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Twitter’s Square purchases US$50 million in Bitcoin, believes in its future  Financial service company Square Inc, owned by Twitter’s founder and CEO Jack Dorsey (image below), announced the purchase of 4,709 bitcoins. The investment, approximately US$50 million at the time of purchase, was executed due to Square’s belief in cryptocurrency as an essential asset for economic empowerment in the global monetary system.  “We believe that

After releasing their most recent report "Bitcoin: This is the Hedge", Zerocap was featured in the Financial Review, Australia's top business and finance newspaper. Two of the founding principals, Jon de Wet and Ryan McCall, were interviewed and gave their thoughts on how bitcoin fits into traditional investment portfolios, the current economic environment brought on by the COVID-19 pandemic, upcoming inflation and how to

Twitter’s Square purchases US$50 million in Bitcoin, believes in its future 

Financial service company Square Inc, owned by Twitter’s founder and CEO Jack Dorsey (image below), announced the purchase of 4,709 bitcoins. The investment, approximately US$50 million at the time of purchase, was executed due to Square’s belief in cryptocurrency as an essential asset for economic empowerment in the global monetary system. 

“We believe that bitcoin has the potential to be a more ubiquitous currency in the future, […] we intend to learn and participate in a disciplined way. For a company that is building products based on a more inclusive future, this investment is a step on that journey.” Says Amrita Ahuja, Square’s Chief Financial Officer.

During the Oslo Freedom Forum in late September, Jack Dorsey stated that Bitcoin and Blockchain are the future of Twitter. “Blockchain and bitcoin point to a future, and point to a world, where content exists forever, where it’s permanent, where it doesn’t go away, where it exists forever on every single node that’s connected to it.” Dorsey has always been quite vocal about Bitcoin. In a 2018 interview with the Times, he claimed that Bitcoin will be the world’s sole currency by 2030. 

This was also not Square’s first experience with the cryptocurrency, having developed services and innovations related to digital currencies. The company’s Cash App, a mobile payment service released in 2018, allows its users to buy and sell cryptocurrencies. Square has also taken a stance in the policies and governance of crypto, having recently created the Cryptocurrency Open Patent Alliance, a non-profit initiative which promotes open patents to crypto development. 

The Digital Yuan is here: China’s Central Bank hands out US$1.5 million in digital currency to promote circulation during public testing phase 

In our recent article on the Digital Yuan, we covered the reasoning behind China’s decision to create the world’s first national digital currency, which was in its final stages of closed development. Now the Digital Yuan is finally among us, as China gives away US$1.5 million worth of digital yuan in one of the country’s biggest public test projects, starting its implementation through the city of Shenzhen. 

The date and city were chosen ahead of a visit from President Xi Jinping as Shenzhen celebrates its 40th anniversary as China’s first “special economic zone”, cities that allow capitalistic principles of free-market in order to attract investment from foreign companies. 

The giveaway was performed through a lottery system where approximately 50 thousand citizens split the prize of 10 million yuan (approx. US$1.5 mi) to stimulate the circulation of the digital asset in the nation. Besides the lottery strategy, the digital currency is already available for any local consumers to utilise through the official App. According to the most recent news on its circulation, the Digital Yuan has already been used in over three million transactions.  

In development since early 2014, the Digital Yuan (also called DCEP) was created as a way to promote China’s transition towards a cashless society while also navigating against the country’s usage of cryptocurrencies and stable coins such as Bitcoin, Ethereum and tokenized dollar (USDT). Chandler Guo, cryptocurrency mining pioneer in the country, stated during a BBC interview that “one day everyone will use China’s digital currency”. 

Seven central banks release report on Central Bank Digital Currencies

The Bank for International Settlements (BIS), an institution hosted in Switzerland, released a report along with seven central banks to discuss the technology and reasoning behind the development and release of CBDCs, or Central Bank Digital Currencies. 

The document was a cooperative effort of research by the Bank of Canada, European Central Bank, Bank of Japan, Sveriges Riksbank (Sweden), Swiss National Bank, Bank of England, Board of Governors Federal Reserve System (USA) and BIS itself. 

