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2020 Global Challenges for Cryptocurrency

Cryptocurrency

2020 Global Challenges for Cryptocurrency

Blockchain, Bitcoin, and Cryptocurrency are some of the terms that you must have heard at some point in your life. Especially in the past decade or so, cryptocurrency became the talk of the global economic forums. As many authorities began to question the future of monetary assets, money, and similar resources, cryptocurrency was among the more controversial topics.

In 2019, right before Blockchain could have seen a public acceptance phase, the revolution came to an abrupt halt. According to the Gartner Group, it was called ‘Blockchain fatigue.’ Other experts also jumped on the bandwagon that the fire of Blockchain technology and virtual currency, in general, has fizzled out. People thought maybe it was a phase after all that overstayed its welcome.

Pragmatically, the perspective is incorrect. According to recent statistics, the crypto market has an estimated total market capitalization of over $155 billion as of 15th March 2020. Considering these numbers and based on many financial institutions, powers might tend to disapprove of cryptocurrency, but they are in favor of Blockchain technology. The disruptive nature of decentralized currencies such as Bitcoin and others has led to a corresponding halt to its progress.

Let’s find out what more challenges do cryptocurrency has to face as the year 2020 goes by.

Challenges Hindering Cryptocurrency Growth and Acceptance Worldwide

The following are the challenges hindering cryptocurrency growth and acceptance on a global scale.

1.  Boom Phase for Blockchain

There is no doubt about the fact that where cryptocurrency is facing the challenge of surviving and being accepted by the masses, Blockchain technology has already surpassed it. The masses have widely accepted it, and big names of global trade specialists are now moving towards Blockchain.

The likes of Trade Lens by IBM and Maersk’s joint Blockchain investment in the shipping industry have welcomed the first-ever initiative taken. Many such mind-blowing initiatives are underway that involve Blockchain apart from the cryptocurrency domain. The challenge for crypto-enthusiasts here is that once the Blockchain technology takes off without crypto, it will be the end to it.

2.  Bad Imagery

Cryptocurrency, even after having gone through a boom phase, still has a PR problem. The terms associated are enough to conjure up images of cringe advertisements, low-quality campaigns, bad actors, get rich quick schemes, and criminals alike. For many people, cryptocurrency spells out new technology for age-old scams and frauds, which they don’t want any.

It may seem like a petty issue, given the magnitude that is a cryptocurrency and the Blockchain industry. However, this issue has hindered crypto for years since its inception and will continue to do so if no knowledgeable individuals came forward in favor of it.

3.  Blockchain vs. Authorities and Officials

US constitution is known worldwide for its protection right given to the democratic entity that the country is. Freedom of speech, access to information, and the right to form an opinion is protected by the officials to be open. However, on the flip side, when it comes to assets and financial resources, our system laws, governments, and authorities are designed to keep it limited amongst the powerful.

It is evident why crypto and Blockchain has taken over a decade to adjust in an economy where it had to tackle issue arising from the core of how our economy and society operates.

a. Lack Of Legislation

Digital currencies are decentralized virtual entities. They are purely digital products, and our authorities are not geared to handle this advanced technology. That is why the lack of legislation regulating these digital currencies and providing any sort of user protection has become a huge challenge.

The essential step that needs to be taken to reduce the risk involves educating and informing people about keeping their personal data safe. There is still a gaping void where insurance and dedicated legislation needs to be placed. But until that happens, awareness to safely exercise crypto is crucial.

b. Legal Obstacles

In addition to lack of legislation, the other big obstacle that stands in the way of cryptocurrency holders like Bitcoin traders and users is the challenge to spend their holdings. The untraceable nature of Bitcoin and its bad imagery as a mode of finance for mega criminal activities like terrorist attacks and the drug trade has made it quite scandalous in some countries.

Cryptocurrency is going through a period of abrupt halt where nothing much seems to be happening around the technology. Therefore, one can’t say for sure that what the future holds unless wide acceptability affects these legal obstacles standing in the way of crypto-trading.

4.  The Technology Is Still Immature

Cryptocurrency faces implementation obstacles beyond the lack of regulation and inactive obligations. The technology is an emerging one and is still immature in a system where other options are widely scalable and accepted over it.

One might think how a technology that has been out there for over a decade now can be new and emerging. The reason is that not much has been done to expand it.

a. Interoperability

Interoperability or the ability of computer system software to exchange and utilize information is a challenge faced by Blockchain. The technology has been divided to make multiple uses of it in different industrial domains, separate form cryptocurrency.

