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CBDCs only solution to ‘smooth continuation’ of the monetary system: ECB

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CBDCs only solution to ‘smooth continuation’ of the monetary system: ECB

The European Central Bank working paper sought to identify issues and consensus regarding CBDCs, as well as to identify gaps in the research — such as what users want.

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CBDCs only solution to 'smooth continuation' of the monetary system: ECB

The European Central Bank (ECB) says the introduction of digital cash in the form of central bank digital currencies (CBDCs) appears to be the “only solution” that will guarantee a “smooth continuation” of the current monetary system. 

The comments were made as part of an ECB Working Paper Series, which was published in August, discussing monetary policy and financial stability as it relates to CBDCs — gathering insights from 150 academic papers on the subject. 

The paper began with the observation that interest in “the economics of money and payments” has increased dramatically in the past 15 years and expanded beyond a narrow academic circle.

After an examination of that process, the paper introduces motives for the creation of a CBDC and the thorny privacy issues related to it. The authors observed:

“While consumers tend to attribute high importance to privacy in surveys, they tend to give away their data for free, or in exchange for very small rewards in practice […]. Analyzing the roots for this apparent dichotomy, researchers point to various contributing factors.”

Nonetheless, the paper concludes that the introduction of CBDCs is “the only solution to guarantee a smooth continuation of the current monetary system” as physical money loses its economic “fitness” and cryptocurrencies and BigTech (large digital platforms) continue to make inroads into the financial system, noting: 

“There is no regulatory alternative that promises to eliminate the threat to the two‐layer monetary system. Since cash is only available in physical form, it is by construction not “fit” for the digital age.”

The importance of central banks achieving the right level of CBDC “take-up” was stressed, and the authors also looked at potential regulatory action that could help CBDCs achieve their goals.

The paper also dismisses concerns that CBDCs could cause shrinkage of the credit supply, noting claims that CBDCs could be a potentially disruptive force were unfounded. Privacy was identified as an area where more research is needed, as was end-user preferences for CBDC functions.

Related: Official explains why China CBDC should not be as anonymous as cash

This is the second paper devoted to crypto issues released by the ECB this month. Earlier, it compared the cross-border payment potential of CBDC, Bitcoin (BTC), and stablecoin, coming out in favor of CBDC.

The paper is authored by Toni Ahnert a Research Economist within the ECB, Katrin Assenmacher, head of the Monetary Policy Strategy Division at ECB, and Financial Research Division economist Peter Hoffmann, among others. 

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California fraud cases highlight the need for a regulatory crackdown on crypto

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California fraud cases highlight the need for a regulatory crackdown on crypto

The California Department of Financial Protection and Innovation (DFPI) announced last month that it had issued desist and refrain orders to 11 entities for violating California securities laws. Some of the highlights included allegations that they offered unqualified securities as well as material misrepresentations and omissions to investors.

These violations should remind us that while crypto is a unique and exciting industry for the public at large, it is still an area that is rife with the potential for bad players and fraud. To date, government crypto regulation has been minimal at best, with a distinct lack of action. Whether you are a full-time professional investor or just a casual fan who wants to be involved, you need to be absolutely sure of what you are getting into before getting involved in any crypto opportunity.

California has toyed with setting up a crypto-specific business registration process for those looking to do business in the state. The proposed framework was vetoed by Governor Gavin Newsom as the resources required to establish and enforce such a framework would be prohibitive for the state. While this type of compliance infrastructure has not been employed yet, it points to concerns that regulatory authorities have related to the crypto industry.

There appears to be a pattern that new industries, especially those that garner as much international attention as crypto, are especially susceptible to fraud. One must go only as far back as cannabis legalization to find the last time California had to deal with fraudulent schemes at this scale.

Related: The feds are coming for the metaverse — from Axie Infinity to Bored Apes

It appears inevitable that California, known to be a first mover in regulation and compliance, will create some form of crypto-specific compliance infrastructure in the name of consumer protection. If history is any indication, once California releases its framework, other states will follow.

