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CBDCs of the World: The Benefits and Drawbacks of National Cryptos, According to Different Jurisdictions

The concept of CBDCs has been steadily drawing the attention of jurisdictions worldwide.

This month alone, at least three separate countries have reported on their prospective central bank-issued digital currencies (CBDCs): The Republic of the Marshall Islands (RMI) announced the creation of a specially dedicated nonprofit organization to support its digital currency that is already being developed. Meanwhile, the central bank of Russia said it was considering its own cryptocurrency (albeit not in the near future), while the National Bank of Ukraine released a report on the matter.

The concept of CBDCs has been steadily drawing the attention of numerous jurisdictions worldwide, but will it prove to be an efficient solution? It is time to delve deeper into the idea of state-backed cryptocurrencies and go through some major examples.

Nations With a Clear Stance on National Cryptocurrency

The state’s answer to the growing popularity of crypto

CBDCs, or national digital currencies, are digital assets that are issued and controlled by a federal regulator.

By design, CBDCs are fully regulated by the state. They don’t aim to become decentralized like most cryptocurrencies — instead, they simply represent fiat money, only in a digital form. Each CBDC unit acts as a secure digital equivalent of a paper bill and is normally powered by blockchain or some other form of distributed ledger technology (DLT).

Consequently, if a central bank issues a CBDC, it becomes not only its regulator but its clients’ account holder as well, therefore taking on the role of conventional, brick-and-mortar banks. Alternatively, a central bank can issue a digital currency in a decentralized manner, similar to how physical cash is distributed.

CBDCs could be seen as central banks’ response to the growing popularity of cryptocurrencies, some of which, however, deliberately attempt to bypass regulators’ purview. CBDCs, in turn, aim to take the best from cryptocurrencies, namely the convenience and security, and combine those features with the time-tested characteristics of the conventional banking system, in which money circulation is regulated and reserve-backed.

Indeed, according to a 2019 report issued by the Bank for International Settlements (BIS) — an organization based in Switzerland and comprises 60 of the world’s central banks — as much as 70% of financial authorities worldwide are conducting research into CBDC-issuance. However, concrete plans for implementation and motivations vary significantly depending on the country.

The BIS survey studied 63 central banks worldwide, 41 of which are based in emerging market economies, and 22 of which are in advanced economies — together representing almost 80% of the world’s population and more than 90% of its economic output. Of these, 70% were found to be already — or soon to be — engaged in theoretical CBDC research.

Notably, the general perception of a CBDC has been shifting toward positive. For instance, the head of the International Monetary Fund (IMF), an entity which once denounced the Republic of the Marshall Islands for its plan to issue a state-backed cryptocurrency, has recently declared that the international community should “consider” endorsing the idea.

“I believe we should consider the possibility to issue digital currency. There may be a role for the state to supply money to the digital economy,” IMF Managing Director Christine Lagarde declared, noting, however, that she is “not entirely convinced” on the concept, yet.

Adopters

Tunisia

Status: Adopted

Release date: 2015

In 2015, Tunisia became the first country in the world to issue a blockchain-based national currency called eDinar, also known as Digicash or BitDinar.

The asset was created with the participation of Monetas, a Switzerland-based software company (its CEO has gained notoriety due to the Tezos scandal), which has put the digital version of Tunisia’s dinar on blockchain rails.

Similarly to cash money, eDinar’s distribution and issuance is under the purview of a governmental body: La Poste, or La Poste Tunisian (LPT). Monetas CEO Johann Gevers commented on the launch:

“The Monetas deployment in Tunisia is the first application for a full ecosystem of digital payments. With the La Poste Tunisienne Android application powered by Monetas, Tunisians can use their smartphones to make instant mobile money transfers, pay for goods and services online and in person, send remittance, pay salaries and bills, and manage official government identification documents.”

There are transaction fees featured in the eDinar system — albeit they are insignificant, as the maximum amount is capped at just 1 dinar ($0.34), which is typical for conventional cryptocurrencies.

Now, the North African country seems to be contemplating the next step: In April, El Abassi, the governor at Banque Centrale de Tunisie — the local central bank — announced that it had created a working group that was studying the issuance of a sovereign bitcoin (BTC) bond.

Abassi added that bitcoin and blockchain technology offers central banks an efficient tool to combat money laundering, manage remittances, fight cross-border terrorism and limit informal economies.

Senegal

Status: Adopted

Release date: 2016

Senegal is also one of the earliest adopters of a national digital currency, having issued its blockchain-based eCFA — named after the CFA franc, the Senegalese paper-based fiat currency — in December 2016.

Like a regular CBDC, eCFA is fully dependent on the central banking system and can only be issued by an authorized financial institution. The currency was created jointly by local bank Banque Régionale de Marchés (BRM) and eCurrency Mint Limited, an Ireland-based startup that assists central banks in creating their own digital fiat currencies.

The eCFA has been designed to be distributed alongside paper money as legal tender. In a shared statement, BRM and eCurrency Mint declared:

“The eCFA is a high-security digital instrument that can be held in all mobile money and e-money wallets. It will secure universal liquidity, enable interoperability and provide transparency to the entire digital ecosystem in WAEMU.”

Indeed, if proven efficient, the eCFA could be extended to other West African Economic and Monetary Union (WAEMU) member states, including Côte d’Ivoire, Burkina Faso, Benin, Togo, Mali, Niger and Guinea-Bissau.

The Marshall Islands

Status: Adopted

Release date: 2019 (expected)

The Republic of the Marshall Islands (RMI) — a small island country in the Pacific Ocean with a population of roughly 53,000 people — is a presidential republic in free association with the United States, which is why it has historically used the U.S. dollar as its official currency.

However, in March 2018, it introduced another legal tender: its own cryptocurrency succinctly dubbed Sovereign (SOV). The digital asset was first introduced in late February the same year, when the government — the country has no central bank — passed the Declaration and Issuance of the Sovereign Currency Act. David Paul, minister-in-assistance to the president of the Marshall Islands, told Reuters at the time:

“As a country, we reserve the right to issue a currency in whatever form it is, whether in digital or fiat form.”

