney.
Pornhub Embraces Cryptocurrency, Adult Content Creators Can Withdaw Money In Tether
KEY POINTS
Paypal's exodus as Pornhub's payment processor in November left the adult entertainment website to seek other ways of paying its hundred thousand performers.
The search led Pornhub to turn to cryptocurrencies once more, as the porn site indicated on its blog. This time they found a solution with controversial stablecoin Tether (USDT). The fifth-largest crypto by market cap will now facilitate zero-fee transactions with digital wallet TronLink. Tether is said to be backed by the U.S. dollar, $1 for every ₮1.
Models who earn from uploading their own content can download the TronLink wallet from the App Store or Google Play to receive USDT.
What about Bitcoin?
Pornhub's move seems to have overlooked the most popular crypto, but Bitcoin's high volatility may have something to do with that decision. Nonetheless, Tether isn't the most immaculate option either as the issues that surround it include pumping BTC's price and not having enough USD to cover each Tether, which was last reported to be down to $0.74 per Tether. Then, there's also the Department of Justice's investigations.
Still, the "stability" it represents maybe a better option, at least for now, for Pornhub rather than deal with an extremely volatile cryptocurrency.
Other cryptos
This isn't the first time that Pornhub embraced crypto, though, as last year, the adult site teamed up with PumaPay to accept PumaPay tokens (PMA), according to CryptoSlate. That partnership is seen as a "match made in crypto heaven."
As the industry is still heavily stigmatized, with PayPal's departure seen as merely contributing to the discrimination of sex workers, the inherent characteristics of a blockchain token offer anonymity and security for people subscribing to this form of entertainment.
Pornhub users may feel more comfortable accessing the site's services since payment privacy is taken care of by the crypto.
XVG
Pornhub also partnered with Verge (XVG) in 2018 to provide a more private and convenient way for its users to pay, but CryptoGlobe reports that only 1 percent of its users were using cryptocurrencies for subscription payments.
The market value of XVG only surged after PayPal announced its exit, jumping 40 percent in the process.
Pornhub is among three adult websites being sued by a deaf man who wants them to offer closed captions Photo: GETTY IMAGES / Ethan Miller
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