Bitcoin Price Hits $10320 as Fed Chairman Confirms Crypto Is a Threat to US Dollar

“A ledger where you know everybody’s payments is not something that would … He also stressed the urgency of making quick progress on blockchain …

Bitcoin price and the overall crypto market reacted positively after Fed Chairman Jerome Powell recently stressed on the importance of private crypto-based transactions. He said that the Fed is working on a number of projects for digital currencies.

Bitcoin price surged over 5% on Tuesday, February 11, pushing it to a five-month high above $10,300 levels. With this move, BTC has surged nearly 50% since the beginning of 2020. At press time, BTC is trading 5.6% up for a price of $10, 304 with a market cap of $187 billion.

This latest price surge comes after the Federal Reserve chairman Jerome Powell expressed his interest in digital currencies. Congressman Bill Foster raised concerns about China’s aggressive push to the use of digital currencies. Responding to this, Powell said that the Fed has several projects underway.

This was enough to usher a fresh optimism in the crypto market. Apart from Bitcoin, a majority of the top-ten cryptocurrencies are showing gains between 5-10%. The overall cryptocurrency market cap added $20 billion soon after Powell’s comments, taking it to above $300 billion.

Powell Stresses Need for Private Crypto Transactions

Speaking on the issue of the American economy and its privacy policy, Jerome Powell also stressed the need for private crypto transactions. “A ledger where you know everybody’s payments is not something that would be particularly attractive in the context of the U.S.,” he said.

BREAKING: Fed Chairman Jerome Powell just came out in favor of private transactions for digital currencies.

He specifically said “A ledger where you know everybody’s payments is not something that would be particularly attractive in the context of the US.”

Game on 🙏🏽

— Pomp 🌪 (@APompliano) February 11, 2020

The Feb Chairman also assured that the U.S. is taking sufficient measures to keep with the pace of China’s development. Powell said that the Fed is currently investing a larger amount in digital currency developments. The cryptocurrency market took Powell’s comments is positive as the market surged soon after.

Besides, Powell also acknowledged that Facebook‘s entry in the crypto space with its native Libra cryptocurrency has been a game-changer. Facebook announced its Libra cryptocurrency in June 2019 but is yet to get regulatory approval for the same.

However, Powell admits that his agency understands the importance of digital currencies. And now it is working on further progress in this direction. He also stressed the urgency of making quick progress on blockchain development.

But Powell remains a bit skeptical about the implementation of the Digital Dollar due to privacy concerns. He added:

“The idea of having a ledger where you record everyone’s payments isn’t particularly attractive in the U.S.; it’s not a problem in China”.

It will be interesting to see how the Fed works out its way to accommodate digital currencies in the country’s financial ecosystem. One thing is sure that digital currencies have a huge role to play in the global economy for the next decade.

Altcoins, Bitcoin (BTC), Cryptocurrency News, News

Bhushan Akolkar
Author: Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

Share this article

Thank you!

You have successfully joined our subscriber list.

Related Posts:

  • No Related Posts

China’s Planned Bitcoin-Killer Sparks Major Concerns

The bitcoin price, which has failed to return to its all-time highs set in late 2017 despite a late December rally, was given a substantial boost in the first …

Bitcoin and cryptocurrency have this year successfully provoked central bankers and governments to take digital currencies seriouslythough many remain skeptical.

The bitcoin price, which has failed to return to its all-time highs set in late 2017 despite a late December rally, was given a substantial boost in the first half of this year by social media giant Facebook’s plans for a bitcoin-like rival.

Now, China’s long-awaited answer to bitcoin and Facebook’s libra is taking shape, with People’s Bank of China confirming the “digital yuan” won’t be “for speculation or require the support of a basket of currencies”— leaving many disappointed and others concerned.

bitcoin, bitcoin price, China, crypto, image

Governments and companies around the world have this year gone public with their plans for … [+] bitcoin-like digital currencies–but many doubt any of the proposed tokens will unseat bitcoin.

Getty Images

“The currency is not for speculation,” Mu Changchun, head of the People’s Bank of China’s digital currency research institute, said over the weekend, according to the official Shanghai Securities News and reported by China’s South China Morning Post newspaper.

“It is different to bitcoin or stable tokens, which can be used for speculation or require the support of a basket of currencies,” Mu said, with the newspaper adding “the top-level design, formulation, functional research and testing of the Digital Currency Electronic Payment had been completed,” with “the next step” to roll out pilot programmes.

