Following El Salvador and Cuba. Part 2

    29 Mar 2022
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    While the world’s largest economies are gearing up for the CBDC race we recently wrote about, smaller countries are looking to integrate “traditional” cryptocurrencies into their financial systems. The alternative, they realise, is quickly losing their fiscal independence in the new economic reality.

    Australia went its own way: ANZ – one of the country’s “big four” banks – became the first to mint a stablecoin pegged to the Australian dollar (AUD) called A$DC. ANZ is working with local regulators, including the Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Australian Prudential Regulation Authority (APRA), to ensure the project complies with legal requirements. The bank has already run a test transaction on the Ethereum blockchain with their institutional partner Victor Smorgon Group. Going forward, however, ANZ is planning to use Hedera-based technologies.

    According to a recent report from the Australian Financial Review (AFR), the stablecoin will initially be launched for institutional clients looking for a cost-effective cryptocurrency investment option. Soon, it is likely to get integrated into the retail market as well.

    The global digital asset custody Fireblocks provided the A$DC infrastructure, while OpenZeppelin audited the smart contracts. The Compliance Services Agreement was signed by Chainalysis.

    Nigel Dobson, ANZ Banking Services Portfolio Lead, believes that their stablecoin will boost the local digital asset economy: “Our clients want to buy digital assets, and seeing a digital Australian dollar issued by a major authorized deposit-taking institution like ANZ will give them the confidence to use it for domestic transactions through our bank. It means they won’t have to buy and sell coins for US dollars, taking on currency risk.”

    Notably, the rival National Australia Bank (NAB) also has its stablecoin project due to be launched by the end of the year. NAB Chief Innovation Officer Howard Silby highlighted at the Australian Blockchain Week event that NAB is working on a stablecoin to perform transactions on its blockchain platform, scheduled to launch in late 2022.

    And what about Europe? Well, there is a lot to get into. The most prominent example is probably Switzerland, a country that has always been lenient towards crypto. Now, the renowned Swiss city of Lugano has declared bitcoin de facto legal tender, along with the Tether stablecoin and their own token. The city representatives said they expect the move to potentially make the region a “major hub for European blockchain adoption” as well as open up appealing cryptocurrency use cases to local communities.

    Current measures include allowing citizens and local businesses to pay their taxes and buy everyday goods and services with cryptocurrencies. To this end, the authorities have facilitated the creation of the necessary infrastructure for the city enterprises to accept crypto transactions by converting funds into fiat at the time of purchase.

    Lugano has also signed a Memorandum of Understanding with Tether that provides for several initiatives, such as a multi-million dollar fund to help finance blockchain startups and 500 scholarships to teach students how to work with the technology.

    Furthermore, the city’s statement mentions using “renewable resources and environmentally friendly alternatives for bitcoin mining”, preempting the objections of critics concerned about the climate impact of Proof-of-Work blockchains.

    Lugano Mayor Michele Foletti said the adoption of crypto as legal tender is a logical next step, given that the city already uses the digital franc – a token that requires a modern approach to loyalty schemes. “We firmly believe in this technology and its potential for scalability, which – along with our integrated collaboration with Tether – will help build a better and more open, transparent, and smart city”,  – Foletti stated.

    In turn, Tether CTO Paolo Ardoino believes that Lugano has the potential to offer its own blueprint for global crypto adoption: “Lugano is a dynamic city filled with innovators and visionaries. As the world’s largest stablecoin, we foresee a future where businesses of any size and scale will use blockchain platforms to improve the quality of life for local communities by providing more sustainable, transparent, and reliable financial and everyday services.”

    Without singling out Switzerland – a country highly experienced in all monetary matters – we can look at the European Union as a whole, with its own, sometimes quite fascinating, processes. For example, the European Parliament has recently rejected a proposal by some European politicians to ban cryptocurrencies with the Proof-of-Work (PoW) consensus model from the end of February. The parliament’s committee on economic and monetary affairs – ECON – voted 30-23 to keep the provision out. (23 pro-ban votes were mainly by the Greens).

    With that decision, European crypto companies have received a legislative guarantee that their countries won’t prohibit the mining and circulation of currencies based on the PoW consensus algorithm. Now, we can look forward to more investments in the European crypto industry from large companies, non-profit organizations, and even government institutions.

    The ECON committee also voted on the final version of the bill on EU cryptocurrency regulation. Among other things, any wording that could be interpreted as a possible ban on BTC was excluded from its final draft.

    The aforementioned decisions could indicate a trend: Europe not wanting to get involved in the rivalry between the digital dollar and the digital yuan, might rather opt for numerous already existing independent cryptocurrencies, blockchain platforms and DeFi services. Such a course seems to be the best available alternative for the Old World.

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