Further, Paul added that SOV is made collaboratively with Israeli fintech startup Neema and will be publicly released through an initial coin offering (ICO), with a seperate presale. Neema CEO Barak Ben-Ezer told the press that SOV “is completely decentralized and the government cannot control the money supply” after the ICO.

As Peter Dittus, chief economist for SOV, told Cointelegraph, the decision to develop a national digital currency is backed by several reasons.

First, Dittus says, developing countries such as RMI struggle with the high costs of remittances, and having a crypto legal tender creates a situation in which the solution to costly payments is integrated into the monetary system itself. Additionally, a central bank-managed fiat currency is costly to implement and to run, wherein “for a small country the costs clearly outweigh the benefits.”

In September 2018, however, the SOV project was criticized by major financial organizations, including the IMF and the U.S. Treasury Department. Specifically, the IMF warned about the potential risks of using a cryptocurrency as legal tender, stating that:

“The potential benefits from revenue gains appear considerably smaller than the potential costs arising from economic, reputational, AML/CFT, and governance risks.”

Further, in November, the RMI President Hilda Heine narrowly survived a no confidence vote that was prompted by her plans to introduce the national digital currency, among other things.

Nevertheless, in January 2019, the team behind SOV announced that a national cryptocurrency for the Marshall Islands was still being actively developed and that it intends to launch SOV sometime this year.

In early June, the RMI established the SOV Development Fund, a nonprofit organization to support the government in the implementation of a national cryptocurrency.

According to its press release, the fund will be fully independent, with a board of seven directors, of whom two will be appointed by the government and two nominated by SFB Technologies — the firm that is developing SOV’s blockchain infrastructure.

The remaining directors will be selected unanimously by the aforementioned four from among international experts in blockchain, banking and monetary policy.

In a video presentation to the Blockchain for Impact Summit at the United Nations Headquarters in New York, the minister in assistance to the president, David Paul, said, “We are designing SOV in a way that will not place any burden on the government’s finances. The currency funds itself.”

Venezuela

Status: Adopted

Release date: 2018

In February 2018, the government of Venezuela launched a national cryptocurrency called Petro (PTR), or sometimes Petromoneda.

Petro was first announced in December 2017 via national television, when President Nicolas Maduro declared that his government was planning to issue a cryptocurrency backed by the country’s oil, gold and mineral reserves. In January, he elaborated, stating that 100 million petros backed by an equivalent number of barrels of oil was going to be issued in the near future. According to Maduro, a number of fiat currencies — including the Russian ruble, the Chinese yuan, Turkish lira and the euro — are freely convertible with Petro.

Notably, the currency was designed to dodge the U.S. sanctions that hinder the local economy — or, as Maduro put it: to fight the financial “blockade” erected by the U.S. President Donald Trump’s administration. In response, the U.S. has issued an order to effectively restrict American investors from participating in the ICO for Petro, which started on Feb. 20, 2018.

In March, Nicolas Maduro claimed that a total of $5 billion was raised during the presale period — which would make it one of the largest ICOs to date, putting the $2 billion Telegram ICO and $4.2 billion token sale of EOS behind it. However, as Steve Hanke, an applied economist at Johns Hopkins University, has pointed out, those claims “aren’t believable” because no independent audits have verified them.

Further, Petro allegedly has ties with Russia, as, according to anonymous sources cited in a Time article, the cryptocurrency has been receiving Russian support since 2017, particularly due to the appeal of bypassing Western sanctions also imposed on the country. As the Russian state bank allegedly told the publication, “People close to Putin, they told him this is how to avoid the sanctions.” However, in March, those claims were denied by Konstantin Vyshkovsky, the head of the Russian Finance Ministry’s State Debt Department.

Meanwhile, Maduro continues to integrate Petro into the troubled, hyperinflated economy. For instance, he has announced the launch of a Petro-funded crypto bank to support initiatives from the youth and students, while Venezuelan Minister of Habitat and Housing Ildemaro Villarroel declared that Petro will be used to fund the construction of houses for the homeless.

Moreover, even the pension bonuses have been converted into Petro, which triggered a protest led by seniors who did not believe in the oil-backed coin. According to a local labor organizer, paying pensions in Petros violates Venezuelan law.

In November 2018, after a series of delays, Petro was finally launched. Soon, crypto enthusiasts pointed out that its white paper seems to be a blatant copy of Dash’s documentation available on GitHub.

As of press time, Petro is still not listed on any major cryptocurrency exchange. According to local and South American experts cited by tech media publication Wired, Petro is a “stunt” and a “smoke curtain” to cover up hyperinflation.

Despite the questionable progress with a national cryptocurrency and, more importantly, a larger economic crisis in his country, in January 2019, Maduro was sworn in for a second term.

He has previously declared that the country was preparing to launch yet another, “even more powerful” cryptocurrency called Petro Gold, this time backed by the country’s reserve of precious metals, meaning that Venezuela might have to witness more cryptocurrency-related experiments from the Maduro government.

Iran

Status: Adopted

Release date: 2019

In April 2018, the Iranian government performed a major crackdown on cryptocurrencies, with local banks being banned from all crypto dealings. Days after, an official declared that an experimental model of a domestic digital currency had been prepared.

Indeed, similarly to Venezuela, Iran might be hoping to use its cryptocurrency to bypass Western sanctions: In May 2018, Mohammad Reza Pourebrahimi, the head of the Iranian Parliamentary Commission for Economic Affairs, referred to cryptocurrencies as a promising way for Iran and Russia to avoid U.S. dollar transactions, as well as a possible replacement of SWIFT (since all Iranian banks have been delisted from the global interbank payment system).

Additionally, Iran has reportedly been negotiating with Switzerland, South Africa, France, the United Kingdom, Russia, Austria, Germany and Bosnia to conduct financial transactions using cryptocurrency.

In January 2019, four local banks developed a gold-pegged cryptocurrency called PayMon amid rumors that Iran was going to issue its state-backed cryptocurrency.

According to reports from local media, the crypto asset has been developed in conjunction with three private banks — Parsian Bank, the Bank Pasargad and Bank Mellat — and one state-owned financial institution, Bank Melli Iran. Iran Fara Bourse, a Teheran-based over-the-counter (OTC) exchange for securities and other financial instruments, will reportedly list the new cryptocurrency.