The news was met with disappointment from China’s social media users, the South China Morning Post reported.

One said there will be “no fun in it,” while another added “if you don’t allow me to speculate on the digital form of the yuan, I’ll speculate on other things, like foreign exchange.”

Meanwhile, China’s plans for a bitcoin-rival have sparked fears Beijing will use the digital yuan to better control its citizens.

“A roller-coaster decade—not just for for banking and money but also for privacy and politics—may just be beginning,” wrote Andy Mukherjee for Bloomberg, a financial newswire.

bitcoin, bitcoin price, China, crypto, chart

The bitcoin price has failed to hold onto its gains from earlier in the year but looks set to close … [+] 2019 up almost 100% year-on-year.

Coinbase

“[China’s digital yuan is] far bigger than [bitcoin]. The crypto yuan, which may be on offer as soon as 2020, will be fully backed by the central bank of the world’s second-largest economy, drawing its value from the Chinese state’s ability to impose taxes in perpetuity,” Mukherjee wrote, adding “a digital yuan could bypass [the current deposit-based banking] system and allow any holder of the currency to have a deposit at the central bank, potentially making the state the monopoly supplier of money to retail customers.”

Mukherjee also warned other nations will follow China’s lead and that “anonymity disappears when cash does.”

Last month, outgoing European Central Bank executive board member Benoît Cœuré, who last year described bitcoin as “the evil spawn of the financial crisis,” outlined plans for a European “central bank digital currency” to rival the likes of Facebook’s libra and bitcoin.

Bitcoin, with its well-earned reputation as internet cash, is only going to become more important as regions, countries and companies try to control digital assets.

Related Posts:

  • No Related Posts

Why is France’s finance minister at war with Facebook’s cryptocurrency?

On Thursday September 13, the French Finance Minister expressed his opposition to the development of the digital currency in Europe, asserting that: …
Advertising

Bruno Le Maire has found a punching bag: Libra, Facebook’s blockchain currency project. On Thursday September 13, the French Finance Minister expressed his opposition to the development of the digital currency in Europe, asserting that: “Our monetary sovereignty is at stake.”

“It’s a bit like Bruno Le Maire versus Libra Act II or Act III,” Loïc Sauce, an economist and cryptocurrency expert at the Institute of Higher Education in Marketing and Commerce (ISTEC), told FRANCE 24. Le Maire has been wary of the project since Facebook announced in June its plan to enable its nearly two billion users to pay and send money with its new currency, Libra.

Protecting the government’s domain

Initially circumspect, Le Maire has since become openly hostile to the plan. In addition to the risk to sovereignty, he has also cited the “danger to consumers” and “systemic risk” when talking about Libra.

“The minister’s reaction is understandable. The power to mint coins is historically the prerogative of the state. Now there is a group of private enterprises (the Libra Association the non-profit that will oversee the currency includes companies such as MasterCard, Uber, Spotify and Vodaphone) saying that their currency is more useful than those being employed in the territories where Facebook is present,” said Michel-Emmanuel de Thuy, digital director at 99 Advisory, a management consulting firm that specialises in the financial sector.

Le Maire hasn’t shied away from hitting Facebook where it hurts. By raising the issue of monetary sovereignty, Le Maire is insinuating that, if successful, Libra could interfere with monetary policies, de Thuy noted. If two billion people turn to Libra for a portion of their online transactions, “governments risk losing control over a significant part of financial flows, which would deprive them of information that is important for determining monetary policy,” said Nathalie Janson, an economist and bitcoin specialist at the Neoma Business School.

For the time being, Facebook is only considering using Libra to allow its users to transfer funds through its site or its messaging services (WhatsApp, Messenger) and to pay some of its merchant partners online. “But as technological progress accelerates, some countries may fear that this dematerialised currency will, in the not too distant future, be used to pay for everyday purchases, such as baguettes,” de Thuy said.

Facebook ‘too big to fail’

In a world where Libra is established as a currency that competes with the euro, the dollar, or other currencies, Facebook would become de facto “too big to fail”, like the banks that governments cannot let go bankrupt for fear of destabilising their entire economies. If Mark Zuckerberg’s Facebook empire were to collapse, the money that users had in their Calibra virtual portfolios managed by Facebook “would not be covered by a government guarantee, as can be the case with bank accounts, and the losses could affect the entire economy. This is the systemic risk that Bruno Le Maire is referring to,” Janson explained.

