Facebook’s Libra Digital Currency would appear to have polarised those who are more receptive than others. In India and China, Libra has not had a positive reception, with both governments potentially banning Facebook’s Crypto from being used by their citizens.

There has been mixed news from the USA, with Trump tweeting “I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behaviour, including drug trade and other illegal activity....” Although also in the USA, the Federal Reserve Chairman, Jerome Powell, seemed to contradict Trump.  Powell likened Bitcoin to gold, as a speculative form of value. Powell did not say Bitcoin is like gold, but how some Bitcoin’s users currently treat Bitcoin as if it were! He was stating what his thoughts were. However, it does offer a degree of legitimacy to Bitcoin’s claim to be a digital replacement for gold!

However, in the USA, there is a draft bill to try and prevent large tech firms to launch their own Cryptocurrency. The situation in the US was aptly summarised in a recent article in The Cryptoeconomist: “The current exclusive administrators of monetary policy, whether direct or indirect, do not seem to tolerate competition very well, but their reaction so far still appears to be fragmented and disorganised. However, it cannot be excluded that at some point they will be able to organise themselves and develop effective reactionary measures”

The French are less positive on Libra, with French Finance Minister, Bruno Le Maire, saying during a radio interview that Facebook’s latest foray into Cryptocurrencies “must not happen.” However, the French have confirmed that they are looking to introduce legislation so that companies, which voluntarily abide by standards on capital requirements, consumer protection and pay tax in France, will then receive approval from the regulator. Authorities in France are encouraging the European Union to create European-wide standards for Cryptocurrencies. Indeed, the French are looking at unveiling their own regulations around custody and asset management of digital assets, digital exchanges and Cryptocurrencies. In Singapore, regulators have actively tried to engage and embrace Cryptocurrencies as its Payments Service Act specifically includes Cryptocurrencies and domestic as well as cross-border transfers. In the third-biggest economy in the world (Japan), the view of its regulator the Financial Services Agency (FSA), which oversees Crypto exchanges, is that under current regulations, stablecoins are not considered to be a Cryptocurrency. Indeed, we have already seen one of Japan’s biggest banks, Mizuho, earlier this year launch a stablecoin pegged to the Yen.

The UK seems to be taking a more accommodative approach, with the FCA having pioneered the highly successful “sandbox” which allows regulated companies to, in effect, experiment and trial products and services. The soon-to-be Ex-Chancellor of the Exchequer, Phillip Hammond, confirmed that in his opinion the British government would not stand in the way of Libra.

Turkey plans to be the First Country to Issue Central Bank Cryptocurrency, according to reports from Coinape. Currently, over 18% of people in Turkey own some form of Cryptocurrency, so there would seem to be reasonable interest already in this asset class.

Finally, it has been reported that “Samsung Coin” has been filed as a trademark, and while Samsung says it is not responsible, one cannot help wondering how long it will be before we see the likes of a Samsung issuing its own Cryptocurrency to pay staff, suppliers, and possibly even use it as part of a loyalty scheme for its customers?

In Europe, we have seen a Luxembourg-based business called Argento emerge and, from the UK, The London Block Exchange has launched what it calls “the world’s first genuine bitcoin (BTC) bond”. This new bond being issued by LBX, which is regulated by the UK FCA, will enable institutional investors to buy a bond that has no exposure to fiat currencies. It will have its own International Securities Identification Number (ISIN) code, and its price will be on all Bloomberg terminals i.e. another example of Crypto being adopted and accessible to institutional managers.

In the UK, Token Market, which had been very active promoting Initial Coin Offerings, raising over £240 million for 30+ companies funded by 170,000 investors, has had approval from the FCA to issue its own Security Token Offering (STO). The Token Market STO goes live on 8th July 2019 and will pave the way for Token Market to launch further STOs - all of which will be subject to much greater regulatory scrutiny, compared to 5,597 ICOs that have been launched to date. Once again pioneers like Token Market, offering STOs in a regulated manner, will make it easier for institutions to be more engaged with this asset class  - not least because these Digital Assets will be backed by assets i.e. bonds, property, shares in companies. 

In February 2019, the London Stock Exchange invested into a UK-regulated company called Nivaura, which has now issued both digital bonds and equities using Blockchain technology. Euronext, a Dutch-based stock exchange that has over 1,300 companies listed with a market capitalisation of over €3.5 trillion, has invested €5 million into Tokeny, which is based in Luxemburg. This investment in Tokeny will compliment Euronext’s investment in Liquidshares, where it joined a consortium of 15 other organisations. Liquidshares is a post-trade Blockchain-powered solution, connecting asset managers’ and broker and custodians’ information systems, thus enabling them to more easily invest in and process listed and non-listed European SMEs.

However, the regulators are also showing some signs of caution, with the UK FCA announcing that it wanted to ban the sale of “Crypto derivatives” to retail customers. It is understandable that the FCA has taken this stance, as crypto derivatives are a highly-geared way in which to get exposure to, in this case, an unregulated asset – Cryptocurrencies. While many have generated high returns, Cryptocurrencies are themselves very volatile. Furthermore, the Cryptocurrencies which largely have been created via an ICO are typically not listed, nor traded, on regulated exchanges. However, as we see more STO’s being launched which can be admitted onto regulated exchanges, such as Token Market, it will be interesting to see if the FCA allows derivatives on these Digital Assets.

Meanwhile, in the USA, there has also been some caution and concerns being raised in particular about Facebook’s new Libra-Cryptocurrency, with the House of Democrats asking Facebook to halt developments until the regulators and congress have had the opportunity to review the potential risks. This is unlikely, as Libra has been established in Switzerland, which is not just able to offer a lower tax jurisdiction but actively promotes itself as being more “Crypto-friendly”!

Finally, we have seen Augstin Carstens -the head of the Bank of International Settlements (BIS), in an interview with the FT, admitting “Many central banks are working on it; we are working on it, supporting them, and it might be that it is sooner than we think that there is a market and we need to be able to provide central bank digital currencies”.

This clearly shows how the development and adoption of Digital Assets are clearly now being driven “Top-Down” (by regulators and governments) as opposed to “Bottom-Up” (by tech start-ups funded by ICOs). It will possibly mean that the digitalisation or, as some people call it, the tokenisation of assets becoming a much bigger part of the world economy - much faster than many thought would be the case, even a few months ago!