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40Crypto has only been Used by 12% of Americans
Crypto Weekly
Crypto has only been Used by 12% of Americans
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12% of American adults used cryptocurrency as an investment last year rather than as a currency, a Federal Reserve survey shows. 12% said they bought or held the cryptocurrency for investment purposes, and 2% used it to buy something or make a payment. A further 1% used it to send money to friends and family, according to the annual survey that surveyed over 11,000 U.S. adults between October and November 2021 about their economic well-being. Survey respondents could select multiple answers. In contrast to how cryptocurrency is often portrayed as a payment vehicle that promotes financial inclusion, the results indicate that the asset class is primarily viewed in the U.S. as an investment vehicle. Investing in cryptocurrencies makes sense since their market capitalization grew by 86%, from $335 billion to $2.54 trillion during the survey period, according to CoinMarketCap. Only 46% of self-identified crypto investors earned $100,000 or more, while 29% earned less than $50,000. Ninety-nine percent of investors did not have retirement savings but had a bank account. In contrast, 2% of people who used the asset class for financial transactions were unbanked, low income, and did not have a credit card.
A survey conducted from late November to February, after the crypto market peaked at the beginning of November, found that 20% of U.S. adults owned cryptocurrency. According to other surveys, such as one from cryptocurrency exchange Gemini at the start of April, the Fed's figures fall short of the level of U.S. crypto adoption. In contrast, data from both surveys and Chainalysis's largest geography study suggest that cryptocurrency isn't primarily used for payments in developed countries.
The U.S. ranked eighth in the study overall for crypto adoption, third for total crypto activity, and fourth among non-professional, individual crypto users. Despite this, the U.S. ranked 109th in peer-to-peer exchange volume.
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The Meaning of Crypto for Global Financial Markets
Robert Stone
Crypto has changed the way people think about finance. Crypto concepts eventually transformed into something that reimagined an entire industry and fundamentally changed people's perceptions of managing and handling their finances.
Cryptocurrencies and digital money have enabled people to regain control of their finances, enhance their privacy, and bypass borders when making international payments. Since the industry is still in its infancy and is only just starting to gain mainstream acceptance, where cryptocurrencies such as Bitcoin (BTC) are becoming legal tender in some countries, understanding their impact on global financial markets has never been more crucial.
Taking the Plunge to Digital Money
Digital money is any form of payment that can only be made electronically. Because these currencies aren't physically tangible, they cannot be held like a dollar bill, a euro, or any other coin.
Global money transfers have become cheaper and quicker using digital money, which streamlines the current financial infrastructure. Crypto, central bank digital currencies (CBDCs), and stablecoins are examples of digital money.
Although historically, digital money has been vulnerable to hacks and could potentially compromise user privacy if mismanaged, leading to a high level of concern. However, there are a few sectors within the cryptocurrency sphere where things are looking up.
Digital currencies issued by central banks are also known as CBDCs (Central Bank Digital Currencies). Although they are more centralized, they are pegged to a country's FIAT currency value. Typically, these coins are issued and regulated by a nation's monetary authority or central bank. A monetary or fiscal policy can be simplified and can promote financial inclusion. CBDCs have become increasingly important in helping to stabilize economies and financial networks in many countries over the past few years. CBDC is most dangerous when citizens track the money or exercise centralized control. This could result in a lot of risks within these systems.
They are structured as follows:
Central Bank Core Ledger - this is a fast and highly secure platform that enables users to make payments quickly. It is called the "Core Ledger." API access enables private-sector payment interface providers to connect to the aforementioned ledger and block unauthorized access. As a result, only regulated entities can access the ledger. Furthermore, payment interface providers are regulated and authorized companies that offer user-friendly interfaces for interacting with the ledger. Last but not least, users can register with the payment interface providers and access these CBDCs.
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Stablecoins are not expected to compete directly with CBDCs but will be more popular among privacy-conscious crypto enthusiasts.
They are cryptocurrencies with their value pegged to the value of an external currency, most commonly the United States dollar. They are not limited to this peg, however. In addition, they can be pegged to gold or can even be algorithmic stablecoins that, theoretically, control the supply.
Due to the recent surge of cryptocurrencies, the desire to know what cryptocurrencies may contribute to the global financial markets is on everyone's mind as advanced economies migrate to a cashless system.
What Will Digital Money Mean for the Global Financial Markets?
When it comes to cross-border payments, digital currencies can help increase efficiency. The payment settlement time has been one of the main issues surrounding global payments for years.
This could take from the same business day to five business days in some cases. Verifying the sender and recipient's information has also always required human interaction. This may include anti-money laundering and counterterrorism financing. Since digital currencies use decentralized ledgers, they can move money within seconds, 24/7, 365, since the digital ledger never sleeps.
