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Digital Dollar

Digital Technology Crucial in Fight Against Coronavirus Pandemic, Says G-20

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During a video conference held on April 30, members from the Group of Twenty (G-20) member nations, emphasized that digital technology and policies are playing a crucial role in retaliation to the widespread COVID-19.

At the Extraordinary G-20 Digital Economy Ministers Meeting, Mr. S. Iswaran, Minister of Communications, who also represented Singapore, stated that coronavirus had critically deranged economies, international trade, and global supply chains.

According to Iswaran, digital technology and policies are doing extra work to improve response to the coronavirus pandemic and recovery from the epidemic. The Communications Minister pointed out three areas where digital tech and policies can reap near-and long-term benefits: intensifying public health, equipping citizens with knowledge, and reinforcing the economy.

Digital technology and policies in health sector 

In addition, he added that the COVID-19 crisis has lad to the need for digital health solutions including telemedicine, and earmarked interventions such as automated temperature screening and the pursuing of contacts.

Moreover, digital technology has made it possible for administrations to engage with the citizens; to enhance widespread trust and togetherness in order to ease effective retaliation against COVID-19.

Furthermore, Iswaran stated that it is significant for business ventures to employ digital tech and policies to enhance the durability of their entities. Adoption of digital technologies such as digital payment methods and online selling would ramp up sales especially during this period clouded with pandemic uncertainties.

Moving forward, while speaking at Saudi Arabia’s invitation, Iswaran added that the coronavirus epidemic has highlighted the significance of making substantial investments in digital connectivity networks and cybersecurity. Adding to that, he claimed that 5G is the spine of the digital economy.

Ministers to revamp business durability by promoting digitization projects

During the virtual meeting, the ministers present concurred to focus on six areas of work. These areas of work include ensuring the security and affordability of communication systems; and network security while transmitting data; and inspiring research and adoption of digital health technologies.

The ministers also concurred in the bid to reinforce business pliability by promoting digitization and offering support. Saudi Arabia’s Minister for Communication and IT,  Abdullah Amer Al-Swaha chaired the virtual meeting.

US Treasury to Introduce New Cryptocurrency Regulations

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The US Treasury plans to introduce new rules and regulations  on Digital currencies intended to crack down on its use to facilitate money laundering and other illicit activities

Steven Mnuchin, the treasury secretary told a Senate Finance Committee that the Financial Crimes Enforcement Network will soon announce new rules on digital payment and cryptocurrency. The primary concern with digital currency adoption is the issue of scams, opacity and ambiguous trade-offs that seem unconventional to traditional finance. Mnuchin hopes the new rules to improve transparency in order to stop money laundering and will prevent the use of cryptocurrencies as a “secret bank accounts”.

The US administration has expressed concern about the increased use of crypto in the execution of anonymous and illegal transactions. Additionally, the lurking potential of evading American Sanctions by nations like North Korea and Iran remains a huge threat to the blockchain. 

He did not hesitate to suggest that the framework was a representation of the government’s support for the new technology; as well as caution of avoiding digital currencies becoming the equivalent of the ancient Swiss Secret number banking. Nonetheless, the charing did not provide further details entailing the new regulations. However, the Treasure Secretary highlighted they would offer improved transparency for law enforcement; and a guide for the enforcement to track where money was going and prevent laundering. 

President Trump was not hesitant to express skepticism about digital currencies. Last year, the president told Twitter followers that he is “not a fan” of Bitcoin and other cryptocurrencies. Adding to the note, he described cryptocurrencies as volatile and based on thin air. Furthermore, he would warn Facebook that they should seek a banking charter and adhere to banking regulations; if they were to issue a digital currency. 

Mr. Mnuchin’s efforts to closely monitor cryptocurrency saw the relocation of the Secret Service towards the treasure Department, rather than Homeland Security. In the White House Budget proposal released this week, the administration cited the efficiency of policing cryptocurrencies through the treasury department and the secret service. White House has identified how cryptocurrencies are used as an emerging threat.

Nevertheless, the United States Federal Reserve stated in a separate hearing; that it was exploring how a US digital currency would look like. The Federal Reserve said it had studied the costs and benefits of implementing the digital currency. As well as the implications of the same in the global economy. However, Mr. Mnuchin had stated on Wednesday that he didn’t believe a digital dollar was even necessary. 

