On March 2, the IRS updated the Frequently Asked Questions (FAQs) on Virtual Currency Transactions. The new FAQ provides that taxpayers whose only crypto transactions include the purchase of virtual currency with real currency need not answer yes to the question on the front page of the 2020 IRS Form 1040. This instruction is directly contrary to the plain reading of the simple question on cryptocurrency, which is highlighted in red here:
I’ve previously written about IRS enforcement of Crypto account holders here, here, and here. Uncovering crypto account holders is a key part of stepping up enforcement in this area, and as I explained just two weeks ago, the IRS is laser-focused on criminal and civil enforcement in this emerging area of taxation.
Both the 2020 IRS Form 1040 and the 1040 instructions provide that a taxpayer who engaged in any transaction involving virtual currency must check the “yes” box next to the question on page 1 of Form 1040. But the 1040 instructions provide a little more color, explaining that “A transaction involving virtual currency does not include the holding of virtual currency in a wallet or account, or the transfer of virtual currency from one wallet or account you own or control to another that you own or control.”
Should crypto account holders who bought, but did not sell, virtual currency in the year 2020 answer “No” to the question based on this FAQ and the 1040 instructions?
I wouldn’t bet a single Bitcoin on it.
First, informal IRS guidance such as FAQs – and even the Internal Revenue Manual – can’t be relied on by taxpayers. Yes, you read that right. The IRS is allowed to and does publish guidance in the form of FAQs and the Internal Revenue Manual to assist taxpayers (and Revenue Agents) in navigating the web of tax law. But there is an abundance of caselaw that says taxpayers don’t have “rights” based on them and can’t try to enforce them.
Eaglehawk Carbon, Inc. v. United States, 122 Fed. Cl. 209, 221 (2015) (noting that “it is beyond cavil” that I.R.M. provisions “do[ ] not have the force of law”); Fargo v. Commissioner, 447 F.3d 706, 713 (9th Cir. 2006) (noting that “[th]e Internal Revenue Manual does not have the force of law and does not confer rights on taxpayers”); Valen Mfg. Co. v. United States, 90 F.3d 1190, 1194 (6th Cir. 1996) (noting that [“[t]he provisions of the manual, however, only ‘govern the internal affairs of the Internal Revenue Service.
They do not have the force and effect of law,’” quoting United States v. Horne, 714 F.2d 206, 207 (1st Cir. 1983)); and Marks v. Commissioner, 947 F.2d 983, 986, n.1 (D.C. Cir. 1991) (noting that [i]t is well-settled … that the provisions of the [I.R.M.] are directory rather than mandatory, are not codified regulations, and clearly do not have the force and effect of law.”).
Second, answering no to the question when the actual answer is yes based on the FAQ or instructions to the 1040, while technically correct, could lead to adverse consequences. Simply purchasing virtual currency does not create a taxable event. Even if no tax is due in year 2020, if a taxpayer answers no in 2020 based on the FAQ but then does not file a tax return for 2021, or files a tax return that omits a crypto transaction, rest assured that the IRS will argue that answering no in 2020 was evidence of intent to conceal the crypto.
And for that matter, so will the Department of Justice, Tax Division. Even if a taxpayer is later vindicated, simply going through an IRS civil or criminal exam can be costly in time, emotional distress, and money on professional fees.
While common sense says it should be perfectly fine to answer “No” based on the FAQ, as a tax litigator who defends clients in civil and criminal tax disputes with the IRS, I’ll advise my clients who bought but did not sell crypto to answer yes, unless there is a compelling non-tax reason not to.
I try tax cases in tax court and federal courts, represent taxpayers who are examined by the IRS, and represent tax professionals who get into disciplinary trouble. I’m also a professional partnership representative. My practice is in Chicago but my clients are all over the country and the world. Email me at guinevere.moore@mooretaxlawgroup.com and follow me at @Mommytax
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Coinbase – a platform used to buy and sell currency – has temporarily disabled its users from being able to purchase Bitcoin and other cryptocurrencies using US dollars.
Users who have attempted to make purchases over the past day have received a message that reads, ‘USD purchases are temporarily disabled,’ while other currencies, including the British pound, are also reported to have been blocked from making purchases.
Coinbase hasn’t commented since its users started getting the message, however the platform has reported experiencing difficulties due a recent surge in interest following a rise in the price of Bitcoin.
