Friday, May 27, 2022

The double face of cryptocurrencies; Wanted or Banned

Cryptocurrencies: Bitcoin and Ethereum are the most popular, but 2022 will be the year of Solana

It is almost like going back to the past with a world divided into blocs, only there is no Cold War in the middle, but rather the orientation of countries towards cryptocurrencies. On the one hand, some want to exploit cryptocurrencies to open up new frontiers, try to stir up a stagnant econom.As well as flaunt opportunities and easy earnings to the army of miners in search of the promised land.

On the other hand, some do not want to hear about digital currencies and even less about solutions that decentralise the control of money. In the middle are many governments and central banks, suspended between trying to understand whether and how to exploit the medium, without however jeopardising the weight and necessity of their own authority in monetary terms. In the background, then, there are different and transversal subjects, such as those who seek secrecy, those who launder money, and those who are interested in bypassing controls, attracted by the peculiarities of digital money.

According to the latest data from the Law Library of Congress, there are about fifty countries that have banned digital currencies, more than twice as many as in the previous survey in 2018. Authorities in North Africa have been the most decisive when it comes to bans: from Algeria to Morocco, via Egypt and Tunisia. Since the beginning of bitcoin’s rise, the common line has been a total rejection. The presence of laws prohibiting the adoption of cryptocurrencies does not mean, however, that citizens do not use them, so much so that almost 2.5% of the Moroccan population is said to own digital currency, with the country estimated by Triple A, a Singaporean cryptocurrency aggregator, to be among the top 50 in the world for cryptocurrency ownership.

The total ban also applies to Iraq, where a black market with no rules has sprung up that has penalised users, who are often left broke after being scammed by foreign companies and agents requesting payments in cryptocurrency (as in the case of the alleged Praetorian Group International, whose manager went underground after collecting more than $40 million from various investors). In essence, then, the ban on cryptocurrencies turns into a boomerang, with the ban arising because digital currencies are used for fraud, but the regulatory vacuum leaves the field open to the fraudsters themselves.

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Bitcoin (credit Cointribune)

The reasons behind China’s ban

China should be safe from these dynamics, as it has banned cryptocurrencies in stages. After banning financial institutions from transacting with digital currency and defining mining as illegal throughout the country, last September it banned the use of cryptocurrencies in all forms and possibilities. This includes purchases from foreign exchanges.

On an official level, the People’s Bank of China and other government institutions have stated that cryptocurrencies are speculative and disruptive to the economic and financial order, and encourage the spread of criminal activities. As such, they pose a risk to people, social stability, and national security. After all, for a country based on the dominance of the state in every field, including the economy, cryptocurrencies are considered a thorn in the flesh. Concerns about the environmental impact of mining count, but only up to a point, with the process consuming large amounts of energy and carbon to run the network in exchange for activities that are not relevant to the central government (so no more mining even to reduce the annual growth in carbon emissions by 2030).

Much more important is the project dedicated to the Digital Chinese Yuan, a digital currency that aims to offer the convenience and ease of use of cryptocurrencies under the control of the state authorities, and has experimented with small-scale tests since 2020. The Chinese government aims to exploit the limelight of the Winter Olympics scheduled to take place in Beijing from 4 to 20 February 2022 to launch the digital yuan, available from January on Apple and Android app stores for users in 10 Chinese cities, which thus becomes the central and only virtual solution, with no alternative to stealing the show.

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Francis Suarez, Mayor of Miami, at the Bitcoin conference 2021 (credit Cryptopotato)

Miami-New York, challenge for cryptocurrency capital

Beyond El Salvador, which has adopted Bitcoins as its official currency alongside the US dollar, the polar opposite of China is the United States, where a battle is underway between several major cities to become the country’s main hub. The two candidates with the most credentials are Miami and New York, with their respective mayors throwing down the gauntlet several times, outlining the future of their respective cities as the capital of cryptographic systems and blockchain.

Pushing hardest on the accelerator is Francis Suarez, Miami’s first citizen since 2017, who aims to pay public employees in Bitcoin and allow citizens to use the most popular of cryptocurrencies to pay taxes. The mayor’s goal is to ride the current excitement that marks the crypto world to get ahead of the curve and burn the competition to emerge as a reference for digital currency worldwide. After asking the state authorities for permission to allow the city to invest funds and resources in Bitcoin early last year, receiving a predictable rejection due to the impossibility of investing in volatile assets under Florida law, Suarez has found an alternative with MiamiCoins.

