Cryptocurrency has dominated worldwide headlines, taken over the minds of basically every tech enthusiast, FinTech genius, business, and global governments across the spectrum.
Everyone is either buying it, investing in it, or mining it; through rise and fall, people are in full swing with crypto wallets popping up as far as the finger can scroll.
Over the last twelve months, Bitcoin has risen once again, soaring beyond $10,000, and hitting heights of more than $60,000. Dogecoin, a currency originally intended to be a digital joke, is also rising; once worth less than a fraction of a cent, it recently hit a high of $0.41.
The UAE is looking to join in on the action as it launches its very own DubaiCoin, with an international starting price of just $0.17 per one coin.
According to Arabian Chain Technology, the company in charge of handling the Gulf-based cryptocurrency, Dubai “plans to go further in its push to play an increasingly important role in the future of global finance and trade, and its plans for the next several years are firmly focused on DubaiCoin and the goal of becoming the world’s first blockchain-powered government.”
The move places the UAE alongside other major economies that have either already integrated or are currently considering their own digital currency such as the UK and U.S.
Arabian Chain Technology – which is a UAE-based venture and the first public, decentralized and consensus-driven blockchain in the MENA region – announced that DubaiCoin will soon be able to be used to pay for a range of goods and services both in-store and online, with the clear intention for the coin to be used in place of traditional bank-backed currencies.
In parallel, the coin’s circulation “will be controlled by both the city itself and authorized brokers.”
However, it is worth mentioning that the past ten days have been a rollercoaster ride the cryptocurrency market far and wide, as the price of Bitcoin went on a freefall earlier last week losing about 38 percent of its value since April 13 when it hit a high of more than $64,800, according to Coindesk.
The price of the famously volatile digital currency fell nearly 30 percent at one point after the China Banking Association warned member banks of the risks associated with digital currencies. The decline narrowed to below 10 percent in the afternoon, but Bitcoin had still lost about $70 billion in market value in 24 hours.
And if that wasn’t enough, Tesla and SpaceX CEO Elon Musk announced that his electric automaking company will stop accepting Bitcoin as a form of payment due to the environmental toll the currency is having when mining it.
But Musk backtracked on his statement earlier on Monday, as he tweeted that he “spoke with North American Bitcoin miners. They committed to publish current & planned renewable usage & to ask miners WW to do so. Potentially promising.”
With that in mind, American entrepreneur Michael Saylor reaffirmed Musk’s statement by adding that the “leading Bitcoin miners in North America have agreed to form the Bitcoin Mining Council to promote energy usage transparency & accelerate sustainability initiatives worldwide,” he said in tweet in reply to the Tesla CEO.
A number of Bitcoin fans pushed back on Musk’s reasoning. Fellow billionaire Mark Cuban said that gold mining is much more damaging to the environment than the mining of Bitcoin.
A 2019 study by the Technical University of Munich and the Massachusetts Institute of Technology found that the Bitcoin network generates an amount of CO2 similar to a large Western city or an entire developing country like Sri Lanka.
But a University of Cambridge study last year estimated that on average, 39 percent of “proof-of-work” crypto mining was powered by renewable energy, primarily hydroelectric energy.
At El Salvador’s Bitcoin Beach, a glimpse of crypto economy
After El Salvador’s congress made the bitcoin legal tender this week, eyes turned to this rural fishing village on the Pacific coast. Known to surfers for its pounding waves, El Zonte has had the cryptocurrency in its economy for the past year.
Some 500 fishing and farming families use bitcoin to buy groceries and pay utilities, something the government envisions for the country at large. Bitcoin already was legal to use in El Salvador but its acceptance was voluntary, so the legislation passed late Tuesday now requires all businesses — except those without the technology — to accept payment in bitcoin.
El Zonte’s mini bitcoin economy 26 miles (43 kilometers) from the capital came about through an anonymous donor who started working through a local nonprofit group in 2019. Supporters of the financial change point to it as a demonstration case for how digital currency could help in a country where 70% of the people don’t have bank accounts.