It’s unclear whether the temporary issue is related to the technical issues the app has been experiencing, or whether it’s a move from Coinbase to try and slow or restrict purchases.
However, it comes in the wake of trading platform Robinhood suspending sales of hugely popular Reddit stocks, GameStop and AMC, causing concern that similar blockages could be happening with Bitcoin too.
If the latter were to be true, it would be an incredibly unpopular move given all the backlash Robinhood is facing for allegedly protecting hedge fund millionaires at the steak of Reddit investors. Donald Trump Jr, Alexandria Ocasio-Cortez and Ted Cruz are among those who have criticised the platform.
One Reddit user has even filed a class action against the platform, after it blocked any further sales of GameStop stock due to ‘volatility of the market’.
Meanwhile, the value of Bitcoin has soared over the past couple of days, after Tesla founder Elon Musk changed his Twitter bio to simply read ‘#bitcoin’.
In just one hour after the multibillionaire updated his profile, the cryptocurrency’s value soared from around $32,000 (£23,500) to above $37,000 (£27,000,) per online trading site Coinbase.
Elsewhere, a cryptocurrency that began as a joke, has also soared in value by 140%, following the recent success of Reddit-fuelled stocks.
Dogecoin, which is based on the popular ‘doge’ meme, saw huge increases after a Reddit thread called SatoshiStreetBets called for the currency to reach the value of $1 per coin.
Again, cryptocurrency fan Musk has touched on the dogecoin, with many Reddit users calling on him to help spread the word about the currency.
Back in April 2019, he tweeted, ‘Dogecoin might be my fav cryptocurrency. It’s pretty cool,’ later sending its value soaring by 20% when he simply tweeted, ‘doge.’
If you have a story you want to tell, send it to UNILAD via story@unilad.com
Emma Rosemurgey is an NCTJ trained Journalist who started her career by producing The Royal Rosemurgey newspaper in 2004, which kept her family up to date with the goings on of her sleepy north east village. She graduated from the University of Central Lancashire in Preston and started her career in regional newspapers before joining Tyla (formerly Pretty 52) in 2017, and progressing onto UNILAD in 2019.
Almost every time the price of bitcoin increases or decreases quickly, Coinbase shuts down. It happens like clockwork, time and time again. Why does Coinbase always go down? Instead of specifically focusing on why Coinbase always crashes, in this video we will go over a simple fix to prevent yourself from being a victim in the future when your exchange of choice crashes or your account is disabled/frozen. Time Stamps: Intro – 0:00 History Of Crashes – 0:15 The Solution- 1:00 Alternative Exchanges – 2:00
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As Microsoft confirms a Google-disclosed and unpatched zero-day vulnerability is being targeted by attackers right now, here’s what you need to know.
Microsoft has confirmed that an unpatched ‘zero-day’ vulnerability in the Windows operating system, affecting every version from Windows 7 through to Windows 10, is being actively targeted. Microsoft was first informed of the vulnerability by Google’s Project Zero team, a dedicated unit comprised of leading vulnerability hunters, which tracks down these so-called zero-day security bugs.
Because Project Zero had identified that the security problem was being actively exploited in the wild by attackers, it gave Microsoft a deadline of just seven days to fix it before disclosure. Microsoft failed to issue a security patch within that hugely restrictive timeframe, and Google went ahead and published details of the zero-day vulnerability, which is tracked as CVE-2020-17087.
The bug itself sits within the Windows Kernel Cryptography Driver, known as cng.sys, and could allow an attacker to escalate the privileges they have when accessing a Windows machine. The full technical detail can be found within the Google Project Zero disclosure, but slightly more simply put, it’s a memory buffer-overflow problem that could give an attacker admin-level control of the targeted Windows computer. Recommended For You
While attackers are known to be actively targeting Windows systems right now, that doesn’t mean your system is going down. Firstly, I should point out that, according to a confirmation from Shane Huntley, director of Google’s Threat Analysis Group, the attackers spotted exploiting the vulnerability are not targeting any U.S. election-related systems at this point. That’s good news, and there’s more.
While Microsoft has confirmed that the reported attack is real, it also suggests that it is limited in scope being targeted in nature. This is not, at least as of yet, a widespread broad-sweep exploit. Microsoft says that it has no evidence of any indication of widespread exploits.
