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Iran's Recognition of Crypto Mining Prompts Local Bitcoin Price Spike

The Iranian government has recognized cryptocurrency mining as a lawful activity as part of its effort to introduce a national cryptocurrency – a move that saw bitcoin’s price briefly spike to record levels on local exchanges.

According to news agency IBENA, which is affiliated to the Central Bank of Iran, Abolhassan Firouzabadi, the Secretary of Iran’s Supreme Council of Cyberspace stated on Tuesday that cryptocurrency mining “has been accepted as an industry in the government.”

Further, the official said the decision was arrived at after consensus among other relevant government agencies such as the Ministry of Communications and Information Technology, the Central Bank and the Ministry of Economic Affairs and Finance, although a final policy legislating for the activity hasn’t been declared as yet.

The move to recognize cryptocurrency mining comes as the country is taking efforts to create its own central bank digital currency as a means to bypass the U.S. economic sanctions recently reimposed by President Trump, as previously reported by CoinDesk.

Firouzabadi added that a national cryptocurrency remains a “promising” tool to facilitate financial transactions with Iran’s trade partners, as the Trump administration has restricted the country’s access to U.S. dollars.

With regard to cryptocurrency trading activities, the official further said “a decision-making authority will declare the framework and final policies for trade and participation of startups and trade activists in the cryptocurrency sphere by September but no definitive decision has been taken yet.”

CoinDesk also reported in July that cryptocurrency investors in Iran then appeared to be facing restrictions from the state, with users being blocked from accessing accounts at exchanges such as Binance, even if using virtual private networks or VPNs.

Following the country’s recognition of crypto mining, reports indicate that the price of bitcoin on some local exchanges such as Exir peaked to over $24,000 – exceeding the global average all-time high of $20,000 seen in December – while prices elsewhere yesterday were around $7,000.

Data from CryptoCompare backs up the reports, indicating that OTC trading prices on LocalBitcoins briefly reached as high as $25,000.

Azadi Tower, Tehran, image via Shutterstock

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India Eyes State Digital Currency to Cut $90 Million Banknote Bill

India’s central bank is researching how to introduce a rupee-backed central bank digital currency (CBDC) into its monetary policy in a bid to reduce its hefty annual bill for minting physical cash.

The news was revealed in the Reserve Bank of India’s (RBI) annual report, published Wednesday, which indicated an inter-departmental unit has already been formed within the organization to study the “desirability and feasibility to introduce a central bank digital currency.”

The effort apparently comes in response to a rapidly changing landscape of digital payments and the “rising costs of managing fiat paper/metallic money,” the bank said.

A news report from the Economic Times on Thursday further indicated the RBI also said that, for 2018, the cost of printing paper notes alone totaled nearly $90 million.

While the RBI did not reveal whether the potential CBDC may be blockchain-powered, it claimed the utilization of distributed ledger technology (DLT) in payment and settlement solutions “holds the promise of significant economic benefits in future.”

Meanwhile, in contrast to its support for adoption of DLT at a state level, the RBI again toughened its stance on crypto trading in the report, shifting its focus to transactions between individuals following its ban on bank accounts for exchanges announced in April.

“Developments on this front need to be monitored as some trading may shift from exchanges to peer-to-peer mode, which may also involve increased usage of cash,” the RBI warned in its yearly report, adding:

“Possibilities of migration of crypto exchange houses to dark pools/cash and to offshore locations, thus raising concerns on anti-money /CFT and taxation issues, require close watch.”

Since the RBI’s bank account ban went into effect in July, local exchanges have been adopting various methods to find new revenue models, including moving business focuses to peer-to-peer trading.

Indian rupees image via Shutterstock

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Bitt Inks Blockchain Deal With Another Caribbean Central Bank

Barbados-based blockchain startup Bitt is partnering with the Centrale Bank van Curaçao en Sint Maarten (CBCS) to look into issuing a central bank-backed digital currency for the two nations.

Bitt, a portfolio company of Overstock’s Medici Ventures, said Monday that it has signed a memorandum of understanding (MOU) with the central bank for the Dutch Caribbean island Curaçao and Netherlands constituent country Sint Maarten earlier this month. The goal of the deal is to jointly examine the possibility of issuing a digital Curaçao and Sint Maarten guilder to replace the current Netherlands Antillean guilder.

The project will focus in part on testing know-your-customer/anti-money laundering (KYC/AML) technology, according to statements.

CBCS acting president Leila Matroos-Lasten said the bank signed the MOU with Bitt “due to this company’s regional experience in digital payments and its macroeconomic views.”

