Following four months of spectacular growth, security token trade volumes have crashed by nearly 60%.

From May through August, monthly volume gains for the sector ranged between 113% and 280%, posting record highs that increased from $998,000 to nearly $22 million, according to Security Token Group’s reports.

The big run-up means that despite the massive slump in trade activity, September was still the second-strongest month on record for security tokens, with more than $9.15 million in combined trade volume.

tZERO’s TZROP token, which represents equity in the alternative trading system, comprised more than half of total trade volume, at $5.3 million, down from August’s $11.8 million.

TZROP declined just 2% in price over the month, from $7.26 to $7.10; however, it traded within a range between $6 and $7.90. TZROP is the second-most popular security token, with a market cap of $128 million, making it the 80th-ranked crypto asset according to CoinMarketCap

Overstock’s OSTKO digital security, which represents equity and voting rights in the company, drove $3.6 million in volume, down from $9.6 million last month.

OSTKO also closed the month fairly flat at 1.5% down, despite producing a wide trading range between $48 and $65. OSTKO is the largest security token with a $321 million capitalization, making it as the 50th-ranked crypto asset overall.




Top 5 security tokens by market cap: STOMarketThe combined market capitalization of security tokens increased by nearly 4% to $528.6 million during September, owing to the addition of three tokens trading on the Seychelles-based MERJ Exchange.

MERJ’s tokens include its own native security token, MERJ-S, which was issued in a token sale that raised more than $450,000 last month; Uprets’ OST1 token representing fractionalized ownership in a Brooklyn apartment building; and Minervest’s MSTV-S token.

The three tokens represent nearly $24 million in assets, although none of them changed hands during September.

Analysts have long tried to imply a strong connection between Bitcoin and gold as safe-haven investments in times of trouble.In theory, this works, as both the crypto asset and the precious commodity are used as a macro hedge against inflation, and the devaluation of fiat currency and traditional equities in tricky markets.

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But the data is often unclear and as a whole, shows shifting sands in terms of direct correlation.Take Kraken’s June 2020 report, for example. The crypto exchange — which has been celebrating its newly-found status as the first of its kind to win a US banking license — noted that Bitcoin’s connection to the price of




Maxim Bederovgold had weakened as volatility and trading volumes declined in the early part of the year.

Indeed, the crypto exchange noted on 8 September that Bitcoin’s rally to an intra-month high of $12,480 coincided with NASDAQ tech giant Microstrategy buying $250m of the cryptocurrency.Two weeks later, the mobile app firm doubled down, purchasing a further $175m of Bitcoin, taking its total holdings to 38,250 BTC.

Founder Michael Saylor tweeted:

“On September 14, 2020, MicroStrategy completed its acquisition of 16,796 additional bitcoins at an aggregate purchase price of $175 million. To date, we have purchased a total of 38,250 bitcoins at an aggregate purchase price of $425 million, inclusive of fees and expenses.

”That Saylor is an alumnus of noted US university MIT is no accident: this technical background may have attracted him to Bitcoin, but it is the asset’s performance this year which is the real sell.

Bitcoin boom

Bitcoin’s strong Spring 2020 recovery while gold and silver limped upwards and crude oil crashed? Manna from heaven for early adopters. Bloomberg figures confirm that Bitcoin is by far 2020’s best performing asset, up 66% and beating gold into second place.

Cryptocurrency does of course now boast an advantage that gold does not: yield.

With the growing adoption of DeFi, users can stake their cryptocurrency and receive a yield in return, ranging anywhere from 6.8% to over 12% for stablecoins.

This is an incredible return when set against the 0.5% or less for long-term US Treasury bonds. And of course the 0% return from gold bullion bars stacked in a vault somewhere. A more popular way of buying gold is through price trackers like Exchange Traded Products, of course, but you get the idea.

DeFi as a sector is white-hot right now: the total value locked in smart contracts enacting these kinds of payment systems and loans now exceeds $11bn, up from $691m just nine months ago. Money is clearly flooding into the space.So a more interesting question than the correlation between these stores of value now presents itself: which will reign supreme in the years to come?

With more major economies now backing negative interest rates this leaves investors basically paying banks to hold their cash, and with central banks amplifying and extending massive quantitative easing programs capital flight away from bonds in the hunt for yield is likely to turn closer to Bitcoin than it is to gold.

Gold prices have now retraced from their record-breaking all-time highs north of $2,000 per ounce, settling around $1,800. But analysts like Bank of America expect this lull is temporary, and in a scorching indictment of unfettered central bank money printing, suggested gold would hit $3,000 per ounce inside 18 months.

Saylor and Microstrategy?

Perhaps they denote the crest of a wave of institutional investors moving away from simply buying gold as a safe haven, instead looking at the world’s largest cryptocurrency as their first port of call in stormy markets.

Late September 2020 analysis by British broadsheet The Guardian flags up a weakening economic recovery in the UK, even before the onset of a much-feared ‘second wave’ of coronavirus infections.

Journalists at the paper describe their data-screening as a kind of early warning alarm of a double-dip recession, which itself could cripple large investors’ share portfolios and send pension funds running for safe havens once again.

2012 was the UK’s last double-dip and before that the catastrophe of the 1970s.

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Never lose money

The issue for large money managers is this: how can they come out of an economic crisis in a reasonably rich position?

As legendary investor Warren Buffett once noted, the absolute rule number one in investing is: Never lose money. Rule number two? Never forget rule number one.

The 90-year-old was left $23bn poorer from the value destruction of the 2008 financial crisis. His holding company Berkshire Hathaway — market cap now over $500bn — even suffered the indignity of losing its AAA counterparty credit rating from S&P, making it incrementally more costly to borrow money.

This is the kind of financial disaster that pension funds and institutional investors fear.It may indeed be what they face if they do not hedge properly against a long, slow global recovery made up of years of currency deflation, high unemployment and stock market value obliteration.

This is certainly what the IMF has told us will happen, repeatedly. Their World Economic Outlook has become bleaker the longer 2020 has run on. And indeed their next report is due out in the next couple of weeks. One suspects the news will not suddenly get better for global growth.

Bigger, stronger, faster

The answer to our query may lie in some serious recent regulatory developments from the world’s largest economies.Nigeria boasts Africa’s largest GDP, of more of $400bn. Only eight of the continent’s 54 nations have people rich enough to make the Forbes Global Billionaires List.

Nigeria is one of them. In September its regulators opened the floodgates to clearly define crypto assets as securities. As we know, regulatory clarity leads to faster innovation and more investment.

Switzerland, a known store of value for the world’s richest in its aged private banking network, this month overhauled its legal code to set new standards for crypto trading.

A leaked report revealed the EU plans to put a Europe-wide cryptocurrency regulatory framework in place by 2024. In the US, 49 state banks agreed on common rules for dealing with cryptocurrency and lawmakers put forward the first real comprehensive national crypto regime in the Digital Commodity Exchange Act of 2020.

More is coming. Bitcoin is moving faster than gold. I know where I would hedge right now, and it’s not in the yellow metal. 

Maxim Bederov is an investor and entrepreneur.

In cryptoland, the fall tends to be regulators’ open season. As unprecedented as it’s been, 2020 is no exception to this trend. Tensions are high on both sides of the Atlantic:

As markets were still processing the news of the United States Commodity Futures Trading Commission cracking down on derivatives exchange platform BitMEX, the Financial Conduct Authority, the British financial watchdog, moved to ban retail investors from using cryptocurrency derivatives altogether.

The densely packed news cycle has somewhat muffled the impact of another regulatory bomb that dropped a week earlier and is bound to have major lasting effects on the global financial system: The European Union’s proposed legislation for crypto-asset markets.

The far-reaching framework, designed to bestow regulatory clarity upon digital finance businesses serving residents of the European Economic Area, is bound to be especially consequential for two interconnected domains of the crypto industry that have dominated the narrative throughout much of 2020: stablecoins and decentralized finance applications.

