Month: August 2020

Cryptocurrency has been lauded as the new emperor of the economy with its ingenious trading facilities and machine benefits. Its stringent supporters have long proclaimed crypto-currency as the next fundamental commodity around which the market will circulate. But it seems like it still has a long way to go and a lot to do before the US dollar loosens its grip on the global economy and moves aside for the Bitcoin revolution. The green fiat emperor has been experiencing lower valuations, which has been exploited by the Cryptocurrency community. However, the fact remains that the dollar still holds massive power, which is not going to give up any time soon.

History and Beginnings

The economy of the whole world has been dictated by this green currency for a long time now. It all probably started after the Second World War as the United States of America spread its massive wings, and the Eagle become the gatekeeper of the treasury. The country gained considerable operative authority over the globe as its currency became the mandated currency of exchange for most international transactions and the economic capability to handle debts effectively.

Current weakening

The country’s previous incumbency had operated cautiously to maintain its global domination of the economy by being responsibly loose on financial barriers raised against other nations. But the current president has been more aggressive with curtailments on foreign countries that have turned many other influential players against the US dollar. Such an angry government has been developing their own economies free of the dollar’s grasp. But since the green currency has been winning the game for decades, it is not very easy to altogether remove it from the picture, especially since such a move would mean losing millions for many. The best to topple the dollar entirely rests with China, whose burgeoning economy coupled with advanced cryptocurrency capabilities, can do the job.

The dollar still enjoys the advantages that come with being the default currency of exchange when any two counties or financial holders engage in trading. Such an arrangement means the United States of America will experience freer trades with cheaper transaction costs and an ability to come out on top despite a large number of outstanding dues. But all things that begin must come to an end, and so will the predominance of the dollar.

Romania had set up its first Bitcoin ATM in 2014, and yet it has been years since the Blockchain and the Cryptocurrency market have been brought under a legal framework. Even though it looked like that the country had shown an early interest in cryptocurrencies, the lack of regulatory framework even after so many years proved otherwise. But, it is expected to change soon as Romania now has a blockchain and crypto regulation framework in place. 

Cryptocurrencies are highly encrypted and allow people to transact with anonymity. It has led to the crypto sector to become a breeding ground for criminals. Many of them have continuously been using the platform for tax evasion, money laundering, and other illegal activities. To prevent the use of cryptocurrencies for cyber crimes or money laundering, the Romanian Government has carried out an Emergency Ordinance. According to the new rule, all crypto exchange service providers and digital wallet providers will be required to register themselves and seek prior approval from the Government to be able to continue offering their services. 

There is no uniform regulation for Blockchain and crypto currently in the European Union, and all its members are free to set up their own framework. There is a Fifth Anti-Money Laundering and Terrorism Financing Directive, in short, 5AMLD, that applies to entire Europe, but Romania would want to take it a step further. The 5AMLD was created to help bring transparency in crypto transactions to combat the misuse of cryptocurrency. In addition to the current 5AMLD regulation, the Emergency Ordinance introduced by the Romanian Government is set to progress the already set 5AMLD agenda. 

The Emergency Ordinance will need all of the crypto exchange providers that handle purchases and selling of different digital currency to have the authorization to be able to function in Romania. Even the providers currently operating in the European Economic Area will not be allowed to operate in Romania till they get a proper registration process as decided in the new directive.

The service provider will need to apply to the authority and verify that they are complying with all the policies in the country where they are based out of. Besides, it also needs a permanent agent to be present in Romania that can get in contracts with foreign companies and are also able to represent them in the court of law. Anyone who does not follow the given guidelines will not have radio, TV, and internet access in Romania. 

Even though 5AMLD and GEO were introduced to combat its use for any illegal activities, the new framework might also work as a hindrance for many start-ups to continue their operations. They feel that the new system will make it difficult for them to operate in the country as they are unable to meet all the requirements that are set up by the new rule. Thus, there is a need to look at the rules again and ensure that they do not become a hindrance to the growth of crypto firms and instead help the crypt industry to grow and flourish in the country. 

A former key executive at the United States Department of Treasury, Sigal Mandelker has joined Chainalysis. She will be working as an advisor in the firm. Chainalysis is a major cryptocurrency investigation firm.

The official announcement was made on July 7. Mandelker has joined the board of advisors in Chainalysis. This participation has also increased the Series B funding round of the firm to $49 million.

