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Bitcoin continued its slide this week and fell below $40,000 for the first time since September 2021, as many digital currencies fell amid the “risk-off” sentiment sparked by a more hawkish Federal Reserve.
The week was full of developments for the sector; the House of Lords suggested that Britain doesn’t need a central bank digital currency to American television Kim Kardashian facing a lawsuit for an alleged crypto “pump and dump” case.
Here are the top stories that caught our eye.
The House of Lords – the second chamber of the UK parliament – said this week that there is no merit in the Bank of England’s efforts to develop a digital pound as it believes that concerns for financial stability and protection of privacy outweigh potential benefits that could come with a digital sterling.
Alarmed by the growth in digital currencies in 2021, the Bank of England is one of many central banks across the world, including the European Central Bank and the People’s Bank of China, that are exploring the possibility of launching a central digital bank currency (CBDC). CBDCs are a digital form of a country’s fiat currency. Unlike traditional money, it is not in physical form.
But the Lords’ report has complicated Britain’s CBDC ambitions. Michael Forsyth, who sits in the Lords as Lord Forsyth of Drumlean and is chair of the House of Lords Economic Affairs Committee, said the “the introduction of a UK central bank digital currency would have far-reaching consequences for households, businesses, and the monetary system”.
There are two main security risks posed by a CBDC, say the Lords. The first is the risk that individual accounts could be compromised by taking advantage of weaknesses in cybersecurity, and there is the threat of the centralised ledger being hacked by hostile state and non-state actors.
The report also suggested that CBDCs would infringe peoples’ privacy as it would give the state greater surveillance over peoples’ financial decisions.
However, the committee was not all downbeat on the digital pound. It said that the case for a digital pound could change in the future and proposed the government and Bank of England take action to “shape global standards which suit the UK’s values and interests, for example with regard to privacy, security and operational standards”.
China may have banned cryptocurrencies last year, but that hasn’t stopped it from steering clear of non-fungible-tokens (NFTs).
China’s state-backed Blockchain Services Network (BSN) is planning to launch infrastructure at the end of the month that will support non-fungible tokens, reports the South China Morning Post. He Yifan, chief executive of technical support company Red Date Technology, the company behind the NFT infrastructure launch, told the paper that the NFT market will not encounter any legal issues so long as the sector distances itself from cryptocurrencies.
The infrastructure, which is called the BSN-Distributed Digital Certificate (BSN-DDC), provides application programming interfaces for both individuals and businesses and paves the way for them to devise their own user portals or apps to manage NFTs.
The Chinese yuan is the only currency that can be used to make purchases and pay for service fees.
Red Date Technology announced in October last year that it would launch its infrastructure in China by the end of January.
China took aggressive measures last year including calling all crypto transactions illegal and banning cryptocurrency mining.
NFTs are cryptographic tokens – much like a cryptocurrency – that are recorded on a blockchain and can be used to prove the authenticity, ownership and provenance of anything – physical or non-physical – such as artwork or collectables.
2021 was a record year for NFTs, with nearly $41bn being spent on them, according to an estimate from blockchain analytics firm Chainalysis.
Kim Kardashian, the media star, socialite and businesswoman, is being sued by cryptocurrency speculators over her alleged role in promoting the EthereumMax cryptocurrency, which eventually lost 98% of its value, according to a class-action complaint. Other defendants include boxer Floyd Mayweather Jr and basketball player Paul Pierce, says the BBC.
Don’t be fooled by the cryptocurrency’s name, however; it has nothing to do with ether, the world’s second largest cryptocurrency. The lawsuit likened EthereumMax’s name association with ethereum as “akin to marketing a restaurant as “McDonald’sMax” when it had no affiliation with McDonald’s other than the name similarity and the fact that both companies sell food products.”
The legal action claims the cryptocurrency operated a “pump and dump scheme”, where the price of an asset is artificially inflated through misleading or overly bullish marketing and then selling the asset once it has risen sufficiently.
Kardashian posted an Instagram ad promoting the cryptocurrency to her 250 million followers.
The class-action complaint was filed on behalf of investors who bought EthereumMax between 14 May and 27 June 2021.
Here’s what happened to five of the largest cryptocurrencies by market cap – according to data compiled by Coinmarketcap – in the last seven days:
Cryptocurrencies may have started 2022 on a sluggish note, but Bank of America thinks it is worth looking out for solana, which is largely expected to surpass ether to become the “Visa of the digital asset ecosystem.”
"Its ability to provide high throughput, low cost and ease of use creates a blockchain optimised for consumer use cases like micropayments, DeFi, NFTs, decentralised networks (Web3) and gaming,” the bank’s digital strategist Alkesh Shah said as cited in Forbes.
Solana has risen by almost 4,300% in the last year.
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