What gives?Stablecoins as a threat to stabilityAt the moment, the draft, known as the “Regulation on Markets in Crypto-assets,” or MiCA, exists in the form of a proposal put forth by the European Commission, the EU’s executive branch.

 It is still bound to go through a rather lengthy legislative process before it becomes law, meaning that it might take months and even years before the new rules kick in.

The text makes it apparent that stablecoins, which are also called “asset-referenced tokens” and “e-money tokens” in the document, have been squarely at the top of European lawmakers’ minds:

MiCA singles out this asset class and affords it a bespoke regulatory framework.Under the proposed law, stablecoin issuers will have to be incorporated as a legal entity in one of the EU member states.

Other requirements include provisions related to capital, investor rights, custody of assets, information disclosure and governance arrangements.Albert Isola, the minister for digital and financial services of Gibraltar, explained to Cointelegraph that the reason for the European Commission’s heightened attention to stablecoins is the authority’s concern for the Eurozone’s financial stability:

Stablecoins are widely considered to potentially bring significant benefits as a digital method of payment, providing for greater financial inclusion and a more efficient method of transferring funds. They are also viewed as a potential risk to financial stability and integrity and could dilute the effectiveness of monetary policy. It would appear logical that the European Union may not welcome an entity other than the European Central Bank issuing Euro in an electronic format.

Isola mentioned that “disruptors,” such as the prospective stablecoin Libra, have the potential to significantly decentralize the control of currencies.Seamus Donoghue, vice president for sales and business development at digital finance infrastructure provider Metaco, cited the impressive growth of the stablecoin market in recent months as a prerequisite for regulatory attention, which he called a “positive response”:

The USDC stablecoin’s market cap alone has grown 250% in 2020 from $520 million to $1.86 billion, with a significant acceleration in growth over the last two months. Bank regulators have no doubt also observed that although the asset class in the context of the traditional payments space remains relatively small, it has the potential to have a huge impact on regulated banks and payments incumbents.

The specter of LibraIllustrating the depth of the top EU officials’ concern over preserving the union’s monetary sovereignty is the fact that, earlier in September, “finance ministers of Germany, France, Italy, Spain and the Netherlands issued a joint statement outlining that stablecoin operations in the European Union should be halted until legal, regulatory and oversight challenges had been addressed,” said Konstantin Richter, CEO and founder of the blockchain infrastructure company Blockdaemon.Richter added that some of the more visible figures in European financial policy, such as the German minister of finance, Olaf Scholz, have advocated for the introduction of the regulatory framework.Most experts who talked to Cointelegraph mentioned Facebook-backed stablecoin Libra as the point of departure in the EC’s thinking about the dangers and opportunities that asset-referenced tokens present.

MiCA opens with an explanatory memo that discusses how the crypto asset market is still too “modest in size” to pose a serious threat to financial stability; however, things can change, the framers admit, with the advent of “global stablecoins, which seek wider adoption by incorporating features aimed at stabilizing their value and by exploiting the network effects derived from the firms promoting these assets.

” There has been a single stablecoin project to this date falling into the scope of this description:

Libra.Mattia Rattaggi, board chairman at FICAS AG — a Swiss-based crypto investment management firm — opined that stablecoins are the application of blockchain technology with the highest probability of big impact — something regulators are well aware of:

Stablecoins have grasped the attention of regulators over 12 months ago with the presentation of project Libra by Facebook and have since been closely monitored by the public and regulators around the world. Regulators are realizing that stablecoins are bound to increase efficiency in the payment system — particularly the international one — and promote financial inclusion.

Further hedging against the potential disruption of the Eurozone’s monetary stability, the MiCA proposal specifies even stricter compliance requirements for issuers of asset-referenced tokens deemed “significant.

” The significance criteria include the size of the customer base, market cap, volume of transactions, and even “significance of the issuers’ cross-border activities and the interconnectedness with the financial system.

”Bad news for DeFi?

Stablecoins largely power another sprawling domain of crypto financial activity: a diverse array of applications and protocols that exist under the umbrella of decentralized finance.

Given the stringency of the proposed requirements around asset-referenced tokens, it is plain to see how complicated things can get if, say, the bulk of liquidity locked in a certain decentralized protocol is denominated in a stablecoin that is not compliant by the MiCA standards.

Another major source of uncertainty is the requirement for all crypto-asset service providers, or CASPs, seeking authorization to operate in the EU to be legal entities with an office in one of the member states.

Whether the European authorities will treat individual DeFi apps as CASPs remains an open (and central) question, but if this is the case, developer teams maintaining DeFi protocols might be forced to come up with workarounds that will stretch the notion of “decentralized” incredibly thin.

In their response to the proposed regulation, members of the International Association for Trusted Blockchain Applications expressed their concern that MiCA could effectively bar European residents from participating in DeFi markets.

Martin Worner, the chief operating officer and vice president of blockchain tooling provider Confio, believes that compliance issues could be resolved by implementing on-chain governance mechanisms tailored to specific jurisdictions’ regulatory frameworks:

[This could be] achieved within a self-sovereign framework where the institutions can develop compliant DeFi instruments, which work within their jurisdictions. Just as there are rules about businesses in different jurisdictions and how they do cross-border transfers, the same would apply on the blockchain.

Elsa Madrolle, international general manager at blockchain security company CoolBitX, told Cointelegraph that by the time MiCA becomes law, the DeFi landscape will have likely changed, much as the ICO landscape changed rapidly after the initial boom.

By that time, “it will be quite clear what is required of DeFi projects to operate in the EU or seek out EU customers.

”Madrolle thinks that at that point, DeFi projects will fall into one of two categories — regulated and unregulated — and the big question will be whether the rest of the world will align itself with the European framework.

Nathan Catania, a partner at XReg Consulting — a regulatory and policy firm that has recently published a breakdown of the proposed regulatory framework — is hopeful that it is possible for regulators to reconcile MiCA requirements with not regulating DeFi out of existence. Catania said:

I believe that a project which is sufficiently decentralized and does not provide the service on a professional basis to a third party cannot be considered a CASP and there is still room for DeFi projects to exist.

Today, many DeFi protocols are far from being fully decentralized. The battles over how much decentralization is good enough are still ideological and are primarily fought inside the crypto bubble. It looks like the day when regulators join this debate will come, but with some very tangible implications for crypto businesses.

On Sept. 27, Coinbase CEO Brian Armstrong sought to center his employees’ work around the company’s core mission: “to bring economic freedom to people all over the world.

” Armstrong argues for a narrow interpretation of Coinbase’s mission to build the best possible product because it is “already hugely ambitious” and because companies generally cannot succeed if their goals “include all forms of equality and justice.

” Armstrong’s perspective is not unique to Coinbase and represents a broader tech industry incarnation of the white-savior complex rooted in the belief of the product’s inherent goodness. This belief is especially noteworthy in crypto, given its diversity problem.

Views like Armstrong’s, when coming from a mission-driven cryptocurrency organization, ignore and insult the people and organizations on the ground doing the critical work to financially empower communities. Furthermore, these views overestimate the ability of cryptocurrency to address financial exclusion caused by structural problems as well as technical ones.

Related: The avaricious misanthropy of Brian Armstrong

The technology of cryptocurrency offers solutions and features critical to increasing financial inclusion. Payments can be made in places where cash is at risk of being stolen and where bank accounts are inaccessible. They can also be made anonymously and tied to contracts, all without the need for third parties.

The technical advantages of cryptocurrency, however, do not line up perfectly with the root causes of financial exclusion.

So, while companies such as Coinbase do important work proliferating cryptocurrencies, achieving economic freedom requires more, and crypto projects must be honest about their opportunities to improve financial inclusion as they reckon with their own limitations.

If they are not interested in economic prosperity and freedom, that is perfectly fine — a company’s end goal is its bottom-line profits after all. But if crypto organizations are to legitimately claim a social mission, they must step out from behind their computer monitors to address the limitations of their technical products.

