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Bitcoin Halving: Nigeria, Others Get Ready For Uncertain Bitcoin Future

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  • Bitcoin Halving: Nigeria, Others Get Ready For Uncertain Bitcoin Future

Nigerians and other global investors in the cryptocurrency market are getting ready for Bitcoin Halving on May 12, 2020.

Cryptocurrency’s most dominant coin, Bitcoin, would experience a historical transformation from supply end for the third time this month. The process known as Bitcoin Halving would impact the number of Bitcoin supplied into the block every 10 minutes.

Bitcoin Halving is a process where the number of Bitcoin earned by miners, known as a block reward, is halved.

The process that began in 2009 started with 50 coins mined every 10 minutes. This was halved twice to current 12.5 bitcoins mined every 10 minutes. According to a document released by Satoshi Nakamoto, who may be an individual or a group that created the digital coin, the process will end with total coins of 21 million around the year 2140.

Why is Bitcoin Halving Important?

Unlike the Central Banks, Bitcoin is not manually regulated rather its algorithm has been engineered to gradually reduce the number of Bitcoins that can be created over time.

Therefore, while the supply of Bitcoin will continue to reduce, its demand will remain constant. A process that if eventually worked could see the digital currency hitting $50,000 a coin or even $1 million as more money would be chasing fewer coins.

This is different from central banks’ approach where money in circulation can be increased or reduced depending on the economic situation.

“Unlike most national currencies we’re familiar with like dollars or euros, bitcoin was designed with a fixed supply and predictable inflation schedule. There will only ever be 21 million bitcoins. This predetermined number makes them scarce, and it’s this scarcity alongside their utility that largely influences their market value,” Blockchain.com, a crypto wallet company, stated in a post.

Advantage of Bitcoin Halving

Bitcoin was trading at $2.01 a coin in 2012 before block reward was first halved to 25 Bitcoins from 50 Bitcoins, the price per coin rose to $664 a coin by 2016 due to the scarcity created by the halving as miners are the only one that can earn the coin every 10 minutes for creating additional blocks needed to strengthen the security of the blockchain.

In 2016, when the block reward was halved again to 12.5 Bitcoins, the price of the cryptocurrency rose to $20,000 in 2017 before plunging to as low as $2,800 a coin 2019 and $3,800 in early March 2020.

Bitcoin 20000Therefore, some Bitcoin experts and investors are predicting that additional reduction in the supply of Bitcoin would bolster the price of the digital currency going forward while others have said the fundamentals have changed that Bitcoin Halving has been priced into the current level as the process is now pretty known by investors.

Still, at Investors King we believed a reduction in supply would positively impact the price of the dominant cryptocurrency but not immediately given the current global health crisis. Therefore, halving may benefit long-term investors more than short term traders as we doubt the market would receive enough funds in the near-term given present surge in global risk and uncertainty.

Implications of Bitcoin Halving

Halvings happened every four years or after every 210,000 blocks. These blocks helped strengthen the cryptocurrency blockchain, improve its security and bolster the confidence of investors holding the unregulated digital currency as an investment vehicle.

However, the continuous reduction in block rewards may result in fewer investments in mining given the amount involved in its set up.  Also, considering the rate at which new blocks are created or expected to be created to further strengthen the Bitcoin blockchain, a decline may render it vulnerable to attacks and gradually expose the unproven or untested blockchain to hackers.

“The more computing power miners direct towards Bitcoin, the harder it is to attack because an attacker would need to have a significant portion of this processing power, known as the hashrate, to execute such an attack, stated by Coindesk.

“The more money they can earn by way of block rewards, the more mining power goes to Bitcoin, and thus the more protected the network is.”

On May 12, 2020, the global cryptocurrency investors and traders expect block reward to be halved again to 6.25 Bitcoin.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Bank CEO Calls for Increased AML & Compliance Initiatives to Counter Funding of Terrorism in Crypto

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Last month, the Kenya Bankers Association had their regular CEO Chat, this time with Alakh Kohli, CEO of M Oriental Bank. He noted that, without further regulatory guidance from government agencies, his bank didn’t plan to increase access to digital currency services.

In particular, he addressed the need to have a more uniform industry standard to deal with countering bad actors intent on utilizing cryptocurrency as a method to launder money and fund terrorist operations.

“For years, I’ve been talking about the need to crackdown on the nefarious activity which resides in the cryptocurrency community. Iran has notably aimed to utilize blockchain technologies to avoid international sanctions. And exchange operators utilize different thresholds of security to prevent money laundering. It is in the best interest of the industry’s long-term longevity that we come together with government agencies to root out the bad actors and end their chicanery,” opined Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.

In the interview, Kohli noted that “at the moment we have no plans on rolling out any digital currency services in the absence of a regulatory framework. This is an evolving space, once the right frameworks are in place to address the risks, including Anti Money Laundering and Countering the Financing of Terrorism and underlying asset concerns for it to be a store of value; I’m sure there will be offerings coming to the market. What is more exciting is the blockchain technology which digital currencies are based on is already being adopted by banks for enhancing and offering new and disruptive product innovations.”

