A new report says bitcoin has failed as a means of payment or store of value, but stablecoins like Libra are a risk to financial stability.
The bitcoin market isn’t mature enough to support an ETF, said the SEC in its latest rejection of the concept. So what now?
In a new report by the International Monetary Fund (IMF) entitled “Global Financial Stability Report: Lower for Longer,” the group gives an overview of the current debt-ridden and precarious state of affairs in global economics. Not lost on some economists, however, is the irony that these modern realities are the direct result of policies historically supported by the IMF itself.
The six-chapter, 109-page report breaks down the ominous state of global finance and “identifies the current key vulnerabilities in the global financial system as the rise in corporate debt burdens, increasing holdings of riskier and more illiquid assets by institutional investors, and growing reliance on external borrowing by emerging and frontier market economies.” The assessments are not inaccurate, but fail to turn the lens back on the source, and the very causal factors contributing to these realities.
Citing continued easing and precipitously falling bond yields, the IMF calls for more conservative approaches to the management of economic problems, stating:
To reduce the risk that additional easing may have the unintended consequence of leading to a further buildup of financial system vulnerabilities, macroprudential policies should be tightened, as warranted.
The IMF is suddenly very interested in prudence, and the management of systemic risk, encouraging the use of prescribed tools for mitigating dismal effects of prolonged negative interest, QE and easy credit, and the resultant movement of investors into riskier, more illiquid assets. The report maintains that “Low interest rates have reduced debt service costs and may have contributed to an increase in sovereign debt. This has made some governments more susceptible to a sudden and sharp tightening in financial conditions.”
Just three years ago, however, in a 2016 blog post, the group was praising these very same practices, noting that “Although the experience with negative nominal interest rates is limited, we tentatively conclude that overall, they help deliver additional monetary stimulus. Wholesale interest rates have fallen as have some bank lending rates, which should help support demand and price stability.” The post further warns of the very same risks the new report cites, such as institutional entry into risky assets, but still concludes that such policies are helpful overall.
Greater Risk Now Condemned
IMF, 2016: “Banks benefit overall from [negative interest] policies that support price stability and growth…” even though “There may also be excessive risk-taking. As banks’ margins are squeezed, they may start lending to riskier borrowers to maintain their profit levels.”
IMF, 2019: “The monetary policy cycle may have reached a turning point in major advanced economies … Persistently low and declining yields on fixed-income instruments have continued to drive institutional investors … to boost returns by using leverage and investing in riskier and less liquid assets.” The report concludes that “Policymakers can help mitigate the buildup of vulnerabilities through appropriate incentives, minimum solvency or liquidity standards, and enhanced disclosures.”
In other words, they warned everyone of their risky, economically unsound plan, encouraged its implementation and adoption, and now are encouraging everyone to pull back quickly.
Global Economic Outlook Unstable
The executive summary of the report states:
Accommodative monetary policy is supporting the economy in the near term, but easy financial conditions are encouraging financial risk-taking and are fueling a further buildup of vulnerabilities in some sectors and countries.
The “some” here may be the understatement of the year. As news.Bitcoin.com has reported extensively, the current global situation is deteriorating rapidly with reckless capital injections, rampant negative interest rate policy implementation, negative yielding debt and once mega-powerful economies beginning to fail. In this sense, the IMF’s report is a mere statement of the obvious for many who are paying attention to the situation. Combined with the continued crackdown on free trade of proposed sound money alternatives like bitcoin, and it’s hard not to wax at least a little bit paranoid. Who knows, perhaps tomorrow the International Monetary fund will be pushing further for the creation of central bank digital currencies (CBDC) as the palliative for all the economic pain they’ve promoted and effected over the years.
What are your thoughts on the IMF’s new report? Let us know in the comments section below.
Image credits: Shutterstock, fair use.
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Dunamu, the operator of Upbit, is releasing a new app this month for trading unlisted securities with a plan to add in blockchain next year.
Cambodia’s Central Bank wants to slash the cost of cross-border payments and is studying how its Bakong digital wallet might help.
The U.S. Securities and Exchange Commission (SEC) is reviewing its order issued last week pertaining to a rejected proposal for a bitcoin exchange-traded fund (ETF). The proposal was filed by NYSE Arca for the Bitwise Bitcoin ETF Trust. Meanwhile, the SEC is also evaluating a proposed rule change for a different type of bitcoin ETF.
ETF Order Stayed
The SEC has sent a letter dated Oct. 15 to Intercontinental Exchange (ICE), the parent company of the NYSE, concerning its recent order disapproving NYSE Arca’s proposal to list and trade shares of the Bitwise Bitcoin ETF Trust. This proposal was rejected on Oct. 9. “This letter is to notify you that, pursuant to Rule 431 of the Commission’s Rules of Practice, 17 CFR 201.431, the Commission will review the delegated action,” the letter explains, adding:
In accordance with Rule 431(e), the October 9, 2019 order is stayed until the Commission orders otherwise.