The director of Kuknos, a blockchain company responsible for the technical side of the project, said that the new crypto asset is the way to tokenize assets and excess properties of the banks. One billion PayMon tokens will be released initially, as per the plan.

Interestingly, the launch of PayMon came less than a week after Iran’s central bank published a draft on future cryptocurrency regulations. According to Aljazeera, the authorities plan to partly reverse the ban on digital currencies but will introduce limits on the amount of cryptocurrencies that an individual can hold.

UAE and Saudi Arabia

Status: Pilot

Release date: 2019-2020 (expected)

In January 2019, the United Arab Emirates and Saudi Arabia announced an agreement to collaborate on the creation of a cryptocurrency for cross-border trading, confirming previous reports.

The project is part of the Strategy of Resolve, a larger agreement between the two countries comprised of seven joint initiatives. According to the UAE official news agency Emirate News Agency, the cryptocurrency “will be strictly targeted for banks at an experimental phase with the aim of better understanding the implications of blockchain technology and facilitating cross-border payments.”

The initiative reportedly seeks to protect customer interests, create standards for technology and consider the cybersecurity risks, while also determining the impact of centralized currencies on monetary policies, the agency reported.

In February, Saudi Arabian financial news portal Argaam reported that six unnamed commercial banks from Saudi Arabia and the UAE had joined the digital currency project dubbed Aber, with a scheduled implementation during the next 12 months. The article also noted:

“The currency’s official issuance is conditional on the outcomes of the ‘proof-of-concept’ stage. The Saudi Arabian Monetary Authority (SAMA) and the UAECB will decide on the feasibility of the currency’s practical applications.”

Uruguay

Status: Pilot

Release date: Unknown

In November 2017, the Central Bank of Uruguay (BCU) presented a six-month pilot plan for the issuance and use of the digital version of the Uruguayan peso. The institution stressed that it “is not a new currency, it is the same Uruguayan peso that, instead of having a physical support, has a technological support.”

According to the scheme — the starting date of which has not been specified — a total of 10,000 mobile phone users of Antel, the state-owned telecommunications company, would be able to download an app with an integrated digital wallet. The first issue of digital tokens will consist of 20 million Uruguayan pesos, the press release notes.

Other players participating in the pilot scheme, apart from the BCU and Antel, are RGC, the system provider; IBM, for storage support, circulation and control; IN Switch, for user management and transfers; and RedPagos, for ticketing.

The head of the BCU elaborated on the plan, adding that Uruguay “is very much in the vanguard” of digital currency development:

“It will be a process of trial and error, success and failures. […] This must have the same soundness as normal currency, but sooner or later it will be implemented in Uruguay.”

However, there has not been any major update to the pilot scheme for more than 12 months.

Singapore

Status: Pilot

Release date: Unknown

Singapore shares a similar experience with Uruguay in terms of issuing a CBDC, as its project has also been stuck in the experimentation phase.  

In June 2017, the Monetary Authority of Singapore (MAS) released a report regarding the so-called Project Ubin, a blockchain-powered plan to put a “tokenized form of the Singapore Dollar (SGD) on a DLT.” The project is a collaboration between the central bank and blockchain consortium R3, which is focused on the development of a blockchain pilot to facilitate cross-border payments.

However, in January 2018, Ravi Menon, the managing director of the MAS, suddenly criticized the idea of CBDCs, specifically in the public context. In an interview with the Financial Times, he questioned the reasoning behind central banks issuing digital currencies to the nonbank public.

“If there’s any sense of nervousness about the banks, you will have a bank run; everybody is going to go into the central bank [with their deposits]. […] And, if people placed their deposits with central banks, who’s going to extend credit?”

As with Uruguay, there have not been any updates on the Ubin project since.

Thailand

Status: Pilot

Release date: Unknown

The Bank of Thailand (BOT) has been notably bullish on the concept of CBDCs. In November last year, the central bank’s governor, Veerathai Santiprabhob, argued that it will take three to five years for countries to switch from using cash to using digital currencies. However, the official noted that digital currency would not replace fiat money right away “because of complication, a readiness of people and an efficiency of technology.”

Meanwhile, the BOT has been studying the prospect of releasing its own CBDC. The project details first surfaced in June 2018, when Santiprabhob revealed details that the central bank had teamed up with a number of local banks to develop a “new way of conducting interbank settlement” using a CBDC.

According to the BOT, releasing its own cryptocurrency would reduce the transaction costs and validation time “due to less intermediation process needed compared to the current systems.”

In May 2019, more details were published. Thus, the CBDC project, dubbed Inthanon, has been developed by blockchain consortium R3 and global IT company Wipro Limited to be used for interbank settlements in Thailand, according to the latest press release. Specifically, the solution will reportedly be used by the BOT and eight local commercial banks.

Researchers

Russia

Status: Research

Release date: Unknown

According to the latest reports, the head of Russia’s central bank, Elvira Nabiullina, has said that, while the launch of a CBDC is being explored, it won’t be released in the near future.

Specifically, Nabiullina suggested that the robustness of blockchain technology should be ensured before any prospective CBDC issuance:

“If we are talking about a national currency that works as a whole in the country —  that is, not about private assets — of course, this requires the technology to provide reliability and continuity. Technologies must be mature, including distributed ledger technologies.”

Further, Nabiullina discussed CBDCs in the context of cash-free societies, arguing that, while some countries have made significant progress and become almost cashless at this point, in other jurisdictions, cash remains in high demand:

“It’s not so much because people want to perform some dubious operations. People often value their privacy, anonymity. Of course, the spread of non-anonymous digital currencies indicate in some sense society’s readiness.”

In April, the country’s central bank released a policy brief on CBDCs, in which it argued that they could represent a less risky and more liquid type of asset that could potentially reduce transaction costs in the economy. However, the paper stressed CBDCs’ lack of anonymity as a potential disadvantage in comparison to cash.

Russia’s authorities have also been working on the so-called CryptoRuble, a national stablecoin. However, the project has been accompanied by contradicting statements from various officials, and, as Cointelegraph previously reported, there are reasons to believe that a ruble-pegged stablecoin might not turn out to be very stable in the end.