Specifically, CBDCs can contribute to a healthy global financial market.
Control is essential because it insulates economies, facilitates real-time payments, fights dollarization, increases inclusion, and lowers cross-border costs. However, they can also create unfair competition and have less lending capacity on the flip side.
A Bigger Change in Global Banking As a Result of Stablecoin Regulation
Stablecoins are under continuous regulatory scrutiny due to their rapid market capitalization growth and their potential impact on financial systems. A leading central bank globally, the U.S. Federal Reserve calls for a comprehensive regulatory framework for stablecoins. Stablecoin regulation goes beyond avoiding destabilizing runs that may negatively impact financial stability, even though it is welcome news that financial regulators are working to reduce their risks. However, these regulators should also consider operational resilience standards and customer data protection.
Moving Forward with Payments
Digital money can boost economic growth as it bypasses any global restrictions. The future of payments will likely be inexpensive, easy, and fast.
To put stablecoins and CBDCs in front of the applications of billions of people, blockchain networks need to solve specific issues and limitations, such as scalability and throughput (transactions per second).
There are two types of digital currency currently available: the Central Bank Digital Currency (CBDC) and Stablecoin.
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The Metaverse Could Be One of the Most Unsafe Situations You've ever Experienced
In the future, virtual worlds will replicate the physical world. There are concerts, casinos, cafes, and even lounges sponsored by your bank where you can meet friends. Regulating these digital spaces is subject to code and terms of service agreements instead of real-world law, leaving some to wonder if this is sufficient. Does your avatar have the same legal rights as you in the metaverse?
Regulatory authorities often struggle to understand their jurisdiction in the metaverse and apply civil and criminal laws to digital assets, land, data, and privacy - civil and criminal laws that deal with interpersonal interactions are left out of the discussion.
As the metaverse promises to play a large role in how we interact in the future, this is even more important. While the metaverse gains momentum and regulators will grapple with this question as real people experience real consequences and injuries in these virtual spaces. Nina Jane Patel described a "virtual gang rape" she experienced in Meta's Horizon Venues in a Medium article. Horizon Worlds now includes Horizon Venues.
Trying to get away, they yelled, "Don't pretend you didn't love it," and "Ruff yourself off to the photo," the 43-year-old mother wrote. The experience was described as a surreal nightmare. It was not an isolated incident. A Horizon Worlds beta tester reported being groped in December 2021. According to her post on Horizons' official Facebook page, "I was not only groped last night but there were others in the Plaza who supported it, which made me feel isolated."
Human interaction in the real world teaches us that more stories like this are likely to emerge. A staggering 81 percent of women and 43 percent of men reported experiencing some form of sexual violence or assault in their lives, according to the National Sexual Violence Resource Center, an American nonprofit organization.
Is it possible to be sexually assaulted in the metaverse? For Patel and the beta users, Meta launched a new solution called Personal Boundary for Horizon Worlds. It prevents others from entering your avatar's personal space, "helping you avoid unwanted interactions."
However, such fixes are not without their own challenges. Meta's unique boundary feature remains on default for "nonfriends," and users can adjust the settings themselves. When users cross boundaries and are sexually assaulted, what happens to them? Are they to blame? How does one navigate the settings if they are not tech savvy? A woman would feel like a victim of sexual assault if she was told that she was attacked for wearing too revealing clothing. What is the point at which an avatar
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becomes legally responsible for the actions of its owner?
Rape is defined in the U.S. Code as committing an act of sexual violence against another person.
Inflicting unlawful force on that person. Using force that causes death or grievous bodily harm to anyone. Threatening or inducing fear that the victim will face death, grievous bodily harm, or kidnapping. People can suffer psychological damage, unlike avatars. It's unclear how the metaverse would mediate mental harm, even though people can be awarded damages for psychological injury.
A new definition?
She described the experience as so horrible that she was unable to think, she could not put a safety barrier in place, and she just froze. Meta developed the safety barrier only after this experience. As the Horizon Worlds beta user noted in her Facebook post, those who experience this type of harm often feel isolated.
We have seen virtual assault and harassment leading to feelings of isolation and helplessness before, and the metaverse is no exception. Due to the social media revolution, it has become easier to communicate behind screens, resulting in harassment. Cyberbullying and cyber assaults have been brought about by social media, but no specific laws apply to interpersonal harm.
17-year-old Rehtaeh Parsons committed suicide in 2013, leaving her community devastated. After pictures of her alleged gang rape surfaced online, Parsons suffered from mental health issues.
The government of Newfoundland passed the Intimate Images and Cyber-Protection Act to address the non-consensual sharing of intimate images and cyberbullying and to give victims a remedy. The law reacted to this situation. If the legal system had kept up with technology, could Parsons' life have been saved?
