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Blockchain and Crypto Investment in H1 2021 Double All of 2020 – KPMG

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Investment in blockchain and cryptocurrencies in the first half (H1) 2021 more than double all investments in blockchain and crypto space in 2020, according to the latest report from KPMG.

In the report titled ‘Pulse of Fintech H1 2021, investment rose over 200 percent of 2020 investment in the first half of 2021 alone to blast through the record set in the entire 2018 financial year.

Explaining evolving nature of investors in the blockchain and crypto space, the report said “As the blockchain and crypto sector has matured, so has the nature of its investors. In H1’21, a significant amount of institutional money flowed into the crypto space, highlighting the broadening of the investor base. Investor awareness and knowledge of the sector is growing, with investors now having a much better understanding not only about crypto assets, but also the operational and procedural side of crypto — from custody and storage to storekeeping and the competitiveness and maturity of service providers.

Rising VC Investment

VC investment was very strong in the blockchain and crypto space in the first half of 2021. Several firms raised $100 million+ funding rounds, including BlockFi ($350 million), Paxos ($300 million), Blockchain.com ($300 million) and Bitso ($250 million).

Central Bank Digital Currency (CBDC)

China has continued to move forward with testing of its central bank digital currency (the ‘digital renminbi’, digital yuan, or e-CNY). In H1’21, it expanded its pilot project to include salary payments for some workers in China’s Xiong’an New Area,16 the payment of subway fares and the exchange of digital and physical currencies at two banks in Beijing. The evolution of the digital currency combined with China’s Belt and Road Initiative could truly open up a whole new level of correspondent banking and money transfers.

Growing Focus on NFTs

Interest in non-fungible tokens (NFTs) has started gaining more traction, with interest in a whole range of new types of assets, ranging from professional real estate to more fragile assets which can be tokenized or fractionalized.

Increasing Regulatory Attention

Cryptocurrencies continued to be a critical focus for some regulators, with widespread differences between jurisdictions as to acceptance and use. During H1’21, China banned financial institutions and payments companies from providing cryptocurrency-related services,19 while El Salvador announced that Bitcoin would become legal tender in the country as of September 7, 2021.

What to watch for in H2’21

— continued maturation of the cryptocurrency space
— stronger separation between cryptocurrencies and the use of blockchain technologies
— further focus on regulatory frameworks, particularly in India, which could regulate cryptocurrencies as an asset class in H2’21
— the evolution of exchanges focused on areas such as NFTs.

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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Here is Why Cryptocurrency, U.S-Dollar Quoted Commodities Drop this Week

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The United States is the world’s largest economy and cryptocurrency’s biggest investor, it means large number of capital inflow into the crypto space are from the United States and with the U.S economy battered and unstable due to COVID-19, foreign policy, etc US investors, mainly institutional investors, have been increasing their investments in crypto space, the new safe haven, in the last one year.

However, on Friday, the U.S commerce department released retail sales report, which measures US consumer spending that contributed over 70% of US GDP estimated at about $13.4 trillion. Retail sales that has been on the  decline for months and was predicted to come out at – 0.8%, unexpectedly came out at 0.7% in the month of August.

The unexpected improvement in consumer spending, in fact against the Consumer Confidence report that came out previously, bolstered U.S dollar attractiveness to 94 on dollar index as investors jumped on it and other dollar assets.

Why did investors jump on Dollar and how does it affect crypto and U.S dollar-quoted commodities?

The US dollar rose to a three-week high because capital inflow into American assets jumped as investors started predicting that the Federal Reserve (US central bank) could announce tapering (cutting down on bond buying -quantitative easing) at the Federal Open Market Committee (FOMC) meeting scheduled to be hold next week.

Quantitative easing is when government is buying debt (bonds) to support the economy. However, when government is cutting bonds purchase, it means the economy has started doing well enough to sustain itself without support.

This is why capital flow out of crypto space rose as institutional investors that are sustaining the crypto are now dumping their money on dollar assets – the very reason dollar value rose since Friday.

