The Bank of Spain joins the debate on digital currencies through a recent report. It acknowledges the role of the Facebook project in digital currency plans.

The Bank of Spain (BDE) recently published a study, through which it joins the existing debate about central bank digital currencies (CBDC), and proposes to “open an orderly discussion” on this issue.

The document seeks to review the reasons that justify the issuance of a CBDC. It also makes a preliminary analysis of the main implications that the issuance of this type of currency could have for central banks.

Juan Ayuso and Carlos Conesa are the authors of the study, titled “An Introduction to the Current Debate on the Central Bank Digital Currency.” In their analysis, they talk about the current motivations that drive the issuance of CBDC.

They acknowledge the role that Bitcoin, and other cryptocurrencies, as well as pegged cryptocurrencies, or stablecoins, have had in accelerating research on central bank digital currencies. They especially refer to Facebook’s Libra project.

Payment System Problems and the Unbanked

The researchers are also members of the Bank for International Settlements (BIS) Committee on Payments and Market Infrastructures. They believe that the growth of the cryptocurrency and stablecoin market is not the only motivation for central banks to address CBDC.

They cite the existing difficulties with the use of cash as another engine. They add the issue of financial inclusion and the limitations of payment systems, especially cross-border ones.

Consequently, central banks mainly seek to solve the problem that the low use of cash has created in some economies. Besides, they aim to have access to the unbanked market through a CBDC.

Concern about Deposit Flight

Ayuso and Conesa also explain the three fundamental concerns that may have an impact on the operation of central banks, in case they issue a CBDC.

They propose three possible scenarios: one in which the CBDC could displace bank deposits, and another one in which the digital currency facilitates the flight of deposits from an entity at a certain moment of crisis. The third scenario has to do with a probable “massive flight of deposits from the banking system, in the event of a global distrust in the financial system as a whole.

The concern about a possible bank run is recurring among analysts at the Bank of Spain. Galo Nuño, a member of the General Directorate of Economy and Statistics of the financial institution, conducted a previous study on CBDC that also mentioned this disadvantage.

Both studies agree that it is necessary to weigh the limitations of the financial system that a central bank digital currency could overcome, along with the improvements that the currency could bring.

Ayuso and Conesa highlight the possibility of designing a kind of “personalized CBDC model”, according to the particularities of each economic system. They outline solutions to the concern raised, such as placing a limit on the use of the digital currency with caps on balances.

By Willmen Blanco

The country is preparing for the issuance due to high inflation and the coronavirus. A second import from Brazil for 1,000-peso banknotes might be ready.

The Argentine government opened an international tender to print 250 million 500-peso banknotes and face a possible shortage of cash. High inflation and the health crisis that triggered the coronavirus pandemic are putting pressure on the local monetary outlook, so the Mint opened an international tender.

The agency launched the “express” selection process for printing and completing 500-peso banknotes in recent weeks, but the delivery deadlines will begin on August 26^th. That day, Argentina must receive the first 100 million banknotes with a second delivery on September 25^th, also for 100 million banknotes. The total order would be complete on October 15^th with the other 50 million pending.

The trouble of the Central Bank of the Argentine Republic (BCRA) is probably the main obstacle since it occurs amid a major monetary issuance in dozens of countries. In other words, the economies are injecting more funds as a measure to face stagnation.

To accelerate the process, which usually takes at least six months, the Mint will send paper and ink so that the chosen supplier has the raw material. Estimates indicate that the Argentine government could award the tender in a week. Some interesting firms reportedly requested an extension of the deadline, but they did not receive it.

Local media assure that an import of 1,000-peso banknotes from Brazil is almost closed, which would complete a guideline of the Mint to maximize its production of banknotes of this denomination. Both the 500- and 1,000-peso banknotes are the largest denomination specimens in the country.

The fact that several Mint employees tested positive for coronavirus recently compromised plans to satisfy Argentina’s “thirst” for cash. The contagion among the workers led to a temporary stoppage of activities at their two headquarters in Retiro and Don Torcuato.