Otherwise, their platitudes for financial prosperity read like an investment bank asserting that it brings economic freedom to the world through increasing market liquidity.

Related: No, blockchain technology cannot solve everything

The limitations of cryptocurrency

While cryptocurrency offers novel ways to create a new financial system, the technology and its proliferation cannot solve the underlying causes of financial exclusion alone.

Today, 1.7 billion people do not have access to a bank account, and billions more do not have access to other basic financial services because institutions have long ignored and oppressed these communities.

Of the people who do have access to the financial system, many are trapped in a cycle of debt without the means to generate wealth. 

According to The Boston Globe, the median net worth of non-immigrant African-American households in Boston is $8. The history of marginalization that cryptocurrency will have to grapple with manifests itself in lack of connectivity, distrust in technology, financial illiteracy, and historical economic and social inequality.

Cryptocurrency requires internet access. Today, only 59% of the world has access to the internet. Smartphones, which serve as a lower barrier to entry for people to access the internet, have a penetration rate of only 45%.

Hidden within these statistics, however, is the fact that many people who do have internet or smartphones may not have stable connections or regular access to electricity.

The overall result is a digital divide preventing billions of people from using cryptocurrency.

Crypto is a novel technology that looks to upend some of the most basic forms of everyday life. Fiat currency is not just an everyday tool but the very basis of people’s livelihoods.

Distrust in cryptocurrency is to be expected, particularly when people cannot see the physical transaction and when mistakes as simple as a forgotten password can make money unrecoverable. Distrust is also higher among people with low income and limited education — the same people who are most likely to be unbanked or underbanked.

Financial illiteracy is also tied to distrust. Financial institutions may offer difficult-to-understand financial products or training, particularly in emerging markets, and some take advantage of consumers through products such as predatory loans.

Lack of financial knowledge also stems from a broader inability to access resources or spending adequate time to understand financial products. As a result, financial illiteracy may prevent people from knowing how or why to use cryptocurrency.

Most importantly, financial exclusion is the result of poverty and inequality tied to oppression. Throughout history, institutions and people in power have excluded or marginalized certain communities, such as women, minorities, rural residents and LGBTQ+ people.

Financial institutions have been part and parcel of this historical exclusion and oppression.

Related: LGBTQ+ in blockchain/crypto: A safe space with room for more inclusion

In the United States, we cannot separate finance from its history in slavery or more recent racial discrimination in lending. Similarly, in Europe finance is intricately tied to colonialism.

The history of oppression connects seamlessly to current wealth inequality and financial exclusion. If people do not have enough money, they simply have no need for access to the financial system.

Cryptocurrency does not generate wealth simply from nothing — it only facilitates the holding and transfer of wealth. Without ways to generate wealth and amid widening economic inequality for over 70% of the global population, people will still find it difficult to use cryptocurrency or have no real use for it at all.

For cryptocurrency to meaningfully move “the needle on large global challenges,” as Armstrong writes, the underlying causes of inequality must be addressed.

And while mission-driven cryptocurrency organizations cannot expect to do this alone, they have an important role to play in developing and directing their products to be used in the service of addressing the underlying problems.

Those who declare they’re on a social mission inevitably sign themselves up for this challenge.

Accounting for cryptocurrency’s limitations

Cryptocurrency offers a novel technical solution to creating a new financial system — this achievement should be celebrated because it has the potential to be truly transformative.

It can be used by people in economically unstable countries such as Argentina to avoid currency volatility or to make anonymous transactions in the face of repressive regimes, for example, Venezuela’s.

In politically stable countries, cryptocurrencies can change everyday life, too.

They give the means to bypass intermediaries that may not be robust, impose exorbitant costs, collect and sell user data, or exclude marginalized groups.

Cryptocurrencies can create a financial infrastructure uniquely suited to addressing financial exclusion, but without enabling easier access to that infrastructure, its benefits are not fully realized.

In response, companies can design easy-to-use crypto products and invest in educating their users. They might also build mobile-friendly decentralized applications, optimize for cheap smartphones and low-bandwidth connectivity, lower the technical barriers to become a validator, and create easy-to-understand user interfaces.

But the real barrier is poverty and people’s inability to access the most basic infrastructure, including the internet and smartphones, which are outside of a cryptocurrency company’s direct mandate.

Unlike a traditional company, a mission-driven crypto organization will have to dedicate its resources to addressing these more underlying systemic problems.

 This can take the form of funding initiatives to increase internet access and financial literacy or engaging in social activism by supporting community organizations working on the ground to alleviate poverty.

A mission-driven company will have to understand the societal problems of today and determine when they can be solved by technology and when they require something more entirely.

Active engagement to do good

Companies are not inherently virtuous because they create technologies that might be used for good. Technology is neutral and open to the direction of anyone who can afford it. Good comes from the active development and implementation of technology by people and mission-driven organizations seeking the resolution of social problems.

Mission-driven cryptocurrency organizations, therefore, must take responsibility for how their technology affects people’s lives and deliberately engage in broader social activism.

To effectively do this, they need to be proximate to the communities in question and treat them as equal partners in the quest for social good.

Twelve years ago, Satoshi Nakamoto published the technical design for Bitcoin (BTC) during a financial crisis originating from historically exclusionary institutions.

The crisis of economic inequality, however, has not ended as evidenced by protests in the U.S. for racial justice and the COVID-19 pandemic, with a severe and disproportionate economic impact on minorities and women.

The financial system needs to be reimagined in order to promote global economic prosperity. In this effort, cryptocurrency organizations can be a crucial player when they engage beyond their technical products to also address the root causes of financial exclusion.

Armstrong is not wrong when he says that the trendy social activism of Silicon Valley companies has “the potential to destroy a lot of value at most companies.

” Doing good costs time and money, and it is rarely profitable. If it were so easy and rewarding, financial exclusion would likely not be a problem for billions of people in the first place.

But that is the point. If a company is to claim that it is mission-driven, it cannot simply make its products and assume that it will be used for good. Even if that assumption is correct, a mission-driven organization must do part of that work itself if it is to ensure its products and work are directed toward doing good.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.This article was co-authored by Nikhil Raghuveera and Stewart Scott.

Nikhil Raghuveera is a fellow at the Atlantic Council GeoTech Center. He previously worked in economic consulting, nonprofit consulting, cryptocurrency and venture capital.

Stewart Scott is a program assistant at the Atlantic Council GeoTech Center.

It's been a challenging year for Wall Street. We've witnessed the quickest bear market decline of at least 30% in history, as well as the most ferocious comeback of all time, with the benchmark S&P 500 taking less than five months to reach new highs.

But one investment that hasn't been phased by the coronavirus pandemic or heightened volatility is the cryptocurrency bitcoin. On a year-to-date basis, through Wednesday evening, Oct. 14, bitcoin was up just shy of 60%.




IMAGE SOURCE: GETTY IMAGES.

Why is bitcoin outperforming in 2020?

Why does bitcoin continue to outperform equities? For one, there's the idea of scarcity. Only 21 million bitcoin tokens can be mined, which creates a level of scarcity that pushes up the value of these digital tokens.

Another reason bitcoin has done so well is the expectation of a digital revolution. This is to say that bitcoin buyers believe the utility of paper money has come and gone.

This could prove somewhat accurate with the pandemic highlighting the potential for physical cash to be a carrier of harmful germs. With the rise of peer-to-peer payment platforms, bitcoin looks to become the superior digital currency.

Bitcoin also benefits from its first-mover advantage in the cryptocurrency space. It was the first digital token to catch on with investors, and happens to be the largest on a market-cap basis by a significant amount (it's five times the size of Ethereum, the second-largest cryptocurrency by market cap).

Today, bitcoin serves as the intermediary asset on a number of crypto investment platforms if you want to purchase a less-common token (i.e., anything not named Ethereum or Ripple).




IMAGE SOURCE: GETTY IMAGES.

