The Bitcoin Policy Institute, a non-profit organization supporting bitcoin initiatives, has launched the Peer-to-Peer Rights Fund, a project seeking to protect bitcoin’s decentralized nature from regulatory overreach. The fund’s first objective is to aid in the defense of the founders of Samourai Wallet given the relevance of the case for the industry. Peer-to-Peer Rights Funds […]
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Cato Institute Experts: Dollarization ‘Protects Ordinary People’s Purchasing Power’
According to Cato Institute experts, full dollarization of the Argentine economy helps to protect “ordinary people’s purchasing power” from corrupt politicians and “often subservient—or simply incompetent—central bankers.” The experts said the loss of seigniorage should be seen as “an infinitesimal price to pay for the advantages of dollarization.”
Fighting Inflation With Dollarization
Argentina should consider dollarizing its economy because this “protects ordinary people’s purchasing power” from corrupt politicians and “often subservient—or simply incompetent—central bankers,” authors of the latest Cato Institute blog post. The authors, Daniel Raisbeck, a policy analyst and the research associate Gabriela Calderon de Burgos, argue that only full dollarization can help Argentina control inflation which currently hovers above 100%.
To support their argument, the two experts point to the inflation rates in South America’s three fully dollarized countries which are namely Panama, Ecuador, and El Salvador. According to the blog post, the dollarized trio, unlike many other countries from the region, “did not see double-digit inflation in the aftermath of the Covid‐19 pandemic.”
The call by the two authors adds to the growing list of experts and economists who endorse the full dollarization of the South American country’s economy. As previously reported by Bitcoin.com News, Javier Milei, a presidential candidate in Argentina’s upcoming elections, has also indicated his readiness to dollarize should he win.
Dollarization and the Loss of Monetary Autonomy
However, opponents of dollarization often cite the loss of monetary autonomy as one of the reasons why inflation-hit countries must avoid replacing their currencies with the greenback. Others have highlighted the United States’ alleged weaponization of the dollar as one example of why countries with collapsing currencies must reject dollarization.
Nevertheless, in their blog post, Raisbeck and Calderon de Burgos use Panama’s experiences since it dollarized in 1999 to push back against some of the arguments used by critics of dollarization. For instance, the authors argued that an analysis of Panama’s dollarization experiences by another Cato Institute expert Juan Luis Moreno‐Villalaz had shown that banks in the country were (and are still) able to allocate resources without major restrictions. Since dollarization, the banks were also able to adjust their liquidity in accordance with the local demand for credit or money, the authors added.
“[The] changes in the money supply—which arise from the interplay between local factors and the specific conditions of global credit markets— and not the Federal Reserve, determine Panama’s monetary policy. Fed policy affects Panama only to the same extent that it does the rest of the world,” Raisbeck and Calderon de Burgos concluded.
Concerning the loss of seigniorage — the profit earned by a government when it issues currency — the two said this must be seen as “an infinitesimal price to pay for the advantages of dollarization.” Similarly, the lack of large dollar reserves should not be an excuse for not dollarizing, the authors added.
What are your thoughts on this story? Let us know what you think in the comments section below.
CATO Institute: CBDC the ‘Single Largest Assault to Financial Privacy Since Creation of Bank Secrecy Act’
A central bank digital currency (CBDC) may turn out to be the “single largest assault to financial privacy since the creation of the Bank Secrecy Act,” a policy analysis document released by CATO Institute has said. To stop the U.S. Federal Reserve and Treasury from threatening the financial system with the CBDC, the document said the U.S. Congress “should explicitly prohibit” its issuance.
CBDCs a Threat to Financial Privacy
A policy analysis document released on April 4 by the CATO Institute warns that a central bank digital currency could be detrimental to the American people. To support this assertion, the analysis document points to the two-thirds of the 2,052 comment letters sent to the U.S. Federal Reserve that oppose plans to launch a CBDC.
Authored by Nicholas Anthony and Norbert Michel, the policy analysis document also lists some of the concerns about CBDCs that have been raised and how the associated risks make the CBDC unsuitable for Americans. As seen in the document, one key concern raised by CBDC opponents is the threat this poses to Americans’ right to financial privacy.
“Laws designed to counter-terrorism, deter money laundering, and collect taxes largely provide the government with the ability to conduct unchecked surveillance over financial information. Nonetheless, a CBDC could spell doom for what little protection remains because it would give the federal government complete visibility into every financial transaction by establishing a direct link between the government and each citizen’s financial activity,” the analysis document stated.
While attaining this feat is something the U.S. government may want to do, the authors assert that the issuance of the CBDC would amount to what they call the “single largest assault to financial privacy since the creation of the Bank Secrecy Act and the establishment of the third-party doctrine.”
