Deutsche Bank Reports About Bitcoin, Hawaii Senators Push New Crypto-Bill, Japan Prepares Their Response To Digital Yuan and Amun Rolls Out Inverse Bitcoin ETP

In this edition:

  • Deutsche Bank Speaks Against Bitcoin
  • Hawaii Senators Push for Banks to Offer Custody Services
  • Japan is Working on Proposal to Issue Digital Currency
  • Amun Rolls Out Inverse Bitcoin ETP for Traders to Capitalize on Negative Price Movements

Fellow Anchorians, it was interesting to see what was going on in the world of crypto this week. The year opened with the increasing buzz from the institutions, calls from various international organizations pushing for the release of digital currencies. A group of central banks, including the Bank of England, Bank of Japan, and the European Central Bank have decided to pool resources, experience, and research to test how a potential central bank digital currency (CBDC) would work. 

Mentioned banks were interested in CBDC use cases, cross-border interoperability, sharing of knowledge on emerging technologies, as well as functional and technical design choices. Individually, banks have their own agendas, ECB was more interested in the pros and cons of building digital currencies, while Swedish Riksbank already began building a platform for a digital currency (e-krona). 

Let’s see what other banking institutions have to say…

Deutsche Bank Speaks Against Bitcoin

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One thing official institutions of the mainstream can do perfectly is state the obvious. Deutsche Bank (not to be confused for Deutsche Bundesbank, which is Germany’s central bank) researched Bitcoin’s price fluctuations and found BTC to be an unreliable store of value.

Deutsche Bank, namely, published the first of three reports last week, concluding that cryptocurrencies have passed the tipping point needed to become fashionable and that they are still in the early adoption stage. They point out that the world’s largest crypto is too volatile to be a reliable store of value, mostly referring to sharp fluctuations during 2017 and 2018.

Though admitting that crypto payments have taken off, report claims they are still just a tiny fraction of global payments, with a note that cryptocurrencies have the potential to revolutionize payments. “Looking ahead, it may not be surprising if a new and mainstream cryptocurrency were to unexpectedly emerge,” the report added.

Anyway, second and third parts of the report are somewhat contradictory, one reports that cash would be around for decades to come, while the other predicts that new digital currency could become mainstream within the next two years. Either way, even Deutsche Bank recognizes that fiat currency looks very fragile in the current system.

Hawaii Senators Push for Banks to Offer Custody Services

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One Republican and four Democratic senators from Hawaii Senate (Kurt Fevella, Gil Riviere, Sharon Moriwaki, Stanley Chang, and Les Ihara) have introduced a bill 2594, hoping to authorize banks to provide custody for cryptocurrencies.

If passed, this would make it legal for Hawaiian banks to hold digital assets including all the virtual currencies, digital securities, and open blockchain tokens for their customers. The bill has passed the first reading and has been referred to the Senate Committee on Commerce, Consumer Protection and Health, as well as to the Senate Committee on Judiciary.  

The new bill also requires banks to maintain reserves the same way trust companies are obliged to: “Every trust company shall have on hand at all times in actual money of the United States an amount equal to at least twelve percent of all agency credit balances payable on demand and of accounts payable, plus at least five percent of all agency credit balances payable on time; provided that such reserve may be deposited payable on demand in banks and other trust companies approved by the commissioner or may be cash in the vaults of the trust company.”

Interestingly enough, the bill also introduces private keys and multi-signature wallets: “A secured party, or an agent, custodian, fiduciary, or trustee of the party, has the exclusive legal authority to conduct a transaction relating to a digital asset, including by means of a private key or the use of a multi‑signature arrangement authorized by the secured party.”

Banks will be required to carry out transactions: “A bank and a customer shall agree in writing regarding the source code version that the bank will use for each digital asset […] Any ambiguity under this subsection shall be resolved in favor of the customer,” the bill states.

It seems like a big step forward for the much-needed adoption of crypto by official financial institutions!

Japan is Working on Proposal to Issue Digital Currency

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Spurred by China’s push for digital currency, Japan’s lawmakers are working on a proposal to issue digital currency. Norihiro Nakayama, parliamentary VP for foreign affairs stated that it’s a matter of diplomatic counter-move to make sure there will be a digital yen once digital yuan shows up.

Towards this goal, the Bank of Japan joined hands with five other central banks (the Bank of England, the European Central Bank, the Bank of Canada, Sweden’s Riksbank and the Swiss National Bank) to explore digital currencies. 

Japan’s digital currency will be a joint effort between the government and the private sector. Prime Minister Shinzo Abe told parliament today that Japan’s central bank will seek ways to increase yen’s convenience as a settlement means. 

Bank for International Settlements researched into the trend, as more and more central banks around the world have accelerated efforts to explore digital currencies: “Some 40% of central banks have progressed from conceptual research to experiments or proofs-of-concept, and another 10% have developed pilot projects,” the survey conducted among 66 central banks states.

Amun Rolls Out Inverse Bitcoin ETP for Traders to Capitalize on Negative Price Movements

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Amun AG has listed a new inverse Bitcoin exchange-traded product (ETP) on Switzerland’s stock exchange SIX. 

What does this mean? Well, inverse ETP lets customers earn a positive return when an asset (or in this case – BTC) falls, as it allows shorting. Therefore, if a trader buys, say $1000 of short Bitcoin ETP (nicknamed 21Shares Short Bitcoin ETP or SBTC), a short position of $1000 is opened. If the price of BTC goes down by 10%, then SBTC ETP will record a positive return of 10% (minus the costs, namely the annual management fee of 2.5%). This way traders can capitalize on negative price movements.

The performance of this short ETP will be reset at the end of each day, making the SBTC ETP ideal to capture the short term price of bitcoin for a short recommended period.

Amun has 11 crypto ETP listed on stock exchanges, tied to Bitcoin, Ether, and XRP digital assets. With SBTC being their first short product, all previous 10 are regular long ETPs. As for the inverse Bitcoin ETP, now that’s a definite first not only for Amun AG but for the world in general! Amun today manages over $55 million in client assets, the most popular being HODL, Bitcoin ETP, and Binance Coin (BNB) ETP. They also did a rebranding of their crypto native products. All their ETPs are now titled “21Shares” which refers to Bitcoin’s fixed supply of 21 million coins.

Amun has secured the green light from the Swedish Financial Supervisory Authority to expand its offerings in the European Union, as they plan to expand their listings on at least two more European exchanges!

Final Thoughts

Wow. An eventful week is behind us. It seems that 2020 will be a year of crypto adoption. The Chinese government and their digital yuan are really causing a stir. Forty percent of central banks from 66 countries are considering going crypto in one way or another, that’s a nice optimistic number, so think about it!

Disclaimer: The information provided in this post is not legal, accounting, or financial advice. I am not a lawyer, accountant, or financial advisor. I am not registered as an investment adviser with any federal or state regulatory agency. The Information should not be construed as investment or trading advice and is not meant to be a solicitation or recommendation to buy, sell, or hold any cryptocurrencies.