But the Secretary said it was also a project to consider somewhere down the road. For instance, Jerome Powell noted that a Federal Reserve digital currency also posed the threat of low privacy and high fraud. The Chair of the Federal Reserve, Mr. Powell stated: 

“There’s a lot to weigh and a lot to work on there. Every major central bank in the world right now is doing a deep dive on digital currencies, and we think it is our responsibility to be at the very forefront of knowledge and thinking about a central bank digital currency.”

The creation and deployment of one such government-issued digital currency would need approval from congress. 

RBS’s Digital Bank Bo Makes Strong Claims as Investors Raise Doubts

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In the past month, major banks have taken drastic steps to save both reputation and fend off attacks from competitive markets. Alison Rose, the current head of the Royal Bank of Scotland, has said the New Year has brought with it a new set of challenges.

The RBS honcho recently claimed that the bank needs to shift its focus to its digital branch Bo as it plans to elevate it in the midst of a revamp. Rose added that the current watch needs to be conducted due to the issues related to the NatWest Markets.

Bo works as the digital arm of the bank with its Chief Executive Officer Mark Bailie set to quit this coming week. In the recent time frame, Bo has had to issue 6000 customer cards to ensure that they comply with newer regulations on the digital finance front.

With Alison Rose now heading the company, shareholders have projected a renewed interest in digital commerce. This comes after issues were raised about Bo since its launch three months ago. A source close to RBS added:

“Bo remains a key part of the bank’s innovation strategy, along with other brands we have launched such as Mettle and Tyl. We are focusing on the areas where we can have the biggest positive impact on our customers.”

Despite the hype created by RBS, financial experts have yet to give it a solid thumbs up. They feel that Bo has a lot of ground to cover before it can make a significant impact on the financial industry. Vincent Vinatier, a porfolion manager at AXA Framlington opined that RBS was not even on his radar. He admitted that Bo did not rank very high in the fintech list as well.

Many proponents of the fintech space have admitted that the real key challenge was to keep customers with the main bank brand ie. RBS. Bo has functioned as an attractive model for RBS and at the same time has not resulted in major losses for the company. Some others believe that the digital bank’s functionality was on the road to improvement while making the industry more competitive.

At the moment, Bo was seen as a savings tool for current customers. Analysts were open when stating that Bo does not compare with existing tools in the market. Some have reported that customers see Bo as just an extension tool and not just a mainstream feature. Another investor stated:

“These new competitors are not yet gaining a great deal of traction as main accounts for many customers – many seem to be using them for specific limited purposes and retaining current accounts with the big incumbents.”

The last time RBS was in the news was when the bank ordered its customers to shred their cards to comply with EU rules. The reissued cards come with multiple capabilities such as chip and pin transactions.

 

 

Source: Reuters

 

Digital Dollar Could Protect Dollar’s Status as Global Currency Reserve

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The digital dollar is the modern renaissance for fervently boosting the US dollar’s position as the world currency reserve.  Lately, the US dollar status has been further weakening. Moreover, the system is losing its confidence in fiat as a store of value.

A situation that has created long term slideS in the amount of reserves that are in dollars.

Regulatory confusion in the wake of digital currencies has created tensions in the adoption of clear compliance frameworks around the innovation. While the United States’ sole competitor – China, is busy adjudicating digital assets as key areas of innovation; the United States is directing hostility against cryptocurrencies. 

In all earnest, Washington’s miasma against cryptocurrency is clearly driving innovation to China. The Asian economy is quickly moving to break things and the prospect of emerging as a dominant financial hub is alarming. 

The Rise of the United States Dollar is attributed to the Federal Reserve Act of 1913 following great instability and unreliability of the time’s banknotes currency system. To create stability around international exchanges, most nations pegged their national currencies to gold.

Around 1913, The United States had already outweighed Britain as the world’s largest economy. 

The break out of World War I in 1914 saw many countries abandon the gold standard as a national reserve. Meanwhile, this move was fueled by the need to pay for military expenses through paper money.