The report covers the benefits and challenges of issuing a CBDC, stating that it is the responsibility of each jurisdiction to make that decision.

Here are the main reasons to issue a CBDC, according to BIS and the seven mentioned central banks: 

  • Financial inclusion of broader population
  • Digital Resilience, acting as an additional method 
  • Diverse payment options through cross-platforming  
  • Supporting public privacy if the CBDC is based on a decentralised Blockchain
  • Easier fiscal transfers

As for the main challenges and risks:

  • Disintermediating the need of central banks and potentially undermining financial stability of the population 
  • The central bank might gradually losing control over its monetary sovereignty, as more citizens adopt decentralised currencies such as “stablecoins and so called cryptocurrencies” 
  • The differing financial systems, economy and infrastructure of digital central currencies might prove to be vastly different than traditional finance and difficult to adapt

The report also touches on the key principles to releasing a Central Bank Digital Currency, which are:

  • A CBDC which supports the country and does not interfere with the central bank’s ability to maintain financial stability for its population 
  • Ethical coexistence with traditional finance systems by complementing one another
  • Continued innovation and competition to drive efficiency and safety for the currency 

The research also states that the purpose of the report is “not about if or when to issue a CBDC” and that “none of the banks contributing to this report have reached a decision” on whether or not to develop a national digital currency.  

US Homeland Security Funds Blockchain Projects to aid in Federal Anti-Forgery Operations 

The US Department of Homeland Security funded five Blockchain start-ups to research a new pathway to anti-forgery and counterfeit strategies for the federal branch. The US$817-thousand award, split between the companies, will be used to develop applicable blockchain concepts in the next six months for the agency’s security clientele. 

The winners were picked amongst 80 applicants through a late-June event by the Silicon Valley Innovation Program (SVIP), during America’s Industry Day Holiday, which had the program’s campaign performed virtually.  

One of the companies awarded is New Zealand-based start-up MATTR LIMITED, who holds the largest chunk of the prize and arguably the most ambitious project of the group. With their funding of US$200 thousand, their Covid-related task is to build a digitally-issued Essential Worker License to the US Citizenship and Immigration Services.  

The funding project is another of few other Blockchain incentives created recently by the Federal government. In July of 2018, the American government created the US Federal Blockchain Program to investigate and promote R&D related to the technology, home to many initiatives like the one which kickstarted Homeland Security’s Blockchain project.   

OECD releases report urging for consistent cryptocurrency tax regulations through digitally-leading nations 

On the 13th of October, the Organization for Economic Co-Operation and Development (OECD) released a thorough report shining a light on the inconsistency of cryptocurrency policies and tax regulations presented by the leading digital-development nations in the world. Titled “Taxing Virtual Currencies: An Overview of Tax Treatments and Tax Policy Issues”, the 69-page document details the different labels (or lack thereof) imposed on digital currencies by over 35 nations. 

For instance; territories such as Australia, France, Sweden, Switzerland and the United Kingdom define cryptocurrencies as intangible assets, which means a resource of value that does not hold a physical substance. It is a malleable definition that can be classified as monetary or non-monetary, depending on how it is utilised in the territory. According to resources such as KPMG, it is the most appropriate definition of overall cryptocurrencies in the current framework. 

Countries like Canada and China, leading nations in crypto research, tax cryptocurrencies as commodities; uniform and intangible assets traded through contracts and allowed to be utilised through the exchange of goods and services but not recognised as actual currencies. Brazil, Denmark and Japan, on the other hand, tax cryptos like financial instruments or assets, used as evidence of ownership for investments and legally exchangeable for cash or other goods.   

The United States presents the most complicated directives not only for taxation but overall cryptocurrency frameworks. On a federal level, there aren’t any. That might be about to change as a new bill proposed by the Digital Commodity Exchange Act of 2020 seeks to create a federal framework for how digital currencies are traded and taxed throughout all 50 states. 

The OECD concludes their report by urging governments to provide guidance for their citizens regarding tax frameworks and establish a more consistent rationale on how those frameworks can align with the development of inclusive crypto policies in the future, under the argument that Central Bank Digital Currencies are starting to emerge in nations like China and Sweden, as we covered in the second topic of this newsletter.  

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