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Fidelity Investments Discusses the Future of the Crypto Ecosystem, Calling Bitcoin “a Superior Form of Money”

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Fidelity Digital Assets has released a report explaining why bitcoin is a superior form of money. The report discusses the future of the digital asset ecosystem and compares bitcoin to newer and smaller cryptocurrencies.

FIDELITY SAYS ‘BITCOIN FIRST’

Fidelity Digital Assets, a subsidiary of Fidelity Investments, published a report this week titled “Bitcoin First: Why investors need to consider bitcoin separately from other digital assets.”

The report addresses some concerns investors have including whether bitcoin “may be vulnerable to innovative destruction from competitors (such as the story of Myspace and Facebook)” or whether the cryptocurrency “offers the same potential reward or upside as some of the newer and smaller digital assets.”

Report authors Chris Kuiper and Jack Neureuter explained:

Traditional investors typically apply a technology investing framework to bitcoin, leading to the conclusion bitcoin as a first-mover technology will easily be supplanted by a superior one or have lower returns.

They noted, “Bitcoin is currently the most secure and decentralized network but, at the base or native network layer, it is not the most scalable.” This has led to a boom in the digital asset ecosystem, they continued.

The report proceeds to discuss two dominant narratives for envisioning the future of the digital asset ecosystem.

The first is “a multi-chain world.” The authors described: “In a world of multiple winning chains, it still appears that Bitcoin is likely the best equipped to fulfill the role of the ecosystem’s non-sovereign monetary good with relatively less competition than other digital assets attempting to fulfill alternative use cases.”

The second is “a winner-take-all or most world” narrative. The report details: “Given that Bitcoin is arguably the most decentralized and immutable blockchain in existence, it appears as a prime candidate to be one of, or perhaps even the sole winner if this situation were to play out.”

After discussing various aspects of Bitcoin, including the Bitcoin network, “its enforceable scarcity,” the Lindy Effect, the blocksize war, the Lightning Network, and Ethereum, the authors wrote:

Bitcoin’s first technological breakthrough was not as a superior payment technology but as a superior form of money. As a monetary good, bitcoin is unique.

“Therefore, not only do we believe investors should consider bitcoin first in order to understand digital assets, but that bitcoin should be considered first and separate from all other digital assets that have come after it,” the Fidelity report concludes.

El Salvador rejects the International Monetary Fund’s call to ban bitcoin as a legal tender.

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El Salvador has rejected the recommendation by the International Monetary Fund (IMF) to drop bitcoin as legal tender. The country’s finance minister reportedly “angrily” said, “No international organization is going to make us do anything, anything at all.”

The government of El Salvador has rejected a recommendation by the International Monetary Fund (IMF) to drop bitcoin as legal tender in the country.

The IMF urged El Salvador last week to drop bitcoin’s use as legal tender and dissolve-Fide bitcoin, the $150 million trust fund created for the Bitcoin law.

El Salvador’s Finance Minister Alejandro Zelaya told a local television station that bitcoin is an issue of “sovereignty.” According to the media, he “angrily” said:

No international organization is going to make us do anything, anything at all.

“Countries are sovereign nations and they take sovereign decisions about public policy,” the finance minister added.

According to its analysis, “In the near-term the actual costs of implementing Chivo and operationalizing the Bitcoin law exceed potential benefits,” the IMF stated in its recent report on El Salvador.

The International Monetary Fund also recommended that El Salvador’s government start charging fees for the use of its digital wallet, Chivo. In addition, the IMF wants the Salvadoran government to stop giving away $30 in bitcoin to anyone signing up to use the Chivo wallet.

According to the IMF’s recent report on El Salvador, the government did not see a need to scale back the scope of its Bitcoin law but agreed that regulation could be strengthened.

El Salvador adopted bitcoin as a national currency with legal tender status alongside the U.S. dollar in September last year. Since then, the country has purchased 1,801 BTC for its treasury.

In early January, El Salvador said 20 bills are being drafted for the legal structure of its bitcoin bonds which President Nayib Bukele expects to be oversubscribed. He also expects two more countries to adopt BTC as legal tender this year. Furthermore, he predicted “a gigantic price increase” for bitcoin.

Microstrategy purchases 660 more Bitcoins, bringing its total holdings to 125,051 BTC.

