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Op-Ed

Regulations and Crypto Havens: China and the Rest of the World

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China is no stranger to censorship and regulation.

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Dubbed by most Western spectators as a ‘totalitarian regime’, the country’s government has been highly successful in their efforts to control the internet and digital economies – along with brick and mortar activities. This can be seen, for example, with government imposed obstructions preventing Chinese residents from accessing popular global social media networks such as Twitter and Facebook; replaced by Weibo (which, being based in China, has previously been subject to extreme government intervention).

It should come as no surprise then, that the government has decided to impose a blanket ban on the trading of cryptocurrencies by citizens and businesses within the country. This occurred last September, where government representatives additionally cited a need for the absolute centralization of all blockchain related activities.

When looking at some of the surrounding geographical areas, for example, countries within the South-East Asia region; we can see a great disparity in regulatory positions and implementations.

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South Korea has been responsible for long-term FUD on the trading markets due to their inability to come to a consensus on how to regulate the crypto-economy, let alone how they would proceed in enforcing guidelines and legislation. Vietnam has, unsurprisingly, decided to go down the same road as China and has banned all cryptocurrencies as of the time of writing.

This has led many to question the hypothetical yet highly reasonable presumption that there could be a time in the future where heavy regulation and blanket crypto bans are commonplace across the globe. If this were to happen, could cryptocurrencies survive; and if so then what measures would have to be taken to ensure its survival as a legitimate, decentralized economy?

Crypto-flight and Crypto-havens

In China, the result has been a ‘crypto-flight’: where businesses and individuals who are heavily invested in the sector have relocated their businesses to Hong Kong avoid breaking the law. Examples of operational Hong Kong based crypto-companies include: OKEx, BTCC and Huobi-Pro.

Hong Kong is classed as a ‘Special Administrative Region’ which sits within the borders of the People’s Republic of China. This means that the area and its citizens enjoy special privileges such as political and economic autonomy.

One of the ways the region’s lawmakers have decided to use this power is to allow for decentralized cryptocurrency business, investment, and trading; whilst simultaneously seeking to regulate fraudulent blockchain activity / enterprise.

If there were to be a situation somehow (and it’s highly unlikely) where Hong Kong were to decide to implement similar rules to their mainland brothers, then the result would most likely be further flight away from the country by cryptos.

Singapore would be a likely candidate due to their liberal approach to cryptocurrencies, in addition to the geographical proximity to China / Hong Kong.

Furthermore, if this were to continue to spread across Asia or the West; then we would be likely to see a consolidation of the population of investors and crypto countries to a smaller number of countries which would subsequently be ‘Crypto Havens’. This could resemble the impact that extensive taxation on creating what are currently known as ‘tax havens’.

Will China Change its Tone?

No matter how frustrated the mainland Chinese Government might get from missing out on this huge economy, there is little they can do politically to pressure the Hong Kong government into implementing similar rules.

The area is simply one of the highest grossing financial areas in the entire country, and as such acts as a central trade hub for the nation. If its sovereignty were to be threatened, then many of the businesses and individuals who are contributing to this wealth are likely to leave themselves (crypto or otherwise).

Conversely, it is much more likely that China will eventually decide to repeal their overarching bans over time. Despite banning the tech, it is highly likely that the government is not ignorant to the added value it could bring to their country’s economy.

Once cryptocurrencies are better understood by governments and established general tech experts in general; don’t be surprised if you see them slowly retreat these laws in favor of regulations and taxes informed by a matured expertise.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Decentralization

JP Morgan’s Surprise Cryptocurrency Fees are a Reminder of Why Decentralization Is Sorely Needed

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JP Morgan Chase & Co has been hit with a class-action lawsuit by cryptocurrency traders over allegations of unannounced fees and higher interest rates on purchases of digital currencies. Though the allegations have not been proven, extra fees are a tactic routinely employed by traditional banking institutions. In the case of JP Morgan, this has karma written all over it given the way its chief executive has ridiculed digital assets by associating them with fraud.

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Class Action Lawsuit

Traders from across the United States are seeking statutory damages of $1 million for unannounced interest charges and fees on cryptocurrency transactions between January and February of this year. The named plaintiff in the lawsuit is Brady Tucker, an Idaho resident who paid a total of $163.91 in fees and surprise interest charges over a six-day stretch.