“It isn’t just his bank. Many institutions are waiting for guidance from the jurisdiction in which they operate. We need a clear set of rules. A set of rules that sets a bar for exchange operators to measure themselves against. Responding to the lack of regulatory guidance, we’ve been advising clients to self-regulate and integrate all the AML & KYC security enhancements available before any mandates are in place. It is better to be ahead of the curve than to simply be responsive,” noted Gardner.

Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Over the past twenty years, the company has built technology for the world’s most notable exchanges, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago. Earlier this year, Modulus  filed for a patent on its Exchange Trust Score System, a revolutionary solution which aims to restore trust in financial exchanges, particularly those dealing in digital assets and cryptocurrencies, and giving regulators an additional tool by which to gauge the integrity of an exchange.

“On the one hand, exchanges need a framework to operate safely. On the other hand, investors need to know which exchanges they can trust. None of the features in the world matter if your exchange isn’t safe. We’ve been focusing on exchange security for the past two decades. Even after building an exchange that approached the laws of physics in terms of transaction speed, that wasn’t enough. Those features are only as good as the security behind them. It is time that the government brings industry insiders to the table to discuss a commonsense set of regulations which will keep the public safe and foster even greater innovation in the industry,” Gardner said.

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Central American Bank for Economic Integration Supports El Salvador’s Bitcoin Law

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The Central American Bank for Economic Integration (CABEI), which has 15 member countries, will help El Salvador implement bitcoin as legal tender.

The CABEI president has expressed his support. “We’re very optimistic,” he said.

The head of the Central American Bank for Economic Integration (CABEI) expressed his support for El Salvador’s bitcoin law Monday. CABEI Executive President Dante Mossi said that the bank will give El Salvador technical assistance to implement bitcoin as legal tender.

Last week, El Salvador became the first country in the world to pass a law making cryptocurrency legal tender.

The CABEI has 15 member countries: Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Dominican Republic, Belize, Mexico, Republic of China (Taiwan), Argentina, Colombia, Spain, Cuba, and Korea. The bank’s objective is to “promote the economic integration and the balanced economic and social development of the Central American region,” its website details.

Mossi said his organization will work with El Salvador’s finance ministry and central bank to select a team to work on the implementation, Reuters reported.

Mossi believes that the move to make bitcoin legal tender would offer many benefits to people in El Salvador. For example, it would lower the cost of remittances for relatives of Salvadorans living abroad, he explained.

The CABEI executive president also called on El Salvador’s government to develop a regulatory framework for bitcoin in order to prevent “bad actors” from taking advantage of the system’s anonymity, the publication conveyed.

Following El Salvador’s move to make bitcoin legal tender, lawmakers in a number of Latin American countries have expressed their interest in bitcoin.

The countries include Paraguay, Argentina, Panama, Brazil, and Mexico. Moreover, Tonga and Tanzania have also reportedly expressed interest in bitcoin.

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SEC Leaves Bitcoin and Cryptocurrency Off 2021 Regulatory Agenda

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The U.S. Securities and Exchange Commission (SEC) has released its regulatory agenda which does not mention bitcoin or cryptocurrency regulation.

The Office of Information and Regulatory Affairs released the Biden administration’s Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions last week.

It details “the actions administrative agencies plan to issue in the near and long term,” which provides “important public notice and transparency about proposed regulatory and deregulatory actions within the Executive Branch,” the accompanying announcement explains.

Included in the agenda is the U.S. Securities and Exchange Commission (SEC)’s “annual regulatory agenda,” the agency independently announced, clarifying:

“The report, which includes contributions related to the Securities and Exchange Commission, lists short- and long-term regulatory actions that administrative agencies plan to take.”

Some of the items the SEC will consider include disclosures relating to climate risk, corporate board diversity, and beneficial ownership and swaps. The SEC will also focus on rules relating to SPACs and short sale disclosure reform. The full list can be found here.

SEC Chairman Gary Gensler commented: “To meet our mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation, the SEC has a lot of regulatory work ahead of us.

“I look forward to collaborating with my fellow commissioners and the dedicated staff to propose and finalize rules that will strengthen our markets, increase transparency, and safeguard investors.”

While bitcoin and cryptocurrency are not on the SEC’s regulatory agenda this year, Gensler has been talking about the need to protect investors and regulate cryptocurrency exchanges.

Last month, the chairman urged Congress to pass cryptocurrency legislation to protect investors, adding that cryptocurrency exchanges needed more regulation. In addition, the SEC cautioned investors about funds trading in bitcoin futures last week.

So far, the agency has brought 75 crypto-related enforcement actions. Meanwhile, a growing number of companies are seeking approval to trade bitcoin exchange-traded funds (ETFs).

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