The technology needs to be made interoperable for the internet dedicated to Blockchain and crypto exchange. Until then, as long as people continue to go by illegal and wrong means of mining it, the technology is a threat to the economic system that opens its gates to accept virtual currencies.

b. Usability

This point cannot be emphasized enough how difficult it is to buy and sell crypto. We are way in the year 2020, and it is still as difficult as it was back in the day when Bitcoin was first launched. The mere participation in the crypto world requires a nerve-wracking validation that general people find unappealing.

The security procedures are so complex that they have become hurdles in crypto adoption as a mode of exchange. Most students look for personal statement help UK who have a high interest in cryptocurrency markets but unable to compose a compelling profile.

It is still a significant challenge for the industry to create user-friendly processes for buying, selling, storing, and using cryptocurrency securely without being called out for it.

c. Scalability

The generally acceptable country-wise currency exchange and even the banking transactions in different currencies have been made scalable and adaptable to the different rates. Cryptocurrency has years of effort to go until it finally reaches a scalability level that Dollar, Yen, Pounds, or Rupee have gotten to.

While interoperability may be a huge step forward to achieve that, that itself is a challenge to mitigate first, the system is so slow, and many dominant platforms for smart contractual applications are still under development. The processes face numerous delays and would require many scalable solutions to counter this issue of exchange.

d. Data Rights

Data has reached a level of becoming a digital asset at this point. Digital mafia considers data the real deal and a key to all things penetrable for the immense value it can hold for individuals and organizations. That is why one of the biggest lose loop in cryptocurrency is and will always be data rights and privacy.

The solution here is not just government protection of privacy and data for cryptocurrency traders. A dedicated system is required where such identities can capture and control their own data. And where there is a long way to go for an efficient framework, many initiatives have been taken and underway.

e. Security

Blockchain might be immature, but it is so far advanced that it is more secure than a traditional computer system.

However, many financial breaches, data leaks, and huge losses due to the system vulnerabilities have made it challenging for people to be satisfied with their transactions. At one point in time, $250 million were lost in a single transaction through QuadrigaCX exchange due to its deadly centralized business model.

In addition to it being not secure enough, these pieces of news make rounds globally. People have lost faith in cryptocurrency over time.

2.  Difficulties Of Bitcoin Transactions

In 2013, a crypto-enthusiast made a luxury car dealership in Costa Mesa, CA, for a Tesla Model S and paid for it in Bitcoin. Just under 92 bitcoins that were worth over $100,000 at that time, the deal was sealed and legally conceived. Considering this transaction and comparing it with the real-time value of crypto right now, the setback and skepticism surrounding Bitcoin have not done much harm to the growing estimation of it.

However, one cannot move past the real-time losses that have occurred given the Bitcoin transactions over the years. Spending Bitcoin is still a huge deal than hoarding it.

a. Countries Banning Bitcoin

Countries like Vietnam, Bangladesh, Bolivia, and Ecuador have prohibited crypto transactions. The state bank has outlawed it and declared cryptocurrency an illegal form of payment with a heavy fine due to violators. And even where it is legal, there are countless logistical issues.

Even in the United States, the Securities and Exchange Commission is having an ongoing debate if it prefers new regulations for the cryptocurrency market. If major countries with relevant economic forums stand against Bitcoin, it will become increasingly difficult for the crypto-type to gain acceptance from the masses as people continue to engage in it illegally.

b. Conversion Issues

Conversion remains a huge hurdle for Bitcoin vendors. As Bitcoin is not a fiat currency and is only limited to monetary value when converted to a cash equivalent, not many vendors go for its conversions for other cryptocurrency types. They are more willing to look for a payment method that delivers in Dollars or any other local currency. So that any exchange made for goods and products is made on consumer rates.

Such an implementation system is difficult even if bigger brands are willing to make it possible. No matter if a business sells cars or academic writing services, there is a lack of appropriate regulations to facilitate this type of exchange.

c. People Losing Money

Though Bitcoin regulatory protocol was not affected and not a single Bitcoin disappeared or got lost, people lost loads of money. The downfall and cases of transactional breakdowns are the major reason why cryptocurrency came to an unannounced halt in the first place.

There is a serious need to regulate and change the trading and mining protocols in Bitcoin and other cryptocurrencies. Only then can I expect the general public to safely indulge in Bitcoin mining and trading without feeling it to be illegal or a complete daredevil gambling moves on their part.

d. Volatility Of Prices

The volatility of prices also hangs in the balance of the potential of Bitcoin and cryptocurrency in general. Even though Bitcoin has gained significant community following over the years, there have been disputes among the community member for deciding the path it should take.

