What has been happening around Blockchain Technology and Cryptocurrencies this week? The most relevant local and international developments as well as appealing background reports in a pointed and compact way in retrospect in our weekly review.
The invention of the blockchain technology has revolutionized how value is transferred over the Internet. Henceforth, intermediaries are no longer necessary to transfer values from A to B. The aging international payment infrastructure with its various layers being involved can particularly benefit from the blockchain. Accordingly, more and more financial institutions are banking on the efficiency benefits of the new technology. The latest example comes from two large banks, JPMorgan and DBS, which have joined forces for a digitalization project. “Partior” is intended to reduce friction in cross-border payment transactions and the processing of foreign exchange transactions in trade transactions.
The planned introduction of a digital currency backed by a diversified basket of currencies via the social media company Facebook shocked regulators and was at the same time a wake-up call to central banks, which previously gave little thought to digital currencies. Due to harsh criticism from regulators and central bank representatives, many founding members dropped out of the Libra project. After multiple revisions, “Libra” was finally abandoned altogether. Instead, a slimmed-down project in the form of individual stablecoins is being pursued under the name “Diem.” How private stablecoins will coexist with central bank-issued digital currencies (CBDCs) going forward remains to be seen.
Ethereum, the largest blockchain-based and “smart contract” capable network, is increasingly being used by established operators. For just under a month, credit card giant Visa has allowed transaction settlements on the public blockchain. This week, the European Investment Bank (EIB) announced that it is issuing a two-year, €100 million bond that will be managed on the Ethereum Blockchain. The issuance is backed by investment banks Goldman Sachs, Banco Santander and Société Générale. Similar efforts are being pursued by the Enterprise Ethereum Alliance (EEA). The organization is seeking to drive adoption of the Ethereum blockchain among Fortune 500 companies. EEA members include well-known companies such as Microsoft, Intel, JPMorgan, and BP.
In addition: Fundraising campaigns with cryptocurrencies are gaining in popularity. One reason is the ease with which transactions can be carried out, even across national borders. The most recent example is a spontaneously initiated fundraising campaign for Covid aid in India. The campaign quickly caught on with the crypto community and within a day, several millions had already been donated. The project comes amid regulatory uncertainty surrounding cryptocurrencies in India. Authorities have announced and lifted bans several times in the past. Industry entrepreneurs could use the successful fundraising to push for regulatory clarity in the country.
Selected articles in the weekly review:
JPMorgan and DBS are using blockchain for efficient payment processing.
An interim report on Facebook’s Coin project.
Bonds 2.0: The European Investment Bank is using the Ethereum blockchain to issue its latest EUR 100m bond.
Trading in tokenized shares is gaining momentum.
Charitable fundraising with cryptocurrencies is growing in popularity as cross-national transactions are easy to execute.
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