Sweden

Status: Research

Release date: Unknown

Sweden’s central bank, Riksbank, has been conducting research since 2017 into a project called e-Krona, a potential DLT-based currency that could be used as a “complement to cash.” In September that year, Riksbank published the first report on e-Krona, followed by an action plan.

The papers note that Riksbank “has not yet taken a decision on whether to issue an e-Krona and the aim is not for an e-Krona to replace cash.”

However, Riksbank’s reports on e-Krona mention the dropping popularity of cash in the country as one of the main reasons for studying the CBDC concept. For instance, the latest survey conducted by the central bank in 2018 found that only 13% of Swedish residents paid for their most recent purchase in cash, while the corresponding figure for 2010 was 39%.

Essentially, Riksbank believes that e-Krona could operate under two systems: a value-based one and a registered-based one. The latter version would have digital currency balances stored in accounts on a central database — potentially underscored by blockchain — while a value-based e-Krona would be stored separately on “deposited currency accounts.”

China

Status: Research

Release date: Unknown

The People’s Bank of China (PBoC) has been researching the concept of CBDC for quite some time, with a specific institute named Digital Currency Research Lab established for this very purpose. However, it seems that the country is in no hurry to issue a national digital currency. In March 2018, governor of the PBoC, Zhou Xiaochuan, expressed the bank’s cautious position regarding the matter of blockchain technology:

“If it spread too rapidly, it may have a big negative impact on consumers. It could also have some unpredictable effects on financial stability and monetary policy transmission.”

Zhou also declared that digital currency will ultimately diminish cash circulation, while stressing that the PBoC “must prevent substantial and irreparable damages” to the domestic economy. Nevertheless, according to China Daily, he also claimed that the development of digital currency is “technologically inevitable.”

In June 2018, the Digital Currency Research Lab at the PBoC filed a new patent for a digital wallet that would allow users to track their transaction histories.

Three months later, it opened a new fintech research center in Nanjing, the capital of China’s eastern Jiangsu province. The establishment will focus on the PBoC’s testing of its developed digital currency prototype, according to reports.

South Africa

Status: Research

Release date: Unknown

Although there are few details on a South African CBDC at this point, the local central bank published a tender last month that mentions the issuance of “electronic legal tender — a central bank digital currency issued and backed by the South African Reserve Bank (SARB).”

The tender — which has been closed at this point — was reportedly created to assist the SARB in studying CBDCs.

The CBDC would be issued at one-to-one parity with the South African rand and accepted by businesses and the government, the paper mentioned. It also should be able to facilitate person-to-person transfers of value without clearing and settlement, the tender said, while consumers must be able to use the CBDC without using a bank account.

European Union

Status: Research

Release date: Unknown

While it is too early to say if EU countries could be joining the ranks of jurisdictions that have adopted the concept of CBDCs, in May 2019, a European Central Bank (ECB) official highlighted the benefits of state-backed digital currencies.

More specifically, Vitas Vasiliauskas — chairman of the board of the Bank of Lithuania and a member of the governing council of the ECB — discussed whether CBDCs should be wholesale, retail or both.

He stressed that CBDCs should serve as a medium of exchange, a means of payment and a store of value, reflecting qualities of the current forms of central bank money, but not a conventional reserve account or a private crypto asset. In the event of a release of a retail CBDC, it would be available to the general public, while access to the wholesale one would be open to financial institutions only.

Among the potential benefits of the CBDC, Vasiliauskas named increased efficiency of payments and securities settlements, as well as the reduction of counterparty credit and liquidity risks. The interest-bearing retail CBDC could purportedly improve the transmission of monetary policy and strengthen the pass-through of the policy to deposit and lending rates. However, Vasiliauskas further warned:

“The amount of cash in circulation is declining in some countries. This could mean that one day, even if it seems like a distant prospect — every single person will have to have an account with a private entity just to make payments. Unfortunately, this may lead to increased levels of financial exclusion.”

A retail CBDC would thus ensure that people continue to have access to the central bank’s money, Vasiliauskas said, and could eventually have positive effects on financial stability. In the meantime, he believes that one of the key issues the EBC should consider is the CBDC’s adherence to Anti-Money Laundering (AML) requirements and the way it can apply these standards to anonymous forms of CBDCs.

Unclear future: Some countries denounce the idea, and a well-executed CBDC is not yet here

It is worth noting that despite the potential benefits of having a CBDC, some jurisdictions have ultimately decided against the idea.

The reasons vary: For instance, Japanese officials explained that their society wasn’t ready to give up cash, as it forms a substantial part of the local economy. The U.K. had to halt its CBDC-related research due to the country’s looming withdrawal from the EU, while South Korean officials even argued that a CBDC is an expensive concept that might destabilize the market and “cause a moral hazard.”

Overall, the actual economic implications of issuing a state-backed cryptocurrency remain largely unknown, as even the jurisdictions that have adopted CBDCs have yet to launch them in a fully fledged form. However, given the steadily increasing amount of countries that have been studying the concept, a CBDC might soon arrive, prompting others to follow suit or give up the idea altogether.

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Russia Is Getting Serious About Blockchain, but Remains on the Fence About Cryptocurrencies

Crypto was a hot topic at a forum featuring Russia’s top people from the economic sector.

Last week, an annual forum featuring Russia’s top people from the economic sector was held in St. Petersburg, and cryptocurrencies were a hot topic there. Notably, government agents and state-controlled businesses were vocal about their interest in blockchain, but seemed to distance themselves from digital tokens.

Meanwhile, the regulatory framework for cryptocurrencies is still missing in the country, despite the fact that local authorities have been tasked to prepare the needed amendment a while ago. So, where is Russia heading in terms of crypto and blockchain?

Brief introduction to Russia’s relationship with cryptocurrencies

Russia’s stance on cryptocurrencies has been mixed and fluid, as demonstrated by how the “CryptoRuble” — the national stablecoin project — has been unfolding. First, the prospect of  using a substitute for conventional money was deemed “illegal” by financial ombudsman Pavel Medvedev. Then, the Kremlin supposedly decided that a pet stablecoin could “minimize the amount of anonymous transactions,” or even help evade Western sanctions, thereby greenlighting the project. However, the CryptoRuble ended up on the back burner in the end, as the current status of the project is unclear. It was last mentioned in the news in January 2019, when a government official declared that it could go live “in a 2-3 years,” although the Central Bank of Russia (CBR) was acting “very conservatively” about the idea.