These worst-case scenarios remain hypothetical and Libra is still in the development stages. But Le Maire believes that prevention is better than cure. He is not the only one: American senators also strongly expressed their opposition to Facebook’s planned currency during the July 2019 hearing of David Marcus.

But figuring out how to respond is not easy. “Lawmakers could, at most, prohibit the payment of taxes in Libra and a court could sanction a contract that uses this currency as a means of payment,” Janson said. Sauce concurred. “Beyond that, the state’s means of intervention are very limited. If an American website, for example, decides to allow payment in Libra, France cannot prohibit it,” he said.

A public cryptocurrency to counter Libra?

Likely aware of those limits, Le Maire seems to be in favour of creating a digital currency managed by central banks a kind of public Bitcoin – in response to Libra. In an interview with La Croix newspaper (and without ever mentioning Facebook’s initiative) he explained that such a digital currency would have the advantage of making “transactions faster and cheaper” (because there would be fewer costs associated with cash management) and would facilitate access to financial services for “less bankable” populations. These are, almost word for word, the advantages Facebook cited when presenting Libra.

Le Maire drove the point home on September 13 by issuing a joint statement with his German counterpart, Olaf Scholz, urging the European Central Bank (ECB) to “accelerate its thinking on a public digital currency”.

“This idea of a public virtual currency has been discussed by central banks for years, but has never been a priority. In a sense, it can be said that the threat of the arrival of Libra has made the debate on the modernisation of the currency more pressing,” de Thuy said.

Such a currency would have the advantage over Facebook’s of “benefitting from the official guarantee of the central bank”, Janson said. But all of the European governments would need to agree on its creation, first in principle and then on the details. In other words, Facebook may have time to introduce its Libra and cash in before the ECB even has a chance to propose an alternative.

The battle between certain countries including France and Facebook for the future of currency could have an unintended victim: the pioneering spirit of cryptocurrencies. Both Libra and the public project proposed by Le Maire call for systems controlled by a central body; whether it is the Libra Association in Geneva or the ECB. These projects are far from the ideal defended by Bitcoin’s promoters, who want to establish a system that would be free of intermediaries, such as banks, and of organisations at the top of the pyramid. Whether it is Libra or a public digital currency that gains a foothold, either would be a blow to the revolutionary ambitions of the original cryptocurrency movement, which aimed to establish a new financial system, Janson concluded.

<span lang=”EN-US”><span>This article was adapted from the original in French.</span></span>

Related Posts:

  • No Related Posts

Head of Libra Association Says Facebook’s Cryptocurrency Will Launch in 2020, Renminbi “Will …

Bertrand Perez, General Director of the Libra Association says Facebook has no plans to delay the launch of its global (crypto)currency network, …

Bertrand Perez, General Director of the Libra Association says Facebook has no plans to delay the launch of its global (crypto)currency network, despite outcry from global regulators.

“We are firmly maintaining our launch schedule, between the end of the first half of next year and the end of 2020,” Perez told online French news site Les Echos this week.

Facebook may be attempting to kowtow to powerful Western interests to help ease tensions if Perez comments to Les Echos are any indication.

In the interview, he assured the public, “the Renminbi will not be part of,” the basket of reserve currencies used to back Libra.

The comment is noteworthy.

In July, Chinese bankers convening at an academic conference at Peking University expressed serious concerns that Libra could upset the balance established by the International Monetary Fund’s Special Drawing Rights basket.

That basket currently includes the Chinese yuan, US dollars, Euros, Japanese yen and British pounds, and “serves as the unit of account of the IMF and some other international organizations.”

“If the digital currency (Libra) is closely associated with the US dollar,” said Wang Xin, director of the People’s Bank of China (PBOC), “it could create a scenario under which sovereign currencies would coexist with US dollar-centric digital currencies. But there would be in essence one boss, that is the US dollar and the United States. If so, it would bring a series of economic, financial and even international political consequences.”

Perez’ interview did nothing to quell China’s concerns:

“(The Libra coin) is 99% fixed, and will include the dollar, euro, yen, pound sterling and Singapore dollar…(as well as) very short-term government dept (less than one year) of these countries.”

As well:

“We are still thinking about weightings, but the dollar should have a very significant weight, around half.”

The Libra Association plans to ongoingly adjust basket holdings based on performance, said Perez:

“If there is a disaster on a currency or crisis between now and the launch of the Libra, we could remove it from the basket, but this decision should be subject to a vote and taken by a two-thirds majority of the association’s members.”