President Nayib Bukele, who pushed through the bitcoin law, touts it both as a way to help those many Salvadorans without access to traditional banking services and as a path to attract foreigners with bitcoin holdings to invest in El Salvador, which is the first nation to make the cryptocurrency legal tender.
Experts are trying to figure out why Bukele is pushing bitcoin. They say it is unclear how the highly volatile cryptocurrency will be a good option for the unbanked and only time will tell if the new system translates into real investment in El Salvador.
Bitcoin, intended as an alternative to government-backed money, is based largely on complex math, data-scrambling cryptography — thus the term “cryptocurrency” — lots of processing power and a distributed global ledger called the blockchain, which records all transactions. No central bank or other institution has any say in its value, which is set entirely by people trading bitcoin and its value has moved wildly over time.
In El Zonte this week, construction worker Hilario Gálvez walked into Tienda María to buy a soda and snacks to share with his friends. Instead of reaching for his wallet, he paid through an app on his phone.
The store’s namesake, María del Carmen Avilés, said she is now expert in bitcoin transactions.
“When a customer comes I ask him if he’s going to pay with the application or in cash. The majority pay with the application Bitcoin Beach. I look for it on my cell to charge them.”
It doesn’t take more than two minutes.
“It’s easier than paying with bills,” Gálvez said. “I can buy from my house, do the transaction with the application Bitcoin Beach, and I just come to pick up what I need.”
Avilés notes that the volatility of the bitcoin can be a problem.
“People ask me if I recommend bitcoin, I tell them I’ve won, but I’ve also lost,” Avilés said. “When bitcoin hit $60,000, I won and I bought this refrigerated room for the store, but then it went down and I lost.”
Román Martínez was a pioneer in using bitcoin in El Zonte. He said the anonymous U.S. donor heard about community projects through the nonprofit Hope House where he works and began working through another American who lives in El Zonte. Hope House shares a building with Strike, a Chicago-based start-up that has been working with Bukele’s government on the nationwide bitcoin launch.
A request by The Associated Press to interview Strike CEO Jack Mallers was not granted. In an email, the company said, “Strike’s app is meant to empower people in all countries, broaden the financial system to include those who have been excluded, and increase economic opportunity around the world, and that is at the heart of this effort.”
El Salvador has used the U.S. dollar as its official currency since 2001, and Strike said that adopting bitcoin “as legal tender will help reduce its dependence on the decisions of a foreign central bank.”
Martinez said El Zonte residents did not have bank accounts, had no access to credit and were forced to handle all transactions in cash. “Now they are small investors whose lives have been changed by bitcoin,” he said.
Some question just how much can be learned from the Bitcoin Beach experiment.
David Gerard, author of “Attack of the 50 Foot Blockchain,” said El Zonte is an artificial demonstration.
At Bitcoin Beach, he said, “the bitcoins are traded inside Strike. They don’t actually move on the bitcoin blockchain or anything.”
Gerard said it appears to work because the bitcoin donor keeps pumping bitcoin into the village’s system. “That’s not a proof of concept that works. That shows that you can trade this stuff if you’re not trading actual bitcoins and someone massively subsidizes it.”
Adoption had been slow in El Zonte, but took off during the coronavirus pandemic when strict lockdown measures kept most people from leaving home.
“Our donor made three deliveries of $40, converted to bitcoin, for each of the community’s 500 families, and they were trained to use the application and now it’s normal to buy with bitcoin,” Martínez said.
El Zonte even has a Bitcoin ATM, which gives dollars in exchange for bitcoin or takes dollars and gives credit in bitcoin.
Edgar Magaña was in town from San Salvador to convert $50 to bitcoin. He inserted the dollars into the machine and was surprised to see only $47 in bitcoin fractions credited to his account on his phone.
“They took three dollars commission,” Magaña said, adding that he had understood there was no commission. “This is like in the banks.”
To spur national adoption, Bukele said the government would create a $150 million fund to allow people receiving payments in bitcoin to immediately convert them to dollars, reducing the risk of holding the fluctuating digital currency.