Then there’s the attack itself which requires two vulnerabilities to be chained together for a successful exploit to happen. One of them has already been patched. That was a browser-based vulnerability, CVE-2020-15999, in Chrome browsers, including Microsoft Edge. As long as your browser is up to date, you are protected. Microsoft Edge was updated on October 22 while Google Chrome was updated on October 20.
There are no known other attack chains for the Windows vulnerability at this point. Which doesn’t mean your machine is 100% safe, as an attacker with access to an already compromised system could still exploit it. However, it does mean there’s no need to hit the panic button, truth be told. Microsoft has also confirmed that the vulnerability cannot be exploited to affect cryptographic functionality.
I reached out to Microsoft, and a spokesperson told me that “Microsoft has a customer commitment to investigate reported security issues and update impacted devices to protect customers.”
As for that seven-day disclosure deadline from the Google Project Zero team, the Microsoft spokesperson said that “while we work to meet all researchers’ deadlines for disclosures, including short-term deadlines like in this scenario, developing a security update is a balance between timeliness and quality, and our ultimate goal is to help ensure maximum customer protection with minimal customer disruption.”
Although Microsoft has not commented on the likely timing of a security patch to prevent exploitation of this Windows vulnerability, the Project Zero technical lead, Ben Hawkes, has tweeted that it is expected as part of the Patch Tuesday updates on November 10.
How big a threat is this to your average Windows user? That remains to be seen, but currently I’d classify it as a be aware but don’t panic situation. Hang-fire, ensure your web browsers are bang up to date, and you should be fine. There are far more significant risks to your data than this zero-day attack, in my never humble opinion. Risks such as phishing in all forms, password reuse, lack of two-factor authentication and software that isn’t kept up to date with security patches.
I’m a three-decade veteran technology journalist and have been a contributing editor at PC Pro magazine since the first issue in 1994. A three-time winner of the BT Security Journalist of the Year award (2006, 2008, 2010) I was also fortunate enough to be named BT Technology Journalist of the Year in 1996 for a forward-looking feature in PC Pro called ‘Threats to the Internet.’ In 2011 I was honored with the Enigma Award for a lifetime contribution to IT security journalism. Contact me in confidence at davey@happygeek.com if you have a story to reveal or research to share.
As Microsoft confirms a Google-disclosed and unpatched zero-day vulnerability is being targeted by attackers right now, here’s what you need to know. Microsoft has confirmed that an unpatched ‘zero-day’ vulnerability in the Windows operating system, affecting every version from Windows 7 through to Windows 10, is being actively targeted. Microsoft was first informed of the vulnerability by Google’s Project Zero team, a dedicated unit comprised of leading vulnerability hunters, which tracks down these so-called zero-day security bugs. Because Project Zero had identified that the security problem was being actively exploited in the wild by attackers, it gave Microsoft a deadline of just seven days to fix it before disclosure.
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Loss attorney David Silver has filed a 2,000 person class action suit against the founder of the “Massive Adoption: Memphis” cryptocurrency conference.
Defendant Jacob Kostecki has yet to refund ticket sales after the event was canceled on January 31.
A class-action lawsuit has been filed against the founder of the “Massive Adoption” conference for bitcoin following his refusal to refund ticket sales.
According to the initial complaint filed on May 7, Ashley Gentry was named as the lead plaintiff in a 2,000 person lawsuit against Colorado native Jacob Kostecki, creator of the “Massive Adoption in Memphis: Blockchain and Digital Assets” event.
The cryptocurrency conference was originally scheduled to be held in November 2019, before being rescheduled to February 2020. The event was subsequently called off on January 31.
The lawsuit, filed in the District of Colorado by securities fraud and investment loss attorney David Silver, claims Kostecki promised event-goers a refund on tickets and packages within six months. The suit, referencing Kostecki’s promises, reads..
Silver accused Kostecki of causing “significant financial loss” to ticketholders after failing to carry out his promise of a refund. The class-action filing demands compensation for damages due to lost airfares, attorney fees and other applicable costs.