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Nasdaq-listed Microstrategy has bought 660 more bitcoins at an average price of $37,865 per coin, bringing the total crypto holdings of the company to 125,051 bitcoins. “Our strategy with bitcoin has been to buy and hold, so to the extent, we have excess cash flows or we find other ways to raise money, we continue to put it into bitcoin.”

The Nasdaq-listed software company Microstrategy has bought the dip again. CEO Michael Saylor tweeted Tuesday:

Microstrategy has purchased an additional 660 bitcoins for ~$25.0 million in cash at an average price of ~$37,865 per bitcoin. As of 1/31/22 we hodl ~125,051 bitcoins acquired for ~$3.78 billion at an average price of ~$30,200 per bitcoin.

According to the company’s filing with the U.S. Securities and Exchange Commission (SEC), the purchase was made during the period between Dec. 30, 2021, and Jan. 31, 2022.

At the time of writing, the price of bitcoin is $39,121.89 based on data from Bitcoin.com Markets. It is up almost 2% within the past 24 hours, 6.4% in the last 7 days, but down 18% over the past 30 days.

Microstrategy’s chief financial officer, Phong Le, said last week:

Our strategy with bitcoin has been to buy and hold, so to the extent we have excess cash flows or we find other ways to raise money, we continue to put it into bitcoin.

Last week, the SEC made public its letters to Microstrategy about the company’s accounting of bitcoin. “We object to your adjustment for bitcoin impairment charges in your non-GAAP measures,” the securities regulator wrote in a Dec. 3 letter. The SEC then told Microstrategy to revise the way it discloses its bitcoin holdings in future filings.

India announces the launch of the Digital Rupee and moves closer to legalizing cryptocurrency with a 30% tax.

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Indian Finance Minister Nirmala Sitharaman announced a 30% tax on any income from the transfer of virtual digital assets, a first for the nation.

Additionally, she also said that the digital rupee will most likely be issued in the 2022-23, which is the first time the Indian government has given a timeline on the launch of a central bank digital currency (CBDC).

“There has been a phenomenal increase in transaction in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime,” Sitharaman said in the critical Indian budget speech, which lasted for over two hours.

Speaking on the adoption of CBDCs, Sitharaman said that a “digital rupee” will be “issued using blockchain and other technologies; to be issued by RBI starting 2022-23. This will give a big boost to the economy.”

The words crypto or cryptocurrency was not used in the budget speech. However, the finance minister used the phrase “virtual digital asset” which the industry interprets as a term for cryptocurrencies and non-fungible tokens (NFTs). The naming and the steps taken are not clear legalisation of crypto , but the industry views this as step towards legitimatisation.

“India is finally on the path to legitimising the crypto sector in India,” said Nischal Shetty, co-founder and CEO of WazirX, one of India’s largest crypto exchanges.

Shetty said the move to launch a blockchain-powered digital rupee is “phenomenal” as it will “pave the way for crypto adoption” and that the “biggest development” was the “clarity on crypto taxation, which will add the much-needed recognition to the crypto ecosystem of India.”

Sumit Gupta, co-founder & CEO, CoinDCX called the budget “forward-looking and inspirational” adding that the taxation is a “step in the right direction.”

Sidharth Sogani, founder and CEO of cryptocurrency research organization Crebaco, said “you can’t tax something which is illegal. Hence, this is a very positive move by the government and is very good for the industry. If there are tax clarities in this space, more money is likely to come in.”

Could Crypto Tax push away retail investors?

The concern among some experts is that the 30% tax could deter retail investors.

“There might be movement in people liquidating their crypto portfolios and moving to the equity market. The 30% tax is too much.” said a source at a major crypto exchange wishing not to be named.

Shivam Thakral, CEO of BuyUcoin, disagrees saying “it (the tax) is normal and not too high” and is in line with normal taxation in which “if you are earning personal income of more than 12 lakh per annum then you are in the 30% slab anyway.”

Another industry source who didn’t wish to be named highlighted a contradiction in the government’s statements. In the past, the government has said it seeks to prohibit all cryptocurrencies in India but will allow certain exceptions to promote underlying technology.

“How will you promote the underlying technology with a 30% tax,” asked the industry source from a major exchange.

