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.
Digitization is having an impact on many aspects of our lives, especially in our day-to-day dealings involving payment methods. A trend away from cash was already evident before Corona and was further accelerated by the pandemic. While most mobile payment solutions are developed by private providers, central banks are also exploring payment infrastructure 2.0. Projects for central bank digital currencies (CBDCs) now exist around the globe, and China has already introduced its digital yuan in certain areas. The Swiss National Bank (SNB) is also looking more closely at the new opportunities that digital currencies offer. Together with the French central bank, the SNB is expanding its pilot project to include cross-border payments. Primarily, the project is exploring payment networks between banks, which are expected to become more efficient thanks to the introduction of a digital Swiss franc.
Financial institutions are increasingly dipping their toes into the digital asset space and developing services around the new asset class. The opportunities in the new area are also increasingly being seized by risk-taking hedge funds, while traditional financial services providers are remaining cautious for the time being. A survey by the fund manager Intertrust came to the conclusion that international hedge funds could have allocated around 7% of their portfolios to cryptocurrencies by 2026. A large proportion of respondents are already invested in the area and would like to further increase their portfolio weighting.
Although the adoption of cryptocurrencies is advancing at a rapid pace, the amount of quality education on the subject is limited. Myths and misinformation are persistent and in-depth knowledge of the subject is offered by only a few educational institutions. One exception is the University of Basel (UniBas), which has been offering a course on Bitcoin, Blockchain and cryptocurrencies since 2017. For the past two weeks, the introductory course at Bachelor level has been publicly available and is enjoying international popularity. At the intersection of business, computer science, and cryptography, the course provides a comprehensive look at various aspects of the emerging field.
The regulation of cryptocurrencies and blockchain networks has reached a certain level, especially in the Western hemisphere. Bitcoin & Co. are mostly considered as a digital asset class with the accompanying tax implications. Things are different in the Asian region. While China attracted attention with restrictive proposals in recent weeks, Thailand is coming up with new limitations regarding cryptocurrencies. The local Securities and Exchange Commission (SEC) has implemented new rules banning the trading of non-fungible tokens (NFTs) and “meme coins” such as Dogecoin. Local service providers have 30 days to implement the necessary arrangements to comply with the ban.
In addition, the Ethereum blockchain has enjoyed strong usage growth since last summer. The emergence of decentralized financial applications (DeFi) and the increased adoption of non-fungible tokens (NFTs) were the main drivers of activity on the blockchain. However, this equally exposed the capacity limits of the smart contract platform. Users were confronted with high transaction costs and long waiting times. This is where “second layer solutions” such as the Polygon scaling project can offer answers. The platform is built on the Ethereum blockchain and forms a so-called “sidechain”.
Selected articles in the weekly review:
The Swiss National Bank is expanding its CBDC plans to an an international perspective.
According to a recent survey, cryptocurrencies are gaining popularity among hedge funds.
The University of Basel makes its Bachelor introductory course on Bitcoin & Blockchain public.
Thailand is taking a more restrictive approach against cryptocurrencies, banning specific token categories.
A look at the leading Ethereum scaling project “Polygon”.
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