Buying bitcoin could be a big mistake

But as good as bitcoin has been for investors in 2020, my blunt opinion is that it's a terrible investment. Here are 10 reasons you should avoid bitcoin like the plague.

1. Bitcoin isn't really scarce

First of all, bitcoin is only as scarce as its programming dictates. Whereas physical metals, such as gold, are limited to what can be mined from the earth, bitcoin's token count is limited by computer programming. It's not out of the question that programmers, with overwhelming community support, could choose to increase bitcoin's token limit at some point in the future. Thus, bitcoin offers the perception of scarcity without actually being scarce.

2. It has a utility problem

The king of cryptocurrencies also has a utility problem. To date, only 18.51 million bitcoin tokens are in circulation, with an estimated 40% of these held by small group of investors. Even considering the fact that fractional token ownership exists, roughly 10 million to 11 million tokens in circulation aren't going to go very far. For context, global gross domestic product was $81 trillion in 2017. Meanwhile, bitcoin has approximately $114 billion to $125 billion in tokens freely circulating and not held tight by investors. There's minimal utility here. 

3. There's a low barrier to entry

Bitcoin may enjoy first-mover advantage at the moment, but the barrier to entry in the cryptocurrency space is especially low. All it takes is time and coding knowledge for blockchain -- the digital and decentralized ledger that records transactions -- to be developed and a digital token to be tethered to the network. There's nothing unique about bitcoin's underlying blockchain that other businesses couldn't one-up.




IMAGE SOURCE: GETTY IMAGES.

4. Few (if any) tangible means to value bitcoin

Another beef with bitcoin is that there's no tangible way to value it as an asset. For instance, if you want to buy shares of a publicly traded company, you can scour income statements, its balance sheet, read about industrywide catalysts, and listen to management commentary from recent conference calls and presentations. In other words, you can make an informed decision.

With bitcoin, there is no tangible data for investors to wrap their hands around. There's transaction settlement times and total circulating token supply, but neither of these figures tells us anything about the value or utility of bitcoin.

5. Fiat currencies may work on blockchain

I believe investors are also placing their faith in the wrong asset. Over the long term, blockchain technology is where the real value lies. Blockchain can be used to reinvent supply-chain management and expedite overseas payments. But when folks are buying into bitcoin, they're gaining ownership in digital tokens with zero ownership of the underlying blockchain.

To build on this point, companies are also testing blockchain that's tethered to fiat currencies. For example, Mastercard (NYSE:MA) was awarded a patent in July 2018 "for linkage of blockchain-based assets to fiat currency amounts." This implies there may not be any need for a made-up digital token to be used at all on blockchain networks.

6. Blockchain is years from being mainstream

A sixth issue is that blockchain is still years away from gaining real relevance. Three years ago, when blockchain companies and cryptocurrency stocks were the hottest thing since sliced bread, it was expected that blockchain technology would be quickly adopted.

Little did investors foresee the Catch-22 that would arise. Specifically, no businesses are willing to make the costly and time-consuming switch to blockchain without the technology being broadly tested -- yet companies aren't willing to make this initial leap to test the technology and prove its scalability.In short, blockchain is years away from being a mainstream technology.




IMAGE SOURCE: GETTY IMAGES.

7. Fraud/theft is a serious issue

By no means are cryptocurrencies the only asset to be hacked by thieves, but there are serious fraud and theft concerns that accompany bitcoin. For instance, novice bitcoin investors may not understand the need to store their tokens in a digital wallet, thereby leaving them susceptible to theft by hackers.

Additionally, it's been hypothesized by numerous blogs and publications that North Korea has turned to bitcoin mining and theft to funnel money into its isolated economy. Bitcoin is commonly viewed as the "currency" of choice for criminal organizations. 

8. There's no regulation

Bitcoin is also an unregulated asset. Though this lack of regulation is actually a selling point for today's crypto investors given that it provides some degree of anonymity, it's bad news if something ever goes wrong. Since the majority of cryptocurrency trading and transactions occur outside the borders of the United States, the Securities and Exchange Commission is very limited in what it can do if your digital tokens are ever stolen.

9. The tax situation is a nightmare

If you think preparing your federal income taxes stinks now, try preparing them after investing in and/or using bitcoin in any transaction. The Internal Revenue Service expects you to report capital gains and losses tied to investment activity, as well as gains and losses associated with purchasing goods and services.

For example, if you bought a single bitcoin token at $11,000, then used a fraction of your bitcoin to buy a new smartphone for $1,000, you'd have to calculate the value of your bitcoin used at the time of the transaction and recognize capital gains or losses relative to your cost basis. It's a gigantic headache.




IMAGE SOURCE: GETTY IMAGES.

10. All bubbles eventually burst

Last, but not least, all next-big-thing investment bubbles eventually burst. No matter how excited investors are about bitcoin and its underlying blockchain, history suggests it won't be enough to match lofty expectations.Mind you, we've already witnessed multiple 80%-plus declines in bitcoin throughout its history.

Extreme volatility is a given with digital currencies like bitcoin, and history would suggest that significant downside from its current price is a near certainty as well.

If you are unfamiliar with cryptocurrency it is unlikely you will know what “Decentralised Finance” (DeFi) is.

Those who do, know that today anyone can exchange their money for a stablecoin (a cryptocurrency backed by a reserve asset), invest them in a promising project and hopefully watch their investment grow.

Is this a variation on the classic pyramid scheme? Not in the sense of Charles Ponzi. But it is clear that the explosive growth of DeFi platforms is driven by a rapid influx of liquidity into the new market, and cannot continue indefinitely.


Nevertheless, the technologies embedded in this infrastructure open up tremendous opportunities for rebuilding the global financial system.The author of this column has devoted 25 years of his life to banking.

Having bought the dwarf National Reserve Bank in Moscow in 1995, I sold it this year as one of the most reliable banks in Russia. It is a shadow of its former self, 20 times smaller, but with no liabilities or obligations.

For a quarter of a century I was the CEO of the third largest private bank in Russia in equity capital terms, after Sberbank and VTB. I was also the constant target of corporate raiders backed by corrupt werewolves from the FSB, which destroyed my business.

Modern bankers ruin their banks by pocketing clients’ money. Since the late 90s, thousands of Russian "banksters" (a portmanteau of "banker" and "gangster") from thousands of banks, appropriated more than $100 billion of their clients’ money and left the country with their stolen money.

Or they opened a new "business" at home, depending on the thickness of the krysha [“roof" in Russian, signifying criminal protection] in government.  

The social function of banks is to serve as the circulatory system of the economy.

They allow transactions in exchange for goods and services, they are engaged in lending, ensuring production, and accumulation of resources. However, the world banking community has turned into an “anti-bank”, whose function is to misappropriate customers’ assets and launder “dirty money”, the volume of which is increasing globally by $1 trillion every year.  


Further confirmation of this can be found in the recent publication by the International Consortium of Investigative Journalists (ICIJ) of the leaked reports of Financial Crimes Enforcement Network (FinCEN – a division of the US Treasury). According to these documents, the five largest international banks laundered $2 trillion even after US authorities had already  fined them for previous misconduct.

As a result, a huge parasitic class has been formed, made of bankers, fake investors, lawyers, auditors and service personnel, who rule entire states called "offshores" and the countries that are invented in them. This class produces nothing but "dirty money".  

Alas, national law enforcement structures and courts are not able to resist this evil on a systemic level – they only provide palliative care, by fighting against individual scams. My appeal for the creation of new international structures remains a lonely one.

Meanwhile, people who really add or invent tangible value in society, by furthering scientific and technological progress or culture, are less and less able to access financial resources.

Their income is incomparable with the wealth of those who are involved in the global oligarchy, which has no physical or intellectual labour at its source.

Billions of people are completely cut off from banking services partially due to their high cost and lack of interest in the poor clients on the part of the banksters, who have nothing to steal from them. A system of financial apartheid drives nations and entire continents into poverty.