As far as user interaction in the metaverse is concerned, legislators can learn from the past and take proactive measures. The psychological safety of every person should be protected if avatars are representative of real-world people.
To assume that the darkest parts of the physical world will not be reflected in the virtual world is naive. In addition to breaking a company's terms of service, it is not clear that the companies or platforms will be held responsible if things go wrong by enabling new types of experiences. Ifyou access the metaverse from the comfort of your own home, you could find yourself entering one of the most dangerous situations you've ever encountered. How's that for meta?
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Why Does Legacy Finance Hate Crypto?
Key Points
Former European Central Bank President
Christine Lagard said cryptos were "worthless." In the eyes of central banks, they are a threat to the implementation of their own digital currencies.
Because crypto cannot be controlled, banks are fearful of it.
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The price of a Bitcoin is currently just over $30,000, but Christine Lagarde thinks Bitcoin and other crypto assets are "worth nothing." In an interview on Dutch television aired on May 22, Lagarde said that she has maintained "all along" that crypto assets are "highly speculative, very risky assets." The speculative part is well known, but Lagarde added:
"My humble assessment is that it is worthless; it is not based on any underlying assets, which can act as a safety net."
What Central Banks Hate About Crypto
Cryptocurrency is vehemently opposed by central banks and their leaders for several reasons. They plan to introduce central bank digital currencies (CBDCs) in competition with decentralized digital assets. In her next statement, Lagarde confirmed this. "I will guarantee any digital euro that we have by the central bank. This is a very different concept from those others."
CBDCs will be fully controlled by the central bank. Using the blockchain, all transactions will be traceable, so banks will have even more control over people's finances than they already do. Crypto is not under the control of banks, so they will do anything to quash it. Banks are also responsible for profiting from deposits made by their customers. Banks operate on a fractional reserves system, in which they lend out and invest the money their customers deposit, leaving just a fraction as a reserve. The bank would collapse if everyone went to the bank at the same time to withdraw money.
When Satoshi Nakamoto created Bitcoin in response to the 2008 financial crisis, which banks were largely responsible for, he warned against exactly this. Inflation is ravaging the world, and central banks are printing more money in the name of stimulus packages that only serve to devalue the currency.
Bankers have stepped up their anti-crypto rhetoric in response to the global economic crisis. The ECB and Lagarde called for tighter crypto controls earlier this year, citing sanctions evasion as the reason.
Unlike traditional markets, crypto markets fluctuate.
Massive crypto market crashes are nothing new; it happened in 2018 and before that in 2014, when Bitcoin lost about 80% of its value before regaining its value a year or two later. The crypto bear market of 2022 was predicted, so this wave of mainstream media, policymaker, and banker FUD is largely unwarranted. The crypto markets are currently down 56% from their peak of just over $3 trillion in November 2021, so there is still a long way to go before this current cycle bottoms out.
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What is Decentralized Finance?
The decentralized finance movement uses blockchain technology to enable peer-topeer payments as part of a new banking and financial services vision. The DeFi blockchain enables "trustless" banking, bypassing traditional financial intermediaries such as banks and brokers.
What does this mean for investors? DeFi allows investors to become "the bank" by lending peer-to-peer and earning higher yields than traditional bank accounts. A digital wallet allows investors to send money quickly and access their funds without paying fees associated with traditional banking methods.
This is how DeFi operates, how it can benefit individuals, how it challenges traditional banking and the risks.
How Decentralized Finance Works
With DeFi, customers and businesses will be able to access many of the financial services they are currently used to - loans, interest on deposits, payments - but with decentralized technology. Rather than changing what, DeFi changes how the industry operates. As a result, DeFi provides similar financial products and services through new infrastructure.
Blockchain is a system of digital ledgers that keeps track of all transactions in a financial platform. The blockchain acts as a chronological log of all transactions on that particular blockchain. The ledger will permanently timestamp every payment made by Person A to Person B. A smart contract and blockchain technology, among other tools, enable it.
According to Oleksandr Lutskevych, CEO and founder of CEX.IO, a company that facilitates DeFi and cryptocurrency, the core of DeFi is smart contracts, which are executable codes that store cryptocurrencies that interact with the blockchain. DeFi is enabled by smart contracts that automatically execute transactions among participants. When the contract's conditions are met, the instructions are self-executed.
David Malka, CEO of YieldFarming.com, a cryptocurrency income-generating site, says DeFi replaces traditional intermediaries, such as banks and brokerage firms, in peer-to-peer transactions. "In DeFi, peerto-peer transactions can include payments, investments, and lending.”Cryptocurrencies have become the de facto currency for transactions and records globally. "DeFi is the natural evolution of the vision of electronic cash outlined in the Bitcoin white paper, so this is an exciting time for the industry," Malka says.
