Could a move to limit cash purchases in Australia give cryptocurrency and blockchain a boost?
The Australian government has banned cash for all purchases over $10,000 (€4,728) in a bid to curb tax evasion and money-laundering.
The hard limit comes into force on 1 July 2019. It was announced by the country’s Liberal Party Treasury spokesman Scott Morrison on 8 May. It means that any payment totalling over $10,000 Australian dollars will have to be made by credit card, debit card or cheque. But opinion is split as to whether this represents a real trend of a move to a cashless society.
Australians are still fond of cash – it makes up 37% of all transactions in the country – and this is perhaps why person-to-person and person-to-bank transactions are excluded from the legislation.
“It is very unlikely that cash will become obsolete,” says Sasha Ivanov, CEO of Waves, a blockchain platform that features a multiple-currency wallet and decentralised exchange.
“It will stay, but you won’t be able to use it as freely as you can now.”
Bitcoin and other crypto tokens were supposed to represent a democratisation of money – levelling the playing field for users with the lowest financial capital. It hasn’t quite worked out like this, but “current fintech is unable to provide ease of use, transparency and security for users and governments,” says Ivanov.
Are we moving towards a cashless society? Blockchain enthusiasts seem to think so, but opinion is split on how long it will take, and what the benefits to society at large will be.
Where cash goes we follow
Australia is certainly not the first country to limit large purchases using cash. Most governments recognise that large cash purchases – for deposits on houses or buying cars – are an easy way to wash dirty money.
In 2012’s Monti reforms, lawmakers in Italy forced through a cap on cash payments over €1,000, ostensibly to make it easier for authorities to track payments made to retailers. Italy also has very high levels of tax evasion. The cap didn’t last. In an attempt to boost consumer spending in 2016, former prime minister Matteo Renzi relaxed this hard limitto €3,000.
Elsewhere in Europe the picture is similarly mixed.
Romania limited cash payments to €1000 a day in 2015, but the law only specifies payments between a person and a company. Spain’s limit is €2,500. In Denmark, the limit on cash transactions is 50,000 krone (€6,700) and again was introduced ostensibly to curb money-laundering.
Germany is a relative outlier. It has the highest GDP in Europe at 4.2 trillion US dollars but unlike other high-performing states, its citizens still keep large amounts of cash on them.
German plans to introduce a €5,000 cap on cash transactions in 2016 sparked furious protests. 80% of transactions in the country are still made with physical notes rather than using NFC ‘tapping’ with debit cards, or mobile apps like Apple Pay and Samsung Pay.
As economist Max Otte told Bloomberg, asking ‘Why do Germans like cash?’ is “the wrong question,” he says. Instead we should be asking: “Why have others shifted to a cashless society so quickly?”
In second place in terms of GDP in Europe is the UK. The country is set to reach ‘peak cash’ in 2018, according to the Guardian, as cash payments fall to just 40% of total transactions. This number could fall as low as 21% by 2026.
The cash gap
At the moment, governments are stuck between piecemeal but positive regulation on blockchain and a general distrust of cryptocurrencies. Without the support of legislators, Bitcoin can not yet fill this cash gap.
Sasha Ivanov explains: “Restrictions on using cash are mainly aimed at making the financial system more transparent. While measures like [Australia’s] should not be punitive [to the average citizen] unfortunately in many cases that is what they are.”
It would be short-sighted not to expect more governments to follow suit and restrict cash usage over the next three to five years, Ivanov says, predicting that peak digitisation of money will happen some time between 2025 and 2035.
“That’s where blockchain kicks in, since it covers the need for security and transparency for everyone involved. Over the next 15-20 years blockchain will positively change today’s financial and governmental landscape.”
red Smith, chairman and CEO of FedEx, told an audience this week that those who don’t embrace blockchain technology will be left behind and disrupted.
The head of the logistics company sees great potential in blockchain technology to improve cross-border transfers, and relayed these thoughts to the crowd at CoinDesk’s Consensus 2018 conference in New York.
“Blockchain has the potential to completely revolutionise what’s across the border, ” he said. “For cross-border shipments, ‘trust’ is legal requirement for every transaction. What blockchain has is a potential for the first time ever to make the information available for everybody.
“If you are not operating at the edge of new technologies, you will surely be disrupted. If you are not willing to embrace new technologies like the internet of things and blockchain to face those new threats, you are, maybe subtly, at some point… going to extinction.”
In February, FedEx joined the Blockchain in Transportation Alliance (BiTA) in order to explore how best to utilise blockchain in its business.
CIO Robert Carter, also speaking at the event, added: “We move easily 12 millionshipments a day and that moer than doubles during the peak seasons. While we absolutely believe this technology is going to scale, right now it makes sense for us to do this in our freight world.
“The application of these custody chains… is so critical to the information aspect. We’re operating on this place between the physical world and the digital world.”
Regarding cryptocurrencies and their stability, there’s always plenty of debate, creating an opinion matrix on the subject. Some experts believe the potential growth of virtual coins is undeniable and secure, and on the other hand, others sustain that what happens behind the curtains with cryptos is just a trend with a limited future.