This conflict is becoming especially obvious now, amid the backdrop of a recession caused by the coronavirus pandemic. Now money itself, which is printed in huge and unsecured quantities by national financial institutions, is increasingly devaluing.  

Sooner or later, this upside-down pyramid must collapse, and the bubble inflated in the stock markets must burst. Excess liquidity from the stock market will inevitably rush into the real world, turning the depreciating money into dust, regardless of their denomination. This will lead to another apocalypse-scale heist.

Fortunately, the human mind does not stand still. Cryptocurrencies, which 10 years ago were perceived as a joke and a toy, are today an important part of the international financial system. The next step will be the "digitalisation" of real assets, including production facilities, real estate, goods and services, with their holding in distributed ledgers.

Many governments that foresee the benefits of these technologies are beginning to implement them. In March, the German Federal Financial Supervision Authority (BaFin) recognised cryptocurrencies as financial instruments.

On 11 August, the German Federal Ministry of Finance (BMF) and the Federal Ministry of Justice and Consumer Protection (BMJV) presented a bill on blockchain-based digital securities.

Xi Jinping, the leader of the most populous and second richest country in the world, said a year ago that the development of blockchain is one of the most urgent tasks for the state.  

Last April, the Central Bank of China, as part of a pilot program, introduced a national cryptocurrency (DCEP) in four major cities in the country. The site for the 2022 Winter Olympics, to be held in Beijing, will also be the basis for exploring opportunities with DCEP.  

The latest news, on 3 September, is that the Swiss canton of Zug began accepting tax payments in Bitcoin and Ethereum. Оn 21 September, the United States Office of the Comptroller of the Currency (OCC) and the Securities and Exchange Commission (SEC) published a stablecoin guide, which provides the first detailed national guidance on how fiat-backed cryptocurrencies should be treated in accordance with the law.

Thus, the regulators gave the green light to work with the issuers (or founders) of stablecoins.

Take a look around: tools that until recently were the dreams of science fiction are becoming reality.

Artificial intelligence is already driving vehicles, and the profession of ‘driver’ may die within the next decade. In the same way, blockchain technologies and smart contracts will make it unnecessary to employ the vast majority of people in the financial sector, and will thus eliminate "banksters" as a social phenomenon.  

With Decentralized Finance (DeFi), it became possible to directly connect clients of traditional banks without the participation of an intermediary in the form of the bank itself, the functionality of which in this case is performed by a so-called “smart contract”.

At the same time, no one will be able to steal a client’s money, because the DeFi system protects them from greedy bankers. A smart contract obeys only the laws of mathematics and, aside from the risk of computer hacking which also exists in conventional banking, it is incorruptible – and it does not need villas on the French Riviera, nor private jets or yachts.  

The current DeFi projects are based on the exchange of liquid tokens (mainly decentralised cryptocurrencies) on the principles of collateralised lending. They are quite primitive and serve either for simple mortgage lending, or for the so-called “Yield Farming” – empty inflation of liquidity for the sake of stock growth with their subsequent sale on the free market.

For example, I have invested $100,000 in one such DeFi platform licensed in Estonia, just out of curiosity. Three days later I checked my digital wallet and found out that I had already earned over $300, which I easily transferred to my bank account via crypto exchange. (I should point out this isn’t investment advice and people should check before putting their money in any particular crypto-currency or platform).

The Independent Decentralized Financial Ecosystem (some might call it a "bank 2.0"), which I am looking to set up with some partners, represents a new generation of bank in which all participants are simultaneously beneficiaries.

It would offer customers the full range of services of traditional banks. Those include currency exchange, deposits, lending, settlement and cash services, local and international transfers. The fundamental distinctness of this platform comes from its supranationality. 

The system for the execution of smart contracts based on blockchain technology is located on the network simultaneously everywhere and nowhere.

 Whatever happens to the people who manage the system, all obligations will be fulfilled, since they are not dependent on personal decency, rather they are enshrined in smart contracts. In this case, of course, it is necessary to monitor the full legal compliance of the issue of credit-collateral tokens with the legislation of the country in which it is carried out.

The most significant aspect of this project will be to provide a working platform for a huge number of third-party start-ups and innovation. This is a mechanism that will ultimately connect a Thai-based IT creator in need of funding, or a waste recycling entrepreneur in Zimbabwe, with a potential investor from Norway or Japan.

The system will include hundreds and thousands of projects of talented people, each of which will become part of the global infrastructure – just like any major bank has hundreds and thousands of projects, related to a financial institution.

Besides, this system will provide additional opportunities for financial transparency in the implementation of non-profit projects – for example environmental protection. Or charity, which, alas, suffers from the fact that half of the hundreds of billions USD donations allocated annually around the world are simply stolen directly or through so-called "management expenses".
  This year my son Evgeny and I visited Chad – to support the local national park. At N'Djamena International Airport, against the backdrop of several dilapidated ancient Cessnas, sat a new Bombardier Global Express jet – white with blue letters “UN OCHA” (United Nations Office for the Coordination of Humanitarian Affairs). I once had one, it costs $60m.  

And when we flew away, there was a similarly "branded" Embraer Legacy worth $30m. There are cargo planes for the transportation of humanitarian aid, which are much cheaper and more spacious. I wondered how many hungry Chadians could be helped with this money from the international community, spent by UN officials for their own comfort?

Crypto-economics allows a donor of any amount, even one pound, to follow their donation to a poor child in Bosnia in need of an expensive operation, to a farmer in Uganda in need of new technology, or to a particular elephant in Gabon. All this information can be completely opened up to the relevant parties through the charity token blockchain.

Perhaps we are on the verge of a real revolution in the international financial system, and the end of the bankster. I do not pretend to be the ultimate oracle of truth; there is much to debate in my piece. Yet one thing is indisputable: in the form in which this system exists now, it is leading the world economy to disaster.

Alexander Lebedev’s family co-own The Independent and Evening Standard titles 

Prosecutors and regulators are signaling an intent to expand accountability amongst cryptocurrency platforms under U.S. laws and regulations, including the Bank Secrecy Act (BSA). On October 8, 2020, the United States Department of Justice (DOJ) released a report on enforcement challenges and areas of focus related to entities dealing in cryptocurrency.

The report came shortly after the DOJ and the Commodity Futures Trading Commission (CFTC) announced an indictment and civil charges against directors and entities related to BitMEX, a platform for trading in futures contracts and other derivatives tied to cryptocurrencies, for failing to register with the CFTC as a Futures Commission Merchant (FCM) and to implement proper anti-money laundering (AML) measures.

The DOJ report and related enforcement actions are aligned with an international focus to increase AML accountability and broaden jurisdiction over cryptocurrency trading platforms.

Shortly before the DOJ’s report was released, the European Commission published several proposals for new EU regulations on crypto-assets and digital operational resilience for the financial sector, further signaling a global interest in clarifying the laws and regulations that govern cryptocurrency.

Shearman’s reporting on these regulations can be found here.DOJ Releases Report Outlining Threats and Enforcement Challenges Related to CryptocurrencyOn October 8, 2020, the DOJ Attorney General’s Cyber-Digital Task Force released “Cryptocurrency: An Enforcement Framework.

” The report outlines the emerging threats and enforcement challenges related to the use of cryptocurrency and the Department’s response strategies.

The report shows that authorities are continuing to grapple with the “breathtaking possibilities” of cryptocurrencies and the “emerging threats posed by [the] rapidly developing technology.

”The report begins by outlining the legal and “illicit” uses of cryptocurrency. Illicit uses fall into three categories: (1) financial transactions associated with the commission of crimes; (2) money laundering and the shielding of legitimate activity from legal requirements; and (3) crimes, such as theft, directly implicating the cryptocurrency marketplace.