She added:

“The central bank is determined to address its challenges proactively by exploring the latest technology available, for example, to reduce the level of cash usage within the monetary union, and to facilitate more secure, more AML and KYC compliant and more efficient financial transactions within and between Curaçao and Sint Maarten.”

The MOU signifies that the bank recognizes the potential improvements that technology can bring, she added.

“The CBCS … is committed to exploring solutions regarding the efficiency of cross-jurisdictional transactions and digital payments whilst ensuring compliance and security assurances obtained by these state of the art [fintech] solutions,” Matroos-Lasten was quoted as saying. “This would be beneficial to everyone.”

The news comes a few months after Bitt signed a similar MOU with the Eastern Caribbean Central Bank, a central banking institution that covers Anguilla, Antigua and Barbuda, the Commonwealth of Dominica, Grenada, Montserrat, St. Kitts and Nevis, Saint Lucia and St. Vincent and the Grenadines.

That trial may be used to develop new digital payment and settlement systems, and if successful, could ultimately help the bank issue a cryptocurrency of its own, as previously reported by CoinDesk.

Image via Shutterstock

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Central Bank Crypto Could Bring Economic Gains: Bank of Canada Paper

Central bank-issued cryptocurrency can potentially bring economic welfare gains for Canada and the U.S., according to a central bank researcher.

In a working paper published Thursday, the Bank of Canada’s S. Mohammad R. Davoodalhosseini states that introducing a central bank digital currency (CBDC) “can lead to an increase of up to 0.64 percent in consumption for Canada and up to 1.6 percent for the US, compared with their respective economies if only cash is used.”

At the moment, Davoodalhosseini says, a key question to the “many” central banks currently mulling the option of issuing a CBDC is whether cash and a digital form of fiat currency should co-exist, and if so, how to maintain an “optimal” monetary policy.

Based on detailed modeling and mathematical calculations, the researcher argues in the paper that a country’s economic welfare – at least for Canada and the U.S. – might be better off by substituting cash with a CBDC, provided implementation is not extremely costly.

He wrote:

“Having both cash and CBDC available to agents (consumers) sometimes results in lower welfare than in cases where only cash or only CBDC is available. This fact suggests that removing cash from circulation may be a welfare-enhancing policy if the motivation to introduce CBDC is to improve monetary policy effectiveness.”

The paper further states that, by introducing a CBDC, central banks could have a higher level of flexibility in adjusting current monetary policy.

“This is because the central bank can monitor agents’ portfolios of CBDC and can cross-subsidize between different types of agents, but these actions are not possible if agents use cash,” it says.

The paper’s quantitative approach follows a previous December 2017 effort by other researchers from Canada’s central bank to gauge the value of offering a CBDC over cash – work that took a more qualitative look at the pros and cons.

CoinDesk reported at the time that the researchers argued that the potential benefits of a CBDC may vary between developed and developing economies.

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Bank of Korea: Central Bank Cryptocurrencies Pose 'Moral Hazard'

South Korea’s central bank has announced that it does not plan to launch its own digital currency over fears it could destabilize the economy.

According to The Korea Times on Monday, the BoK said that issuing a central bank digital currency (CBDC) could pose a “moral hazard” by adversely affecting monetary policy and its implementation, and possibly causing instability in the market as it effectively doesn’t function like fiat money.

More than that, the Bank of Korea (BoK) went as far as to say that “digital currencies do not perform as money,” in a new report.

While the central bank set out to examine the feasibility of using digital currencies as currency, “our thoughts are that digital currencies have been exposed to various categories of risk associated with credit, liquidity and legal management,” said Kwon Oh-ik, a BoK economist, in the report.

Looking more widely, the unrestricted issuance of both traditional and digital currencies could bring “social costs and undermine social welfare,” the paper warns, adding:

“It’s desirable that the BoK is the only entity to entirely control the issuing of money.”

The central bank isn’t entirely negative on CBDCs, however, saying that they could “revolutionize” the banking system. Even so, they would need to be rigorously tested before being approved.

The paper also recommends the regulation of private issuance of digital currencies, according to Yonhap, adding that the government should impose a tax on issuers to make them less likely to exaggerate the value of their holdings.

“Technology improvements don’t mean private sectors will be allowed to have the rights for money issuance. If this happens, the BoK should regulate them but properly,” Kwon said.

The central bank has been studying the possibility of a CBDC and how cryptocurrencies might influence the financial sector since January, when it set up a task-force to research the technology.