According to information obtained by Reuters, the lawsuit accuses the bank of violating the U.S. Truth in Lending Act, a piece of legislation that requires credit card issuers to inform customers in writing of any notable change in fees.

The lawsuit asserts that Tucker tried to resolve the dispute by calling Chase’s customer support service directly. His request was turned down, prompting him to seek legal help. According to Bloomberg, the case in question is Tucker v. Chase Bank USA NA, 18-cv-3155, U.S. District Court, Southern District of New York (Manhattan).

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The Growing Case for Decentralization

Depending on who you ask, the allegations against JP Morgan are akin to cryptocurrency fraud not unlike the kind Jamie Dimon talked about while ridiculing bitcoin. But the irony in Dimon’s comments extend far beyond Chase’s latest dealings.

As the actions of Chase bank and other financial institutions have clearly demonstrated over the years, those who control the size and growth rate of fiat money cannot be trusted to do the right thing. As Nassim Taleb argues in The Black Swan, banks have a tendency of losing as much money as they make in the long run due to shady business practices and high-risk ventures. Decisions like these are easy when you are Too Big to Fail.

Decentralization, like the kind advocated by blockchain startups and cryptocurrencies, allows users to trade directly with each other without having to go through a (predatory) middleman. Decentralized systems not only help participants avoid unnecessary fees, red tape and other forms of unwanted intervention, they are virtually impossible to shut down. In this vein, decentralized currencies give people a fighting chance in their battle against never-ending inflation. As we’ve argued before, this is not only a prudent fight, but a noble one as well.

Cryptocurrencies that rely on decentralization offer society a unique value proposition unlike anything we’ve seen in recent history. What’s more, their adoption is not contingent upon us leaving the realm of traditional finance – at least, not yet. That’s because cryptocurrency started off as an obscure and esoteric asset class but has since become a value store for investors. Tomorrow, it will become a viable medium of exchange accepted worldwide.

That said, we are still in the very early days of the crypto revolution and it may be a while still before we can conclusively prove people like Dimon wrong. But crypto backers and investors should take comfort in knowing that big banks rarely lead in disruption these days. They have the resources to play catch-up, which they are clearly doing with blockchain.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 335 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Altcoins

Will Dash Be the Bitcoin Killer?

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Well, it has finally happened.  We’ve gone a full week with crypto prices showing positive returns.  OMG, what a big surprise; ether is leading the pack, advancing nearly 15% at the time of this writing.  This is encouraging because it shows that perhaps finally value investors are stepping in and helping set a pricing bottom.  

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It hasn’t hurt a bit that stock and bond market investors have become seasick from all the volatility.  Suddenly, a tiny little weekly Litecoin move of +0.46% or even a 2.47% bitcoin cash gain, looks like pure serenity.  

 

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For a while now our focus has been on relative value and there is very little argument that, after the first quarter price collapse, a whole lot of risk has been taken out of bitcoin, ether, Ripple and thousands of others.

The question is where to go and what to go with from here.  The big crypto names are the safe way to go in the short run, but each has become mired in network limitations on scaling and the concomitant cost issues.  

Yes, transaction fees have dropped like a stone from their prohibitively high levels of December but then transaction volumes have fallen by half and more.  That is not the stuff an investor wants to see.

Both bitcoin and Ethereum hope to solve scaling issues with the Lightning Network and Raiden. But for now, if transaction volume were to suddenly rise, the same network limitations would be there.  So even though the big crypto names offer the safest short term options, does that mean we shouldn’t look further out to find value?

Will Dash Solve Bitcoin’s Problem?

Dash emerged last year as one of the most popular and most valuable altcoins. At the time it was considered a real competitor to bitcoin and the leading cryptocurrency of the future. The price of Dash increased from $11 to over $1,430. Dash had a capitalization of over $11 billion at its December peak. Since then it has tumbled more than 80%.  Is now the time to move into Dash? The timing could be very good but before making that decision, we should consider a few things.

Judgement Time

If a jury of its peers were to grade Dash on its performance in 2017, the majority would say it lived up to its billing.  Using Dash, users could send money instantly using the InstaSend feature that allowed for complete anonymity. At the peak, transaction costs were around $0.60, which were dwarfed by bitcoin’s high of $30. 