Twitter: @BeardsBitcoins Website: BeardsAndBitcoins.com Telegram: http://t.me.beardsandbitcoins Hosts BitBoy: @BitBoy_Crypto JChains: @CryptoJChains EPISODE 77: Crypto Fyre Fest Implosion & ICX Explosion Episode 77: Crypto Fyre Fest, ICON Pumps, & Greatest UFC Fighter JChains gets ready to go on a one week cruise vacation while the market is pumping. We take a look at the markets and how they could help everyone in crypto take vacations! In this episode BitBoy & JChains talk about the most interesting storylines from this week in crypto. This week on Beards and Bitcoins: JChains is going on vacation. BitBoy discusses the market & how the stock to flow chart looks like Bitcoin is heading to at least $90k in 18 months. Token Time this week features Celsius Token $ICX – https://coinmarketcap.com/currencies/… Icon has been on an absolute tear and shows no signs of stopping. At one point it was down 98% and was the face of the bear market. But finally it looks like altcoin season is upon us. This week for News Break.. we talk about what is being dubbed the crypto Fyre Fest. The Massive Adoption conference in Memphis has been postponed several times. People have asked for refunds, and now founder Jacob Kostecki has announced he is cancelling the conference. People have claimed he is scammer from Poland who is currently on the run and people will never get their money back. For Manspreading today, the boys give their picks for the best UFC Fighter of all time. BitBoy is taking Jon Jones while JChains goes with the classic Chuck Liddell. This week, the Beards & Bitcoins podcast has announced their new telegram group t.me/BeardsBitcoins
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Bitcoin’s blockchain has been hijacked by a new strain of the Glupteba malware that uses the network to resist attacks, cyber security researchers have warned.
The malware uses the bitcoin blockchain to update, meaning it can continue running even if a device’s antivirus software blocks its connection to servers run by the hackers, security intelligence blog Trend Micro reported this week.
The Glupteba malware, first discovered in December 2018, is distributed through advertising designed to spread viruses through script and can steal an infected devices’ browsing history, website cookies, and account names and passwords with this particular variant found to be targeting file-sharing websites.
However, according to researchers, the new version of the malware can also mine the privacy-specialized monero cryptocurrency and threaten the security of Instagram users’ accounts.
The malware uses the Electrum bitcoin wallet to send bitcoin transactions that the attackers use to gain access to systems.
“This technique makes it more convenient for the threat actor to replace command and control servers,” Trend Micro researchers wrote. A command and control server is the centralized computer that issues commands to an infected network of devices.
The Glupteba malware, first discovered in December 2018, is distributed through advertising designed to spread viruses through script and can steal an infected devices’ browsing history, website cookies, and account names and passwords with this particular variant found to be targeting file-sharing websites.
However, according to researchers, the new version of the malware can also mine the privacy-specialized monero cryptocurrency and threaten the security of Instagram users’ accounts.
The malware uses the Electrum bitcoin wallet to send bitcoin transactions that the attackers use to gain access to systems.
“This technique makes it more convenient for the threat actor to replace command and control servers,” Trend Micro researchers wrote. A command and control server is the centralized computer that issues commands to an infected network of devices.
“If they lose control of a command and control server for any reason, they simply need to add a new bitcoin script and the infected machines obtain a new command and control server by decrypting the script data and reconnecting.”
Security researchers at Trend Micro detailed how the Glupteba malware infects and compromises devices, which now can use the bitcoin blockchain to stay alive.
Trend Micro
It’s not the first time the bitcoin blockchain has been taken advantage of by criminals, with German researchers last year discovering child abuse imagery shared via the decentralized network.
I am a journalist with significant experience covering technology, finance, economics, and business around the world. As the founding editor of Verdict.co.uk I reported on how technology is changing business, political trends, and the latest culture and lifestyle. I have covered the rise of bitcoin and cryptocurrency since 2012 and have charted its emergence as a niche technology into the greatest threat to the established financial system the world has ever seen and the most important new technology since the internet itself. I have worked and written for CityAM, the Financial Times, and the New Statesman, amongst others. Follow me on Twitter @billybambrough or email me on billyATbillybambrough.com. Disclosure: I occasionally hold some small amount of bitcoin and other cryptocurrencies.
by Christian Karam & Vitaly Kamluk The blockchain is the public ledger stacking all bitcoin/altcoins transactions. It is constantly growing as “completed” blocks are automatically added to it with a new set of records. The blocks are added to the blockchain in a linear and chronological order. The blockchain has complete information about the addresses and their balances right from the genesis block to the most recently completed block through the mining process. Depending on the crypto-currency and the implementation of its protocols, there would be a fixed open space, where data can be stored, referenced or hosted on the blockchain within encrypted transactions and their records. This very versatile nature of the blockchain offers great opportunities for future innovation especially in decentralized systems. The research focus revolves around the threat of embedding decentralized chunks of malware on the blockchain by either hosting it or referencing it with cascaded pointers. Transactions and data are encrypted throughout the blockchain networks using different versions of public/private key encryption. Could malware survive eternally inside crypto-transactions? A proof of concept will be explained highlighting the concerns revolving around the “abuse and bloating” of the blockchain while comparing it to previous malware hosting and deployment models. In this talk, INTERPOL will frame the scope of this future threat and provide potential solutions for a threat surrounding the blockchain technology.
