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Bitcoin in El Salvador: World-First Adoption of Cryptocurrency Sees Angry Protest, Glitches, and a Dip

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By Reuters | Updated: 8 September 2021

El Salvador’s historic adoption of Bitcoin as legal tender on Tuesday was beset by teething problems, as an angry protest by mistrustful citizens, technological glitches, and a dip in the cryptocurrency clouded the rollout.

The bold experiment got off to a bumpy start when shortly after midnight, Salvadoran President Nayib Bukele complained the government-backed Bitcoin app was not available on various Internet platforms including Apple and Huawei. Bitcoin price in India stood at Rs. 37.4 lakhs as of 10am IST on September 8.

Bukele used his Twitter account to press online stores to stock the app, or digital wallet, known as Chivo, and Huawei later began making it available. But when the app proved unable to cope with user registrations, the government unplugged it in order to connect to more servers and increase capacity.

Still, as the app began appearing on more platforms, Bukele was by afternoon retweeting videos posted on social media with people making payments using Bitcoin at retailers in El Salvador including McDonald’s and Starbucks.

“El Salvador is taking a great step forward today,” said Carlos Garcia, who went to a booth at a San Salvador shopping mall giving out advice on how the new currency would work.

Starbucks’ El Salvador unit said it was accepting Bitcoin for purchases at its restaurants, drive-through facilities or to go.

The wallet was later available from Huawei and Apple.

A spokesman for Huawei said the company’s platform showed less than a thousand installations by late afternoon on Tuesday.

“Like all innovations, El Salvador’s Bitcoin process has a learning curve,” Bukele said in a tweet. “Not everything will be achieved in a day, or in a month.”

In barely two years in office, Bukele has taken control of almost all levers of power. But although he has promised to clean up graft, the US recently put some of his close allies on a corruption blacklist.

Last week, top judges appointed by Bukele’s lawmakers ruled that he could serve a second term, breaking away from a constitutional rule that forbade consecutive terms.

Analysts fear the adoption of Bitcoin, whose transaction records are distributed across the Internet, beyond the reach of national jurisdictions, could encourage money laundering.

After the Bitcoin law was approved, the ratings agency Moody’s downgraded El Salvador’s creditworthiness, while its dollar-denominated bonds have also come under pressure.

The World Bank reiterated on Tuesday it could not help El Salvador in adopting Bitcoin “given environmental and transparency shortcomings,” a bank spokesperson said.

© Thomson Reuters 2021

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Cryptocurrency

Cryptocurrency Ban: Russia’s Central Bank Calls for Crackdown on Mining, Transactions

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By Agence France-Presse | Updated: 21 January 2022

The Russian central bank proposed Thursday cracking down on cryptocurrencies, a move which if adopted could disrupt the burgeoning virtual money sector as Russia is one of the largest crypto-mining nations in the world.

Russian authorities have for years criticised cryptocurrencies over fears they can be used for illegal activities and have called for regulation.

Authorities granted cryptocurrencies legal status in 2020, but their use in payments was never authorised.

The Bank of Russia called Thursday for reinforcing the ban on cryptocurrency payments, banning cryptocurrency mining, and tightening laws on trading virtual money.

“The use of cryptocurrencies creates significant threats to the well-being of Russian citizens and the stability of the financial system,” a report published by the central bank said.

It added that the swift growth of cryptocurrencies is driven by “speculative demand” that leads to the forming of a “bubble”.

The report added that cryptos resemble financial “pyramid schemes” because their value increases with the emergence of new players on the market.

It estimated the annual transaction volume of Russian citizens at $5 billion (roughly Rs. 37,270 crore).

Bloomberg earlier cited sources as saying that Russia’s domestic security agency, the FSB, had lobbied central bank head Elvira Nabiulina for a ban.

The FSB cited concerns over Russians frequently using the hard-to-trace transactions to support “undesirable organisations”, such as opposition groups.

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Twitter Debuts Hexagon-Shaped NFT Profile Pictures

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By Reuters | Updated: 21 January 2022

Twitter on Thursday announced the launch of a tool through which users can showcase non-fungible tokens (NFTs)as their profile pictures, tapping into a digital collectibles craze that has exploded over the past year.