Mandelker’s Blockchain Experience

Mandelker left Trump’s White House in October 2019. Chainalysis will be her first public sector work since she has left her position as a treasury executive in the States. She will meet Chainalysis team to give insights on crypto crimes and its investigation.

Chainalysis works on cryptoanalysis and provides transaction data to major federal agencies like FBI and Internal Revenue Service. According to Mandelker, law enforcement will play a crucial role in the future of the industry.

Mandelker’s Achievements

She has been a part of some major investigations in the United States including three hacker groups of North Korea. These groups were involved to rob billions of dollars in cryptocurrency. Mandelker was also a part of the investigation on an illicit digital currency platform “E-Gold” in 2008.

The CEO and co-founder of Chainalysis, Michael Gronagar said that Mandelker’s contribution to the cryptocurrency sector will help it evolve further. Sigal has a wealth of knowledge and it will be leveraged by the firm.

Chainalysis Is Expanding To $49 Million After Raising $36 Million In The Beginning

After joining hands with Mandelker, Chainalysis has entered into the Series B of $49 million after hitting the first investment of $36 million in February 2019. Major capital giants including Accel have invested in the startup.

Chainalysis also raised $13 million from a venture capital firm Ribbit Capital. This venture capital has also invested in major crypto startups including Robinhood, Coinbase and more.

According to a report, Sigal also joined Ribbit Capital in early 2020 as a general partner. Apart from the other fundraising, Chainalysis is also able to raise an additional fund from Sound Ventures.

This venture capital firm is founded by actor Guy Oseary and Ashton Kutcher. Sound Ventures has also invested in a Bitcoin rewards company called Lolli in May 2020.

This is not the first time when a regulator has joined a private cryptocurrency firm. Along with Mandelker, there are some examples of this trend. For example, Juan Zarate joined Coinbase as an advisory board member, Ben Lawsky joined Stone Ridge Asset Management LLC, and Chris Giancarlo joined Ripple.

Since the end of WorldWar II, the global financial system has been revolving around the US dollar. The Bretton Woods Agreement, signed in 1944, standardized the US dollar to unchallenged hegemony. Today, several economic experts believe that the greenback’s domination is on its decline.

America’s decrease in share in the global trade, China monetary expansion with full might, centralized and decentralized cryptocurrencies, and the expected digitization of currencies are factors threatening the dominance of the greenback.   

The US government has been exploiting its position of being able to mint the globally-centered currency for a long time. It gives the US a huge advantage over other world economies.  The US pays for imports with its domestic currency and has no balance of payments problems. It faces no hassles to finance its deficit account.

The country has been able to overspend for decades now because of the dollar’s strength. As the demand for dollar liquidity in the global banking system is endless, the US gets access to cheap credits. Other than benefiting itself, the US can also leverage the greenback’s dominance to deny rebel nations’ access to the financial order.

The Trump administration has moved against adversary countries like China and Iran by ramping up financial sanctions against them. However, many experts believe that exploiting the dollar’s position to inflict economic damage to adversary countries can have serious economic repercussions. Dissatisfied nations like Russia and China are in the pursuit of the de-dollarization of their economies.

It’s also true that no nation will opt for an alternative medium of exchange if it can’t match the efficiency gains of the old system. The imminent rise of CBDCs could threaten the dollar’s hegemony as they could provide a more convenient system. Market observers believe that China can be a potential threat to the greenback’s power if they can leverage the utility of its digital currency framework and its extensive economic influence.

Many financial pundits also are considering a situatn where a common global cryptocurrency gets developed. Decentralized currencies like Bitcoin and Ethereum can also be accepted by economies as foreign reserves in the future.

The problem with the dominance of any country’s currency in the financial market is that the nation in control can always leverage its position. The only way to disarm a country from weaponizing its position in the financial system is to switch to a politically unprejudiced currency. Many believe that the US-China political standoff can lead to the development of a neutral solution.

Bitcoin’s algorithmically limited supply and its concentration among a few quadrillionaires are some of the hurdles that Bitcoin faces in its getting accepted as the reserve currency. It may also be possible that the development of multiple greenback substitutes leads to an agreement where no single currency holds the hegemonic position.

An opinion resonating with most financial experts is that Bitcoin has the best shot at ousting the US dollar from its dominance status. USD is still the ruler of the world’s financial order, and only time will tell if digital currencies can displace it from its hegemony.