American company Bloomberg, that offers financial software, data, and news, recently deployed a study to determine how the future for cryptocurrencies looks and how comparable virtual coins are with traditional asset classes.
Bloomberg’s research on cryptocurrencies
To complete the study, Bloomberg collected information related to the trading activity of cryptocurrencies over 16 months and observed the volatility of virtual coins to establish how close or far are cryptocurrencies to acting like a traditional asset.
The study was published last Wednesday, May 3rd, on their website. Among other things it firmly concluded that, even though cryptocurrencies have shown a bullish behavior despite its volatility, this doesn’t give assurance that the new form of money will continue this behavior into the future.
An important factor mentioned in the study is that cryptocurrencies are so volatile that they are unlikely to be used as a payment method while purchasing goods or services, and even less so for paying salaries. In fact, during the timeframe of the study, only two out of the thousands of investments not related to cryptos had similar fluctuation.
Similarly, Bloomberg established that cryptocurrencies are not comparable with traditional assets and that if there were to be a relation between these two, it would be very remote.
Bloomberg concludes their study by saying that potential notable returns within the crypto market through Initial Coin Offerings could actually be dwarfed and put at risk with by the government entities designed to keep an eye on virtual coins, such as the US Securities and Exchange Commission’s (SEC).
The insights of the study deployed by Bloomberg are somehow discouraging in relation to what’s the ‘actual’ future of cryptocurrencies.
While there isn’t good reason to disregard Bloomberg’s opinion, it is also true that cryptocurrencies are still new, and their long-term behavior has not been deciphered yet.
So, even when many may think they have it all discovered, the new form of money could strike back and surprise them in the near future. In fact, Goldman Sachs, the giant of the banking industry has recently declared that is opening up a crypto trading desk as many of its users were calling for it.
Ok, so those of you Cryptocurrency aficionados will reguarly visit the website Coinmarketcap.com for your real time view of how your cryptocurrencies are performing, so often that according to Alexa, CMC is now the 154th most visited website in the world.
If you don’t use CMC the likelihood is that you use a tool that uses it’s API’s to pull data into the tool you use.So today if you had checked your coins value, you may of thought WTF as you saw more red than the soles of a pair of Christian Louboutin killer heels.
For all wants and purposes the Cryptocurrency market appeared to have had a brutal, brutal day, loosing >$100Bn of its total market cap, causing many to panic sell thinking the wheels on the Altcoin gravy train had stopped turning.But is this the case? Errrm, actually no.
Earlier today Coin Market Cap removed Korean exchanges from their coin price calculations and being that all coins are about 30% pricier over there, it instantly tanked the prices on CMC graphs, in practice this is actually not relevant to people outside Korea who don’t trade there.
In turn a large number of people did not recognise what actually happened and that there were not moves/selling on their western exchanges, so many began and are now dumping large amount of coins such as Bitcoin BTC, Ethereum ETH, Tron TRX and ZClassic ZCL, trying to “cut loses” because of the false impression that their coin is crashing.
My opinion is that this could of been handled much better by Coinmarketcap.com, The Cryptocurrency market is a world in which it’s hard for even the most experienced eye to cut through the noise, propaganda and BS to decipher what is ACTUALLY going on.
So, hey CMC, Maybe an easy bit of UX like a banner saying “WE HAVE EXCLUDED KOREAN EXCHANGES BECAUSE OF THIS OR THAT AND IT WILL HAVE SUCH INFLUENCE ON CALCULATIONS” would of been sensible.
Personally, I didn’t panic sell.. as I understood what was happening.
In the real world, companies can always secure funds by approaching angel investors and venture capitalists but by doing that, they would have to give away a share of their equity to them. What companies wanted, was to get a lot of funds without giving away equity and ownership. The only way that they could do that was by going public.
The way companies do this is by holding an IPO aka Initial Public Offering. How does an IPO work?
In an IPO a private company basically decides to put up its private shares up for sale to the general public. Anyone anywhere can buy the shares of the company. Initially, these shares are dirt cheap and if the company hits it big then there is a chance of your shares ballooning up to exorbitant prices. We have all heard stories of the masseuse who became a multi-millionaire after her 500 “useless” stocks in Google matured over time.
So, people started wondering what would happen if we used the same concept and put it on a blockchain based environment. This is what gave birth to the concept of ICOs. ICOs are pretty similar to IPOs but with 3 major differences.
Firstly, the ICO was decentralized with no central authority, secondly, the ICOs lacked the tedious red tape that most IPOs were bogged down by and finally, they were unregulated while IPOs have always under been heavy regulation. Now there was a problem that blockchain based companies were facing when it came to ICOs. In an IPO, the investors got shares in return of their investment. What would a blockchain based company give away in exchange of capital? They had to invent the blockchain equivalent of a share and that was when they came up with the idea of “Tokens”.
Singapore’s government is launching a challenge that will reward successful blockchain projects with funding.