The feature, available on iOS to users of the company’s Twitter Blue subscription service, connects their Twitter accounts to cryptocurrency wallets where the users store NFT holdings.

Twitter displays the NFT profile pictures as hexagons, differentiating them from the standard circles available to other users. Tapping on the pictures prompts details about the art and its ownership to appear.

Like other tech companies, Twitter is rushing to cash in on crypto trends like NFTs, a type of speculative asset authenticating digital items such as images, videos, and land in virtual worlds.

The social media platform last year added functionality for users to send and receive Bitcoin.

Sales of NFTs reached some $25 billion (roughly Rs. 1,86,250 crore) in 2021, according to data from market tracker DappRadar, although there were signs of growth slowing toward the end of the year.

Proponents of Web3 technologies like NFTs say they decentralise ownership online, creating a path for users to earn money from popular creations, rather than having those benefits accrue primarily to a handful of tech platforms.

Critics dismiss the decentralisation claims, noting that many of the services powering adoption of those technologies – like the six crypto wallets supported by Twitter’s NFT product – are backed by a small group of venture capitalists.

In a widely circulated tweet after the launch, security researcher Jane Manchun Wong highlighted one of those links, showing how an outage at venture-backed NFT marketplace OpenSea temporarily blocked NFTs from loading on Twitter.

OpenSea did not immediately respond to a request from Reuters for comment.

© Thomson Reuters 2022

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Singapore Central Bank Issues Guidelines to Discourage Crypto Trading by Public

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By Reuters | Updated: 17 January 2022 

The Monetary Authority of Singapore (MAS) on Monday issued guidelines that limit cryptocurrency trading service providers from promoting their services to the general public, as part of a bid to shield retail investors from potential risks.

Singapore is a popular location for cryptocurrency companies due to a comparatively clear regulatory and operating environment and is among the forerunners globally in developing a formal licensing framework.

But the city-state’s authorities have repeatedly warned that trading in digital payment tokens (DPT), or cryptocurrency, is highly risky and not suitable for the general public, as they are subject to sharp speculative swings.

The new guidelines clarify the expectations of MAS that companies should not engage in marketing or advertising of DPT services in public areas in Singapore or through the engagement of third parties, such as social media influencers, to promote DPT services to the general public.

They can only market or advertise on their own corporate websites, mobile applications or official social media accounts.

“MAS strongly encourages the development of blockchain technology and innovative application of crypto tokens in value-adding use cases,” Loo Siew Yee, MAS Assistant Managing Director (Policy, Payments and Financial Crime), said in a statement.

“But the trading of cryptocurrencies is highly risky and not suitable for the general public. DPT service providers should therefore not portray the trading of DPTs in a manner that trivialises the high risks of trading in DPTs, nor engage in marketing activities that target the general public.”

© Thomson Reuters 2022

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Dogecoin Jumps After Elon Musk Tweets Tesla Merchandise ‘Buyable’ With the Token

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By Reuters | Updated: 14 January 2022

Meme-based cryptocurrency Dogecoin jumped on Friday after Tesla chief Elon Musk said the electric carmaker will accept it as payment for merchandise.

“Tesla merch buyable with Dogecoin,” Musk tweeted.

His mid-December tweet saying such use of Dogecoin will be allowed on a test basis sent the cryptocurrency up more than 20 percent. Dogecoin price in India stood at Rs. 15.02 as of 4:30pm IST on January 14.
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Dogecoin, popular among retail investors, raced up 18 percent to above $0.2 (roughly Rs. 14) after Friday’s tweet.

Musk’s tweets on the cryptocurrency, including the one where he called it the “people’s crypto”, buoyed the meme coin and caused it to soar roughly 4,000 percent in 2021.

In other Tesla-related news, Musk tweeted on January 13 that Tesla is “still working through a lot of challenges with the government” in India. Musk said this in response to a question on when it would launch its electric cars in the country.