Since then, Dash fees have fallen to about $0.20, making them attractive for small sized transactions. All alone this represents a compelling feature of Dash.  Add to that the immediacy of InstaSend and you have the makings of a genuine challenge to Bitcoin.

Caveat Emptor

In appraising Dash’s performance it is useful to look at Metcalfe’s Law, which values social media assets based on a formula of network size.  For Dash, it’s network is processing a tiny fraction of bitcoin’s. The limitations of its network have very likely not yet been tested, so proclaiming Dash the speed king is a bit early. There is still a larger issue to consider.

In the case of Metcalfe’s Law we need to include merchants and other service providers that accept Dash as payment.  That is the big hump for them to overcome before overturning bitcoin. So far, after all, bitcoin is accepted by only about 10,000 or so merchants.  

Further progress by bitcoin is stymied by transaction costs that remain far too high.  Even so look at how many years it has taken bitcoin to attract merchants. Dash faces the same hurdles.

In other words, the trick for Dash is the find a way to gain mass acceptance quickly. That is when the huge $11 billion valuation of last December will begin to be justified. Look over your shoulder bitcoin – faster, lower cost competition is looking to eat your lunch. Dash could be one of those.

 Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 60 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Op-Ed

Crypto: Looking For Leadership

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Cryptocurrencies

The crypto world needs a messiah.  Well, maybe the crypto world doesn’t need one, but crypto investors sure do.

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For all the ballyhoo over decentralization, sometimes it would be nice to have a central authority.  Someone that everyone in the industry looked to provide the vision for the future. In the past guys like Bill Gates and Steve Jobs filled those roles.  

Behind Gates was the power of the WinTel monopoly.  Steve Jobs held the enormous power of his creative genius to give us all a vision of the future.  If either of these two spoke, you could pretty much take it as gospel.

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These days, there are tons of brilliant developers whose vision is practically Hawkingian in depth.  But understanding the english language version is made impossible by loads mathematical mush or linguistic portmanteaus.

You may ask, why is any of this relevant? It is not just the fact that crypto prices have collapsed this year.  Only about 8% of Americans own cryptocurrencies and less than 2% of institutional capital is involved.

At the time of the first iPhone, fewer than 8% of Americans owned smartphones.  Steve Jobs helped them see why they desperately needed to own one. Call this nothing more than salesmanship but satisfying that desperate need added almost $600 billion to investors pockets by the time iPhone 10 came along.

 

Ethereum started the Enterprise Ethereum Alliance a year ago to connect Fortune 500 companies with experts on blockchain capabilities.  So far they have about 200 members and could be genuine crypto evangelists. So far they have been working hard but the last news out of EEC was three months ago.  Obviously, the price of Ether is not their first priority. There are plenty of qualified spokes people leaving the White House these days.

Acceptance Of The Present State Is Necessary

If we were dealing with Microsoft or Apple corporations there would be a full staff of PR types spinning the virtues of Windows or Mac products.  But with crypto we are dealing with greater democracy in a decentralized public forum that anytime in history.

So, everything from honest differences of opinion to downright rebellion comes through in public forums.  It is not always cool but it is democracy in action.

Missed Opportunity

The recent Deconomy conference in South Korea Ethereum creator Vitalik Buterin was there to present his 12-month vision for Ethereum.  This was the perfect time for this 24 year old industry leader to step to the plate and lead the crypto world. Instead, according to reports from CoinDesk, he scrapped the whole thing.

The thrust of his remarks focused on the slow transaction speeds of the present network leading to the headline: Vitalink:“Ethereum Apps are being ‘Screwed’ by scaling”.

In the true spirit of democracy, Buterin was addressing Ethereum research scientists at the conference about the needs to change in order to accommodate a growing level of developer needs.  The problem for ordinary investors like you and I is that there were no solution for journalists to pounce on only the frustrations over present limitations. If this had been a corporate environment none this would have been news.  

Restating The Obvious?

There may only be 8% of Americans who own Bitcoin, Ether or one of the thousand plus others but 99% of those understand the issue of scaling.  Bitcoin recently launched The Lightning Network and Ethereum has Radien and others. And then let’s not forget EOS. So what is the point of one of the industry’s truly brilliant figures reminding us what is wrong in the world of Ethereum?

In the real world of depressed prices and diminished expectations, crypto investors need a messiah.  

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 60 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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