Bermuda – First Government to Accept USDC for Tax Payments

Bermuda has become the first government to accept the USDC stablecoin – a U.S. dollar-pegged stablecoin, managed by major players in the crypto market, Circle and Coinbase –   for tax payments, marking a milestone for cryptoasset adoption.

Global financial services company Circle published a report on Wednesday, confirming that the government of Bermuda will accept payments in USD Coin (USDC) “for taxes, fees and other government services.” The country will be supporting USDC as a method of tax payment for all its residents, which accounts for circa 65,000 people.

The latest development is a part of a broader initiative by Bermuda’s government, as stated by Circle, as its goal is to support the usage of USD-dollar backed stablecoins and decentralized finance protocols and services. The stablecoin launched a year ago by cryptocurrency exchange Coinbase and Circle. Up until now, over $1 billion worth of USDC has been issued between the two startups.

Circle co-founder and CEO Jeremy Allaire stated:

“Bermuda’s Premier made a broader announcement today about embracing stablecoins as the future of the financial system, with a focus on innovations in fintech that can deliver value not just for Bermudians, but also globally via company’s licensed under their Digital Asset Business Act.”

Allaire further explained that the country’s economy already relies on a United States dollar-backed currency, namely the Bermudian dollar. As such, he believes that “it’s natural that they would both embrace USD-backed stablecoins for their own government services.” He further added that Bermuda is currently focused on enabling financial services to be created and delivered using cryptocurrency and digital assets.

Allaire strongly believes that this new development reinforces the idea of global mainstream adoption of stablecoins for everyday payments and commerce.

Circle has also been granted awarded a “Class F” license under Bermuda’s Digital Assets Business Act (DABA) of 2018. According to the company, the DABA license makes the company the first major cryptocurrency exchange and wallet service ever to receive such a permit.

Allaire commented:

“Through the DABA, Bermuda is one of the first countries in the world to create a comprehensive regulatory framework for digital currency and digital asset-based products and services, including licensing of firms operating payment systems using stablecoins. It will be interesting to see how other governments will respond to this fundamental innovation.”

The Bermuda government launched a blockchain task force in partnership with the Bermuda Business Development Agency (BDA) in late 2017. It went on to pass legislation on initial coin offerings (ICOs) as well as establishing a regulatory sandbox for cryptocurrency companies.

Due to the favourable crypto conditions in the country, Circle has recently moved its exchange operations to Bermuda.

Following this news, it has also been reported that Bermuda will be partnering up with blockchain startup Shyft Network to launch a digital identity program, which will benefit business individuals, claimint that it will be easy to use and will provide better transparency and place the individuals in control of their identity-related data.

Libra Marches on Following the Association’s First Member Meeting

The Libra Association – a consortium of companies who governs over Facebook’s proposed stablecoin Libra – held its first meeting on Monday in Geneva, Switzerland.

Following the meeting in Geneva, the twenty-one organizations formally signed the Libra Association charter as well as named its board of directors and formalized the consortium’s executive team.

As such, the five-member board is comprised of Calibra cofounder David Marcus, Andreessen Horowitz general partner Katie Haun, Xapo CEO Wences Cesares, PayU general counsel Patrick Ellis, and Kiva chief strategy officer Matthew Davie. PayPal veterans Bertrand Perez, Dante Disaprte, and Kurt Hemecker will comprise the Association’s executive team.

Most major decisions will require a majority vote of the ruling council, whilst proposed changes to membership or management of the reserve must pass by a two-thirds majority.

In addition to Calibra, the association consists of Coinbase, Xapo, Anchorage, Bison Trails, Creative Destruction Lab, Andreessen Horowitz, Thrive Capital, Ribbit Capital, Union Square Ventures, Breakthrough Initiatives, Illiad, Vodafone, Farfetch, Uber, Lyft, Kiva, Mercy Corps, Women’s World Banking, Spotify and PayU, according to a press release.

The news follows a string of significant departures of major companies such as Visa, PayPal, MasterCard, Stripe, eBay and Booking from the Facebook-led stablecoin project. Most announced their withdrawals from Libra citing concerns over the regulatory backlash faced by the project.