The letter continues, “The Office of the Secretary will notify you of any pertinent action taken by the Commission.”
Prior to the Oct. 9 rejection, ICE and Bitwise had been actively discussing their bitcoin ETF proposal with the SEC. The Commission emphasized that its disapproval “does not rest on an evaluation of whether bitcoin, or blockchain technology more generally, has utility or value as an innovation or an investment.” This is also not the first time the SEC has taken this action. In August last year, the Commission did the same with three orders for nine bitcoin ETFs.
T-Bill Bitcoin ETF in the Running
Besides reviewing the order disapproving the proposal for the Bitwise Bitcoin ETF Trust, the SEC is currently evaluating another proposed rule change filed by NYSE Arca. The exchange is seeking to list and trade shares of the United States Bitcoin and Treasury Investment Trust.
The proposal was first filed with the agency on June 12 and published in the Federal Register on July 1. The exchange filed Amendment No. 1 to the proposed rule change on Oct. 4, after which the SEC proceeded to solicit comments from the public. As of Oct. 10, the agency says it has received nine comments on the proposal.
According to the amendment, “the trust will have no assets other than (a) bitcoin and (b) short-term U.S. Treasury securities with a maturity of less than one year (‘T-Bills’).” Further, the trust will hold U.S. dollars for short periods of time in connection with the maturity of the T-bills, the sale and purchase of the underlying assets, redemptions, if any, and expenses of the trust.
Do you think the SEC will approve any bitcoin ETF proposal anytime soon? Let us know in the comments section below.
Images courtesy of Shutterstock.
Did you know you can buy and sell BCH privately using our noncustodial, peer-to-peer Local Bitcoin Cash trading platform? The local.Bitcoin.com marketplace has thousands of participants from all around the world trading BCH right now. And if you need a bitcoin wallet to securely store your coins, you can download one from us here.
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A Las Vegas man is charged with raising at least $11 million from cryptocurrency investors he promised to trade binary options for, and make gains of up to 300%. According to the charges the money was sent from new clients to previous ones in a classic Ponzi scheme manner.
CFTC Charges Las Vegas Man in $11 Million Fraud
The U.S. Commodity Futures Trading Commission (CFTC) has announced it has filed a civil enforcement action in the U.S. District Court for the District of Nevada, charging David Gilbert Saffron of Las Vegas as well as his company, Circle Society, Corp., with fraudulent solicitation, misappropriation, and registration violations. The case reportedly involves an $11 million binary options scheme Saffron operated through Circle Society. The court issued an order freezing the assets controlled by Saffron and his company following the filing.
“Digital assets and other 21st century commodities hold great promise for our economy,” stated CFTC Chairman Heath P. Tarbert. “Fraudulent schemes, like that alleged in this case, not only cheat innocent people out of their hard-earned money, but they threaten to undermine the responsible development of these new and innovative markets. America must be a leader in this space, and we will only succeed if these markets have integrity.”
Guaranteed up to 300% Returns
From December 2017 to now, the Las Vegas man and his company raised at least $11 million worth of bitcoin and U.S. dollars from people in the U.S. in order to trade off-exchange binary options on forex and cryptocurrency pairs. According to the complaint, they solicited funds from at least fourteen investors to participate in a pool operated by Circle Society, an entity Saffron created for this purpose, by making false claims about his supposed trading expertise and guaranteeing rates of return up to 300%.
The CFTC found that instead of using the funds to trade in binary options contracts as promised, the assets were misappropriated, including by keeping pool participants’ money in Saffron’s personal cryptocurrency wallet and by using funds to pay other participants, which is a hallmark of a Ponzi scheme. The man and his company are also accused of lying to pool participants in order to conceal their fund’s misappropriation.
The CFTC seeks from the court a full restitution to defrauded investors, disgorgement of ill-gotten gains, civil monetary penalties, permanent trading bans, and a permanent injunction against future violations. However, it warned the alleged victims that restitution orders may not result in full recovery of their lost money because the accused may not have sufficient funds or assets left to pay them in full.
What do you think about the charges against this alleged Las Vegas scammer? Share your thoughts in the comments section below.
Images courtesy of Shutterstock.
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Jet8 is taking a new approach to social media and data ownership using blockchain.
Bucking a trend, Sen. Mike Rounds (R-S.D.) wrote a letter praising Libra as a technological advance that he feels is needed.
No mention of Libra.