Homepage / Investment / Next stop in the cryptocurrency craze: A government-backed coin is coming soon
Amazon says this Prime Day was its biggest shopping event ever Kudlow says President Trump is 'so dissatisfied' with China trade talks that he is keeping the pressure on As stocks regain their footing, an ominous warning looms Goldman Sachs downgrades Clorox to sell, says valuation is 'unsustainably high' How Satya Nadella has spurred a tripling of Microsoft's stock price in just over four years Kudlow says economic growth could top 4% for 'a quarter or two,' more tax cuts could be coming The one chart that explains Netflix’s stunning comeback US housing starts plunge 12% in June to a nine-month low Aerospace titans Boeing and Airbus top $110 billion in orders at Farnborough Target uses Prime Day to its advantage, logging its 'biggest online shopping day' so far this year Billionaire Marc Lasry sees bitcoin reaching up to $40,000 as it becomes more mainstream and easier to trade These are the 10 US airports where you're most likely to be hacked Amazon shares slightly higher as investors await Prime Day results Wreck of Russian warship found, believed to hold gold worth $130 billion A bullish ‘phenomenon’ in bond market is weeks away from fading, top credit strategist says Stocks making the biggest moves premarket: MS, GOOGL, TXN, UAL, NFLX & more Twitter shares up 50% since late April means most upside priced in, analyst says in downgrade EU fines Google $5 billion over Android antitrust abuse Mortgage applications fall 2.5% as buyers struggle to find affordable homes America may not have the tools to counter the next financial crisis, warn Bernanke, Geithner and Paulson Investors are getting spooked as the risk of a no-deal Brexit rises EU expected to fine Google $5 billion over Android antitrust abuse Ex-FBI chief James Comey urges Americans to vote for Democrats in midterm elections Elon Musk apologizes to British cave diver following baseless 'pedo guy' claim Disney, Comcast and Fox: All you need to know about one of the biggest media battles ever Xiaomi shares notch new high after Hong Kong, mainland China stock exchanges reach agreement The trade war is complicating China's efforts to fix its economy European markets set for a strong open amid earnings; Google in focus Hedge fund billionaire Einhorn places sixth in major poker tournament The biggest spender of political ads on Facebook? President Trump Asian stocks poised to gain after Fed's Powell gives upbeat comments; dollar firmer Stocks are setting up to break to new highs Not all FAANG stocks are created equal EU ruling may be too little, too late to stop Google's mobile dominance Cramer explains how Netflix's stock managed to taper its drop after disappointing on earnings Airbnb condemns New York City's 'bellhop politics,' threatens legal retaliation Amazon sellers say they were unfairly suspended right before Prime Day, and now have two bad choices Investor explains why 'duller' tech stocks can have better returns than 'high-flying' tech names Elon Musk is 'thin-skinned and short-tempered,' says tech VC Texas Instruments CEO Brian Crutcher resigns for violating code of conduct Google Cloud Platform fixes issues that took down Spotify, Snapchat and other popular sites Uber exec: We want to become the 'one stop' transportation app 'What a dumb hearing,' says Democrat as Congress grills tech companies on conservative bias Amazon shares rebound, report says Prime Day sales jumped 89 percent in first 12 hours of the event How to put your medical history on your iPhone in less than 5 minutes Investment chief: Watch these two big events in 2018 Even with Netflix slowing, the market rally is likely not over Cramer: Netflix subscriber weakness debunks the 'sky's the limit' theory on the stock Netflix is looking at watch time as a new area of growth, but the competition is stiff Why Nobel laureate Richard Thaler follows Warren Buffett's advice to avoid bitcoin Rolls-Royce is developing tiny 'cockroach' robots to crawl in and fix airplane engines After Netflix plunge, Wall Street analysts forecast just tame returns ahead for the once high-flying FANG group Roku shares rise after analyst raises streaming video company's price target due to customer growth China is investing 9 times more into Europe than into North America, report reveals Amazon says US Prime Day sales 'so far bigger than ever' as glitch is resolved Netflix is on pace for its worst day in two years US lumber producers see huge opportunity, rush to expand San Francisco to consider tax on companies to help homeless Homebuilder sentiment, still high, stalls as tariffs, labor and land drive up costs Powell backs more rate hikes as economy growing 'considerably stronger' Netflix history is filled with big stock declines – like today – followed by bigger rebounds Intel shares get downgraded by Evercore ISI due to rising competition from Nvidia, AMD Petco aims to reinvent the pet store with something you can't buy online Genetic testing is coming of age, but for consumers it's buyer beware Tech 'FAANG' was the most-crowded trade in the world heading into the Netflix implosion, survey shows Netflix weak subscriber growth may indicate a 'maturity wall' that could whack the stock even more: Analyst This chart may be predicting the bull market's demise Wall Street says Netflix's stock plunge is a ‘compelling’ buying opportunity because the streaming giant ‘never misses twice’ Tesla sinks after Musk tweets, again Boeing announces new division devoted to flying taxis Stocks making the biggest move premarket: NFLX, UNH, GS, AMZN, WMT & more Deutsche Bank downgrades Netflix, but says big subscriber miss is not 'thesis changing' IBM is experimenting with a cryptocurrency that’s pegged to the US dollar North Korea and Zimbabwe: A friendship explained Virgin Galactic spinoff Orbit to launch rockets from the UK with space deal Artificial intelligence will create more jobs than it destroys? That’s what PwC says ‘Treasonous’ Trump and ‘Putin’s poodle:' Scathing headlines follow the Trump-Putin summit China’s fintech companies offer ‘enormous’ opportunity, investment manager says Trump's performance at summit with Putin was 'unprecedented,' experts say Walmart and Microsoft link up on cloud technology as they both battle Amazon European stocks seen mixed amid earnings; Fed’s Powell to address Congress How I knew I should quit my day job and run my start-up full-time: Viral website founder China's stocks have been trounced, but the trade war may ultimately be good news for those shares Billionaire tech investor Peter Thiel bets on crypto start-up Block.one Asian shares subdued open after mixed close on Wall Street; energy stocks under pressure Amazon cloud hits snags after Amazon Prime Day downtime Netflix isn't doomed by one quarter unless people start questioning the long-term investor thesis Tech stocks set to sink on Tuesday after rough evening for ‘FANG’ Netflix plummets after missing big on subscriber growth This wristband lets humans control machines with their minds The U.S. has a rocky history convincing Russia to extradite computer criminals Amazon suffers glitches at the start of Prime Day Jeff Bezos is now the richest man in modern history 'The United States has been foolish': Read Trump and Putin's full exchange Goldman Sachs recommends these 5 highly profitable companies — including Nvidia — to combat rising inflation Goldman Sachs releases 'tactical' stock picks for this earnings season Three red flags for Netflix ahead of its earnings report The bond market may be raising recession fears, but don't expect one anytime soon Cramer: Banks are 'making fortunes' but are still as hated as they were during the financial crisis Putin told Trump at summit: Russia never meddled in US election