Critics have warned rapid implementation of Libra payments across Facebook’s network of 2.4 billion users could have a destabilizing effect on the current global financial balance and/or could undermine sanctions or illicit finance controls.

Critics have also questioned Facebook’s ability to competently act as a central bank adjusting the taps on a massive currency system, especially given the company’s dramatic mishandling of customer data (ie. the Cambridge Analytica affair).

Other critics have argued that history has proven that currency systems are best managed by elected bodies- not private companies.

The Libra Association has 28 current (mostly corporate) members, and Perez told Les Echos the association plans to bring that number to 100 by next year.

Perez also claimed the association has received “many more than a hundred” requests to join.

Perez dismissed concerns regarding the potentially destabilizing effect of Libra, and said the system will circulate, “a hundred and probably no more than $200 billion (units).”

According to the current model, Libra coins will be “stablecoins” designed to maintain a consistent value via rebalancing of assets in the reserve basket.

The relatively insubstantial amount of Libras (initially?) makes concerns about destabilization overblown, said Perez:

“This is a low figure compared to the global financial markets for currencies. We are not going to become a new BlackRock. For this reason, we do not believe that the fears about the destabilizing nature of this reserve on the monetary policy of the central banks whose currencies are in our basket are well founded. It is their monetary policies that will influence Libra, through the basket, and not the other way around.”

Perez added that, “Facebook’s motto encourages governments to accelerate their own cryptomoney projects”:

“We are also assuring central banks that…we are not going to create money. We are not here to do the work of the banks.”

While the Libra network will not be fully implemented until at least next year, Perez claimed that, “(Libra) is about to obtain…approval as a payment system in Switzerland.”

Related Posts:

  • No Related Posts

German Gov’t Approves ‘Bundes-Chain’ to Combat Libra Cryptocurrency

The German government will approve its proposed blockchain strategy this September which reportedly blocks projects like Facebook’s Libra …

The German government will approve its proposed blockchain strategy this September which reportedly blocks projects like Facebook’s Libra cryptocurrency.


Germany Readies Anti-Libra Response

According to Spiegel, Germany’s federal cabinet will approve its blockchain strategy announced back in June 2019.

While the move signals the country’s intent to be a part of the emerging global economy, the government-run ‘Bundes-chain’ might sound the latest death knell for Libra in Europe.

Thomas Heilmann of the center-right Christian Democratic Union (CDU) says Germany’s legislative coalition already has a standing agreement to prevent the operation of any “market-relevant private stablecoin.”

Commenting on the matter, Heilmann declared:

Up to now, the economy has done a great job in countering crises and inflation with measures taken by central banks. Once a digital currency provider dominates the market, it will be quite difficult for competitors.

Rather than Libra capturing the market in Germany, authorities appear to be in favor of creating a state-backed digital currency which will run on the Bundes-chain.

Part of Germany’s proposed blockchain strategy involves creating a framework for crypto startups in the country. As previously reported by Bitcoinist, Bitbond in May 2019, launched the first-ever regulated security token offering (STO) in Germany.

According to Heilmann, authorities in Germany are hoping that the blockchain strategy will help local crypto startups enjoy competitive advantages over their foreign counterparts.

There is, however, little information as to how a government-run Bundes-chain will incentivize private participants.

Europe Wants Nothing to do with Facebook’s Cryptocurrency

For crypto analyst, Alex Krüger, other countries may soon begin to copy Germany’s approach to the emerging cryptocurrency and blockchain technology industry.

Some more color on Germany’s proposed blockchain strategy/legislation 👇https://t.co/IxrogqbDin

— Alex Krüger (@krugermacro) September 13, 2019

Germany is one of a growing list of nations making efforts to block Facebook’s Libra cryptocurrency.

On Friday (September 13, 2019), French Finance Minister Bruno Le Maire declared that the country will work towards blocking Libra in Europe.

Echoing sentiments similar to those espoused by Heilmann, Le Maire surmised that Libra constitutes a threat to the economic sovereignty of Europe.

In China, the central bank is accelerating efforts to launch the country’s digital yuan project. This move is also part of China’s plan to block Libra.

Meanwhile, the Libra Association is moving forward with its plans to launch the crypto project. The Association recently applied for a payment license with Swiss regulators.

How will a government-run Bundes-chain provide economically viable incentives for private participants? Let us know in the comments below.


Images via Shutterstock, Twitter @krugermacro

Related Posts:

  • No Related Posts