Crypto’s Last Week
This edition of “Crypto’s Last Week” accounts for the most notable, and crypto-related — institutional, investment, and regulatory — news published between Saturday, October 17, 2020, and Friday, October 23, 2020.
The Bretton Woods system is monetary management that was agreed upon, by 44 allied nations, during World War 2 and implemented in 1945 as a way to create a working framework for commercial and financial relations among the countries that were expected to win the war and drive the reconstruction of the world economy.
Said system gave us the International Monetary Fund (IMF), the World Bank, and most importantly caused the shift from what was known as a traditional gold standard, in which paper money was backed by the equivalent amount in gold held by banks or central banks at the very end, to a dollar-pegged monetary system.
This system allowed only a 1% variation of currencies against the US dollar, intending to minimize volatility, improving international trade relations, and promoting healthy lending and granting attitude from those countries with an economic surplus to those needed economies with deficits. This whole system, however, came down once the number of dollars held by central banks around the globe made it impossible for the US central bank to honor its $35 per ounce of gold commitment.
This week, IMF Managing Director, Kristalina Georgieva referred to the 2020 global health and economic crisis as a “Bretton Woods moment” due to the expected 4.4% contraction of the global economy in 2020 and the removal of $11 trillion in economic output for 2021. Which begs the consideration of having currencies go back to a standard where Gold or even Bitcoin could be the base for currencies around the world.
Bringing back said standard could bring back the era of deflationary monetary policies, fomenting savings over credit and a more predictable economic growth for each nation, while capping, in a sense, the potential expansion economies could experience. Nevertheless, based on Ms. Georgieva’s speech, the application of a deflationary model would tend to reduce wealth and financial gaps, rising the number of individuals lifted above poverty lines and giving equal opportunity to millions of global citizens to improve their living standards.
The question is, are governments willing to lose a large amount of power that comes with the implementation of monetary policy?
Probably, this month’s most impactful institutional report comes from the global online payments service provider, PayPal, and the approval by the New York Department of Financial Services of the first bitlicense to the Palo Alto headquartered organization. This comes at a time when the number of publicly traded companies are hedging their reserves with Bitcoin as a strategy to avoid being affected by the devaluation of currencies is continuously increasing.
Additionally, it feels like yesterday (October 2019), when PayPal became the first entity to leave the Libra association while stating that the company “fully supported the Libra project, but would focus on its core business”.
Nevertheless, 2020 had plenty of evidence that PayPal was not only moving forward with its internal agenda to integrate itself into the blockchain and cryptocurrency industry by actively approaching the European Commission, disclosing its intentions within the “crypto space” and the solutions crypto could bring to “pain points” in the financial system.
With its reported 300 million active users and 26 million merchants globally, this latest move has brought PayPal to the front pages of small and large news sites around the world, signaling a clear move to take over as much of the exchange and custody of Bitcoin, Ethereum, Bitcoin Cash, and Litecoin as possible with its over 20,000 employees and subsidiaries such as Venmo and Honey.
Also, coming like a cherry on top of this big move Sunday, Bloomberg News reported, within 24 hours, the potential acquisition of BitGo, a private institutional security, custody, and liquidity solution that has been a leader in their respective area of the cryptocurrency ecosystem since 2013, with over $69 million funding from the likes of Goldman Sachs, Founders Fund, Galaxy Digital, and Digital Currency Group among others.
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