The best way to lose money in the markets is to sell when you are scared and buy/hold when you are happy with your profits.
So it was for me a couple of days ago when bitcoin (BTC) was $9,500. I so wanted to close out 25% of my BTC and leave myself to run the rest, having taken out the cost of my position in cash and thereby run the rest as free carry. You can spin all sorts of narrative why that’s a smart idea or why that’s a dumb one, but the fall was the impetus and the desire to flee a normal human emotion. It is an instinct that traders and especially investors need to control.
Luckily, I’ve been playing the high risk game long enough to wait. When I want to sell an investment solely because it has dumped I wait at least two or three days before making such a move. If and when bitcoin hits $13,500, I will want to load up on more but I will likewise stop myself from buying into bullishness.
So I did nothing with my bitcoin and this happens:
Bitcoin jumped again on Monday
Credit: ADVFN
Once again doing nothing is the best move you can make with a good position.
So in my model, this is China and this is down to the trade war.
When bitcoin jumps, something bad has just happened in the U.S./China trade talks. We don’t know what it is, but soon enough we will find out.
Well today we get a Trump tweet and up BTC goes again. Yesterday, what happened? I guess whatever it was that made bitcoin pop, also left the U.S. president even more incandescent than normal.
This is still a theory, but it keeps on playing out. So what to do? In the short term the question is, is the China situation going to continue for long?
Continuation of the trade war means BTC up. The longer the war runs, the higher bitcoin will go.
For me it’s likely that the trade war is going to run and run. Both sides can’t buckle and like most wars, sides are prepared to take big losses, not to lose. This means holding through a rollercoaster ride of developments.
If we are in for a trade war of attrition, bitcoin will be above £20,000 by Christmas or sooner.
What we also have here if this theory is right is a gift to the extra greedy. When bitcoin flies, short the Dow, because when BTC flies, for no apparent reason, it is a high probability that something Dow slapping will come out of the trade war in a day or two’s time. While information may flow more slowly in the U.S., whatever goes wrong will nonetheless hit the U.S. equities market soon enough, but meanwhile the bad news will hit the Asia bitcoin market much sooner, about as long as it takes for the participants to get out of their meetings and past the revolving doors.
BTC down on Monday, should also give Dow up on a Tuesday and vice versa. Bitcoin is the gift that keeps on giving to traders.
Gold and the whole platinum group metals (PGM) will follow but at a much more refined and subdued pace; bitcoin delivering another leading signal to the stacker community or any trader that wants to play the dangerous game of levered commodities.
Signals like this don’t come by very often and can’t last for long, but while the stakes are in trillion dollar scale, quite a few million dollar crumbs are going to be left lying around the table.
I am the CEO of stocks and investment website ADVFN . As well as running Europe and South America’s leading financial market website I am a prolific financial writer. I wrote a stock column for WIRED – which described me as a ‘Market Maven’ – and am a regular columnist for numerous financial publications around the world. I have written for titles including: Working Money, Active Trader, SFO and Technical Analysis of Stocks & Commodities in the US and have written for pretty much every UK national newspaper. In the last few years I have become a financial thriller writer and have just had my first non-fiction title published: 101 ways to pick stock market winners. Find me here on US Amazon. You’ll also see me regularly on CNBC, CNN, SKY, Business News Network and the BBC giving my take on the markets.
Intelligent Investing is a contributor page dedicated to the insights and ideas of Forbes Investor Team. Forbes Investor Team is comprised of thought leaders in the areas of money, investing and markets.
The Beijing headquarters of China’s central bank, the People’s Bank of China, where research into the technology behind bitcoin is about to culminate in an entirely new kind of cryptocurrency backed by the government.
Zhang Peng/LightRocket via Getty Images
China’s central bank will launch a state-backed cryptocurrency and issue it to seven institutions in the coming months, according to a former employee of one of the institutions who is now an independent researcher. Paul Schulte, who worked as global head of financial strategy for China Construction Bank until 2012, says the largest bank in the world, the Industrial and Commercial Bank of China, the second largest bank in the world, his former employer, the Bank of China, the Agricultural Bank of China; two of China’s largest financial technology companies, Alibaba and Tencent; and Union Pay, an association of Chinese banks, will receive the cryptocurrency.