Cryptocurrencies at large are in a similar situation. In October 2017, President Vladimir Putin claimed that cryptocurrencies “cause serious risk” and are used for crime, citing the CBR’s decision to block websites selling digital assets. Just a month prior to that, Russian Finance Minister Anton Siluanov argued that the authorities had to accept the idea of the digital currencies market:

“There is no sense in banning them, there is a need to regulate them.”

There have been numerous attempts to define cryptocurrencies legally since then. At different times, Russian lawmakers have been urged to introduce a regulatory framework by President Putin (twice), the local Supreme Arbitration Court and the Financial Action Task Force.

In May 2018, the crypto bill — titled “On Digital Financial Assets” (DFA) — was passed by the Russian parliament but was soon sent back to the first reading stage due to the lack of definitions for key concepts, such as crypto mining, cryptocurrencies and tokens.

Last month, Prime Minister Dmitry Medvedev reportedly said that the popularity of cryptocurrencies “has decreased,” which is why the regulation issue “not that relevant” anymore. Notably, a year ago, he urged the government to legislate at least some basic crypto terms.

The current deadline for the regulatory framework set by Putin expires in July.

Recap of SPIEF, an annual Russian business event for the economic sector

Binance and Huobi reported an influx of traders, Vitalik Buterin talked about Ethereum 2.0

Despite the prime minister’s suggestion that cryptocurrencies have decreased in popularity, they were widely discussed at the St. Petersburg International Economic Forum (SPIEF), an annual Russian business event for the economic sector, which took place from 6 to 8 June.

The panel dubbed “Blockchain technology and cryptocurrencies: Past, Present, Future” saw Vitalik Buterin, a co-founder of Ethereum; Chris Lee, a financial director at Huobi; Ted Lin, chief growth officer at Binance; and Kevin Shao, among others, featured in the expert pool.

Lin and Lee reported an influx of traders of a “new generation” on their platforms due to the recent market growth. According to them, the trend will persist for the near future.

Buterin, in turn, talked about Ethereum 2.0, also called Serenity — a major upgrade that is supposed to make Ethereum 1,000 times more scalable in 18 to 24 months.

The Bank of Russia said that cryptocurrencies are not part of traditional financial sector

Sergey Shvetsov, first deputy governor of the CBR, reportedly compared cryptocurrencies to a “game” while peaking at the SPIEF. He is quoted as saying:

“If we’re talking about cryptocurrencies and forex-clubs, it’s not a financial market, it’s just a game. There are people who like to play, they invest in it [cryptocurrency], but the ripples will affect others. Which is why we have quite a strict policy here.”

Hence, the CBR once again stressed its skeptical position toward cryptocurrencies. Last month, Elvira Nabiullina, the head of the Bank of Russia, said her agency was against the idea of crypto becoming a substitute for fiat money.

Russian official suggested creating a special economic zone that would cater to cryptocurrencies

Leonid Petukhov, the head of the Far East Investment and Export Agency, suggested creating an offshore destination for cryptocurrencies on the Bolshoi Ussuriysky island, which lies on the border with China. He told TASS, a Russian news media:

“We want to make a large financial center there. Metaphorically speaking, that would involve cryptocurrencies, cryptocurrency exchanges, timber trading platforms — so like domestic offshore, in a good sense. What we did in Kaliningrad.”

Petukhov was likely referring to Oktyabrsky Island in the Kaliningrad region, which, along with Russky Island in Vladivostok, became offshore economic zones in 2018. Foreign companies registering in those clusters are exempt from certain levies — for instance, they are free from paying taxes on profits received by way of dividends. However, neither of those zones currently involve any cryptocurrency-related benefits.

Head of Russia’s largest bank said that bitcoin is for transactions, not investment — plans to stick with blockchain instead

Herman Gref, CEO of state-owned bank Sberbank, declared that he considers bitcoin a “technical instrument for transactions,” rather than a type of investment. He also referred to his own experience of investments in crypto, revealing that he had bought bitcoin when it was worth about $5 and used it for payment purposes instead of holding the coins.

Further, Gref clarified that his bank will not develop any crypto-related services but will focus on blockchain-enabled tools instead. As the CEO put it, the crypto market’s hype has gone, but “regular work with blockchain tech has remained,” which makes him “happy.”

Nornickel teamed up with IBM to curate blockchain academic programmes

Nornickel, the world’s leading producer of nickel and palladium, signed a partnership agreement with IBM and the Moscow Institute of Physics and Technology (MIPT) during the forum. The alliance will establish an education center that will offer blockchain-related programs, both for postgraduate and Ph.D. students.

“Students and postgraduates will learn how to apply blockchain technologies, and will gain knowledge about cryptocurrency exchanges, stablecoins, tokenization platforms and similar services,” the parties reportedly declared in a mutual statement.

Moreover, Nornickel’s president, Vladimir Potanin, argued that tokenization has the potential to make trading easier, cheaper and more transparent. Earlier in March, he unveiled his company’s plans to create cryptocurrency tokens backed by palladium. Those tokens will purportedly be used for trading palladium through a Switzerland-based palladium fund, as well as on several other digital platforms.

Private blockchain platform for enterprises and government launched its mainnet

Blockchain-based Vostok platform’s main network was launched at SPIEF. The mainnet will reportedly be used to validate transactions, while Vostok’s clients — represented by large Russian corporations and state agencies — will also have the ability to create their own nodes and use private subnets.

As Cointelegraph reported last month, the Russian city of Nizhny Novgorod had begun testing the use of the Vostok-powered application “City N,” which allegedly allows residents to file their taxes and verify their identity, among other things.

Russia’s leading oil company said a Facebook coin could be used to purchase oil in the future

Igor Sechin, head of major Russian oil company Rosneft, reflected on a potential relationship between oil and cryptocurrencies. Specifically, he said that the possibility of paying for oil using digital assets in the future “should not be ruled out.”

According to Sechin, Silicon Valley tech giants like Google, Amazon and Apple are beginning to explore the oil and gas sector, which is why a Facebook stablecoin could one day be used to purchase oil by the barrel.