The compact user base has made the currency increasingly volatile. The stability expected concerning a centralized authority system to regulate it will increase once people start to accept it. The doubts about Bitcoin’s usage and the resistance by major countries to integrate the system and legalize it will continue to deteriorate the prices further.

Conclusion – The Stakes Are High

All in all, the results of no action being taken by major industrial giants, businesses, and government authorities have never been so altering ever since all these years of crypto trading and mining as it is now. The year 2020 is going to shape the cryptocurrency industry either for better or for worse.

Crypto networks like Bitcoin, corporations like Facebook, and nations like China implementing digital currency by the end of this year will be taking a step towards stumping Dollar as the record currency. It will, in turn, lead to the US Federal Reserve pushing ahead of the digital counterpart.

There is no denying that the stakes are high, and just like everything else, the future is unpredictable for cryptocurrency too.

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Claudia Jeffrey is currently working as a Junior Finance advisor at Crowd Writer, an excellent platform to get assignment help UK. She is a self-proclaimed crypto-influencer. She has gained significant expertise and knowledge in this regard over the years and likes to share it with an interested audience.

cryptocurrency

What is Cryptocurrency? Is It Accepted Globally?

Money is an ancient technology and is almost as old as language itself. Back in the day, before the introduction of money, all transactions were done with the barter system as products and services were not quite complex. For instance, a farmer who grew vegetables could exchange a reasonable quantity of it with wool from a Shepard. With the introduction of precious metal coins as currency, the barter system eventually faded out, and so did precious metal coins with the adoption of paper currency notes. With the advent of new technology, the older systems phase out giving way for new ones.

Cryptocurrency is a digital asset that is based on a network that uses strong cryptographic encryption techniques for carrying out secure financial transactions and is distributed across a large number of computers. Most cryptocurrencies employ decentralized networks based on blockchain technology which means every new block generated must be verified by each node before being confirmed. Simply put, a cryptocurrency is a virtual currency that is secured by nearly impossible to counterfeit cryptography.

Besides being the most secure way to conduct a transaction, it also happens to attract the lowest transaction costs, the prime reason for which is its decentralized system. Unlike conventional centralized systems used by banks, cryptocurrencies make use of each of the nodes to confirm the transaction. The conventional system can also be referred to as master-slave architecture in which the bank is the center of power, hence the master and all users are slaves whereas, in decentralized cryptocurrencies, each node is equipped with equal access to all financial services.

We humans are not exactly fond of change though. Despite the benefits of using a newer system, mass adoption takes a while. Did you know that until 1933, each dollar could be redeemed in gold? Did you know all Americans were required to turn in their gold on or before May 1, 1933, to the Federal Reserve in return for $20.67 of paper money per troy ounce? Yes, it was made illegal to own and trade gold by Executive Order 6102 by President Franklin D. Roosevelt whereas the gold standard was suspended in Britain on September 21, 1931. Many speculate that a similar blow from the government could happen anytime in the future since fiat currencies that are controlled by the government. Cryptocurrencies are global and will not be affected by decisions made by the government of one country or the other.

Currently, there are several thousand cryptocurrencies, Bitcoin, Litecoin, and Ethereum are the most popular ones. Check out this infographic by Total Processing to learn more about other advantages of cryptocurrencies.

Click here for a full-size image.

 

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This infographic originally appeared on TotalProcessing.com. Republished with permission.

BUILDING TRUST IN THE CRYPTO MARKET

The cryptocurrency (‘crypto’) market is on the rise. Bitcoin, the main altcoin with a market share of over 60%, has seen its price increase from around $4,000 in April 2019 to over $10,000 in July 2019, despite the recent Congressional hearings on Facebook’s Libra.

In tandem with increasing prices, institutional investors are getting more involved in the market. Last year, we saw institutional investors surpass high-net-worth individuals (HNWIs) for the first time in terms of purchasing cryptocurrencies. It’s fast becoming part of a diversified investment strategy. Whilst there is still a strong UK/US footprint, we’re seeing deals in Switzerland, Hong Kong and Canada.