Primary Benefits
DeFi could potentially offer individuals greater security, potentially lower costs, a greater variety of services, and the capability of earning higher income from crypto holdings. Decentralized apps from a variety of groups allow for these benefits and more. "Decentralized apps, or dApps, enable people to move capital anywhere in the world (with fast settlements and a low cost), peer-to-peer borrowing and lending, crypto exchanges, NFTs, and more services, such as crypto wallets and storage solutions," Lutskevich says.
"DApps are pre-programmed by developers and can be used to execute transactions on a specific blockchain network, settle agreements between buyers and sellers, or move assets from a decentralized exchange to a decentralized lending platform," he says. Your only limitation is your ability to create an app that follows your commands.
One of the biggest benefits of cryptocurrency investing is the possibility of generating income. For example, crypto staking allows coin owners to help support a coin's ecosystem and earn income by validating transactions. This is called yield farming and has proved attractive when interest rates at banks have been at rock bottom for years. YieldFarming's Malka says that anyone can provide crypto assets as liquidity or loans through yield farming, which pays the depositor with interest and fees. "Yield farming is the process of generating passive income with cryptocurrency." DApps need liquid cryptocurrency to run, offering
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income to investors who put up their funds for a period. This is similar to interest paid on deposits at traditional banks but with a greater risk.
Different dApps offer different ways for cryptocurrency owners to farm yield, including: Offering liquidity in an exchange Smart contracts allow peer-to-peer lending to borrowers who can borrow against their holdings and farm the coins they borrow using coins such as Ethereum Investing in yield farms is a great way for investors to find profits, but just like traditional income sources, crypto profits are taxed in the same way. "Even low-risk yield farms can easily return rates several times higher than those of savings accounts in banks," says Malka. "This is particularly important during bear markets when cryptocurrencies like Bitcoin and Ethereum decline."
Investors Face Various Risks
Even though DeFi seems like a brave new world for finance, it does present some drawbacks and risks to potential participants: Complexity: There is more to DeFi than going to a local bank. The onboarding process can be confusing for some people because they must transfer money from an exchange like Coinbase to a noncustodial wallet, such as MetaMask, to begin using DeFi. "DeFi can be hard to navigate for beginners because there
are so many DeFi applications and investment possibilities," Malka says. Frauds and Scams: Several fraudsters are trying to entice new crypto investors with yields that may be drastically better than those offered by traditional financial institutions. A high return may not be what it seems.
Theft: As well as outright scams, crypto coins can also be stolen via exploits, as some dApps have vulnerable coding. "Funds can be lost in these exploits, and it is up to the core team behind the DeFi project to decide how to compensate the victims," says CEX.IO's Lutskevych. Cost: As with any transaction, smart contracts require a gas fee to make them work. "Fees can top $200 on a round trip," Lutskevych says. Several steps along the way could add up quickly, which could be especially costly for those with modest bankrolls.
Volatility: While yield farming can help mitigate your downside in the volatile world of cryptocurrency, you will still have to deal with stunning fluctuations to earn what may be modest yields. In one day, cryptocurrency could easily lose a year's yield. Volatile Fluctuating Yields: DeFi participants have to contend with fluctuating yields and fluctuating cryptocurrencies. As supply increases, yields can fall. Dying projects: A given dApp can die on the vine as the core team behind it pursue other endeavors. "If, one day, the team decides to quit, the protocol will carry on as before, but no further upgrades will occur," Lutskevych says.
Investors thinking of participating in DeFi need to know about these risks ahead of time.
How does DeFi challenge traditional banking?
A major claim of DeFi proponents is that this new financial technology will disrupt traditional banking. In extreme cases, DeFi will eliminate the middleman in financial transactions, replacing it with decentralized networks of peers.
Why wouldn't banks take advantage of DeFi, which is so powerful?
In the coming years, you'll see traditional financial institutions increasingly using blockchain and distributed ledger technology, says Malka of YieldFarming.com. "All of these institutions understand the inherent security of blockchain technology."
"Traditional banks will offer yield-farming opportunities to their clients to remain competitive and relevant," Malka predicts. According to CEX.IO CEO Lutskevych, however, such a change would be easier on paper than in practice due to the regulatory burden, causing complications for traditional businesses that are even contemplating it.
The implementation of blockchain technology would entail revisions of many well-established processes while exposing them to additional risks. "In addition, these institutions would need regulatory approval for these activities."
Summary
If you're looking to get started in DeFi, go slow and ensure you work with a reputable counterparty. While the yields offered by DeFi are enticing, don't let the potential gain blind you to the other risks. A downturn in cryptocurrency markets could quickly wipe out any small gains from yield farming, and outright scams or theft could further wipe out your crypto wealth.
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