The report appears to be particularly concerned with criminals (including foreign terrorist organizations) using cryptocurrency to carry out illegal activities.For example, the report emphasizes the risk that cryptocurrency can be used as a tool for money laundering:

“[u]nlicensed or unregistered exchanges or money transmitting businesses can provide an avenue of laundering for those who use digital currency for illicit purposes.

” The report warns of cryptocurrency exchanges that avoid compliance with AML and know-your-customer (KYC) regulations, allowing criminals and terrorists “to hide their illicit financial activity from regulators and investigators.

”Next, the report outlines the laws and regulations that govern the use of cryptocurrency. The report notes that “[m]uch of the regulatory activity conducted by the agencies [overseeing the use of cryptocurrency] focuses on money services businesses (MSBs) and virtual asset service providers (VAPs).

” In the United States, individuals and entities that offer money transmitting services involving virtual assets (such as cryptocurrency exchanges, issuers and brokers) are considered MSBs that are subject to the BSA and its AML regulations.

Authorities with regulatory control over the use of cryptocurrency include the DOJ, the Department of the Treasury, the Securities and Exchange Commission and the CFTC.In particular, under the Commodity Exchange Act (CEA), the CFTC has oversight over derivatives contracts, including futures, swaps and options that involve a commodity.

The CFTC (and multiple federal courts) have held that virtual currencies fall within the CEA’s definition of “commodity.” Further, “[t]he CFTC’s jurisdiction is implicated when a virtual currency is the underlying asset in a derivatives contract, or there is fraud or manipulation involving a virtual currency traded in interstate commerce.

” For example, the report notes that the CFTC has taken action against unregistered bitcoin futures exchanges illegally offering margined or financed retail virtual currency transactions in violation of the retail commodity transaction provision of the CEA.

However, the report further notes that the CFTC’s jurisdiction does not cover ‘spot’ or cash market exchanges and transactions involving virtual currencies that do not utilize margin, leverage or financing.

Finally, the report warns that many entities dealing in cryptocurrency (including exchanges and brokers) “often fail to comply, in whole or in part, with the BSA and other legal requirements, thereby threatening the Department’s investigative abilities and undermining public safety.

” Specifically, the report appears concerned with cryptocurrency exchanges, peer-to-peer exchangers and platforms, and cryptocurrency kiosks, which are considered MSBs and are subject to the BSA and must register with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and follow AML and KYC protocols.

The report also warns that “the global and cross-border nature of transactions involving virtual assets [and] the lack of consistent AML [protocols] . . . is detrimental to the safety and stability of the international financial system.

” Importantly, the report notes that companies using cryptocurrency physically located outside of the United States may still be subject to U.S. law, including the BSA, if, for example, entities or individuals engage in money transmission as a business and operate in part in the United States.

The report emphasizes that the DOJ will continue to work with its regulatory partners, including the CFTC, to prosecute “those who use cryptocurrencies to commit, facilitate, or conceal crimes.

” The DOJ will also work with federal, state and foreign regulatory and law enforcement groups to increase awareness about the threats posed by cryptocurrency platforms.

DOJ and CFTC Charge BitMEX Over Failure to Implement Anti-Money Laundering MeasuresOn October 1, 2020, the DOJ filed criminal charges against four founders and executives of BitMEX, a platform for trading in futures contracts and other derivatives tied to cryptocurrencies, for violating and conspiring to violate the BSA.

Prosecutors allege that defendants willfully caused BitMEX to fail to establish, implement and maintain an adequate BSA-compliant anti-money laundering AML program.

The indictment, along with a concurrent civil action brought by the CFTC, further show that U.S. prosecutors and regulators may consider certain cryptocurrency trading platforms that serve U.S. customers to be FCMs subject to the BSA, regardless of where the platforms are incorporated.

The charges also indicate a push to hold directors and executives of such platforms accountable under AML rules and requirements.Jurisdiction over defendants appears to be predicated on BitMEX’s offering to U.S. customers trades in futures contracts, options, swaps and other derivatives products tied to the value of cryptocurrencies.

For example, as noted in the indictment, “BitMEX accepts Bitcoin to margin and guarantee its derivative products, and . . . has offered its customers up to 100 times leverage on certain of its products.

” According to the indictment, these activities caused BitMEX to have been operating as an FCM required to comply with the BSA.

In addition to alleging that BitMEX is an unregistered FCM, the CFTC complaint charges defendants with operating a facility for the trading of swaps without being registered as a swap execution facility or as a designated contract market, in violation of the Commodity Exchange Act and CFTC regulations.

According to the indictment, defendants took affirmative steps to exempt BitMEX from having to comply with the BSA, including by incorporating BitMEX in the Seychelles, where defendants believed that they could serve U.S. customers without having to comply with U.S. laws (the indictment alleges that one defendant even bragged that it would cost less—“just ‘a coconut’”—to bribe regulators in the Seychelles than it would in the United States).

However, as defendants “intended for BitMEX to solicit and accept customers in the United States,” and, in fact, operated within the United States and served thousands of customers located in the United States, the indictment alleges that BitMEX “has at all relevant times been a [FCM] required to comply with the [BSA].

”Accordingly, BitMEX was required to register with the CFTC and to maintain an adequate AML program that included a KYC component—which BitMEX failed to do.

The cumulative effects of defendants’ actions, according to the indictment, made BitMEX “available as a vehicle for money laundering and sanctions violations.

”The CFTC’s civil enforcement action, which was filed in the United States District Court for the Southern District of New York against three of the defendants (the founders of BitMEX) and five related entities, alleges that defendants failed to register with the CFTC and failed to implement AML and KYC procedures and a customer information program.

In a press release accompanying the filing of the action, CFTC Chairman Heath P. Tarbert noted that “[d]igital assets hold great promise for our derivatives markets and for our economy. For the United States to be a global leader in this space, it is imperative that we root out illegal activity like that alleged in this case.

”On October 8, 2020, BitMEX announced that each of the four individuals charged in the DOJ indictment have stepped back from their respective roles with the company.

Anticipated Impact on Cryptocurrency Platforms and ExchangesThe report and charges show that prosecutors and regulators are concerned with the harm that can be caused by cryptocurrency platforms that operate unchecked—particularly with regards to AML accountably.

As the DOJ noted in its press release announcing the BitMEX indictment, the charges “represent another push . . . to bring platforms for money laundering into the light.

” As noted throughout the DOJ report, several regulatory bodies have oversight over companies dealing in cryptocurrency, and the DOJ will continue to work with those bodies to ensure that such companies comply with the pertinent laws and regulations (e.g., the BSA or CEA).

Accordingly, directors and executives of such companies—even those incorporated in foreign jurisdictions—should be aware of their company’s potential classifications as MSBs or VAPs, and potential liability under U.S. laws like the BSA.

Directors and executives should develop compliance programs that strictly adhere to proper AML and KYC practices.

Cryptocurrency trading companies must also continuously monitor transactions and collect data analytics, be mindful of key risk indicators when onboarding new customers, and promptly report suspicious trading activities.

While the DOJ report suggests that there are several open jurisdictional issues related to cryptocurrency platforms (e.g., the extent to which prosecutors can reach to enforce U.S. laws against foreign actors), these statements and actions collectively indicate that authorities may be expanding their reach into cryptocurrency platforms.

Shearman & Sterling LLP - Danforth Newcomb, Philip Urofsky, Donna Parisi, Reena Agrawal Sahni and Daniel Chozick

On Thursday Filecoin (FIL) began trading across major exchanges over three years after its initial coin offering. 

Upon listing, the token traded at wildly different prices across multiple exchanges and while the premium shows there is still an appetite for altcoins, investors interpreting the rallies from FIL and Polkadot (DOT) as the beginning of an altseason may be disappointed. 

Hours after trading began, top cryptocurrency exchanges including FTX, Binance, and Gemini announced that they would swiftly list the altcoin. Consequently, the token saw significantly different prices across platforms due to a combination of limited liquidity and supply.