Federal and state representatives have been attempting to draft legislation to establish financial standards for crypto with little luck to date. At the federal level, Senators Cory Booker, John Thune, Debbie Stabenow and John Boozman co-sponsored a bill to empower the Commodities Futures Trading Commission (CFTC) to serve as the regulatory body for crypto, while Senators Kirsten Gillibrand and Cynthia Lummis co-sponsored a bill to establish more clear guidance on digital assets and virtual currencies. Lawmakers have even reached out to tech luminaries such as Mark Zuckerberg to weigh in on crypto fraud.

Cryptocurrencies, California, CFTC, Legislation, Law, Scams, Fraud, Bitcoin Scams
Source: Chainalysis

None of these or other similarly crypto-focused bills are expected to pass in 2022, but this level of bipartisan cooperation has been unprecedented in recent times. The collaboration should reflect just the sheer magnitude of the need for a regulatory framework. Said another way, Democrats and Republicans speaking to one another about anything should stop the presses, but the fact that they are co-sponsoring multiple bills should tell us that there is a monumental requirement for guidance.

How should one approach investing in the crypto space if the government is not going to establish controls for crypto? There are a few general points that one should consider if they are presented with a crypto investment opportunity.

Related: GameFi developers could be facing big fines and hard time

When reviewing any opportunity, do your due diligence! Do not take anyone’s word without some level of substantive support. If crypto is not an area of expertise, reach out to professionals who do have qualified experience. Make sure to utilize crypto monitoring and blockchain analysis tools, if possible, as part of the vetting process.

A common strategy of fraudsters is putting undue pressure or artificial timelines on a potential close. Slow down the process and use any and all time necessary to make an investment decision.

If it sounds too good to be true, it probably is. As overplayed as the cliché may be, it does bring up a valid point. There have been instances of schemes offering to pay initial and ongoing dividends for any new investors that are brought in and for additional dividends to be paid from any investors that those new investors bring in. If this sounds like a pyramid or multi-level marketing scheme, that’s because it is. Terms like “No Risk Investment” get thrown around as well. Ultimately, if no one knows where the opportunity is coming from, beware.

While crypto can be a fun and electrifying topic with many legitimate opportunities, there are bad players who will take advantage of the lack of government oversight and the excitement of overenthusiastic or undereducated investors.

Zach Gordon is a certified public accountant (CPA) and vice president of crypto accounting for Propeller Industries, serving as fractional chief financial officer and adviser to a portfolio of crypto and Web3 clients. He has been named a Forty Under 40 CPA, sits on the Digital Assets Committee for the NYSSCPA and has been working with crypto clients in a variety of capacities since 2016.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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NFT space bridges passions for tennis legend Maria Sharapova

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NFT space bridges passions for tennis legend Maria Sharapova

Tennis legend Maria Sharapova appeared at the Binance Blockchain Week Paris 2022 to share her interest in nonfungible tokens (NFTs).

During an exclusive interview with Cointelegraph, Sharapova mentioned that “she is exposing herself to this new world of crypto and Web3,” noting that the sector will help her better engage with her fans. Sharapova was also one of the strategic investors behind MoonPay’s Series A financing round, yet she mentioned that she aims to bridge her personal experiences to the digital world moving forward.

Maria Sharapova (right) with Cointelegraph senior reporter Rachel Wolfson (left) at Binance Blockchain Week Paris 2022. Source: Rachel Wolfson

Cointelegraph: What are you doing here today at Binance Blockchain Week Paris?

Maria Sharapova: I’m crypto curious and would like to figure out how to bridge the incredible physical experiences that I’ve been able to have with my fans over so many years. I’m now finding ways to include experiences in the digital world, so that’s what I’m most excited about. Also, as a female entrepreneur, I believe it’s important to pave the way for other women to enter Web3. Money is a topic that I feel we don’t speak enough about as women.

CT: Do you have plans to launch an NFT project?

MS: I’ve been looking at this space for several months now, as I’m someone who is more in favor of opportunities for the long haul. When I saw the opportunity to bridge physical with digital experiences, I knew I wanted it to be a long-term experience for myself. Storytelling is very important and it’s a huge component of Web3. I think stories will be told better for both parties when thinking about a project long-term.

Recent: The Caribbean is pioneering CBDCs with mixed results amid banking difficulties

CT: Do you think NFTs can help create better fan engagement?