The speed of professionalization in the cryptocurrency market has ramped up, with much of the recent growth driven by more efficient financial infrastructure. This is helping financial institutions to take a more considered look at crypto, and use it to revamp their portfolios. As of July 2019, the total market capitalization for these digital assets in circulation is just under $300bn. It’s likely that this will rise above $300bn in the near future, though longer-term prospects depend on how the industry adapts to upcoming regulatory framework, with the likes of the Financial Industry Regulatory Authority (FINRA) looking to apply rules that will provide a stable platform to trade digital assets while reducing risk.

Trading volumes have been boosted by a sharp rise in over-the-counter (OTC) trading as crypto projects look for liquidity. In the so-called ‘Crypto Winter’ of 2018, crypto-centric OTC desks, including Genesis Trading and Circle (backed by Goldman Sachs) started reporting tremendous growth and this trend is continuing. According to research by Diar, over 25% of Bitcoin in circulation now sits in addresses that have a balance of between 1,000 and 10,000 BTC – volumes that point to financial institutions.

These institutional investors opt for OTC trading as opposed to spot exchanges for a number of reasons. Exchanges often have low liquidity in their order books which rules out large orders, OTC allows large orders without an unfavorable impact on the price, and exchanges limit the total number of Bitcoins that can be traded in one go – Coinbase, for example, has a daily trading limit of $25,000.

That said, there are a few complications that both buyer and seller could run into when they want to set up an OTC trade. There is often no guarantee that the asset (altcoin) will be delivered or cash paid. Most OTC brokers don’t provide an appropriate custody solution, which increases this settlement risk. It’s also worth noting that current OTC trading doesn’t include suitable Know Your Customer (KYC) procedures as it lacks the monitoring and surveillance tools of traditional trading systems.

A Safer Trade

However, there is a different avenue that institutional investors can explore. OTC trading via escrow can effectively tackle these risks and issues. This more robust approach benefits both sides of the trade as the escrow agent will follow everything to the letter. The seller benefits from dealing with a party that has funds to make the purchase, whilst the buyer can be confident a trusted independent party won’t release funds until the altcoins have been received. Crucially, by trading via escrow there is no need for participants to seek out an additional custody solution – it’s already in hand – and the escrow agent will perform KYC as part of the service provided.

If you go down this route, it’s important to select a global partner to avoid any multi-jurisdictional issues cropping up. The right partner will always start with a rigorous KYC process. Once both parties have been positively identified and no red flags are raised, they will move to exchange the cryptocurrency and the cash.  In most cases, it is best to first run a simulated deal with a small exchange of cryptocurrency, backed by cash in escrow, between the address of the seller and that of the buyer to establish a working link to build on.

Crypto represents a good opportunity for investors and it has a big future. There will undoubtedly be market consolidation, with a small number of the 1,500+ altcoins in circulation emerging as a favored core. As institutional investor appetite increases, bigger names will enter the arena. You can stay ahead of the game by using an escrow agent to implement custodial arrangements and manage the risks associated with this emerging asset class.

BREAKING BAD TRADE: FENTANYL FROM CHINA

The Real Poison Pill in U.S.-China Trade

Following a historic dinner between President Trump and President Xi last December in Argentina on the margins of the G20 Summit, many of us awaited news on tariffs. We were surprised when, as part of a trade announcement, President Trump hailed a commitment from China to step up its regulatory oversight of fentanyl, the opioid that the Centers for Disease Control says has caused a “third wave” of drug-related overdose deaths in the United States.

It seems the seedy underbelly of e-commerce involves a steady stream of online purchases of deadly variants of the drug fentanyl, made in China and shipped to American doorsteps through the U.S. postal service.

Deadly Parcels from China

Fatal drug overdoses have doubled over the last decade, rising from 36,010 in 2007 to 70,237 in 2017. Synthetic opioids other than methadone – mainly fentanyl – now account for 40 percent of all drug overdose deaths and 60 percent of opioid overdose deaths.

China is the primary source of illicit fentanyl, fentanyl analogues, and fentanyl precursor chemicals in the United States. According to U.S. Customs and Border Protection, almost 80 percent of fentanyl seized in 2017 was interdicted at U.S. Postal Service and express consignment carrier facilities, having been shipped in small quantities from China.

Fentanyl precursors are also shipped from China to Mexico, and to a lesser degree Canada, before being synthesized, often mixed with heroin or cocaine, repackaged, and then trafficked over U.S. land borders in the southwest.

Fentanyl third wave of overdoses

STOP

Last March, the White House stepped up its campaign against opioid abuse, seeking to address factors driving both demand and supply. The Initiative to Stop Opioid Abuse (referred to as STOP) includes education programs, measures to curb over-prescription, expanded access to treatment and recovery, and – a focus on cutting off the flow of illicit drugs from China.