Economists believed that gold was increasingly devaluing their paper money. However, Britain went ahead to hold on to gold as its reserve for three more years. A decision that plucked away Britain’s position as a center of commerce.

For the first time, the country found itself having to borrow money. Britain turned the United States and in the subsequent flow of events; the US became the lender of choice for most nations willing to buy into dollar-pegged bonds. Britain abandoned its gold standard and the dollar replaced the pound as the global leading reserve. 

Entry into World War I as a key supplier of weapons and goods, the United States found itself collecting vast amounts of gold payments. A move that signaled a return to the gold standard.

A meeting in 1944 at Bretton Wood, New Hampshire saw 44 delegates from the allied countries come up with a new system. This new system would not any nation at a disadvantage in the lucrative foreign exchange market and international trade. 

Therefore, they devised that the world’s currencies could be linked to the US dollar and not gold. On the other hand, the US dollar was linked to gold. Popularly known as the Bretton Woods Agreement, the proposal established that all central banks would maintain fixed exchange rates between the US dollar and other currencies. In turn and on-demand, the US could redeem their dollar reserves for gold. 

Deficit spending on servicing the Vietnam War flooded the United States market with paper money. The situation threatened the stability of the US dollar. Forcing many countries to convert their reserves into gold once again.

This created an extremely high demand for gold that then US President Richard Nixon delinked the dollar from gold; and replaced the system with today’s floating exchange rates. Since the dollar has remained the leading global currency reserve. 

The International Monetary Fund (IMF) claims that at least 61% of global foreign banks are held in US dollars. The majority of the reserves are in cash or cash bonds. 

Meanwhile, the reserve is influenced by the size and strength of the United States economy as well as the country dominance in financial markets. Despite unbridled printing of U.S dollars,  large deficit spending and foreign debts in the figure of trillions of dollars -; US treasury securities still maintain as the world’s safest store of value. 

The United States enjoys myriad benefits with the US dollar’s position in macroeconomics. So big have been these benefits, that a former president of France described the position as an “exorbitant privilege”

It is a status that gives the superpower edge against inhumane intolerance by imposing sanctions. The framing of an alternative cryptocurrency serves as a way to avoid the US dollar as a reserve. China is not likely to give up on this front for innovation. 

Conclusion

In case the United States does not execute a digital makeover of its greenback and deploy a digital dollar, 

I am afraid, that the US dollar will be stripped of its power as a worldwide central bank reserve. 

 

Digital Renminbi Coins, Digital Dollar and the Race to Central Bank Backed Stablecoins

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Top global central banks are scrambling to launch their state-backed digital currencies. China set the pace with its digital renminbi coins with hopes of gaining a competitive advantage against the US in world trade.

Besides central banks and tech companies joining the stable coins front, the International Monetary Fund (IMF) believes that cryptocurrencies backed by fiat could reduce over-reliance on government issued money.

Additionally, the IMF highlighted that CBDCs would help to clear and settle transactions without the need for intermediaries. 

Well, cryptocurrencies have effectively slashed the duration for cross-border transactions from days to even seconds. An apparent benefit while compared to the limitations of fiat currency. 

Bitcoin was the first digital currency to emerge back in 2009. By the end of 2019, at least 1,600 digital currency surfaced. Data from Coinmarket cap released statistics indicating at least 3,000 alternative coins by 2020. 

While the past decade could trick you into thinking that digital currency is just a concept of present millennials; 

Note that the concept of cryptocurrency dates all the way back to 1983, when David Chaum conceived the first electronic cash machine called the eCash. 1998 followed with headlines of Nick Szabo‘s attempt at Bit Gold. 

However, neither of these two projects turned out successful.

Mobile Payment and Digital Currencies

The lesser-known story of a  mobile operator’s attempt at digital payment in Kenya set out the narrative for digital currency.

M-pesa is now the leading mobile payment system in the world serving more than 37 million subscribers. Then comes Satoshi Nakamoto’s January 2009 paper publication of the functionality of a possible Bitcoin Blockchain Network. 

A paper that was followed by the remarkable execution of the first mining Block. Popularly known as the Genesis Block. By 2010, the first purchase of products using bitcoins was recorded.

Since, thousands of digital currencies have come into existence. 

