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Blockchain Technology Delivers ‘Scalable Efficient CBDC’

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  • Eesti Pank and Guardtime research project confirms role for digital bill money systems in CBDC deployment
  • KSI Cash per transaction energy use is just 70 µWh (micro-Watt hours) compared to 0.1 Wh for Visa and 1 MWh for Bitcoin

Blockchain technology can play a key role in the development of Central Bank Digital Currency  CBDC) platforms worldwide, a joint research project by Estonian Central Bank Eesti Pank and leading European deep tech company Guardtime has found.

The study set out to investigate the technological and operational frontiers of blockchain technology and its use in the context of CBDCs using KSI Cash, a digital currency technology based on the KSI Blockchain.

Testing confirmed that digital bill-based money systems are linearly scalable and highly efficient delivering end-to-end payment times of 0.6 seconds based on speeds of up to two million bill transactions per second.

Crucially it delivered a much smaller carbon footprint and lower energy use than current instant payments platforms – per transaction energy was just 70 µWh (micro-Watt -hour), compared with 0.1 Wh (Watt hour) for Visa and 1 MWh (Megawatt hour) for Bitcoin (1 Megawatt hour is one trillion micro-Watt hours).

The summary report written by Rainer Olt and Tiit Meidla of Eesti Pank and Luukas Ilves and Jamie Steiner of Guardtime says:

“The CBDC platform we deployed proved to perform well. The system was tested at speeds of up to two million bill transactions per second, where it operated with faster transaction times, lower energy use, and a smaller carbon footprint than current instant payment platforms.”

Central Banks worldwide are considering the introduction of both retail and wholesale CBDCs with countries including China with the e-Yuan and the Bahamas with the Sand Dollar launching or making retail versions widely available. The European Central Bank had decided to proceed with more intense investigations into a retail digital Euro while the Bank of International Settlements says 86% of Central Banks are conducting research or pilot schemes.

Eesti Pank and Guardtime’s research demonstrated its CBDC platform can integrate with existing e-ID schemes, making Know Your Customer checks easier and onboarding users into the system. Privacy preserving architectures can be made compatible with analytics needed for anti-money laundering monitoring.

Digital bills provide the privacy and programmability benefits of tokens but can also be held in account-like wallets, while the custodial layer used in the test enabled compatibility with conventional payment infrastructures.

KSI Cash’s security model delivers cryptographic verifiability of system operations without compromising privacy and the system proved to be resilient and resistant to insider and outsider attacks. It also provides resistance to quantum attacks.

The project measured resource load during testing and an indirect assessment of the carbon footprint of the system showed emissions of 32 tonnes of CO 2 per year, assuming a 14kW power requirement.

Energy needs of one bill payment were estimated at 0.000000070 kWh (70 microwatt-hours) which is equivalent to 0.000016 g of CO 2 (16 micrograms). The table below shows the comparable figures for Visa and major cryptocurrencies.

Table. Comparison of per transaction energy use (given in Wh per transaction. 1 MWh = 1,000,000,000,000 µWh)

Bitcoin Ethereum Visa Algorand KSI Cash
1 MWh 170kWh 0.1Wh 36 mWh 7 μWh

 

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Nigeria’s SEC to Enforce Weekly, Monthly Reports from Crypto Service Providers

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The Securities and Exchange Commission (SEC) has announced a new regulatory framework requiring Virtual Assets Service Providers (VASPs) to submit weekly and monthly trading statistics.

This move is part of a broader effort to monitor and regulate Nigeria’s burgeoning crypto market, according to a document released by the SEC titled “A Framework on Accelerated Regulatory Incubation Program for the Onboarding of Virtual Assets Service Providers (VASPs) and other Digital Investments Service Providers (DISPs).”

The framework aims to bring more structure to the country’s crypto ecosystem by amending existing rules on digital asset issuance, offering platforms, exchanges, and custodians.

The SEC’s initiative is seen as a significant step toward enhancing oversight and ensuring compliance within the rapidly evolving digital asset space.

Accelerated Regulatory Incubation Program

The Accelerated Regulatory Incubation Program (ARIP) will provide a special window for onboarding VASPs. The SEC has outlined specific reporting requirements for participants in the ARIP, including:

  • Weekly and monthly trading statistics.
  • Quarterly financials.
  • Compliance reports demonstrating adherence to the SEC’s conditions.
  • Reports on key issues such as misconduct, fraud, or operational incidents.
  • Actions taken to address customer complaints and emergent risks.

A Growing Market

Nigeria boasts one of the largest peer-to-peer (P2P) crypto markets globally. According to blockchain analytics firm Chainalysis, crypto transactions in the country amounted to $56.7 billion between July 2022 and June 2023, averaging $1.09 billion weekly.

Industry and Regulatory Insights

Senator Ihenyen, lead partner and head of blockchain and virtual assets practice at Infusion Lawyers, emphasized the importance of regulating digital assets for economic and security reasons.

“Nigeria can no longer afford to keep pushing digital assets underground for obvious economic and security reasons,” Ihenyen said.

He noted that the Central Bank of Nigeria’s (CBN) recognition of the SEC’s regulatory role marks a positive shift for the sector, with regulators now working together to ensure consumer protection and investor safety.