A separate source, who’s involved in the development of the cryptocurrency, dubbed DC/EP (Digital Currency/Electronic Payments), confirmed that the seven institutions would be receiving the new asset when it launches, adding that an eighth institution could also be among the first tier of recipients. The source declined to provide the name of the additional company. Speaking under terms of anonymity, the source, who previously worked for the Chinese government, confirmed that the technology behind the cryptocurrency has been ready since last year and that the cryptocurrency could launch as soon as November 11, China’s busiest shopping day, known as Singles Day.
At the time of launch, the recipient institutions will then be responsible for dispersing the cryptocurrency to 1.3 billion Chinese citizens and others doing business in the renminbi, China’s fiat currency, according to the source. The source added that the central bank hopes the currency will eventually be made available to spenders in the United States and elsewhere through relationships with correspondent banks in the West. “That’s the plan, but that won’t happen right away,” the source said.
The plan to use a diverse set of China’s trusted intuitions to disperse the cryptocurrency is reminiscent of a number of other ideas currently percolating around the world. For instance, Facebook’s planned libra cryptocurrency will be backed by a basket of currencies issued by central banks with support from companies like Mastercard and Uber in the United States, Vodaphone in England and Mercado Pago in Argentina. And last week, Bank of England governor Mark Carney floated the idea of a new currency backed by a number of central banks to replace the U.S. dollar as the global reserve currency.
What sets China’s DC/EP apart from libra and Carney’s “synthetic hegemonic currency” (SHC), according to Shulte, is that while libra is little more than early-stage computer code and the SHC doesn’t appear to have gone much further than Carney’s mind, the Chinese cryptocurrency is ready to launch. “China is barreling forward on reforms and rolling out the cryptocurrency,” says Schulte, who now runs an eponymous bank research firm. “It will be the first central bank to do so.”
At the time of publication, neither the People’s Bank of China nor any of the seven institutions mentioned by Schulte had responded to Forbes requests to confirm or deny his claim. However, the two-tiered strategy, where the central bank creates the currency and others distribute it, aligns with previously unreported statements made by Mu Changchun, deputy director of the Paying Division of the People’s Bank of China (PBOC) and the new head of China’s cryptocurrency research lab. In a speech on August 10 at the China Finance 40 Forum, since revised and posted on the PBOC’s WeChat channel, Mu described the central bank’s “two-tiered” system, wherein the bank would create the cryptocurrency and a small group of trusted commercial businesses would “pay the central bank 100% in full” to be allowed to distribute it.
In addition to preventing regional banks and other organizations from being disintermediated, Mu said the two-tiered system is designed to “curb” public demand for other cryptographic assets, consolidate China’s national currency sovereignty, ensure that the central bank maintains control over monetary policy affecting the currency, increase the likelihood of people using the currency, distribute the risk of having all the authority directly in the hands of the central bank and encourage competition between the organizations that receive the cryptocurrency.
“This dual delivery system is suitable for our national conditions,” said Mu. “It can not only use existing resources to mobilize the enthusiasm of commercial banks but also smoothly improve the acceptance of the digital currency.”
The composition of the organizations Schulte says will receive the DC/EP also aligns with Mu’s comments. Later in his speech, Mu added that only after the technical specifications for the DC/EP were completed in 2018 did the central bank realize the similarity between its design and that of libra, the cryptocurrency being developed by Facebook and about 30 other early-stage partners.
One key difference, according to Mu, is that while libra is being designed to handle 1,000 transactions per second, the DC/EP was designed to handle 300,000 transactions per second. For context, Mu added that during last year’s Singles Day the peak volume of all transactions in China was 92,771 transactions per second, dwarfing what the other platforms could support, but well within the DC/EP specifications. “At present, we belong to a state of horse racing,” Mu said according to the translation.
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The DC/EP can achieve this kind of volume only because it is not a “pure blockchain architecture,” according to Mu, and therefore it doesn’t need to wait for groups of transactions to settle in a block. Like other permissioned blockchains that not anyone can use, the DC/EP is centrally managed, in this case by the central bank, meaning the digital currency remains a liability of the bank and the debtor/creditor relationship is unchanged, according to Mu. Also, instead of using an algorithm to limit supply, like bitcoin, Mu says the PBoC itself will control supply. Crucially, Mu says, the DC/EP is being designed to replace the physical notes and coins in circulation, not the renminbi sitting in bank accounts in a digital form.