Jessica Velis, who runs the El Zonte business where the ATM is located, said some people here are already receiving remittances from abroad in bitcoin.
Salvadorans received some $6 billion in remittances last year from relatives living abroad, mostly in the United States. Bukele has said adopting bitcoin could save on the costs of sending that money home.
Not everyone in El Zonte is sold on the idea.
At Olas Permanentes, one of the town’s most popular restaurants, customers have been able to pay using bitcoin. But when the waitstaff was asked if they use it, they all said no. Some said they didn’t have higher-end cellphones needed to download the app, while others said they had doubts about how it worked.
“They pay me in dollars and in cash,” said one waitress, who declined to give her name.
Walking through town, a woman who only gave her name as Teresita, was asked if she used bitcoin. “Not me, I prefer to have the bills,” she said.
EL ZONTE, El Salvador (AP) — By MARCOS ALEMAN Associated Press.
Associated Press writer Christopher Sherman in Mexico City contributed to this report.
DubaiCoin is a scam, Dubai govt warns
DubaiCoin, the digital currency intended to pay for a range of goods and services both in-store and online in the UAE, has been unveiled to be a scam, Dubai’s government said earlier last week.
“DubaiCoin cryptocurrency was never approved by any official authority,” the government said on its Twitter account. “The website promoting the coin is an elaborate phishing campaign that is designed to steal personal information from its visitors.”
DubaiCoin had initially surfaced back in 2017 for trials and testing, but was later shelved, but the ploy portrayed a relaunch of the cryptocurrency while claiming that it had official backing from the government.
News of DubaiCoin’s announcement was even listed on PR Newswire; it is worth mentioning that the press release claimed that it would become Dubai’s official digital currency, raising suspicions between investors and crypto experts in the GCC.
Perpetrators of the phishing scam remain unknown.
In parallel, according to Arabian Chain Technology, a UAE-based blockchain start-up that set up Dubai Coin in 2017, said the relaunch was fake and that its name and logo had been used fraudulently in a news release and website.
“We haven’t made such an announcement, please be cautious,” the company said on Twitter.
The landing page, which featured ArabianChain’s logo, was purportedly being run by a company calling itself Dubpay International but contained no contact details and is no longer operational.
According prices on crypto.com, DubaiCoin’s value jumped up 14-fold going from $0.09 per coin Tuesday May 25, to $1.13 as of two days later.
El Salvador makes Bitcoin legal tender
El Salvador’s Legislative Assembly has approved legislation making the cryptocurrency Bitcoin legal tender in the country, the first nation to do so, just days after President Nayib Bukele made the proposal at a Bitcoin conference.
The digital currency, originally created to be money out of the control of governments, can be used in any transaction and any business will have to accept payment in Bitcoin, with the exception of those lacking the technology to do so. The U.S. dollar will also continue to be El Salvador’s currency and no one will be forced to pay in Bitcoin, according to the legislation approved late Tuesday.
“Every restaurant, every barber shop, every bank….everything can be paid in U.S. dollars or Bitcoin and nobody can refuse payment,” Bukele said in an hour-long social media hangout with thousands of U.S.-based Bitcoiners as the bill was being debated Tuesday night in El Salvador’s congress.
The exchange rate between the two currencies will be established by the market and all prices will be able to be expressed in Bitcoin — though for accounting purposes, the dollar will continue to be the currency of reference.
The government will promote training for people to be able to carry out transactions using Bitcoin, which has been used for people trading in black markets to avoid government oversight.
The Economy Ministry noted that 70% of Salvadorans do not have access to traditional financial services and it said the country “needs to authorize the circulation of a digital currency who value exclusively follows free market criteria” to stimulate growth.
“The Bitcoin law is ambitious, but simple,” Bukele said on Twitter. “Furthermore it is well structured to have zero risk for those who do not want to take risks. The government will guarantee the convertibility to the exact value in dollars at the moment of the transaction.”
The law would create mechanisms to help Salvadoarans, especially small businesses, quickly convert payments they receive in Bitcoins into dollars — helping them avoid the risk of the value plummeting, as it had in recent days
The legislation established a government fund that will guarantee the automatic convertibility to dollars.