Bitcoin and other cryptos have challenged central banks and governments to change their monetary mindset. China’s fear of an imminent end to its economic supremacy. As well as having a reserve largely consisting of US dollars, gave rise to the idea of central backed digital currency in China. 

Digital Dollar Foundation

In fact, the chinese central bank is currently in the final stages of launching its digital renminbi coins. China’s digital coin could easily oustet the US Dollar as the de  facto currency for global trade. However, the United States has joined the frenzy with former CFTC chairman outlining the idea of a Digital Dollar. 

The Ex Commodities and Futures Trading Commission Christopher Giancarlo formed the Digital Dollar Foundation. An organization that will design and push for the adoption of a US central bank backed digital currency. 

Unfortunately, the United States is showing up for the occasion late. 

The Bank of England was among the first Central Banks to hold discussions on the prospect of a central bank stablecoin. Moreover, the Central Bank of Sweden rolled out implementation plans for state -sponsored digital currency dubbed e-krona.

In the course of last year,  ex Bank of Spain Governor Miguel Fernandez Ordonez proposed the introduction of digital euro. 

So far, China’s digital renminbi coins are winning in the CBDC front. On the other hand, the two largest central banks in the world: the European Central Bank and the Federal Reserve have failed to precipitate considerable plans for a CBDC. 

It is this laxity of the Federal Reserve that prompted  Giancarlo to pioneer the Digital Dollar Foundation. 

Benefits of the Central Backed Digital Coins

Some stablecoins such as the Renminbi coins could gain more popularity than others. Nevertheless, the rise of this digital backed stablecoins have several benefits. 

  • The issuance of digital cryptographically encrypted assets would prevent the chances of currency counterfeiting. 
  • A CDBC would facilitate tracing of every transaction that takes place on the blockchain.  
  • Prevention of money laundering activities, revenue tracking, and tax collection.
  • Facilitate accurate assessment of government agencies, value chains and sectors. 
  • This information will also enable governments to efficiently utilize their taxes.  

Given the efficiencies of blockchain and cryptocurrencies, dozens of technology firms, Universities, central banks and scholars are working round the clock to replace conventional clearing settlements associated with traditional banking.

Large scale adoption of cryptocurrencies in the future for dozens of revenue models cutting across several industries.

A digital reserve inclusive of CBDCs such as the Renminbi coins, digital dollars, and other stablecoins is the winning trend for decentralization, financial transparency and trade efficiency. 

 

Former Chair of CFTC Establishes a Nonprofit Entity for the Promotion of Digital Dollar

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Christopher Giancarlo, a former CFTC Chair establishes a nonprofit organization to create a mobile digital dollar that could easily be carried and sent as a text.

Digital Dollar Attempts to Secure Future of Banknotes

As per Giancarlo, digital dollars will secure the future of banknotes and allow individuals and global businesses for making payments in dollars irrespective of space and time.

According to a press release, the nonprofit Digital Dollar Foundation will research on conversion of dollars into a blockchain-based digital currency.

Although Giancarlo left CFTC, yet, he is gearing up in the crypto industry. Among other founders of nonprofit are a former CFTC’s official Daniel Gorfine, and Giancarlo’s brother Charles Giancarlo, who is a former Cisco Systems executive, and Silver Lake Partners, a private equity firm.

Also known as “Crypto Dad”, Giancarlo has teamed up with one of the IT giants, Accenture which has worked with several state banks on digital currencies – Bank of Canada, the European Central Bank, and the Monetary Authority of Singapore to name a few. 

The sole aim of the foundation is to research the possible profits of digitizing the dollar. Moreover, it will help explore design options and arrange meetings of stakeholders, roundtable conferences, and open forums are to name a few. Speaking about the organization, Giancarlo said; 

“We are launching the Digital Dollar Project to catalyze a digital, tokenized U.S. currency that would coexist with other Federal Reserve liabilities and serve as a settlement medium to meet the demands of the new digital world and a cheaper, faster and more inclusive global financial system.”

Furthermore, on Wednesday at the Crypto Finance Conference St. Moritz, Giancarlo signified the project in appearance. At a podcast show, Giancarlo stated that the time has arrived for thinking about the digitization of dollars.