“The central bank’s digital currency can be circulated as easily as cash,” said Mu. “Which is conducive to the circulation and internationalization of the renminbi.”
Whether anyone outside China would actually use a digital renminbi for transactions in their own country is unclear. As the Bank of England governor’s comments about replacing the U.S. dollar indicate, much of the world is tired of having their financial stability tied to the United States’ monetary system. But China may not be the best alternative. Earlier this month, as part of the escalating trade war between the United States and China, U.S. President Trump accused China of being a “currency manipulator.” After China’s renminbi fell to its lowest in 11 years, hitting 6.9225 renminbi per dollar on August 5, according to a Financial Times report, it has recovered significantly, trading at 7.15 renminbi per dollar today. While China has denied the charge and called the U.S. “protectionist” in a press statement, the perception of manipulation could be harmful to broader adoption of a digital currency linked to the renminbi.
In December 2017, another country accused of devaluing its currency, Venezuela, revealed plans for its own cryptocurrency, backed by oil and called the petro. After much hullabaloo, the currency somewhat officially launched in 2018, but it isn’t available on most international exchanges because of a U.S. embargo and has been almost impossible to accurately value. Another obstacle to adoption could be uncertainty about the benefits of a technology that’s intended to replace fiat currency but is still under centralized control. While it’s obvious that any central bank wishing to more closely observe how citizens are using a cryptocurrency would prefer a transparent ledger like the bitcoin blockchain, which makes transactions easily traceable, most of the benefits to users of current blockchains, such as instant settlement and digital transactions without the need of a middleman, could be undermined by central control.
One person who’s not concerned about the obstacles to adoption of China’s cryptocurrency is Charles Liu, chairman of HAO International, a private equity firm investing over $700 million in Chinese growth companies. After largely focusing on solar, organic fertilizer, and wastewater treatment technologies since 2012, Liu says he is an angel investor in “the first blockchain company to be able to sign an official contract with the People’s Bank” of China.
Liu declined to reveal the name of the firm or its technology but lent support to Mu’s comments about the potential benefits to businesses using China’s cryptocurrency. In addition to being a more efficient way to track money laundering, bribery and other transactions, Liu says, the cryptocurrency will give banks increased confidence in the creditworthiness of borrowers, let merchants receive payments instantly and lower transaction fees. While Liu says that banks in the United States have been resistant to such improvements that eat away at their bottom line, he adds that China doesn’t have that problem, because the government owns the banks.
“What will facilitate commercial transactions and enhance efficiency, the central government decides and they go ahead and do it,” says Liu, adding that “China’s strategic plan is to integrate more closely with the rest of the world. Cryptocurrency is just one of the means to have a more internationalized renminbi. It’s all strategic. It’s all long term.”
I report on how blockchain and cryptocurrencies are being adopted by enterprises and the broader business community. My coverage includes the use of cryptocurrencies such as Bitcoin, Ethereum and Ripple, and extends to non-cryptocurrency applications of blockchain in finance, supply chain management, digital identity and a number of other use cases. Previously, I was a staff reporter at blockchain news site, CoinDesk, where I covered the increasing willingness of enterprises to explore how blockchain could make their work more efficient and in some cases, unnecessary. I have been covering blockchain since 2011, been published in the New Yorker, and been nationally syndicated by American City Business Journals. My work has been published in Blockchain in Financial Markets and Beyond by Risk Books and I am regularly cited in industry research reports. Since 2009 I’ve run Literary Manhattan, a 501 (c) (3) non-profit organization dedicated to showing Manhattan’s rich literary heritage.
China’s central bank is reportedly on the verge of launching a national digital currency. Investigative Journalist Ben Swann joins Scottie Nell Hughes to discuss the implications. He argues that at some point every country will have its own digital currency. And that there’s “nothing attractive” about such currencies as they’re no better than traditional government-backed fiat currency. #NVHughes#QuestionMore#RTAmerica Find RT America in your area: http://rt.com/where-to-watch/ Or watch us online: http://rt.com/on-air/rt-america-air/ Like us on Facebook http://www.facebook.com/RTAmerica Follow us on Twitter http://twitter.com/RT_America
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