Investment

Next stop in the cryptocurrency craze: A government-backed coin is coming soon

In the light of the rising popularity of cryptocurrencies, like bitcoin and ethereum, central banks around the world are busy experimenting with their own versions of cryptocurrency, or digital currency.

China’s central bank announced in January that it has completed a successful trial run of transacting digital currencies among banks. Then in September, Japan, Sweden and Estonia all announced similar digital currency projects: J-coin for Japan, E-krona for Sweden and Estcoin for Estonia. The roster doesn’t stop there — the UK, Uruguay and Kazakhstan have all expressed similar ambitions.

On Wednesday, William Dudley, president and CEO of the Federal Reserve Bank of New York, said the Fed is exploring the idea of offering its own digital currency, according to published reports on comments the Fed president made at a conference. However, Dudley said it would be “very premature” to estimate when the Fed would come up with its own version of bitcoin.

How soon will we see a government-backed digital currency up and running? This past summer Peter Smith, CEO of Blockchain (the leading digital wallet), predicted that “we are 24 months from a major government issuing a sovereign digital currency.”

This global phenomenon is so new that no one has yet to solidify a term to address it. Some call it central bank–issued cryptocurrency or government-backed cryptocurrency. Some refuse to call it cryptocurrency, naming it digital fiat or sovereign digital currency.