This is a cryptocurrency generated through CityCoins, an open source project based on Stacks (an ecosystem that facilitates the construction of smart contracts and decentralised applications), which allows crypto miners to exchange and hold a digital currency linked to the city. Through a programme whereby new tokens are minted, 30% of their value goes to the selected city, with 70% remaining in the users’ virtual wallets.

Miami Cryptocurrency

Miami was the first city to create its currency, followed by New York (the third city will be Austin, the capital of Texas), and the first tests have gone beyond the most optimistic expectations: just over 7 million dollars have been accumulated in the space of five weeks, with the city administration estimating that it will earn 60 million dollars within a year. This is a significant figure, unexpected until recently (although donations from citizens should be monitored, as they could conceal opaque operations between cybercriminals and frontmen), and as Suarez himself assured, it would be used to finance anti-poverty programmes and build infrastructures, parks, and roads.

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Blockchain.com Web Site – Home

The city’s receptiveness to the crypto world combined with the climate, nightlife, and cost of living almost halved compared to New York and lower property taxes are other arrows in Miami’s bow that are bearing fruit. In addition to the arrival of Blockchain.com, which moved its headquarters from New York to Florida, several cryptocurrency companies, such as FTX US, eToro, and Bit Digital, have opened offices in the city, but also giants such as Softbank and Goldman Sachs. Peter Smith, co-founder and CEO of Blochckain.com, said: “Miami was an almost obvious choice for us, it is the gateway to Latin America and the most enthusiastic and prepared city in the world to support cryptocurrencies at the moment”.

New York Cryptocurrency

“New York will be at the centre of the crypto world”. That’s what Eric Adams wrote on Twitter on the day of the city’s leadership election, which put him in charge of the Big Apple. As soon as he was elected, Adams declared that he would get his first three salaries in bitcoin, adding that he wanted to introduce courses in schools dedicated to cryptocurrencies and blockchain. What is holding back the first citizen’s momentum is the current state regulation, one of the strictest for cryptocurrencies, with New York’s attorney, Letitia James, repeatedly reiterating her distrust of digital currencies. This attitude has contributed to alienating many crypto businesses, along with high state taxes. There is nothing the new mayor can do about this, even if the other side of the scale is the city’s pool of talent to recruit for companies in the sector.

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Solana

The cryptocurrencies-surprise of 2022? Solana

Leaving the US contention, with the growing popularity of digital currencies, the ranking of the richest sees Bitcoin in the lead, with Ethereum, the decentralised blockchain with its cryptocurrency, emerging as a breeding ground for the rise of non-fungible tokens. The market capitalisation exceeds $447 billion, the result of an increase of over 33,500% from 2016 to January 2022, with the value rising from $11 to $3,700. Rounding out the podium is Binance Coin with a capitalisation close to $90 billion, followed by Tether and Solana.

The latter, created in 2019 to overcome the limitations of Ethereum, is considered by insiders to be the cryptocurrency to monitor in 2022. The absolute value is still low, hovering around $160, after starting 2021 with exchanges in the range of $2, however those who are convinced that within the next few months Solana will overtake Ethereum. Its strengths are its affordability ($0.00025 per transaction) and the technology that allows it to process 50,000 transactions per second, compared to Ethereum’s 30. In addition to the much lower costs compared to other blockchains and the speed of execution that eliminates the wait for validation, Solana adds eco-sustainability, as it consumes less energy than other blockchains, thus overcoming one of the most serious limitations that damages the consideration of cryptocurrencies in the public debate.

Alessio Caprodossi
Alessio Caprodossi
Freelance journalist, I write about technology, sport and news on print & media online (Wired Italy, Mashable Italy, Panorama.it, StartupItalia.eu, Il Messaggero, Spazio Italia). I like people and technologies that improve our lives and our world, 3P addicted (in Italian language means pane, pasta & parmigiano), I love working with music in my headphones. Feel free to write me to talk your story & projects about startup, sustainability and general tech news

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