“Prima facie, self-declaration of crypto ownership and tax filing is a progressive move that displays the government’s conviction in monitoring, validating, and regulating the evolution of the crypto economy,” according to Gaurav Mehta, founder of Catax, a one-stop-shop for crypto taxes, blockchain auditing, and forensics.

The Reserve Bank of India, India’s central bank, had earlier indicated launching a pilot CBDC project in the fiscal year April 2022 to March 2023.

India’s crypto ecosystem had several demands which included a classification of cryptocurrencies, clarity on taxation, and a self-regulatory framework shaped by the crypto industry. While clarity on taxation has emerged, the formal classification of cryptocurrency is awaited.

The country appears to be waiting for a global consensus on crypto regulation. Earlier this year, Indian Prime Minister Narendra Modi had called for global cooperation on cryptocurrencies. Modi said that challenges like crypto can not be tackled by nations in isolation.

Last year, Sitharaman told Parliament that “a new [cryptocurrencies] bill is in the works,” warning that “the risk of cryptocurrency and it going in the wrong hands is being monitored.”

The ‘America Competes Act’ is a direct attack on the cryptocurrency industry, with the government deciding who wins and who loses.

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U.S. Senator Cynthia Lummis says that the recently introduced “America Competes Act of 2022” is a direct attack on the crypto industry. “I will not stand by and let the heavy hand of the government pick winners and losers,” she stressed. Congressman Tom Emmer explained that the legislation would give Treasury Secretary Janet Yellen “dictatorial-level power to prohibit any transactions they deem concerning without due process.”

A bill called the “America Competes Act of 2022,” introduced in the House of Representatives last week has raised much concern in the financial sector, as Bitcoin.com News reported. Among those who have warned about its detrimental effect is the pro-bitcoin U.S. Senator Cynthia Lummis. She explained in a series of tweets last week why this bill is “a direct attack” on the crypto industry.

“I wanted to share a few thoughts about House Democrats’ version of the America Competes Act … which is raising alarms across the financial industry,” the senator from Wyoming began. She elaborated:

This provision would give the Treasury Secretary and those she deputizes unilateral, unlimited power to ban any type of financial asset that has a foreign link, without public notice and without any time limit … This is a direct attack on the digital asset industry.

“Should this provision remain in the bill, we really should rename it the America Fails Act. This provision stifles innovation and competition. And feels more like something the Chinese Communist Party would impose on the industry,” Senator Lummis stressed, adding:

I will not stand by and let the heavy hand of the government pick winners and losers. If we go down this path, we threaten our own position as global financial leader.

The senator concluded that she is talking to her colleagues in the Senate and with officials at the Treasury to make her concerns known.

Senator Lummis is not the only lawmaker in the U.S. concerned about the potentially harmful effect of the America Competes Act of 2022 on the financial services industry.

Congressman Tom Emmer, for example, tweeted last week:

House Democrats introduced legislation that would give the Secretary of the Treasury dictatorial-level power to prohibit any transactions they deem concerning without due process. This leaves the American people powerless to hold Secretary Yellen accountable.

Senator Lummis, a bitcoin holder, has said many times that bitcoin is a great store of value. While Congress was discussing raising the debt ceiling, she said, “Thank God for Bitcoin.”

Crypto Exchange Binance Restricts 281 Nigerian Accounts

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Cryptocurrency exchange Binance has restricted 281 Nigerian user accounts. Citing user security and fraud prevention, CEO Changpeng Zhao explained that “approximately 38% of these cases [are] restricted at the request of international law enforcement.”

281 Nigerian Accounts Restricted by Binance, CEO Says 79 Cases Have Been Resolved

Cryptocurrency exchange Binance has sent a letter to its Nigerian users. In the letter, Binance CEO Changpeng Zhao (CZ) apologized for the inconvenience caused by delays in resolving customer support requests.

Noting that “User security” remains his exchange’s top priority, Zhao detailed: “Protection mechanisms such as KYC, anti-money laundering measures, collaboration with law enforcement, and account restrictions are in place to ensure our community remains protected and that fraudulent activity is prevented. This is a global approach applied in every country.” The CEO added:

Some 281 Nigerian accounts have been affected by these personal account restrictions with approximately 38% of these cases restricted at the request of international law enforcement.