To meet the growing demand for banknotes, the agency is working 24 hours in shifts of 8 hours each, which shows the urgency of the country to mitigate the effects of inflation and support its fellow citizens. The international tender suggests that all the efforts have been insufficient to avoid a major collapse, making it necessary to resort to external actors.

The case of Argentina is similar to what happened in the USA but on a greater scale. The government of Donald Trump and the Federal Reserve have announced the issuance of billions of US dollars to try to rescue the economy from a recession due to the COVID-19 pandemic and the semi-paralysis of its productive system.

Alberto Cárdenas, a market analyst and trader, indicated that the general printing of money is unprecedented. However, he said that fiat currencies could show a loss in value in a recovery scenario. For this reason, many Argentines seek refuge in cryptocurrencies like Bitcoin.

In June of this year, the BCRA had already issued more than ARS 1 trillion to finance the public sector, an all-time nominal record. Argentina is showing an annual inflation rate higher than 50%, and so its effects on the economy would not be the best.

By Alexander Salazar

The Ethereum Foundation developed two experimental networks for these tests. The attackers must render the networks unusable for 1 hour and 42 minutes.

Ethereum Foundation developer Danny Ryan announced rewards for those who make attacks on two experimental Ethereum 2.0 networks. The individuals or teams that complete the task will receive USD 5,000 for each network that they manage to attack.

The Ethereum Foundation announced the open-source hosting platform Github. There they indicate that they may pay the rewards in Ether (ETH) or the stablecoin DAI, depending on the winners’ preference. The Ethereum Foundation will hold sole responsibility for judging the attacks and deciding whether or not to pay the rewards.

Sigma Prime and Prysmatic Labs designed the attack networks “lighthouse-attack-0” and “prysm-attack-0”, respectively. Both companies focus on developing implementations and research on the Ethereum blockchain.

The reason for these experimental networks is that of providing a sandbox environment in which researchers can breach the security of Ethereum 2.0 to make it more robust in the future.

How to Take Part

In this test, the attackers’ objective will be to avoid, in any way, the completion of operations for 16 consecutive epochs on a single network.

On Ethereum 2.0, an epoch is the time when block proponents suggest a block for certification. After this time, the validators reorganize themselves into committees, that is, into groups that the Beacon Chain randomly chooses to certify the validity of the blocks.

Each epoch lasts 6.4 seconds, which means that attackers will have to manage to render the Ethereum 2.0 network unusable for 1 hour and 42 minutes.

The regulations state that, once the participants perform the attack, they must send as an issue in the same Github repository. There they must describe the work that they have done, with all the technical details that show how they did it to qualify for the reward,

The Ethereum Foundation also requests a description of the effect that the attack has caused on the network and any specific details about what happened, including the epochs and slots where they can see it.

Assessing Attacks and Paying Rewards

The regulations make it clear that there will be at most one reward per attacking entity. In other words, those who manage to breach the lighthouse-attack0 network do not qualify for the reward for successfully attacking prysm-attack-0, and vice versa. To verify who the attacker was, the Ethereum Foundation will review the logs and will see if they match the description that the attacker provides.

Ethereum Foundation researcher Diederik Loerakker clarified that “all this is experimental” and they will improve the process before scaling the test networks. He further clarified that they could divide the reward if it is not clear who made the attack.

The author of the call on Github, Danny Ryan, replied to the announcement on his personal Twitter account. There he clarified that, since the two networks are very small, conducting the attacks should be quite easy. He further announced that, in subsequent attack networks, they will increase the size and will make the challenges more specific and difficult.

It is common practice for the Ethereum Foundation to offer rewards for detecting faults. In early April, they made a call offering up to USD 10,000 for discovering critical vulnerabilities in Ethereum 2.0.

By Alexander Salazar

Tether (USDT) leads among the tokens with USD 10.01 billion worth of  market capitalization. ETH has a market capitalization of around USD 27,000 million.

The total market capitalization of all Ethereum ERC-20 tokens exceeds that of Ether (ETH), the network’s primary cryptocurrency, according to data from Etherscan.