Further, Sechin warned there are some obstacles that cryptocurrencies need to overcome in order to draw the attention of energy giants. He was quoted as saying:

“Greater flexibility often means greater volatility, and digitalization creates risks for maintaining commercial secrets and leads to the need to create new regulatory mechanisms, additional reservations. Today, technology companies do not have quality answers to these fundamental questions.”

Russian government continues to look into blockchain, but remains cold on digital assets

Meanwhile, the Russian government continues to consider strict regulations for the cryptocurrency industry. Most recently, a representative of Russia’s parliament mentioned that the officials are considering imposing administrative responsibility for the mining of cryptocurrencies.

“We believe that cryptocurrencies created on open blockchains such as bitcoins, ethers, and others are illegitimate tools,” Anatoly Aksakov, the chairman of the State Duma Committee on the Financial Market, told TASS.

Things are much more bullish on the blockchain front, however. This week, Russian authorities signed an agreement with Danish logistics titan Maersk to launch TradeLens — a blockchain shipping platform — across all of Russia to digitize paper-based transportation operations. Earlier last month, Russian state-owned holding conglomerate Rostec proposed an ambitious roadmap on applying blockchain in all the governmental data systems — all of which seems to suggest that Russia’s intentions toward the technology are getting increasingly serious.

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Overstock Subsidiary to Help Liberia Digitize Services, Boost Economy with Blockchain

A subsidiary of Overstock.com has reached an agreement to help Liberia digitize government services.

Overstock.com subsidiary Medici Land Governance has signed a memorandum of understanding with Liberia to help the African nation digitize government services, a news release announced on June 10.

The pro bono pilot project will explore how Liberia can strengthen its economy through blockchain and enhance interoperability between government departments. As well as strengthen the country’s capacity to generate revenues, the release notes that such infrastructure could reduce corruption.

During the project, local workers in Liberia will also be given technological trading to create sustainable jobs and ensure blockchain systems can be maintained once they have gone live. Ali El Husseini, the CEO of Medici Land Governance, said:

“Liberia is well-positioned to explore implementing a blockchain backbone for e-government, which connects the various government ministries as their services are digitized and brought online.”

According to Patrick M. Byrne, Medici Land Governance’s chairman and Overstock.com CEO, Liberia is the third country on the continent to put its suite of blockchain products to the test. He added:

“In 2019 I have been pleased and honored to see African nations growing enthusiastic about the possibility of using blockchain to accelerate their development.”

Last August, Zambia signed a MoU with Medici Land Governance that was designed to help rural landowners legitimize their estates and gain access to the financial world, in turn making it easier for the government to collect taxes.

A similar agreement was also signed in Mexico back in February.

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President of Germany’s Central Bank Warns of Serious Outcomes of Digital Currencies

The Bundesbank president said that easy access to digital currencies could destabilize the financial system during periods of crisis.

The president of Germany’s central bank, the Deutsche Bundesbank (BBk), has warned central banks about the potential risks of introducing digital currencies, Reuters reports on May 29.

Jens Weidmann, BBk president and chairman of the board of the Bank for International Settlements (BIS), reportedly claimed that the adoption of digital money could potentially destabilize the financial system during periods of crisis.

The German economist explained that easy access to digital currencies could accelerate a collapse of lenders, while it would “fundamentally change the business model of banks” even in a good economic environment .

Weidmann also argued that easy access to digital money can potentially lead to increased volatility, which would negatively affect central banks in terms of balance sheets.

The Deutsche Bundesbank is a part of the European System of Central Banks, and is reportedly the most influential entrant of the organization due to its former size. The bank is purportedly the first central bank to acquire full independence, resulting in the name Bundesbank model for its form of a central bank.

The Bundesbank model is reportedly used by the European Central Bank (ECB) as a basis for the entire euro system.

Yesterday, the German government claimed that the authority has not seen any “cyber incidents” or market manipulation occurring on crypto trading platforms in the country.

Earlier this week, an official at the ECB outlined major benefits of central bank digital currencies (CBDCs), while also stressing caution. According to the official, CBDCs can play the role of a medium of exchange, a means of payment and a store of value. However, the adoption of such currencies could also potentially increase levels of financial exclusion, the ECB official added.

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Russian State-Owned Holding Giant Proposes to Apply DLT in All the Gov’t Data Systems

Russian state-owned firm Rostec offers a $1.3 billion-worth plan to apply blockchain in all the state data systems.

Russian state-owned holding conglomerate Rostec proposed a roadmap on applying blockchain in all the governmental data systems, local financial newspaper Kommersant reports on May 24.

An institution under Rostec has reportedly developed a blockchain roadmap worth of up to 85 billion rubles ($1.3 billion) that claims to provide an economic impact of up to 1.6 trillion rubles ($25.4 billion) in five years.

The project was presented by Rostec’s structural body, the Novosibirsk Institute of Programming Systems (NIPS), during a blockchain conference held in the Republic of Tatarstan on May 23.

According to Kommersant, the NIPS’ roadmap includes a blockchain implementation in the processes and data systems of industrial enterprises, municipal elections, the monitoring of the budgetary performance, and others.

With that, the absence of cryptocurrency and blockchain regulation is a major impediment to the adoption of the proposed roadmap, the report notes. Yuri Pripachkin, the President of the Russian Association of crypto-industry and blockchain, considered the lack of regulation a “catastrophic obstacle on the path blockchain adoption.”

The expert argued that a necessary legislation should be enforced as soon as in late 2019 in order to reach better results, while the roadmap is based on a supposition that the regulation will come into force in 2021.

On the other hand, Russian prime minister and former president Dmitry Medvedev recently declared that crypto regulation is not a priority for the state of Russia since cryptocurrencies “have lost their popularity.”

On May 22, the central bank of Russia claimed that they suppose that the draft bill on crypto regulation is prepared enough to be adopted in the spring of 2019, in accordance with the order of the country’s president, Vladimir Putin.

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Senior Official in Russian Parliament Says That Cryptos Can Ruin Governments

Nikolai Arefiev, a senior official in the Russian State Duma, argued that cryptos were created to hide money from the government.

A senior official in Russia’s parliament, the State Duma, has argued that cryptocurrencies have the potential to ruin governments, Russian financial media agency Rambler reported on May 20.