Zhao proceeded to highlight what Binance is doing to rebuild trust in the Nigerian community.

Firstly, he said that Binance is “Ensuring speedy resolutions of ongoing user cases tied to account restrictions,” noting:

Currently, we have resolved 79 cases and continue to work through others. All non-law enforcement-related cases will be resolved within two weeks.

Another area that is being addressed is “Devoting more customer service personnel to the region.” Zhao stressed, “We will dedicate more CS and risk agents with a great understanding of the Nigerian market.”

Putin calls on the government and the central bank to reach an agreement on cryptocurrency and emphasizes Russia’s mining potential.

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President Vladimir Putin has joined the debate on the future of cryptocurrencies in Russia, calling on the government and central bank to work out a common position on their regulation. The Russian leader also emphasized Russia’s strengths as a crypto mining destination.

Russian President Vladimir Putin has added his comments to the ongoing discussion on how to put Russia’s growing crypto space in order. At the start of a video conference with the members of the Russian government, Putin gave his take on “an issue that is currently in the spotlight – the regulation of cryptocurrencies.”

The Central Bank of Russia has its own position, Putin said, acknowledging some of the concerns expressed by the monetary authority. The head of state noted that the bank’s experts believe the expansion of crypto-related activities carries certain risks, first of all for Russian citizens, given the high volatility and other aspects.

The president also pointed out that Bank of Russia does not stand in the way of progress and is making the necessary efforts to introduce the latest technologies in this field. His remarks come after the CBR recently launched the pilot phase of its digital ruble project.

A week ago, Russia’s central bank proposed a blanket ban on a range of operations involving other digital coins including the issuing, use, investing, trading, and mining of cryptocurrencies like bitcoin. Its hardline stance, elaborated in a consultation paper on the matter, was met with opposition from members of the government and parliament in Moscow.

This week, the Ministry of Finance joined the front against the CBR. The head of its Financial Policy Department, Ivan Chebeskov, insisted that the crypto market needs to be regulated, not banned. In his view, the main task is to provide protection for the interests of investors and citizens who use cryptocurrencies, which requires regulation, not prohibition.

According to a report by the business news portal RBC on Thursday, the finance ministry has prepared its own proposal for the regulation of cryptocurrencies without their prohibition. The department suggests all crypto-related transactions should be carried out through Russian banks. It also calls for introducing identification for Russians owning crypto wallets and dividing investors into two groups — qualified and non-qualified.

In his address to the members of the Russian cabinet, Vladimir Putin also stated:

I would ask both the Government of Russia and the Central Bank to come to some kind of unanimous opinion during the discussion, and I would ask you to hold this discussion in the near future, and then report on the results that will be achieved.

President Erdogan of Turkey has instructed his ruling party to research cryptocurrency and the metaverse.

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Turkish President Recep Tayyip Erdoğan reportedly discussed cryptocurrency and the metaverse at the Justice and Development Party’s central executive board meeting held Tuesday under his chairmanship.

The Justice and Development Party (AK Party) is the largest party in Turkey, and President Erdoğan is its current leader.

During the meeting, President Erdoğan directed the AK Party to analyze new developments, including cryptocurrency and the metaverse, local media reported Wednesday. He also instructed the party members to organize a forum to focus on these areas. President Erdoğan reportedly said at the meeting:

It is a sensitive subject. A good and meticulous study should be done.

AK Party spokesperson Ömer Çelik, a former Turkish Minister of European Union Affairs, explained that there are many issues that directly affect people’s lives and the economy. “When all these issues are discussed, it will be seen that there are some threats as well as benefits. All of these need to be regulated legally,” he emphasized, elaborating:

The president has also given instructions regarding the study of the legal infrastructure of these issues.

Stating that cryptocurrencies and the metaverse should be followed closely, Ömer Çelik added: “A forum will be held in the near future under the chairmanship of our president. The technological, philosophical, political, and economic dimensions of these concepts (cryptocurrency and metaverse) will be comprehensively discussed.”

Despite an SEC lawsuit over XRP, Ripple is valued at $15 billion, according to its CEO, who asserts the company’s financial position is the strongest it has ever been.

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Ripple has bought back shares from its Series C funding round, which raised the company’s valuation to $15 billion, according to CEO Brad Garlinghouse. He added that despite the lawsuit by the U.S. Securities and Exchange Commission (SEC) over the status of XRP cryptocurrency, Ripple had the best year on record.