Korean won image via Shutterstock

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Thailand Trials Central Bank Digital Currency for Interbank Settlement

Bank of Thailand (BoT), the country’s central banking authority, is eyeing the adoption of blockchain technology in its interbank clearance and settlement system.

According to a speech published on Wednesday, central bank governor Veerathai Santiprabhob indicated at an event in Singapore that developing a wholesale central bank digital currency is currently in the country’s pipeline as part of its wider effort to trial blockchain technology in various sectors.

The project, dubbed Inthanon, seeks to create the bank’s own blockchain-based cryptocurrency to make interbank transactions both faster and cheaper.

The initial goal of the trial, according to Santiprabhob, is to understand the potential of this technology before moving to bring CBDC into larger scale of real life use.

He said in the speech:

“Like other central banks, our goal is not to immediately bring CBDC into use, but rather to explore its potential and implications for back-office operations. These efforts should pave way for faster and cheaper transaction and validation due to less intermediation needed compared to the current systems.”

The effort follows Bank of Thailand’s several existing work in exploring blockchain technology.

As previously reported by CoinDesk, in March, 14 Thai banks joined the central bank in March in piloting a shared blockchain platform to digitize letters of guarantee in the country. That work, according to Santiprabhob in the latest speech is “expected to become operational in the second half of this year.”

In addition, Santiprabhob said his agency is also testing a proof-of-concept that uses a blockchain platform to issue bonds digitally, and could reduce “bond allocation to retail investors from 15 days to 2 days.”

The proof-of-concept is “almost complete,” he said, adding that a product is anticipated to launch in the “very near future.”

Thai baht image via Shutterstock

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Hong Kong Official Rules Out Plan for Central Bank Digital Currency

Hong Kong Monetary Authority (HKMA), the region’s de facto central bank, currently has no plan to issue a central bank digital currency (CBDC), a high level government official said on Wednesday.

During a council meeting with legislators in Hong Kong, Joseph Chan, Acting Secretary for Financial Services and the Treasury, said the HKMA’s research on the topic led to a belief that CBDC would be less useful in Hong Kong compared to other jurisdictions.

Chan told the legislators:

“The HKMA has carried out research on CBDC. At the same time, the HKMA notes that the benefits of CBDC and its efficiency gains will depend on the actual circumstances of a jurisdiction. In the context of Hong Kong, the already efficient payment infrastructure and services make CBDC a less attractive proposition. The HKMA has no plan to issue CBDC at this stage but will continue to monitor the international development.”

A representative from the HKMA also confirmed the news but denied to disclose further details on the agency’s research on the issue.

Yet Chan’s response marks a notable update to the HKMA’s earlier move to explore a CBDC prototype as part of its wider effort to experiment with the potential of distributed ledger technology.

In April of last year, the HKMA first revealed in a response to legislators that the banking authority has started “a research and a proof-of-concept work on central bank digital currency.”

The HKMA said at the time that the first phase of the study would expect to be done by the end of 2017, based on which the authority would decide on an appropriate action forward.

Chan’s latest remark came as a response to a question raised by legislator Denis Kwok on May 18. According to a document released at the time, Kwok was seeking an answer from the government whether it considers to issue a CBDC in a bid to keep the city’s competitive edge on financial innovation.

Hong Kong dollar image via Shutterstock

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Japanese Official: No Plans For Central Bank Cryptocurrency

Bank of Japan (BoJ), the country’s central banking authority, currently has no plan to issue a central bank digital currency (CBDC), citing financial stability concerns.

In a closing remark at a conference with the International Monetary Fund and Japan’s Financial Services Agency on Monday, the BoJ’s deputy governor Masayoshi Amamiya said issuing a digital currency directly for consumers – whether or not on a blockchain – could undermine the existing two-tiered system.

Currently central banks only give access to limited entities such as private banks, which in a second tier directly face consumers – a process that Amamiya praises as “the wisdom of human beings in history to achieve both efficiency and stability in the currency system.”

As such the deputy governor moved on explaining that having a digital currency backed by the central bank will change the system without proving to be financially stable.

Amamiya stated:

“In this regard, the issuance of central bank digital currencies for general use could be analogous to allowing households and firms to directly have accounts in the central bank. This may have a large impact on the aforementioned two-tiered currency system and private banks’ financial intermediation.”

That said, Amamiya does not entirely rule out the possibility of considering the bank’s own cryptocurrency in the future as it has already started looking into the underlying blockchain technology, though currently just for business applications.

As reported before, through a partnership with the European Central Bank, the BoJ has kicked off an initiative called Project Stella, which has recently published research results on how the distributed ledger technology can create new securities settlement mechanisms.

Bank of Japan image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.