Comparisons have been drawn with regulatory practices in South Africa, where a similar approach has been adopted to meet Financial Action Task Force (FATF) standards on anti-money laundering and counter-terrorism financing for digital assets.

“Execution is what will make the difference,” said an industry expert. “We’ve never been lacking in regulations.”

Government and Industry Reactions

Earlier in July, Wale Edun, Nigeria’s minister of finance and coordinating minister of the economy, urged the SEC to address the complexities of crypto regulation.

“The SEC board should be willing to accept the challenge of regulating these new areas, particularly crypto, as they are fast-moving complex areas,” Edun stated.

The Senate Committee on Capital Markets also emphasized the need for crypto regulation to ensure accountability and protect investors’ funds.

Osita Izunaso, chairman of the committee, pointed out, “The issue of cryptocurrency must be regulated because Nigerians are trading in crypto. Since Nigerians are trading in crypto, why are we not regulating it? Where is the money going if we don’t regulate activities in the crypto market?”

Compliance and Challenges

The new regulatory framework aims to facilitate the onboarding of entities willing to engage in virtual asset activities and enhance the SEC’s understanding of digital asset business models.

However, some industry insiders have raised concerns about the practicality of certain requirements, such as the need for a physical presence for crypto companies.

Chimezie Chuta, founder and coordinator of the Blockchain Nigeria User Group, highlighted the potential benefits of regulation for tax revenues.

However, others worry about over-regulation. “We are now like banks that are over-regulated. Between 2020 and now, we have had new regulations and changes to existing rules, but where has that taken us to?” questioned a Lagos-based crypto player.

As Nigeria’s crypto market continues to evolve, the SEC’s new regulatory framework represents a crucial step towards ensuring transparency, accountability, and consumer protection in the digital assets space.

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KuCoin Announces New 7.5% VAT on Transaction Fees for Nigerian Customers

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KuCoin has announced the implementation of a 7.5% Value-Added Tax (VAT) on transaction fees.

This new regulation will take effect on July 8th, 2024, impacting all users whose Know Your Customer (KYC) information is registered in Nigeria.

KuCoin, one of the world’s leading cryptocurrency exchange platforms, revealed this update in a statement addressed to its Nigerian users.

The tax will be applied exclusively to transaction fees, not the overall transaction amount.

For example, a user buying 1,000 USDT worth of Bitcoin will incur a fee of 1 USDT at the standard 0.1% fee rate.

The new VAT at 7.5% will apply to this fee, resulting in an additional charge of 0.075 USDT.

Consequently, the net amount available for the transaction will be 998.925 USDT.

KuCoin clarified that the VAT would cover all types of transactions on its platform. The move aligns with recent regulatory updates and demonstrates the company’s commitment to complying with local tax laws.

The announcement has garnered mixed reactions from the Nigerian cryptocurrency community. Some users express concern over the added cost to their transactions, while others recognize it as a necessary step towards greater regulatory compliance and legitimacy for cryptocurrency trading in Nigeria.

KuCoin encourages affected users to seek assistance through their Telegram group or by contacting the online support team for further guidance on the new tax regulations.

As Nigeria continues to evolve its regulatory framework for digital assets, this development underscores the importance for traders to stay informed about local laws and their potential impacts on trading activities.

The KuCoin team expressed their gratitude for users’ cooperation and understanding, reiterating their commitment to providing a secure and compliant trading environment.

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Bitcoin Eyes Gains with Seasonal July Boost After Slump

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After several months of declines and rangebound trading, Bitcoin (BTC) bulls have reason to cheer as the largest cryptocurrency is poised for a potential seasonal upswing this July.

Historical data and recent market movements suggest a positive outlook for Bitcoin, following a period marked by billions in sales, upcoming selling pressure, and outflows from exchange-traded funds (ETFs).

Since April, Bitcoin has been trading within a narrow band of $59,000 to $74,000, weighed down by market dynamics and peak negative sentiment among retail traders.

However, July has historically been a bullish month for Bitcoin, and early indicators show a possible reversal of recent trends.

On the first day of July, U.S.-listed ETFs recorded nearly $130 million in inflows, their highest since early June.

This influx comes after a significant $900 million outflow in the previous month, signaling renewed investor confidence in the cryptocurrency.

“Bitcoin has a median return of 9.6% in July and tends to bounce back strongly, especially after a negative June,” said Singapore-based QCP Capital in a recent Telegram broadcast.

“Our options desk saw flows positioning for an upside move last Friday into the month-end, possibly in anticipation of the ETH spot ETF launch. Many signs point to a bullish July.”

Historical data supports this optimistic outlook. Over the past decade, Bitcoin has gained an average of more than 11% in July, with positive returns in seven out of the ten months.

A 2023 report by crypto fund Matrixport highlighted significant July returns in recent years, with gains of around 27% in 2019, 20% in 2020, and 24% in 2021.

Seasonality, the tendency of assets to experience regular and predictable changes that recur annually, appears to be a driving factor.

These seasonal cycles can be influenced by various factors, such as profit-taking around tax season in April and May, leading to drawdowns, and the generally bullish “Santa Claus” rally in December, which reflects increased demand.

As the cryptocurrency market enters July, Bitcoin traders and investors are optimistic about a potential rally. While the market remains cautious of underlying pressures, the historical trends and recent inflows suggest a favorable environment for Bitcoin’s resurgence.

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