Ripple’s $15 Billion Valuation and ‘Best Year on Record’

Ripple CEO Brad Garlinghouse announced via Twitter Wednesday that Ripple has bought back its Series C shares at a $15 billion valuation.

The CEO described that “Even with 2021’s headwinds, it was our best year on record,” adding that Ripple’s financial position is the strongest it has ever been, with $1 billion dollars in the bank.

In December 2019, the company raised $200 million in the Series C funding round, led by Tetragon. SBI Holdings and Route 66 Ventures also participated. According to reports, the company’s valuation was $10 billion after the Series C funding round.

Noting that “slow down” is not in Ripple’s vocabulary for 2022, Garlinghouse proceeded to explain the progress of Ripplenet and Ripplex in follow-up tweets Wednesday.

Regarding Ripplenet, he said that the network has a volume run rate of more than $10 billion today. In addition, Ripplex is “establishing a multitude of capabilities to the XRPledger – NFTs, CBDCs, interoperability bridges, sidechains, and so much more,” the executive explained.

In December, Garlinghouse similarly said that Ripple had their strongest year ever despite the ongoing lawsuit brought by the U.S. Securities and Exchange Commission (SEC) over the status of XRP cryptocurrency.

The SEC filed the lawsuit against Ripple Labs, Garlinghouse, and co-founder Chris Larsen in December 2020 alleging that the sale of XRP was an unregistered securities offering. Garlinghouse believes that the lawsuit will conclude this year.

After a proposal to jail Ponzi operators, Nigerian lawmakers have been urged to consider regulating the cryptocurrency industry.

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The leader of the Nigerian blockchain association, Senator Ihenyen, has implored the country’s lawmakers — currently pushing for the securities law to be revamped — to consider crafting laws that regulate the crypto industry. 

Proposed Law Does Not Expressly Mention Cryptocurrencies

As Nigerian lawmakers debate a bill that proposes a ten-year jail term for operators of Ponzi schemes, a leader of a Nigerian blockchain lobby group, Senator Ihenyen, has urged the country’s lawmakers to consider crafting a law to govern the cryptocurrency industry. He argued that an “unregulated crypto space is not in anyone’s best interest.”

Ihenyen, who heads the Stakeholders in Blockchain Technology Association of Nigeria (SIBAN), however, concedes that while the proposed bill does not expressly mention or refer to digital currencies, crypto Ponzi schemes are included in what the lawmakers call “prohibited schemes.”

The remarks by the leader of SIBAN follow reports that Nigerian lawmakers had passed a bill to repeal and re-enact the country’s Capital Markets, Investment and Securities Act for a second reading. Ibrahim Babangida, one of the lawmakers leading the push to have the law changed, is quoted in a Premium Times report explaining why this needs to be changed. He said:

The bill prohibits Ponzi/Pyramid Schemes as well as other illegal investment schemes and prescribes a jail term of not less than 10 years for promoters of such schemes.

In addition to seeking a custodial sentence, lawmakers also want the new law to grant the Nigeria Securities and Exchange Commission the power to shut down Ponzi schemes. The lawmakers also insist the current law is not compatible with present trends in capital markets regulation, hence the need to revamp the act.

Most Alleged Crypto Ponzis Have Nothing to Do With Cryptocurrencies

Meanwhile, Ihenyen explained to Bitcoin.com News that even though so-called crypto Ponzi schemes have dominated headlines, it later turned out that some of these investments had nothing to do with cryptocurrencies. He said:

The tricky part with most so-called crypto Ponzi schemes, however—which I must point out—is that many of these so-called ‘crypto ponzis’ have nothing to do with crypto, except that crypto was used to collect the unsuspecting participants’ funds, just the same way these bad actors could have used fiat currencies.

In instances when crypto is actually involved, if such crypto is not a scam or scam-coin, then “you find that it is often not the crypto invested that failed.” Rather it is the promoters or marketers, who eventually misappropriate participants’ funds or simply disappear, thus causing the investment to collapse, Ihenyen said.

In conclusion, the SIBAN president said “as long as this [proposed law] seeks to protect investors and consumers, it is welcomed.”

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