In an announcement , Singapore’s Infocomm Media Development Authority (IMDA) said the challenge aims to boost blockchain innovation as part of a wider goal of the digital transformation in the city state.
According to the fact sheet for the challenge, the bureau is specifically targeting two categories of blockchain applications: “enterprise” and “transformation.”
The agency further explains that it is looking for distributed ledge technology that can either streamline business operations or that more broadly envisions changes in social interactions, such as within public services.
A claim by Wikileak’s official online store states that its account with Coinbase was suspended by the cryptocurrency exchange. In 2016, Wikileaks was central to a long string of international scandals before the presidential election according to the leaked document depository and it is now calling for a boycott of coinbase. Coinbase says that its primary goal is to make digital currency safe and secure for its customers.
According to reports, an unconfirmed announcement from Coinbase has irritated the Bitcoin community and also highlighted certain unavoidable tensions as cryptocurrency becomes increasingly commonplace. Wikileaks Shop claims to have received a note that was posted on Twitter from Coinbase that appears as if the cryptocurrency exchange cites U.S government financial regulations as one reason for the suspension.
A letter sent to Wikileaks by Coinbase states “Coinbase is a regulated Money Service Business under Fincen that is obligated to implement regulatory compliance mechanisms. Upon careful review, we believe your account has engaged in prohibited use in violation of our terms of service and we regret to inform you that we can no longer provide you with access to our service.” The letter continues to show the instructions that “We respectfully request that you follow the on-screen instructions presented when you log into your Coinbase account to send any remaining balance offsite to an external address.”
There are no indications that show how Wikileaks specifically violated the rules. Coinbase is concerned about Wikileaks to operate legitimately in order to prevent money laundering and other illegal activities.
Wikileaks also responded immediately via a tweet upon receiving Coinbase’s notice and called for the crypto community to stop using the exchange until further notice. “Wikileaks will call for global blockade of Coinbase next week as an unfit member of the cryptocurrency community.
Coinbase, a large Californian Bitcoin processor, responding to a concealed influence, has blocked the entirely harmless @WikileaksShop in decision approved by management,” Wikileaks said.
The suspension by Coinbase will not stop Wikileaks from accepting payments or donations through Bitcoin though the organization may have to doom a lot of resources to handle its accounts directly and will find it more challenging to convert bitcoin to other currencies such as the dollar.
Prominent Bitcoin Users Worried
Bitcoin has gained a lot of popularity as it can be used to bypass or avoid existing financial regulations and systems including banks. Andreas Antonopoulos pointed out on twitter that many politically involved users were first attracted to Bitcoin as a way of donating to Wikileaks after being cut off in 2010 by traditional financial services.
Although Coinbase has attracted a lot of users to Bitcoin and many more crypto exchanges by providing an easy way for them to be bought and used, its status as a regulated U.S business means it must accord and agree with U.S financial regulations. Most Bitcoin advocates remain questioning and skeptical of Coinbase and other intermediaries due to the exposure and many act as caretakers of customers’ cryptocurrency, defensibly increasing systemic risk in an occurrence of their failure.
Japan has now proposed guidelines with the view of legalizing ICOs in the country.
The report states:
“ICO is still in its infancy and has no industry practices yet. Appropriate rules must be set to enable ICO to obtain public trust and to expand as a sound and reliable financing method. Based on a shared awareness of this necessity, financial institutions, non-financial companies, and venture companies have co-founded the ICO Business Research Group.”
The set guidelines are as follows:
“ICOs should be designed to be acceptable to existing shareholders and debt holders.”
“ICOs should not become a loophole in existing financing methods as equity finance.”
The ICO Business Research Group proposed five trading principles:
“Token sellers should confirm the identity (Know Your Customer: KYC) and suitability of customers.”
“Administrative companies that support the issuance of tokens should confirm the KYCs of issuers.”
“Cryptocurrency exchanges should define and adopt an industry-wide minimum standard on token listing.”
“After tokens are listed, unfair trade practices of such tokens such as insider trading should be restricted.”
“Parties related to the trading of tokens such as issuers, administrative companies, and token exchanges should make efforts to ensure cyber security.”
Why The Crypto World is in PANIC ?
The first and foremost reason is all around the world REGULATORS are motivated in full swing to draw down protocols and regulations to regulated the so far currently volatility driven crypto currency markets.
Primarily one has to understand that once any commodity/ Currency/ or unregulated market is at the brink of getting regulated, the panic of loosing the substantial growth and autonomous growth is seen to come at hault, for some short duration, and this is where the common masses begin to panic. CRYPTO markets are not the first markets which has seen such panic and red Flags. Several years before FOREX markets used to suffer the same.
But the major panic wave was driven after china pressed the crypto ban button all of sudden.
So the falling prices do not mean that the crypto currency evolution is going to take a down turn but its the beginning of price correction and systematic market functioning.
So let the news play its own saga, BUT INVESTORS & ENTREPRENEURS need to stick to their self decided and self derived estimated and evaluations and workout their logics keeping the market discounting news of falling prices and crashing crypto-currencies.