US Congressional Intervention Sought
Besides being a threat to citizens’ right to privacy as guaranteed by the U.S. constitution, Anthony and Michel claimed that a CBDC is likely to be a threat to financial freedom as well. They said:
A CBDC would provide countless opportunities for the government to control citizens’ financial transactions. Such control could be preemptive (prohibiting and limiting purchases), behavioural (spurring and curbing purchases), or punitive (freezing and seizing funds).
The policy document also suggested that a CBDC will pose a threat to free markets and will give cybercriminals “a prominent platform on which to focus their efforts.”
To prevent the U.S. Federal Reserve from creating these risks, the two authors recommend that the U.S. Congress “should explicitly prohibit” the U.S. Treasury and central bank from issuing digital currency in any form. This can be done by amending Section 13 of the Federal Reserve Act and by limiting the U.S. “Treasury’s authority to expand existing offerings.”
The authors also recommend that the U.S. Congress must “require that the Fed’s compliance with the Depository Institutions Deregulation and Monetary Control Act’s cost recovery provisions be subject to regular audits by third parties.”
What are your thoughts on this story? Let us know what you think in the comments section below.
PBoCs Fintech Research Institute Is Hiring Blockchain Experts
A research institute under the Chinese central bank has just announced 29 job openings three of which focus on blockchain-related expertise.
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Chinese Central Bank-Led Fintech Research Institute Seeks New Blockchain Talent
n A fintech research institute established by China’s central bank has posted several new job openings for blockchain talentn
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German State Announces Plan to Establish European Blockchain Institute
n Germany unveils plans for the European Blockchain Institute, a blockchain research center to be based in Dortmundn
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Israel Institute Sues Professor for Alleged Blockchain Intellectual Property Violation
n The Technion has reportedly sued a faculty member for allegedly profiting from the zero knowledge proof technology he developed while working at the instituten
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New Zealand Govt-Backed Institute Issues Grant to Crypto Wallet and Trading Service
n New Zealand state-backed innovation and research agency Callaghan Innovation has awarded a 0,000 grant to a domestic crypto wallet and trading servicen
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American National Standards Institute to Address Blockchain at Upcoming Forum
n The American National Standards Institute will focus on blockchain and AI application and development issues at the next Legal Issues and Joint Member Forumn
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CFA Institute Adds Cryptocurrency Topics to its 2019 Financial Exam
The Chartered Financial Analyst (CFA) Institute are adding cryptocurrency and blockchain topics to their 2019 exam. The subjects will form a new module called Fintech in Investment Management.
Inclusion on the CFA Institute Exam Important for Public Perception of Crypto
The CFA Institute have responded to growing demand for education on digital currencies and blockchain. According to a report from Bloomberg, many connected with the financial industry have requested the inclusion of such topics through interest groups and surveys.
The exam itself is a three-level study. It has already been taken by over 150,000 professionals in the financial industry. The 2019 edition of the paper will, for the first time, include study of cryptocurrencies and blockchain.
The inclusion of such topics is appropriate as more traditional financial interests are beginning to explore digital currencies. The likes of the CBOE and the CME Group launched Bitcoin futures contract trading late last year, and Goldman Sachs have been exploring how they can offer cryptocurrency trading.
Stephan Horan is the managing director for general education and curriculum at the CFA Institute in Virginia. He spoke to Bloomberg about the decision to include the topics on their curriculum:
“We saw the field advancing more quickly than other fields and we also saw it as more durable. This is not a passing fad.”
Kayden Lee, a student of finance at Colombia University, added that the extra topics would be beneficial to those in similar educational pursuits since there has been a “huge expansion and adoption of crypto in our investment universe.”
As well as the dedicated fintech module, cryptocurrency will also appear as part of the professional ethics side of the course. Such inclusion is relevant as many see ethics as being absent from the digital currency space – particularly as the financial innovation largely exists outside of legal frameworks at present.
Candidates take the CFA Institute exam to give them a better understanding of global finance, as well as a greater likelihood of landing a job in the field. According to Bloomberg, most of the candidates taking the test come from Asia. This also happens to be where a lot of current cryptocurrency trading takes place.
Darius Sit, a foreign-exchange trader-turned managing partner at a digital asset trading platform in Singapore, believes that the decision of the CFA Institute to include topics on cryptocurrency and blockchain is beneficial to the space as a whole. He told Bloomberg that “more education is always good.”
Elsewhere, cryptocurrency and blockchain courses are becoming more widely available. Several universities now offer courses on the subject. Institutions in Illinois, India, and Australia have all recently included studies on the financial and technological innovation.
Featured image from Shutterstock.
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