The 15-minute chart of Filecoin (FIL) after the FTX listing. Source: TradingView.comHours after the FTX integration, the FIL futures contract processed $150 million in trading volume. FTX CEO Sam Bankman-Fried said:

“$FIL has traded about $150m so far. Roughly 60% of the volume has been on FTX! Started around $30, went up to $80 on FTX and $200 on other exchanges, now around $40-$80 on various exchanges.”

Traders expect a boring fourth quarter

Historically, the fourth quarter has been relatively slow for the entire crypto market and in 2018 and 2019 BTC saw losses against the U.S. dollar during Q4.

Based on historical trends and what appears to be the end of an explosive multi-month rally, traders expect a drawn out consolidation phase as the next step for the crypto market. 

Michael van de Poppe, a full-time trader at the Amsterdam Stock Exchange, suggested that an altseason in early 2021 is most likely. He wrote:

“I do believe we'll be seeing a relatively boring and corrective quarter on the cryptomarkets. In history; $ETH frequently bottoms out in December, to start running the quarter after. $BTC dominance to run up, to have an altseason in Q1 2021. Continuing the patience.”

Bitcoin and cryptocurrency use by terrorists, rogue nations and other criminals has grown in recent years—with high-profile attacks drawing international attention.

The illicit use of bitcoin and cryptocurrency ranges from money laundering and tax evasion to extortion, with cyber criminals increasingly demanding bitcoin and crypto payments in ransomware attacks on computer systems.

Now, the U.S. Department of Justice (DOJ) has warned the emergence of bitcoin and similar cryptocurrencies is a growing threat to U.S. national security, with the attorney general William Barr’s Cyber-Digital Task Force calling it the "first raindrops of an oncoming storm.

"MORE FROM FORBES

Neither Trump Nor Biden Will Help The U.S. Dollar, Warns Early Facebook Exec-Calls Bitcoin An 'Insurance Policy'By Billy Bambrough


"Current terrorist use of cryptocurrency may represent the first raindrops of an oncoming storm of expanded use," the Cyber-Digital Task Force said in a report that found bitcoin and cryptocurrencies pose an emerging challenge to law enforcement activities.

"Cryptocurrency also provides bad actors and rogue nation states with the means to earn profits."

The DOJ report, titled Cryptocurrency: An Enforcement Framework and published by the Attorney General’s Cyber-Digital Task Force last week, found bitcoin and cryptocurrencies have been used to support terrorism, purchase illicit items, conduct blackmail and extortion, cryptojacking and launder funds.

Investigators also said bitcoin and cryptocurrencies could be "detrimental to the safety and stability of the international financial system."The response of U.S. and international law enforcement has been held back by inconsistent regulation country-to-country.

The DOJ has spent the last two years determining how best to address these issues, according to the document that "outlines the Department’s response strategies.

"MORE FROM FORBES

'High Risk' Warning: A Major Bitcoin Exchange Is In Even Worse Trouble Than ThoughtBy Billy Bambrough“

Cryptocurrency is a technology that could fundamentally transform how human beings interact, and how we organize society," Barr said in a statement alongside the report.

"Ensuring that use of this technology is safe, and does not imperil our public safety or our national security, is vitally important to America and its allies.

"The report underlines the growing seriousness the U.S. and other international powers consider bitcoin and cryptocurrency development and adoption.

Earlier this year, Pentagon documents revealed the U.S. Department of Defense has wargamed scenarios involving a Generation Z rebellion that uses bitcoin to undermine and evade "the establishment.

" In the Pentagon war game, young people born between the mid-1990s and early 2010s use cyber attacks to steal money and convert it to bitcoin.

Last year, Treasury secretary Steven Mnuchin, echoing U.S. president Donald Trump's criticism of bitcoin and cryptocurrencies, warned that bitcoin will not be widely used in ten years time and that it could be considered a U.S. national security risk.

The current economic situation in South Africa is pushing a lot of the country's citizens into the cryptocurrency markets.During the first quarter of 2020, the economy plunged deeper into recession.

The South African economy was already suffering from a breakdown even before the pandemic hit globally. As seen when the GDP of the country dropped to 2% at the beginning of the year as opposed to the statistics from last year.

With a 0.1% drop for the year-on-year basis data. This further spiked when the nation was experiencing power outages, which is still one of the biggest problems affecting the country to date. 

South Africa’s recession is also heightened by the fact that President Cyril Ramaphosa imposed one of the longest lockdown restrictions during the peak of the pandemic, and the result was that the economy was pushed far deeper down.

The minister of finance in South Africa, Tito Mboweni, noted that throughout this year, the economy is expected to still have a 7% plunge further into this recession, making a lot of nationals worried because this is worse than the 1930s Great Depression that affected the world.

This is bad because the country was trying to recover from the economy of the time of former president Jacob Zuma, which left the nation in a deplorable condition. GDP in South Africa started falling in 2013 and has only gotten worse in the advent of the pandemic.

The economy of South Africa is currently going through one of the worst economic crises it has ever been faced with, and the rate of recession is only getting worse and has been the biggest hit the country has ever taken.

This budget deficit is not only affecting the employment rates in the country but also the local currency, forcing people to buy up on cryptocurrencies in order to somehow retain the worth of their money.

This is unheard of, because the currency is one of the economy’s strongest assets, and if inflation rates are uncontrollable, it is difficult to foresee when the economy will become stable. FX volumes are also down as people are starting to flee towards cryptocurrencies.

However, South Africa being home to some of the best African financial traders, it was expected that the population would quickly diversify, but not necessarily into crypto. 

The chief economist for Africa and the Middle East at Standard Chartered, Razia Khan, said that if the economic starting point of a country is the unemployment rate, of below 30%, it would be complicated to anticipate how deep the decline could be.

The decline became very evident with the steep decline in the activities of the manufacturing and mining industries, which is the economy’s pillar. There was also a 20% deterioration in the formation of gross fixed capital. This statistic was the country’s worst since 2008.

This situation of the economy has made it very difficult for the state to provide a relief fund because it is very expensive for the administration to fund since the minister of finance is trying to control the budget deficit. 

As lockdown measures have become monetarily unreasonable Mr. Ramaphosa is steadily resuming the economy while there is a flood in COVID-19 cases, especially in the nation's industrial capital, Gauteng.

The nation has recorded over 144,000 coronavirus cases, of which more than 42,000 were identified in the previous week. On Tuesday, the minister of health, Zweli Mkhize, said that cases in Gauteng were rising quicker than anticipated and didn't preclude getting back to strict regulations locally.

He told the radio that there might be a need in certain regions for restrictions, it may not be public, but will however be restricted. Yet, no such choice has been taken up until now.

There are signs of new confirmed cases coming from Cape Town, where the nation's first large number of infections started, however, its clinics stay under tension.

The President of South Africa, Cyril Ramaphosa, has been confronted with a  lot of backlash from his citizens and is increasing pressurized to quickly start reforms, especially to address the power shortage problem and also and in the telecoms sectors, which are the most prominent in the region, and trying to ensure growth in an economy which has almost been wiped out by the effects of COVID-19, in one Africa’s most industrialized economy.

The harming effect of COVID-19 on South Africa's economy was clarified a week ago after GDP in the subsequent quarter, the peak of the coronavirus lockdown, dropped nearly five years consecutively, a dive so enormous that the rank of GDP tumbled to the level of 2007.

Taking the country almost thirteen years back.This back-date highlights the problems confronting the president, and his ruling party, African National Congress as they face new calls from the people to embrace a change of an economy where development rates were deteriorating and power outages were happening even before the outbreak of the pandemic. 

With the increase in the number of recorded infected people in the nation's scourge reducing at under 1,000 new cases a day, out of below 650,000 affirmed cases to date, with many businesses gradually reopening

However, the size of the lockdown drop in GDP signified that the administration has to resume its normal activities and also to take measures in bringing the South African economy back from the recession it is going through.

The president of South Africa, Mr. Ramaphosa, said that this will be used to snap the country out of the budget deficit, the economic crisis, and so that it can attain its full potential. 

