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Recent actions by the US government against stablecoins pegged to the US dollar may lead to the global crypto industry switching to stablecoins that are not backed by the US dollar.
Last week, the United States Securities and Exchange Commission (SEC) issued a notice to Paxos claiming that BUSD is not a registered security. Subsequently, the New York Department of Financial Services (NYDFS) ordered Paxos to cease issuing BUSD.
The following day, February 14th, during a Twitter Spaces event, Binance's CEO - Changpeng Zhao, was asked to comment on the current situation. Among other things, he spoke about the potential use of gold as a standard of value instead of the US dollar. While acknowledging the practicality of using gold, CZ noted that most of the people's spending is still in fiat currencies, thus their investment returns calculations are also in dollars. Therefore, CZ believes that fiat currency-backed stablecoins are still vital to the industry.
However, Changpeng Zhao added in the same sentence that after the recent actions against the US dollar-backed BUSD stablecoin, the industry may start using stablecoins pegged to the euro, Japanese yen or Singapore dollar. After all, this has actually prompted us to look for other options in different places.
The use of 'zero-knowledge proofs' in digital currencies is becoming more widespread as regulators seek to address privacy concerns. Due to this, the European Union initiated a project based on the study of blockchain and decentralized data storage. This type of verification allows authorities to determine the authenticity of an identity without revealing any additional information. At the same time, this technology prevents the information from being stored in a central database that is vulnerable to cyber-attacks.
The EU Central Bank Digital Currency Project (CBDC) does not have anonymity standards like private cryptocurrencies, highlighting the European Union's ambivalent relationship with privacy. The EU was the first in the world to implement strict data protection regulations but continues to struggle to fully protect the data of its own citizens. And that's why it has come up with a proposal for eIDs that could help address some of these concerns.
The Committee on Industry, Research and Energy has approved a proposal on the use of 'zero-knowledge proofs' in digital identities. The proposal aims to give EU citizens full control over their data, including the ability to decide what information they want to share. At the same time, the technology will allow them to identify themselves online without having to rely on commercial providers. The use of 'zero-knowledge proofs' will enable new business models and opportunities in the digital economy as companies develop innovative products and services depending on eID solutions. Incorporating this type of authentication into European eIDs could facilitate the widespread adoption of this technology and thus increase the level of privacy protection.
Japan plans to launch the CBDC pilot program by May 2023
Japan is likely to launch its digital currency pilot project (CBDC) in April this year. The pilot will test a CBDC ecosystem model involving private companies. The Bank of Japan (BoJ) has announced that it has decided to launch a pilot project for a digital Japanese currency (digital yen) in 2021 after the completion of proof of concept testing. According to the BoJ, no actual transactions will take place during the testing phase, only simulated transactions.
The BoJ will focus on the technical feasibility of the digital currency as well as modeling the CBDC ecosystem with the participation of private firms. Alternative data models will need to be consulted with the private sector. This will include the architecture for offline payments as well as other critical elements of the system. At the same time, a forum for consultation on CBDC will be established.
At least three Japanese megabanks and regional banks are expected to participate in the pilot, working with the BoJ. At the same time, the Japanese authorities are considering lifting the ban on foreign stablecoins, which was approved in 2022. However, these stablecoins will only be accepted if they pass the various tests. The plan is that the new proposals could be approved by June 2023.