The total market capitalization of the 970 ERC-20 standard tokens is USD 33 billion, while that of ETH is around USD 27 billion. This means that ERC-20 tokens are 22% above the market capitalization of the network’s native cryptocurrency.

It seems unfair to compare the capitalization of 970 tokens with that of a single cryptocurrency. However, this could be a way to analyze the growth of the tokens. Of course, the more tokens there are in the Ethereum network, the more companies and use cases for ETH.

However, several tokens considered for such capitalization are on more than one blockchain or are no longer on Ethereum. Part of the value safeguarded in some tokens might not be on the Ethereum network, so the tokens could represent around 20% of Ethereum’s capitalization.

For example, of the USD 10 billion taken as Tether’s market capitalization, only USD 6 billion is from tokens on the Ethereum network. On the Tron network, Tether’s capitalization is USD 2.8 billion, and on the Omni network, a Bitcoin-related network, it is USD 1.3 billion. Tether also trades on networks like EOS, Liquid, Algorand and SLP, so it stands to reason that its value is distributed on multiple networks.

Binance Coin (BNB) bases on Ethereum’s ERC-20 standard, but is on the Binance Chain, so some of the tokens may not be on Ethereum. Aeternity and Tron also released their tokens on the Ethereum network but then migrated their ERC-20 tokens to their own blockchain networks.

Stablecoin and DeFi ERC-20 Tokens Impact Ethereum

Market capitalization results from multiplying the price of an asset by the number of units available on the market. The capitalization of a stablecoin will increase along with the number of units, while that of a DeFi token increases with the price. Taking this into account, it is striking that there are around USD 2.18 billion locked on Decentralized Finance (DeFi) platforms.

The use of ERC-20 tokens on DeFi platforms could drive an increase in the value safeguarded on the Ethereum network. DeFi-related ERC-20 tokens like 0x (ZRX), Kyber Network (KNC) and Maker (MRK) have an increasing number of active addresses, according to data from Coin Metrics. ZRX has a market capitalization of USD 370 million, KNC has one of USD 330 million, and MRK has one of about USD 440 million.

Despite the increasing importance of ERC-20 tokens on Ethereum, ETH remains the main reserve asset for the Ethereum financial system. Even though DeFi and other Ethereum-based platforms have their own tokens, most of them allow using ETH to pay transaction fees.

However, the accelerated growth of the DeFi ecosystem is another factor that has increasingly caught the attention of the Ethereum community. The growth of DeFi creates concern that it is an indication of the emergence of a new economic bubble on Ethereum.

By Alexander Salazar

SEC Found a Wrong Behavior in Two Related Firms and Took Immediate Remedial Actions.

The United States financial regulators went under a strict web of procedures and have identified a violation of the rules by two related cryptocurrency firms in the last days. The main cause of this foul is Illegal off-exchange swaps.

On July 13, the U.S. Commodity Futures Trading Commission delivered immediate charges against both firms as well as SEC sent a direct announcement; an agreement that explained the whole situation, and why this misconduct happened.

The announcement says that Abra is a private company that offers an app that allows financial movements via contracts closely related to the Bitcoin blockchain.

Abra started to grow up in February 2019; giving the users the possibility of entering into contracts that provide access, complete exposure to the market, and the price movements in the U.S., as well as stocks and ex-changed funds.

The judgment is based on a shady sale to non-eligible contract participants, ones without a right and updated registration which violates the securities Act. of the United States of America. The offerings are, in fact, a violation of the exchange act by making validated transactions with the U.S and foreign retail investors completely outside the national securities exchange registrations.

The SEC accepted a sum of actions from both firms to pay for what they have done. The sanctions and civil penalty are estimated at $150.000, and maybe more.

The penalty

The respondents are being charged with a civil penalty estimated in $150.000, which includes the general cease of operations due to a violation of the commodity Exchange Act. The swaps offered to the U.S., foreign customers, and investors that do not make an appearance in the SEC registration or with a contract that breaks the codes are one of the most important violations in SEC’s policy.

