Throughout history, money has existed in many different forms. It has evolved from gold to paper to plastic, and now, it’s digital too. Not only has the physical shape of money changed, but there’s also been a significant shift in who issues it and decides its value.
Bitcoin introduced the world to decentralized digital currency and opened the door to an entirely new asset class. It proved that people could create and sustain a global currency with very little government interference. It also exposed the world to the benefits of blockchain technology in transferring wealth around the world safely, securely, and quickly.
As the interest in Bitcoin and crypto has risen, businesses and even governments are starting to create their own blockchain-based currencies. What's the difference and which type of currency is superior? Let's take a look.
Government-backed Digital Currencies:
Several countries around the world, including China, have issued or are actively developing their own digital currencies. Most of these are stable-coins, a digital representation of the existing national currency valued by a mix of exchange rates, treasury notes, and foreign exchange reserves.
Other countries, like Venezuela, have pegged the value of their digital currency to natural resources. The Petro, for example, is backed by Venezuela’s oil, gas, gold, and diamond reserves.
Corporation-backed Digital Currencies:
The global surge in government-backed cryptocurrencies has likely been amplified by Facebook. In June, the social media giant announced its plans to launch Libra, a digital currency issued by a non-profit foundation made up of 100+ companies around the globe. According to the organization, Libra’s value will be pegged to a variety of stable assets, including bank deposits and government securities in currencies from stable and reputable central banks.
Bitcoin, Libra, or National Digital Currencies?
Whether Libra sees the light of day or not, the mere idea of it shows the changing form of money and, ultimately, the resilience of decentralized currencies.
Bitcoin, Libra, and government-backed digital currencies can likely peacefully co-exist, giving people options to diversify their wealth and transact more securely and efficiently than ever before. The biggest losers will be those who don't evolve to meet the demands of an increasingly digital global economy.
Two former heads of the Commodity Futures Trading Commission (CFTC) are offering up a plan for a government-sanctioned, blockchain-based digital dollar. Read more.
Facebook's embattled Libra project suffered a major blow on Friday as four payment processors—Stripe, Visa, Mastercard, and Mercado Pago—withdrew from participation in the Libra Association, the Geneva-based group Facebook created to develop the virtual currency. eBay also announced its resignation Friday. eBay's former subsidiary, PayPal, quit the group last week. Read more.
A U.S. federal grand jury indicted a South Korean citizen for operating the largest child porn site by volume, where visitors spent millions of dollars worth of bitcoin to pay for the illegal content. Read more.
In a report, the New York-based investment firm said Q3 inflows amounted to $254.9 million, which is triple the $85 million it posted the previous quarter, and that 84% of the new funds came from hedge funds and other institutional investors. Read more.
A Bitcoin Lightning Network authentication tool has gone live at Lapps.co, a website featuring a curated selection of Lightning apps (Lapps). This means that users can “Sign in with Lightning” rather than using a trusted third party such as Google or Facebook. Read more.
Facebook sent the world into a frenzy when it announced its intention to enter the payments space with the launch of its controversial ‘cryptocurrency‘ Libra earlier this year. Read more.
When it comes to producing Bitcoin, China is the pre-eminent power in the world. The People's Republic boasts the largest mining companies, and dominates the manufacture of chips and other equipment used to mine Bitcoin. A U.S. startup wants to change all that with a bold plan to make Texas the global hub of Bitcoin mining. Read more.
The Securities and Exchange Commission declined to approve Bitwise Asset Management’s long-awaited bitcoin-based exchange-traded fund again on Friday, adding to a yearslong series of rejections for hopeful cryptocurrency ETF issuers. Read more.
Following assent from the Financial Industry Regulatory Authority (FINRA), the Digital Large Cap Fund (DLC) will be listed on over-the-counter markets and trade under the initials GDLCF. Read more.
Following the release earlier this week of the IRS’s long-awaited guidance for reporting crypto-related income, the IRS on Friday circulated a draft of the new Form 1040, Schedule 1, Additional Income and Adjustments to Income. The draft was shared in an email to tax software companies, which the agency also shared with journalists. Read more.