Market is about demand and supply, no demand in crypto space means falling/bearish market and demand in dollar means stronger US dollar – I actually bought dollar -sold GBPUSD- on Monday.

Here is why dollar quoted commodities like crude oil dropped. It is simple, because dollar products is now expensive for holders of other currencies. Therefore, demand for crude oil dropped against constant supply.

If FOMC announces tapering earlier than expected next week, crypto could fall even more!

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Fintech CEO: India’s Former Deputy Governor of RBI Right on Crypto

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Recently, R. Gandhi, the former Deputy Governor at the Reserve Bank of India, went on the record, saying that cryptocurrencies should be treated as an asset or commodity. Such treatment would ensure that they are governed by existing laws and regulations for exchanges. Once this happens, Gandhi noted that “…automatically, people can start buying, selling and holding.” He also noted that regulators would be able to retrieve information on holdings for purposes of taxation.

“This is important for a few reasons. First, India is preparing to test out its own central bank digital currency, so it makes sense that they would take a look at how they regulate all digital assets before the launch. Second, India is a major power, which, until recently, has not been the friendliest towards cryptocurrencies, so this new approach should be a welcome change of direction for those involved in the industry. Finally, it’s also worth discussing when you consider how India has typically interacted with assets and wealth,” said 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.

“India has long been a country which has been loyal to both cash and gold. Those kinds of cultural attitudes, many hypothesize, may be the largest hurdles for CBDCs. Can you educate enough of the populace to move them from cash to a digital asset of any kind? Now, you have a big name with RBI ties saying that the country needs to re-evaluate how it deals with cryptocurrencies. That’s telling,” noted Gardner.

“I’ve long believed that the education component will be as important as the technological component. You can build the most secure, most convenient digital currency on the planet. But, if it isn’t widely used, then it really doesn’t matter. Particularly in countries with a loyalty to a cash economy, the educational aspect of a central bank digital currency could present problems,” Gardner said.

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.

“If I’m looking to support a CBDC from the RBI, I’d begin the educational component now. According to surveys, cryptocurrency usage in India is up significantly over the past couple years. However, now is the time to work with stakeholders and give the citizenry peace of mind. They need to explain why a CBDC would benefit them, and, most importantly, let folks ask questions so they can feel comfortable with the transition. All that takes time,” said Gardner.

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Coinbase Abandons Plan to Launch Lend Program After SEC Threatens Lawsuit

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The Nasdaq-listed cryptocurrency exchange Coinbase has dropped its plan to launch a lending program after the U.S. Securities and Exchange Commission (SEC) threatened to sue the company.

Coinbase announced that it has decided not to launch the Lend program. The exchange wrote:

Our goal is to create great products for our customers and to advance our mission to increase economic freedom in the world. As we continue our work to seek regulatory clarity for the crypto industry as a whole, we’ve made the difficult decision not to launch the USDC APY program.

“We have also discontinued the waitlist for this program as we turn our work to what comes next. We had hundreds of thousands of customers from across the country sign up and we want to thank you all for your interest. We will not stop looking for ways to bring innovatively, trusted programs and products to our customers,” Coinbase added.

Coinbase unveiled the Lend program in June where users could “earn interest on USD coin (USDC) with rates more than 50x the national average of a traditional savings account,” the company explained at the time. The program advertised that users could earn 4% APY and the “principal is guaranteed.”

However, Coinbase revealed in early September that the SEC sent the company a Wells Notice regarding its Lend program. “The SEC has told us it wants to sue us over Lend. We don’t know why,” the exchange said. “The SEC told us they consider Lend to involve a security, but wouldn’t say why or how they’d reached that conclusion.”

Meanwhile, Coinbase is growing its business in some other ways. Last week, the company filed an application with the National Futures Association (NFA) to offer futures and derivatives trading on its platform. Coinbase is also raising $2 billion by selling bonds. Furthermore, the exchange announced Monday that Coinbase Prime, a comprehensive platform for institutional investors, is launching with updated capabilities.

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