Nikolai Arefiev, a member of the Communist Party of the Russian Federation and vice-chairman of the Duma’s committee on economic policy, innovative development and entrepreneurship, claimed that cryptocurrencies were created in order to hide large offshore assets from the government.

If cryptos such as bitcoin (BTC) had emerged by 1994, Russia would have been “fully destroyed” so far because it would have lost all its capital offshore, Arefiev stated, speaking at a recent press conference of local media agency, National News Service.

The 70-year-old official has further suggested that it is useless for a government to attempt to be involved in cryptocurrencies’ operations, emphasizing that those jurisdictions that decided to ban cryptocurrencies have chosen the easiest way to protect their capital.

Also today, Arefiev warned the public against speculative capital, claiming that it accounts for more than 90% of the global economy. According to the official, bitcoin is a part of those speculative schemes, which create “money from money” and do not actually produce any products.

The cryptocurrency industry is still not regulated in Russia.

Recently, Russia’s largest bank, Sberbank, requested that a client provide information on their income from operations with cryptocurrency. Last week, Russian prime minister and former president Dmitry Medvedev claimed that crypto regulation is not a priority for the Russian government since cryptocurrencies “have lost their popularity.”

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‘Legendary’ PoS Creator Announces Plans to Remove Entry Barriers for Developers in 2019

A blockchain project led by the creator of PoS, Sunny King, revealed five milestones for 2019 to bring a “brand-new digital economy era.”

A blockchain project with the ambition of being at the forefront of a “brand-new digital economy era” has unveiled its vision for 2019-2020, with five important milestones that will enable its technology to evolve in line with the needs of its user base.

VEE, the latest blockchain database project by Sunny King — the creator of PoS — is based on supernode proof-of-stake (SPoS) — a consensus algorithm that the company says is “currently up, running and extremely stable.” With a success rate of up to 99.99 percent for blocks and with a new block produced every four seconds, the platform says it has managed to minimize average network delays to a matter of sub-milliseconds — and is confident block periods will shorten further as it expands.

Its name is an acronym and stands for Virtual Economy Era. The blockchain database cloud wants to have the capacity and capability for carrying “complexed decentralized applications” in a plethora of fields — including banking and asset management — enabling developers to instantly create blockchains on demand. Its team firmly believes that this will help “significantly lower the barrier of entry for blockchain development.”

Goals for the future

Sunny King, the chief architect of VEE, says the first milestone in his sights is the development of the world’s first full-featured blockchain database for storing object-oriented data. In addition to being built for financial organizations, there is hope that this infrastructure will lend itself to other applications like social and gaming — delivering scope for customization, efficient indexing and data security.

He also wants to help enterprise developers focus on building their blockchain-driven business instead of worrying about difficult coding issues — and this would be achieved through new efforts that ensure the platform is easier to use. Modular development functions and cloud platform tools are the second milestone that VEE has in the works, “greatly improving overall development efficiency and guaranteeing stability from the outset.” This aligns with his vision that everyone should have access to blockchain, and people shouldn’t have to be an expert to do so.

Smart contracts are the third emphasis. VEE argues that existing models are neither smart nor safe and could be difficult to scale up in future. Through its public chain, the company is vowing to deliver “the next generation of smart contracts” — supporting non-fungible assets and offering implementation verification requirements for an array of situations. Further details on this milestone are set to emerge over the course of 2019.

Fourthly, King says that his platform is going to implement full support for Enterprise DApps similar to zero-knowledge-proof cryptography, adding a privacy layer to protect data stored on the blockchain. This, on one hand, guarantees the transparency of the blockchain, but at the same time, keeps the data private and unexposed.

Last but not least, VEE plans to create a new decentralized mobile internet network complete with a browser, with the goal of simplifying blockchain operations in apps. It argues that the concept is necessary given how the modern economy has become increasingly reliant on mobile-centered apps for social media, commerce, gaming and communication as a whole.

VEE’s ision

Sunny King and his team firmly believe that people around the world have the opportunity to live a better life through blockchain technology — and its solutions offer something that is “even more secure, flexible, compatible and open” than current platforms.

VEE’s mainnet launched on Sept. 17. King created the proof-of-stake (PoS) consensus, and it is hoped that SPoS will offer considerable security improvements. He is also the man behind Peercoin and Primecoin.

 

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.

Posted on

‘Legendary’ PoS Creator Announces Plans to Remove Entry Barriers for Developers in 2019

A blockchain project led by the creator of PoS, Sunny King, revealed five milestones for 2019 to bring a “brand-new digital economy era.”

A blockchain project with the ambition of being at the forefront of a “brand-new digital economy era” has unveiled its vision for 2019-2020, with five important milestones that will enable its technology to evolve in line with the needs of its user base.

VEE, the latest blockchain database project by Sunny King — the creator of PoS — is based on supernode proof-of-stake (SPoS) — a consensus algorithm that the company says is “currently up, running and extremely stable.” With a success rate of up to 99.99 percent for blocks and with a new block produced every four seconds, the platform says it has managed to minimize average network delays to a matter of sub-milliseconds — and is confident block periods will shorten further as it expands.

Its name is an acronym and stands for Virtual Economy Era. The blockchain database cloud wants to have the capacity and capability for carrying “complexed decentralized applications” in a plethora of fields — including banking and asset management — enabling developers to instantly create blockchains on demand. Its team firmly believes that this will help “significantly lower the barrier of entry for blockchain development.”

Goals for the future

Sunny King, the chief architect of VEE, says the first milestone in his sights is the development of the world’s first full-featured blockchain database for storing object-oriented data. In addition to being built for financial organizations, there is hope that this infrastructure will lend itself to other applications like social and gaming — delivering scope for customization, efficient indexing and data security.

He also wants to help enterprise developers focus on building their blockchain-driven business instead of worrying about difficult coding issues — and this would be achieved through new efforts that ensure the platform is easier to use. Modular development functions and cloud platform tools are the second milestone that VEE has in the works, “greatly improving overall development efficiency and guaranteeing stability from the outset.” This aligns with his vision that everyone should have access to blockchain, and people shouldn’t have to be an expert to do so.