What is SEC and why is it so important?

The U.S. Securities and Exchange Commission (SEC) is an agency specially created to regulate and protect investors, creating rules and laws to keep the functionality of the securities markets and the normal flow of capital formation.

The congress gave birth to this organization in 1934 and is the very first commission that regulates securities markets. The main mission of this commission is to protect investors against manipulations, fraudulent moves, and other shady or completely dark behaviors that may occur in the market.

Functions and other features.

• The Securities and Exchange Commission (SEC) is a U.S. government oversight agency responsible for regulating the securities markets and protecting investors.
• The SEC was established by the passage of the U.S. Securities Act of 1933 and the Securities and Exchange Act of 1934. This happened because of the stock market crash that took place in 1929 which also caused the Great Depression in the U.S. economy.
• The SEC is in total power to take action when the law is broken by any cause. It can work in parallel with the justice department of criminal cases to make the misconduct be repaired and the lawbreakers punished. It also can bring civil actions against lawbreakers.

by Jenson Nuñez

Changpeng Zhao, Binance Founder, and CEO takes advantage of the BNB burn to assess the history of the exchange.

Changpeng Zhao opens his post on Binance’s blog celebrating the achievement that they reached with the twelfth BNB burn in history. This is the largest burn of the cryptocurrency since its launch, withdrawing the equivalent of USD 60,500,000 from circulation. In the previous burn, there was only a withdrawal of USD 52,466,000.

Some blockchains burn cryptocurrencies aiming to limit the supply of the virtual coins in circulation. In this way, they seek to guarantee the value of the crypto asset to users. Besides, it helps them to prevent excess in money issuance from depreciating it and causing inflation.

Cryptocurrencies that do not have an automatic mechanism would use this method to limit the supply of money, such as happens with currencies like Bitcoin through halvings. For this reason, burning becomes the only alternative to avoid an inflationary phenomenon. The sheer size of the BNB burn is an indicator of the increasing growth in the use of Binance’s cryptocurrency.

Changpeng Zhao Talks about Binance

Changpeng Zhao’s assessment of the current status of Binance is the most interesting thing about his post. He lists the many achievements that the exchange has reached since its birth. Among them, he includes futures contracts, the fiat money market, the stablecoin BUSD, the purchase of CoinMarketCap, and Swipe, as well as the partnerships with BitTorrent, Brave Browser and BitPay.

In this way, he briefly tells the history of Binance, trying to show that the company has maintained the culture and the attempt to decentralize as much as possible, since its foundation with an Initial Coin Offering (ICO) in 2017.

The exchange faced great challenges such as its transition to remote work after China banned cryptocurrency exchanges in September of that year. Binance had to use 40% of its funds (USD 6 million at the time) just to protect its users from losses.

Although that move was risky from a financial point of view, it did gain Binance a strong reputational boost, with thousands of users migrating to the exchange. Thanks to this, during the peak in the price of Bitcoin in December 2017, Binance was already the first exchange in the world by trading volume.

Continued Work

Even the crypto winter after the 2017 rally did not stop Binance’s work of building a solid financial infrastructure. The exchange and its team took advantage of this period to travel around the world promoting cryptocurrencies. They lobbied for the adoption of modern regulations for the cryptocurrency market during the 2018 financial uncertainty.

This effort had its counterpart at the technical level, where the performance of the exchange continued to improve. This could not prevent the 2019 attack, in which users lost USD 42 million, which the Binance fund had to cover.

However, this setback could not prevent the company from continuing to develop, as Changpeng Zhao comments. It launched a series of new products in 2019, with the Binance Chain at the center, and has prepared a blitz of innovations so far in 2020.

Today, decentralization and the motto “put users first and do the right thing” have led Binance to become the world’s leading cryptocurrency company. Changpeng Zhao runs an ecosystem of unparalleled products and services that will only continue to grow in the coming years, according to what he wrote in his post.

By Alexander Salazar