According to Homeland Security, more fentanyl in larger volumes is seized at land crossings, but the fentanyl seized from mail and express consignment carrier facilities is far more potent with purities of over 90 percent versus Mexico-sourced fentanyl that is often diluted to less than 10 percent.

The president’s initiative would require the postal service to provide advance electronic data for 90 percent of all international mail shipments within the next two years, offering data that will help law enforcement identify and seize illegal substances shipped through mail. Private shippers such as UPS and FedEx routinely require such electronic data.

The administration is also scaling up the Department of Justice’s “darknet” enforcement efforts. Fentanyl in its various forms is relatively cheap and easy to buy from China online paying with cryptocurrencies, or even credit cards or money transfers.

fentanyl shipments from China

Over One Million Pills a Day – In One Factory in China

China has grown to become the largest mass producer of generic drugs and pharmaceutical ingredients in the world with over 5,000 pharmaceutical manufacturers. Upwards of 90 percent of the active pharmaceutical ingredients used in U.S. production of finished dosage forms of medical pharmaceuticals is imported from just two countries: India and China.

In addition, China has over 160,000 chemical producers and hundreds of thousands of pharmaceutical and chemicals distributors. The explosion in volume and number of producers has far outstripped China’s FDA (CFDA) from adequately regulating and monitoring them.

Faster Than Can Be Regulated

Unlike opioids derived from the poppy plant, fentanyl is a synthetic painkiller produced in a laboratory. It is 50 times more potent than heroine and 50-100 times more potent than morphine. Inhaling just two milligrams of pure fentanyl can be lethal.

In the United States, most fentanyl products are classified either as Schedule I chemicals, those that have no accepted medical use and high potential for abuse, or as Schedule II chemicals, those with medical use but only available through a non-refillable prescription.

Fentanyl’s molecular structure can be easily modified to create new derivatives, putting regulators constantly behind in evaluating and classifying each new variant one-by-one. From furanyl fentanyl, acetyl fentanyl, acryl fentanyl, to carfentanil — to name just a few — fentanyl has hundreds of analogues that differ slightly from the original, enabling criminal producers to operate in a gray territory while regulators struggle to ban the new substances. Legislation passed in 2017 now allows U.S. FDA to schedule fentanyl analogues immediately on a temporary basis while the agency conducts its investigations.

President Trump has urged President Xi to implement a similar approach. China currently controls around 25 types of fentanyl-related products. President Trump wants China to establish fentanyl as its own class of controlled substances, restricting all fentanyl analogues, including future fentanyl-like substances. Doing so would be a start.

Busting Drug Trade

Such a commitment by China is not, however, likely to put a dent in its fentanyl exports to the United States absent real enforcement. In recent years, CFDA has imposed stricter licensing requirements for pharmaceutical and chemical producers, but diversion, adulteration, and clandestine production remain significant problems.

“Chinese chemical manufacturers export a range of fentanyl products to the United States, including raw fentanyl, fentanyl precursors, fentanyl analogues, fentanyl-laced counterfeit prescription drugs like oxycodone, and pill presses and other machinery necessary for fentanyl production.” — U.S China Economic and Security Review Commission Staff Research Report

CFDA has undergone several reorganizations in the last few years. In the most recent, some of its regulatory responsibilities have devolved to provinces and counties with little accountability. Pre-marketing approvals will be managed separately from post-market inspections and surveillance. With just a little over 2,000 inspectors, authorities have little hope of effectively overseeing legal compliance, let alone spotting even a fraction of criminal activity.

The central government has assisted U.S. drug and law enforcement agencies, sharing information and intelligence that helps U.S. agencies target Chinese nationals trafficking illicit drugs in the United States. To alleviate the free flow of fentanyl from China, the Chinese government should also prosecute transnational criminals operating in China in high-profile cases with severe penalties.

Soybeans, Tech Transfer, and Fentanyl

Trade talks over soybeans and intellectual property protections for American technologies seem an unlikely setting for addressing illicit trade in deadly fentanyl.

There are some in the United States who are frustrated with this administration’s willingness to toss out the traditional trade policy playbook, but this is one case where it can welcomed by everyone.

 

 

Interested to read about fentanyl trade in more detail?

See two key reports produced by U.S.-China Economic and Security Review Commission analyst Sean O’Connor: Fentanyl: China’s Deadly Export to the United States, February 2017 and Fentanyl Flows from China: An Update, November 2018

Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fourteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.