Smart contracts are the third emphasis. VEE argues that existing models are neither smart nor safe and could be difficult to scale up in future. Through its public chain, the company is vowing to deliver “the next generation of smart contracts” — supporting non-fungible assets and offering implementation verification requirements for an array of situations. Further details on this milestone are set to emerge over the course of 2019.

Fourthly, King says that his platform is going to implement full support for Enterprise DApps similar to zero-knowledge-proof cryptography, adding a privacy layer to protect data stored on the blockchain. This, on one hand, guarantees the transparency of the blockchain, but at the same time, keeps the data private and unexposed.

Last but not least, VEE plans to create a new decentralized mobile internet network complete with a browser, with the goal of simplifying blockchain operations in apps. It argues that the concept is necessary given how the modern economy has become increasingly reliant on mobile-centered apps for social media, commerce, gaming and communication as a whole.

VEE’s ision

Sunny King and his team firmly believe that people around the world have the opportunity to live a better life through blockchain technology — and its solutions offer something that is “even more secure, flexible, compatible and open” than current platforms.

VEE’s mainnet launched on Sept. 17. King created the proof-of-stake (PoS) consensus, and it is hoped that SPoS will offer considerable security improvements. He is also the man behind Peercoin and Primecoin.

 

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.

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Low Capitalization, Institutional Exposure Make Crypto Low Risk, Says Dutch Gov’t Report

A branch the Dutch government has recently released an economic risk report, claiming that cryptocurrencies present a low risk to financial stability in the country, according a report published on May 29. The report was prepared and published by the CPB Netherlands Bureau for Economic Policy Analysis (CPB).

The CPB states in the report that at the current time, cryptocurrencies pose a low risk to the financial system due to the low level of capitalization, as well as the limited involvement of traditional financial institutions and systems. The CPB separately noted the problems associated with crypto’s use in crime financing, fraud, high crypto market volatility, and the energy consumption of crypto mining.

The report predicts that crypto-related risks will increase with more interaction with government financial institutions. The agency also states that cryptocurrencies are not “money substitutes,” claiming that users generally prefer to hold their crypto instead of using it as an everyday payment method.

The report stressed the need for balanced financial regulation. The CPB compared the risks of a lack of financial regulation equally with strict regulations, claiming that overly harsh measures can increase the activity of “shadow banks.”

The CPB has been tasked with providing a financial risk report at the request of the Parliamentary Committee of Inquiry on Financial Assistance every year since 2012. Affirming the low negative impact of crypto on financial stability, the CPB claimed that the most important financial risks are currently low interest rates and the involved risks of reducing the sustainability of debts on a macroeconomic level.

Earlier this year, a Dutch court recognized Bitcoin (BTC) as a “transferable value,” declaring that the major cryptocurrency “shows characteristics of a property right.” In the case, the court ordered the defendant party to pay a debt in Bitcoin. By the court’s reasoning, since the obligation of the defendant was originally made in BTC, the amount should likewise be paid back.

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Startup To Solve Major Problems of Gig Economy By Building A Decentralized Network

In early 2018, a team of entrepreneurs in Singapore launched a startup called the Blue Whale Foundation, aiming to overcome the crucial problems of sharing economy, such as high commissions and no employment benefits for the self-employed. In the future, the Blue Whale platform could let any freelancer or small to medium enterprise (SME) scale their businesses and release their own token without giving up equity.

When an Uber-driver’s dream come true

In the early 2010s, the gig economy – also known as the sharing economy – boosted the rental markets, the short and long-distance rides markets, and the freelance markets. Behind this boom were platforms like Airbnb, Uber, Blah-blah-car, Freelancer.com, and numerous local copies of those platforms.

Since then, the euphoria has died down, and the army of self-employed workers and freelancers have had to come to terms with several crucial problems. These obstacles include high commissions at marketplaces, high marketing costs of using platforms such as Facebook and Google, and the total absence of employment benefits for those who are self-employed, such as paid leave or pension.

Blue Whale is based in Singapore with offices in San Francisco, Seoul and Zurich. It recently revealed its plans for building a decentralized ecosystem for the self-employed that will be able to solve their problems.

The project team is focused on creating a Decentralized Associated Network (DAN), a free marketing software enabling anyone to advertise for other services.

According to its white paper, Blue Whale is also working on developing a Reward Bank (ReBA) to allow freelancers and self-employed to get paid time off, health insurance and pensions. The ReBA will include a Blockchain based decentralized ledger that will ensure transparent distribution of BWX coins, reduce volatility and maintain growth.

Another feature that the startup team intends to unveil is the Contribution Activity Manager (CAM), which is a verification tool that allows users to get rewarded in BWX coins by passing a verification process. The transparent reward system will be maintained by smart contracts. CAM is intended to be used as an additional revenue source, where freelancers will be also rewarded for referrals and other actions.

For the love of the gig economy

Blue Whale Foundation representatives told Cointelegraph that the project is receiving strong support from the ICON team. The Blue Whale token sale is to become the first initial coin offering (ICO) on the ICON Blockchain.

“Blue Whale will be an ICON decentralized application but will also have its own protocol for the decentralized M&A part”, said company representatives. The Blue Whale team plans for the DAN protocol to be ready by the end of 2018, while the decentralized applications will be revealed in the beginning of 2019.

Freelancers at Blue Whale’s platform will be able to use the BWX tokens for not only payment, but also to expand their business, says the project’s blog at Medium. “Furthermore, through decentralized M&A, a new business will have the chance to start a decentralized ICO themselves so that they can proactively seize, and even create, opportunities within the economy.”

Big partnerships with traditional businesses are to be announced in the coming weeks, said the company to Cointelegraph. Other projects with existing decentralized applications can also join Blue Whale Network to allow their freelancers and users to receive the benefits of the new platform.

As the Blue Whale team reported on Twitter, the project recently recruited a new advisor – Mai Gang (Mark Mai), Co-Founder of OKCoin and founder of VenturesLab. According to the project’s Facebook page, there are also other advisors attached to the project: Injong-Rhee from Google EIR; Marco Torregrossa, President of Euro Freelancers; and Simon Yu, CEO of Stormx.

On April 2, the project started a pre-sale, along with the private sale – both finished on April 15. According to the project landing page, the team has already raised SGD $25 mln. The public crowdfunding campaign opens in May 2018.The project also actively develops its Telegram community.

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.