MS: Absolutely. NFTs are about finding ways to communicate with the right communities interested in what I’m doing within a different type of space. For example, I was seen on a television screen every week playing tennis for so many years, yet I no longer have that platform on a daily basis because I retired a couple of years ago. The Web3 experience has given me access to my fans in entirely new ways. I feel like I’m more engaged with them, as opposed to them just being engaged by watching me compete.

CT: As a female entrepreneur and former athlete, do you have plans to get more women involved in Web3?

MS: I want to allow women to have a space where they experiment with Web3. For example, I was 17 when I won my first grand slam and social media was in no way part of that experience. It took years for me to get comfortable with social media over time. I think Web3 is also an area where one has to get out there in order to learn and grow from it. As I mentioned earlier, the conversation about money, finance, crypto and blockchain is a taboo conversation. People may feel that unless they know about these topics, they shouldn’t speak up. But I think this should be the other way around — you learn a lot more if you ask questions and get involved.

CT: Why did you decide to invest in MoonPay?

MS: I want to diversify my portfolio. In the beginning, my investments were around consumer goods. For example, I invested in the sunscreen brand Supergoop early on. I am now exposing myself to an entirely new category.

CT: What do you think are the biggest challenges associated with Web3 and how can we overcome these?

MS: I’d love to see the quality of Web3 experiences come through a bit more and improve, specifically in the digital space.

Recent: Are decentralized digital identities the future or just a niche use case?

CT: Any additional comments?

MS: I’m really interested in the NFT space because it bridges my passion for fashion, interior design and creating spaces that are unique to individuals and communities. I’ve become more interested in this space because it has more of a design perspective. It’s also an entirely new revenue stream that both artists and women are discovering.

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Bill Aims to Limit Crypto Mining in Kazakhstan Only to Registered Companies

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Bill Aims to Limit Crypto Mining in Kazakhstan Only to Registered Companies

Bill Aims to Limit Crypto Mining in Kazakhstan Only to Registered Companies

New legislation proposed in the parliament of Kazakhstan will allow only authorized miners to mint digital currency, if adopted. The draft has been designed to comprehensively regulate the industry and reduce what its sponsors label as uncontrolled consumption of electricity in the sector.

Lawmakers in Kazakhstan Submit Crypto Mining Law, Seek to Curb ‘Gray’ Mining

Members of the Mazhilis, the lower house of Kazakhstan’s parliament, have put forward a new bill introducing rules for the extraction of cryptocurrencies in the country. Under its provisions, only companies registered at the Astana International Financial Center (AIFC) or non-resident entities that have agreements with licensed data centers, will be permitted to mine digital coins.

Kazakhstan became a magnet for crypto miners following China’s crackdown on the industry and the influx of mining businesses has caused a growing power deficit. AIFC, the Central Asian nation’s financial hub, is in the focus of government efforts to place the country’s growing crypto sector under oversight. Earlier this year, exchanges registered there were allowed to open accounts with local banks.

The current procedure for notifying authorities of mining activities is voluntary, the crypto news outlet Forklog noted in a report on the legislative attempt. The process is regulated by an order issued by the minister of digital development. Only a third of all mining companies operating in Kazakhstan have registered, Member of Parliament Ekaterina Smyshlyaeva revealed.

“The uncontrolled use of electricity by ‘gray’ miners poses a threat to the energy security of Kazakhstan,” the lawmaker insisted. Smyshlyaeva added that the current legislation does not regulate the mechanism for the sale of the mined cryptocurrency or the role of local financial service providers and the circulation of digital assets. “The procedure for their production and the establishment of property rights to them are regulated only at sub-legislative level,” she explained.

According to Kazakhstan’s State Revenue Committee, the contributions of crypto mining entities to the state budget reached $1.5 million in the first quarter of 2022. In July, President Kassym-Jomart Tokayev signed into law a bill amending the country’s Tax Code to impose higher tax rates on crypto miners. The levies now depend on the amount and average price of electricity consumed for the minting of bitcoin and other cryptocurrencies.

Do you expect the new law to reduce the number of entities authorized to mine cryptocurrencies in Kazakhstan? Tell us in the comments section below.

Lubomir Tassev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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