Still, according to the Libra Association more than 1,500 institutions have expressed interest in joining the project, with 180 meeting the organization’s membership criteria. In June, Facebook claimed a consortium of 100 companies would back the cryptocurrency project at launch.

However, the association shared no updates regarding those plans nor the exact launch date. Although Facebook initially targeted an early 2020 launch date, recent statements by CEO Zuckerberg have put this timeline into doubt.

Meanwhile, financial regulators around the globe have expressed their opposition to the project, citing fears that Libra could destabilize the global monetary order. Ministers in France and Germany stated they were against Libra and India announced that Libra may not even be legal in the country. Most recently, U.S. Rep. Maxine Waters (D-Calif.) called for a moratorium on the project until all regulatory questions could be cleared.

However, Calibra’s Marcus has claimed that these fears are misplaced. He recently testified before the U.S. Congress, trying to dispel the concerns of both the Senate Banking Committee and the House Financial Services Committee.  Mark Zuckerberg is also slated to testify about the project before the House of Representatives Financial Services Committee.

Despite regulatory backlash, the Libra Association remains optimistic about going forth with the project. Dante Disparte, the head of policy and communications at Libra Association, stated that the recent flight of major backers is “a correction; it’s not a setback.” Nonetheless, he admitted that any delay to the launch will be a result of its regulatory issues, rather than technical concerns.

Coinbase Users Will Start Earning Interest on USDC Holdings

San Francisco-based cryptocurrency exchange Coinbase has announced that from now clients will be able to earn interest for holding the stablecoin USD Coin (USDC) in its crypto wallet. Coinbase users will receive a 1.25% on their USDC holdings per year.

The news had been shared through a blog post on the exchange’s website, stating that Coinbase will pay rewards on literally any amount of USDC held, which will be distributed each month automatically.

Users with at least one dollar’s worth of USDC in their accounts will automatically begin to accumulate rewards on their holdings, with no additional cost or fees. USDC is a stablecoin, whose value is pegged to the U.S. dollar at a 1:1 ratio. It was launched last year by CENTRE, a consortium co-founded by Coinbase and Circle.

Currently, the Coinbase Rewards is only available to eligible U.S. customers, however New York State based users will not have access to this reward system. Furthermore, it will only be available on Coinbase and not Coinbase Pro – Coinbase’s sister exchange for professional traders.

Coinbase product manager Paul Katsen has explained that the exchange is trying to build more ways for customers to grow their wealth on Coinbase.

He further added:

“One of the things we know is a bad customer experience is having to move your money back and forth from Coinbase to a bank account [to] earn a little bit of interest in the bank account. We’re trying to bring some of these experiences together but make them crypto-first and on Coinbase.”

According to Max Branzburg – director of product at Coinbase – the user experience is very simple and smooth. He explained that as soon as a client has USDC in their wallets, they can start earning rewards. All rewards earned on the exchange can be tracked in real-time and used immediately to buy other cryptocurrencies listed on the exchange.

He further stated that the reward system will be financed by the exchange itself, by using pre-existing revenue streams.

“We can pull from the profits we generate as a business to reward our customers for storing their assets on the platform,” Branzburg said, adding:

“We’re fortunate to be able to do that as a profitable business.”

This is an attractive proposal for anyone that trades on Coinbase, as it is more advantageous than moving fiat from a bank to Coinbase and vice versa. Indeed, at 1.25 percent, the interest rate offered by many federally-insured bank accounts trump that of Coinbase. Although it is still higher than the apparent U.S. national average of 0.9 percent, NerdWallet lists a total of 14 savings accounts that offer more than two percent APY.

Meanwhile, Coinbase’s news follows competitor Binance’s launch of a staking platform yesterday, which rewards users keeping coins, including Algorand’s Algo and Stellar’s XLM, on the exchange. Whilst this makes it much easier for users to grow their supply of stake-able coins, it does mean that the exchanges will have sizeable influence over such proof-of-stake blockchains, which is a worrying sign.

Binance and Paxos Launch NYDFS-Approved Stablecoin

Leading crypto exchange Binance has announced its partnership with digital asset trust company Paxos to launch a USD-pegged stablecoin.