Besides the many challenges that the country is currently going through which are affecting the president’s administration, there is the way that the plunge of South Africa's public funds is much more profound than in 2007 when the nation had a financial overflow and venture grade appraisals at all three significant organizations.

This year the nation's state debt rounded off its drop into garbage status, in March, Moody's downsized, and the spending deficit is probably going to hit twofold digits as a level of a GDP. Mr. Ramaphosa had promised off a greater amount of South Africa's 4G and 5G range this year to bring down data prices, just as critically securing more power supplies to calm Eskom, the power company prone to power outages.

Both are viewed as significant hindrances to investing. However, the launch date has been pushed back to one year from now, and to get power would have passed the point of no return given the current level of power outages.

Disclaimer: information contained herein is provided without considering your personal circumstances, therefore should not be construed as financial advice, investment recommendation or an offer of, or solicitation for, any transactions in cryptocurrencies.

The Chinese city of Shenzhen will become a testing ground for a new sovereign cryptocurrency with residents issued millions in the digital coin for free. 

As reported by the South China Morning Post, citizens have been able to enter a lottery to receive the digital funds, of which coins worth 10 million yuan ($1.47 million) will be awarded to promote their use in roughly 3,400 designated stores in the Luohu district. 

The 50,000 "red packets" will each contain roughly $30 in cryptocurrency. Chinese citizens living in Shenzhen have been able to apply via iShenzhen, a blockchain-based and government-operated network that backs the new sovereign asset. 

See also: IRS offers grants for software to trace privacy-focused cryptocurrency trades

Digital Renminbi, an official state app, can be used to create an e-wallet to store and exchange the cryptocurrency. The gift amounts can only be used until October 18 and cannot be transferred to traditional bank accounts. If the coins are not used, they will be taken back. 

The scheme is considered a pilot for the digital yuan, also known as Digital Currency Electronic Payment (DCEP). 

CNET: Huawei ban timeline: UK says there's 'clear evidence of collusion' between Huawei and China

The need for an all-optical network

A mind-boggling number of smart devices and sensors are connecting to the internet through cloud-based data centres across the world at a pace unseen before.

By airdropping this vast amount and encouraging residents to spend their funds in a short time, China will be able to test the transactional capacity and reliability of the DCEP system, while also isolating the trial from traditional payment methods and accounts. 

Many cryptocurrencies currently in circulation are decentralized, which means that there is no central backing -- loosening control in comparison to traditional fiat currency, but also increasing the likelihood of market fluctuations. 

However, China's sovereign virtual coin is backed by the People's Bank of China (PBOC), which means the coin should be considered less of a standard cryptocurrency, and more like a government-controlled digital alternative to cash.

TechRepublic: How to secure your open source supply chain

Beyond retail use cases, transport and bill payments are also being floated as potential applications of DCEP.

Other pilot programs have taken place over 2020 to debut DCEP, including in the cities of Xiongan, Suzhou, and Chengdu.

China is seeking to move to a cashless society, and state-backed virtual alternatives could provide the means to do so. However, with every transaction recorded on the blockchain, this may also be considered a risk to privacy as payments would not have the anonymity offered by traditional, physical cash.

Spain’s government has reportedly approved a bill that requires cryptocurrency owners to disclose their crypto holdings and any gains on their assets.

Spain’s Finance Minister and the government’s spokesperson, Maria Jesus Montero, said at a press conference following the weekly cabinet meeting that this bill is part of broader legislation to crack down on tax fraud, several Spanish news outlets have reported.

The bill was sent to the Spanish Congress of Deputies on Tuesday and will now go to parliament for discussion and final approval.“This is a bill that will add to the work already being carried out by tax authorities,” Montero explained but did not go into detail about how the rules will be enforced.

It is one of the latest efforts by the government to raise tax revenue amid a severe coronavirus pandemic-driven economic crisis.

The bill, entitled “Law on preventive measures to combat tax avoidance,” seeks greater control over cryptocurrencies, Criptonoticias publication described, noting that the government intends to “oblige citizens to provide detailed information on balances and transactions carried out inside and outside of Spain.

” If approved, crypto activities that must be reported to the authorities include “acquisition, transmission, exchange, transfer, collections and payments,” the news outlet conveyed.

The Spanish tax authority, the Agencia Estatal de Administración Tributaria (AEAT), began sending out tax notices in April to remind cryptocurrency owners of their tax obligations.According to Global Legal Insights, capital gains from the sale of cryptocurrencies by a resident of Spain are taxed between 19% and 23%.

The higher rate applies to gains in excess of €50,000 ($58,666). The exchange between cryptocurrencies and euros is VAT-exempt.

Meanwhile, all 350 Spanish deputies were sent bitcoin last week as part of an educational campaign by blockchain platform Tutellus and Observatorio Blockchain. This initiative is similar to the Crypto for Congress campaign that recently sent bitcoin to all Members of Congress in the U.S.

• Institutional money is flowing into Bitcoin.
• The trend is likely to gain traction in the nearest future.
• The technical picture implies BTC/USD needs to clear $12,000 to resume the recovery.

Bitcoin is attracting a lot of attention from large companies. According to the recent report published by the Fidelity Investments' cryptocurrency department, almost 60% of the surveyed investors believe that digital assets have a place in a portfolio.

Square, Stone Ridge, MicroStrategy, and the likes turn to Bitcoin to protect their assets from inflation, diversify portfolios, or get ready for an imminent money revolution.

JPMorgan, known for its critical approach towards digital assets, admitted that Bitcoin has a lot of potential.

At the same time, the recent investments announced by large companies can be interpreted as a vote of confidence.

Whatever the motives behind their BTC investments, they signal that big business spotted the advantages of the new investment tool and now pivoting to it, paving way for the cryptocurrency mass adoption. 

Bitcoin is a safe haven

Bitcoin is less vulnerable to the economic woes that may plague other asset classes in the nearest months and years, Fidelity states. They pointed out that digital assets investments allow hedging the risks associated with traditional investments and get exposure to non-traditional returns. 

The careful and informed use of alternative investments in a diversified portfolio can reduce risk, lower volatility, and improve returns over the longterm, enhancing investors' ability to meet their return outcomes.

The experts pointed out that Bitcoin is an easily accessible, liquid, and low-cost investment that can significantly enhance portfolio performance. According to the research, even 3% of Bitcoins in the investment portfolio would have increased the annual returns by over 4% from 2015 to 2020. 

Summary portfolio metrics

Source: Fidelity InvestmentsMeanwhile, the former hedge fund manager Raoul Pal believes that cryptocurrency is the only answer to what the global central banks are doing.Speaking in the interview with Daniela Cambone of Stansberry Research, he explained: 

I don't dislike gold, but when you get to the macro opportunity … if bitcoin starts breaking out of these patterns that it's been forming, it is going to massively outperform gold. I'm 100% sure of that, so in which case why would I have the gold allocation.

BTC/USD: The technical picture

From the long-term perspective, BTC/USD is moving inside the range limited by $12,000 on the upside and $10,000 on the downside. The coin reversed from the channel support at the end of August and has been recovering slowly ever since. While the price is moving towards the channel resistance at $12,000, only a sustainable move above this area will signal that the bullish trend is resumed and open up the way to the psychological 13,000 and $13,800 (the highest level of 2019).

BTC/USD weekly chart

Meanwhile, Bitcoin's market positioning implies that there is a big cluster of 1.48 million BTC addresses holding nearly 1 million coins with their breakeven point on the approach to $11,700. This barrier may slow down the recovery and even push the price towards the channel support. However, once it is cleared, nothing can stop BTC from a sustainable rally.

Bitcoin's IOMP data

Source: IntotheblockOn the downside, the significant barrier comes at $10,700. The wall of 1.5 million addresses with over 1 million coins will protect their breakeven point and absorb the selling pressure. If it is passed, the sell-off may be extended towards $10,000.