Tesla had plans to begin selling imported cars in India last year and has been lobbying the government to slash import taxes on electric vehicles (EVs) before it enters the market. In October, it took its demands to Indian Prime Minister Narendra Modi’s office.

Musk didn’t identify the “challenges” being worked on in his Twitter post.

© Thomson Reuters 2022

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Jack Dorsey Fintech Firm Block Wants Bitcoin Mining for All

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By Agence France-Presse | Updated: 14 January 2022

Jack Dorsey on Thursday announced that his digital payments firm Block is building a system to make it easier for people to mine Bitcoin.

Dorsey said in a tweet that Block, formerly known as Square, is “officially building an open Bitcoin mining system,” following through on an idea floated publicly late last year. Bitcoin price in India stood at Rs. 34.11 lakhs as of 12:00pm IST on January

In November, Twitter co-founder Dorsey announced his departure from the social media platform, allowing him to concentrate on his digital payments firm as it expands into cryptocurrency.

Block changed its name from Square late last year to denote a broader mission that includes blockchain and economic empowerment.

Hardware and software teams at Block will openly collaborate with the cryptocurrency community outside the San Francisco-based company, aiming to create a mining system that could be used by anyone, according to Dorsey’s tweets.

Block hardware general manager Thomas Templeton said on Twitter that the project’s aim was: “To make mining more distributed and efficient in every way, from buying, to set up, to maintenance, to mining.”

“We see it as a long-term need for a future that is fully decentralised and permissionless.”

No timeline was given for when Block’s system might be ready. Block is also working on a wallet for storing cryptocurrency, using similar open collaboration.

“For most people, mining rigs are hard to find,” Templeton said in a tweet.

“How can we make it so that anyone, anywhere, can easily purchase a mining rig?”

The price of Bitcoin hit record highs in 2021 thanks to support from traditional finance. But it slid below $40,000 (roughly Rs. 30 lakh) on Monday, falling to its lowest level since the end of September as the world’s leading cryptocurrency showed no end to its volatility.

Created following the 2008 global financial crisis, Bitcoin initially promoted a libertarian ideal and aspired to overthrow traditional monetary and financial institutions such as central banks.

In more recent times, climate change watchers have shone a spotlight on the huge amount of electricity used to power computers required to unearth new Bitcoin tokens.

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Digital Pound Could Hit Financial Stability and Erode Privacy, UK Lawmakers Warn

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By Reuters | Updated: 13 January 2022

A digital pound used by consumers could harm financial stability, raise the cost of credit, and erode privacy, though a version for wholesale use in the financial sector demands greater appraisal, British lawmakers said on Thursday.

Britain’s central bank and finance ministry said in November they would hold a consultation this year on whether to move forward on a central bank digital currency (CBDC) that would be introduced after 2025 at the earliest.

Central banks across the world have stepped up work on CBDCs to avoid the private sector dominating digital payments as cash use falls. The prospect of widely-used cryptocurrencies issued by Big Tech has also galvanised such efforts.

But an e-pound used by households and business for everyday payments could see people move cash from commercial bank accounts to digital wallets, said the report by a committee in the House of Lords, parliament’s unelected upper chamber.

That could spark financial instability in times of economic stress and increase borrowing costs as a key source of lenders’ funding would dry up, it said.

A digital pound could also harm privacy, the report added, by allowing the central bank to monitor spending.

“We were really concerned by a number of the risks that are posed by the introduction of a CBDC,” Economic Affairs Committee Chair Michael Forsyth told Reuters.

Many benefits for the consumers could be “achieved by alternative means with fewer risks,” Forsyth said, pointing to regulation as a better tool to ward off the threat of crypto issued by Big Tech firms.

However, a wholesale CBDC used to transfer large sums could make securities trading and settlement more efficient, the report said. Britain’s central bank and finance ministry should consult on its advantages over the expansion of the existing settlements system, it said.

Britain’s parliament should have the final say on any decision to launch a e-pound, the report said, calling for lawmakers to also vote on its governance.

A CBDC would have “far-reaching consequences for households, business and the monetary system,” Forsyth said. “That needs to be approved by parliament.”

© Thomson Reuters 2022

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