“To me the idea of cryptocurrency is free of control from any person and institution. There’s nothing cryptocurrency about these [government-backed projects],” said Jacob Eliosoff, investment manager of Trevi Digital Assets Fund.

He added: “You have one institution that controls it, and they can change the rules when they want; they can prevent certain transactions from happening if they don’t trust the party involved. It’s not that bad, but that’s not a cryptocurrency. That’s just a currency that happens to run on a computer. “

Driving this global trend is a confluence of factors.

Governments are now responding to the rise of cryptocurrencies. It is a global market composed of a number of virtual currencies — i.e. bitcoin, ethereum, Zcash, dash T— that has reached $335 billion in size, according to CoinMarketCap. And it is expected to reach $2 trillion in 2018, predicts Mike Novogratz, a billionaire trader and long-time cryptocurrency bull who forecast a bitcoin price increase by the end of next year to as high as $40,000.

This year alone, Bitcoin’s value has soared about 900 percent hitting more than $11,0O0 Wednesday. At the same time, ethereum’s value rose a whopping 5,900 percent to $519.85 on Wednesday.

Investors in cryptocurrencies have been riding a tremendous bull run, outpacing stock market returns by a huge margin so far this year. The S&P 500 is on track for a 20 percent annual return, but meager when compared to such cryptocurrencies as bitcoin.

Many countries concerned about the future of finance are tracking the digital currency movement, and they are developing strategic plans for adoption. “I think China, in particular, as opposed to some other countries over the last four years, felt the threat of the rise of bitcoin and other cryptocurrency,” said Paul Triolo, practice head of geotechnology at Eurasia Group. “The [Chinese government thinks] that [cryptocurrencies] could potentially threaten the central government control over the financial system.”

Governments also see blockchain — the underlying technology of cryptocurrencies — as a way to move forward or perhaps even to get ahead of the trend. In countries like Sweden and China, cash is giving away to more convenient mobile payment systems. Last year only 15 percent of retail payments in Sweden were made in cash, a steep drop from 2010, when cash payments accounted for 40 percent.

More from Global Investing Hotspots:
World capital of blockchain is now rising in the Middle East
World markets boom even as the globe gets more chaotic and dangerous

“There’s this really interesting prospect of creating a platform for innovation,” said Xen Baynham-Herd, head of strategy and lead economist at Blockchain. “If a government was able to issue a second currency in digital form, it would be a building block of the money for the internet. You can imagine micro transactions and cross-border payments happening as easy as sending an email to someone.”

How would these government-backed digital currencies affect the value of cryptocurrencies? This is an open question, as there are no existing government-backed digital currencies implemented at scale.

Triolo thinks “bitcoin would probably be the one that’s mostly affected, because it was originally intended to be used as a digital currency.” But he’s bullish on ethereum and others that are more tied to broader application platforms than just currencies.

Baynham-Herd disagrees and thinks bitcoin could become digital gold. “I think bitcoin and other crypto will coexist with government-issued cryptocurrencies, because they offer different things. Bitcoin, from the very beginning, was all about decentralized, peer-to-peer digital cash, without the need for central intermediary, without the control of a government, and these features remain whether or not a government issues its own digital currency.”

While Trevi’s Eliosoff sees real opportunities for cryptocurrency in cross-border transactions. Baynham-Herd sees the opportunities in “combining the innovative features of bitcoin and other cryptocurrencies with the established trust and security of a currency issued and regulated under a central bank and a government.”

Meanwhile, Rod Garratt, an economic professor at UCSB (University of California, Santa Barbara), thinks “if there was a central bank cryptocurrency that provide some anonymity, then it would be a very close substitute for bitcoin, except it would not provide autonomy. So it really comes down to what feature people desire.”

“Central banks don’t get to decide whether or not bitcoin is there or not; bitcoin is there,” said Garratt.

To be sure, cryptocurrencies are global technologies, proved to be resilient to government regulation (the bitcoin price rally was undeterred in the last few months after China shut down cryptocurrency exchanges and ICOs in September). So it remains to be seen if governments are able to develop digital currencies that can rival with bitcoin and others.

— CNBC’s Evelyn Cheng contributed to this report.

Source: Investment Cnbc
Next stop in the cryptocurrency craze: A government-backed coin is coming soon

Comments are closed.