“They have to take the Bitcoin, but they don’t have to take the risk,” Bukele said. “We might earn some money or we might lose some money, but it doesn’t matter. The purpose of the trust fund is not to make money but to support making Bitcoin a legal tender.”
That $150 million fund was the aspect of the legislation drawing immediate attention.
“I don’t know how they’re going to sustain this trust, because if they have all these bitcoins coming in and all these dollars coming out for the Bitcoins, because they’ll be freely interchangeable between the two, that’s going to be a way to clean dirty bitcoins,” said David Gerard, author of “Attack of the 50 Foot Blockchain.” Without very rigid controls on Bitcoin movements and full know-your-customer rules, “they’re going to be a laundromat for money.”
Additionally, Bukele said that anyone who invests three Bitcoin in El Salvador—currently about $105,000— will be entitled to permanent residency.
Bukele said he would discuss his plans with the International Monetary Fund on Thursday. He denied that the move was an attempt to de-dollarize the economy.
“The objectives of having the U.S. dollar as legal tender are replicated on steroids with Bitcoin,” he said. “It’s going to help having both currencies as legal tender.”
The law will take effect 90 days after its official publication. The Central Bank and financial system regulators will publish the implementing rules in the interim.
Bukele’s New Ideas party holds a supermajority in the new congress seated May 1. On its first day it ousted the justices of the Constitutional Chamber of the Supreme Court and then replaced the Attorney General, leading to concerns from the United States and others about Bukele’s concentration of power.
Other countries in the region, including Venezuela and the Bahamas, have introduced digital currencies, though none had adopted the original cryptocurrency, Bitcoin, itself.
Bitcoin, intended as an alternative to government-backed money, is based largely on complex math, data-scrambling cryptography — thus the term “cryptocurrency” — lots of processing power and a distributed global ledger called the blockchain, which records all transactions. No central bank or other institution has any say in its value, which is set entirely by people trading Bitcoins and which has wobbled wildly over time.
Bitcoin and other popular digital currencies, including Ethereum and Dogecoin, all rose on Wednesday according to the tracking site Coindesk. Bitcoin, which climbed above $60,000 early this year, was up 10% to $36,050.
Carlos Carcach, a profesor at El Salvador’s Superior School of Economics and Business, argued that adoption of Bitcoin as legal tender “is not necessary, nor convenient,” though he added, “as long as there is someone who accepts payment with Bitcoin, the same as they accept dollars, there wouldn’t be problems.”
He noted that Bitcoin is extremely volatile, so investors “run the risk of becoming rich and the next day being poor.”
Opposition lawmaker Rodrigo Ávila of the conservative Arena party complained that the legislation was not sufficiently discussed by the Legislative Assembly before passage. There was no testimony from economic or cybercrime experts.
U.S. officials have said Bitcoin was used to pay the ransom in the cyberattack of Colonial Pipeline that caused the operator of the nation’s largest fuel pipeline to halt its operations last month.
El Salvador’s move rekindled memories of the Nov. 30, 2000, decision to dollarize El Salvador’s economy, an action taken in the middle of the night by the Arena-controlled congress.
El Salvador received some $6 billion in remittances from Salvadorans living abroad last year, about 16% of the country’s gross domestic product. Bukele has said Bitcoin could eliminate the costs of sending that money home.
“This is not something for rich people only. It’s for everybody,” said the 39-year-old Bukele, who waxed philosophically about the power of cryptocurrency to loosen the control of central banks and empower young entrepreneurs.
“We build our own future. So why do we have to resign ourselves to a dystopic future?” he said, adding that he’s enjoying the moment without fully understanding the shift in international finance his tiny homeland may have triggered. “This will be a huge gamechanger not for El Salvador but for the world. It’s beautiful to be part of a huge change in humanity.”
SAN SALVADOR, El Salvador (AP) — By MARCOS ALEMAN Associated Press
AP writer Joshua Goodman in Miami and Christopher Sherman in Mexico City contributed to this report.
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