According to the announcement made on Thursday, the two companies will launch a USD-pegged stablecoin called Binance USD (BUSD). The stablecoin has already received the approval of the New York State Department of Financial Services (NYDFS) and will be available for trading later this month.

Paxos co-founder and CEO Asia Rich Teo has stated that the NYDFS’s approval of the stablecoin is a vital step towards long term stability in global crypto markets. He further added:

“We are proud that our stablecoin as a service offering enables trusted companies like Binance to introduce products customized for their users. The Paxos brand symbolizes regulatory integrity, consumer protection and transparency for all of our partners.”

The upcoming stablecoin will be backed by U.S. dollar on a 1:1 ratio. In addition to that, a Binance spokesperson stated that the BUSD will be built on the Ethereum blockchain, however it may move to Binance Chain in the future.

The coin will start trading on Paxos’ and Binance’s exchange platforms later this month. Paxos will issue the coin and look after the reserves of dollars–and Paxos customers will be able to directly purchase BUSD tokens through the company’s wallet using either U.S. dollars or PAX, its own stablecoin.  Binance users will likewise be able to trade BUSD on the platform.

BUSD will trade against three cryptocurrencies – Bitcoin (BTC), Binance coin (BNB) and XRP – on the platform. According to the announcement, Paxos will act as both the custodian and the issuer for the stablecoin, and will regularly audit the dollar holdings.

Binance CEO Changpeng Zhao, commonly known as “CZ”, stated that Paxos is leading the digital trusts space and further added that Binance is excited to work with them in developing their native stablecoin.

“We hope to unlock more financial services for the greater blockchain ecosystem through the issuance of BUSD, including more use cases and utility through the power of stable digital assets.”

Following this news, BUSD joins the Paxos Standard and the Gemini Dollar as an NYDFS-approved stablecoins.

Meanwhile, Binance has been steadily showing interest in stablecoins. The exchange previously announced its intention to issue stablecoins worldwide as part of its Venus project. Back in July, it listed BGBP stablecoin, which is pegged 1:1 to the British pound, however is built on the Binance Chain blockchain network. At the time, the company said it would launch a collection of stablecoins pegged to different fiat currencies.

Tether Looking to Issue Commodity-Backed Stablecoin

USD-pegged stablecoin issuer Tether is looking into releasing a new version of the digital currency backed by a basket of commodities including gold, crude oil, and rubber, Zhao Dong, an investor of Bitfinex, revealed.

Reported by Cointelegraph, the stablecoin issuer is considering the move to reduce dependency on storing fiat at traditional banks. As revealed in a lawsuit, the sister company Bitfinex had transferred around $850 million to payment processor Crypto Capital, which had been frozen by authorities, leaving a gap in Bitfinex’s books.

The stablecoin issuer, Tether, made headlines after granting a $700 million loan to Bitfinex, which was made public by the New York Attorney General’s office earlier this year. The exchange hasn’t retrieved the money yet, although its representatives are firmly optimistic of the outcome.

The company has been under constant pressure with allegations of not maintaining enough reserves to back the USD-pegged stablecoin. Squashing all allegations, Dong told the publication:

“Tether is fully backed by reserves, out of 4 billion existing USDT about 3.35 billion are now in securities and 650 million are being lent to Bitfinex. Bitfinex has been raising 1 billion with it’s LEO token IEO and could easily pay back Tether any time (as a matter of fact it already paid 100 million last month).”

In addition to the commodity-backed currency, the company is planning to create a stablecoin that is pegged to the Chinese renminbi. Dubbed CNHT, the new stablecoin’s reserve will be held in a bank in Belgium and will be launched very soon, possibly within weeks according to the report. Dong also stated that CNHT will have no issues with the capital control policy from China’s Central Bank:

“CNHT will not interfere with PBOC [People’s Bank of China} capital control policy because CNH is different than CNY, as it’s already an offshore product. On the contrary CNHT will help China to expand the adoption of CNH for international settlements.”

Now that Bitfinex was able to raise $1 billion in USDT through the sale of its LEO token in mid-May, the firm started paying back the loan that it got from Tether. However, Bitfinex plans to recover the funds that have been frozen at Crypto Capital Corp. before full payment is issued, according to Dong.

In the meantime, Tether remains under investigation from the New York Attorney General for covering up the $850 million loss.