August 28, 2014 - In This Issue:


International Megabank Santander Commissions Study on Bitcoin

     Global banking giant Santander has commissioned a study investigating the potential impact of bitcoin and other cryptocurrencies on the banking sector.

 

     As the 43rd largest company in the world, the multinational megabank has branches on five continents and upwards of 180,000 employees.

 

     Santander's study, titled Bitcoin's Impact on Banks, is being run by insight network Yegii, which is now recruiting experts in the field. The project's budget is $5,000 and the stage one deadline is 27th August 2014. The report is due to be finalised in late September. 

 

     The bitcoin report was commissioned by Julio Faura, head of corporate development at Santander.

 

     Faura told Yegii founder Trond Undheim that the bank is looking for "additional outside perspectives" on the topic of bitcoin. Faura added that acquiring consulting services from top tier firms would be exciting, but getting an independent multidisciplinary perspective would be of particular interest to the bank.

 

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FBI Examining Whether Russia Is Tied to JPMorgan Hacking

     Russian hackers attacked the U.S. financial system in mid-August, infiltrating and stealing data from JPMorgan Chase & Co. (JPM) and at least one other bank, an incident the FBI is investigating as a possible retaliation for government-sponsored sanctions, according to two people familiar with the probe.

 

     The attack resulted in the loss of gigabytes of sensitive data, said the people, who asked not to be identified because the probe is still preliminary. Authorities are investigating whether recent infiltrations of major European banks using a similar vulnerability are also linked to the attack, one of the people said.

 

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10 Reasons Why Bitcoin is Better than PayPal

     It is no secret to Bitcoin users that digital currency makes PayPal's model of online transaction look somewhat archaic by comparison. While the method was the darling of the online community in years gone by, the rapid advance of Bitcoin in particular has caused PayPal to come increasingly under the spotlight recently.

 

     There is even an online platform for users to share their horror stories and experiences when using PayPal: http://www.paypalsucks.com/ 

Stories of high fees, delayed payments and frozen accounts are also now abound in forums and news resources, while Ebay's (PayPal) CEO, John Donahoe, even stated that Paypal will have to integrate digital currencies in their wallet sometime in the near future. But while the company considers how to move forward, the world of digital currencies is quickly gaining a foothold and gaining momentum.

 

     Digital currency transactions themselves are not entirely foolproof as several high-profile cases in the past year have shown, but how do they really stack up with PayPal's offering?

We decided to give readers a rundown of why we at CoinTelegraph are all about crypto for sending and receiving payments - any payments.

 

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      Bitcoin, an alternative digital currency which is used to purchase goods and services online, is showing staying power, Reuters reported on Thursday, August 28.

 

     Though virtually unknown only a few years ago, the electronic currency is now catching on among more and more online vendors, including

   

     Expedia, America's largest online travel agent, and Overstock, an online retailer.

 

     Although bitcoin sales hardly ever represent more than one percent of total sales, Reuters says many of the vendors it interviewed expect that the online currency "will one day be as ubiquitous as the Internet."

 

     Expedia started accepting Bitcoin payments for hotel bookings on July 11.

 

     Bitcoin has become a software-based online payment system. It is easy for users to access: bitcoins are stored in international digital wallets with a unique identification number, like Coinbase or Blockchain. When buying something online, the user simply needs to choose bitcoin as a payment option and enter his wallet ID number.

 

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Please read this roundup of political and economic recent history as data points and the view from our perspective as it relates to Bitcoin's future.

    

  • The USA has declined from it's peak as the world's largest economy, and the BRICS in total (and China almost on it's own) are now a larger economic unit.
  • Since 2008, the central banks of the major trading currencies in the world have engaged in unprecedented money printing (QE) as part of a largely unreported currency war. This inevitably will lead to a currency collapse for those currencies. Unfortunately this time the currency war is truly global and that implies a global collapse at an unknowable but fairly near time in the future.
  • The USA in a fairly imperial manner, has triggered an increasing number of conflicts around the globe, and now regularly resorts to 'asset freezes' and 'sanctions' on an arbitrary basis to exert it's global influence. (in addition to more traditional military pressure exerted by it's roving armed forces and extensive overseas garrisons)
  • Recently, the independence of SWIFT network was shown to be compromised when the USA forced it to suspend it's services to Iran.
  • The American VISA/Mastercard networks and American banks have also been coerced into removing their services from organisations that the US administration has some grudge with. Wikileaks, Colorado (legal) cannabis traders, Bitcoin traders and so on.
  • The BRICS countries, and especially Russia/China have now openly called for the 'de-dollarisation' of the world to constrain the actions of the USA, and Russia is now actively removing the use of VISA/Master card and replacing it with the Chinese UnionPay system
What has not happened, is for the BRICS countries to actively sideline SWIFT to remove the leverage that it gives the USA. What the BRICS need is a global payments system that is beyond US control and can cope with the type of settlements that SWIFT is used for.
The Bitcoin network already exists globally, and is mostly beyond control of any single country (though it's usage can be locally throttled as shown by the subtle restrictions instituted by China). As such, it has promise as a drop-in replacement for SWIFT. There is just one problem - the current 'pricing' of Bitcoin is not high enough to support world trade.
The Bitcoin pricing (approx USD 500 at present), is actively manipulated by 'whales' in the thin markets that exist. They move price up, then down and spike hope and panic to extract trading profits. Because the Bitcoin markets are so small and illiquid, the 'whales' are in fact only very small currency traders when compared with their peers in the global Forex markets.
That means, a sovereign backed trader could simply begin to 'buy the market' and achieve two goals almost instantly.
  • Collect a small amount of Bitcoins for future use in trade settlement
  • Reprice Bitcoin massively upwards to make it suitable for world trade in competition with SWIFT.
At one level, this would also be remarkably profitable in it's own right. The 're-pricing' of the payments system automatically generates a capital gain for the Bitcoin units obtains. For example: When I last looked, it would take only about USD 20 Million on two exchanges (BTC-e and Bitstamp) to buy 90% of the liquidity. That would drive the pricing up to over USD 1000 per BTC ... and generate on a 'mark to market' basis, about a USD 8 Million profit. The more extreme the 'buy in', the more this effect gets magnified. Add to that, the panic buy it would induce from other players and the upward re-pricing could easily be more extreme.
So the question is: What Bitcoin price is needed to compete with SWIFT?
One way to estimate this, is to take total official world trade (USD 71 Trillion) plus the black economy or System D (est USD 30 Trillion), and map it against the approx 13 Million Bitcoins that have been mined. Very roughly, that means if one Bitcoin is the equivalent of USD 10 Million, Bitcoin could settle all world trade. Clearly, Bitcoin would still be competing with USD as they will still exist, and the USD has it's supporters. So a lower target exchange rate would suffice - perhaps USD 1 Million to start.
At a guess, spending about USD 250 Million right now, especially as part of announced policy, would drive the re-pricing of Bitcoin towards a level suitable for trade settlement. For a BRICS sovereign nation, USD 250 million is small change.
From the BRICS perspective, the capital gains are not very interesting, but re-pricing the Bitcoin system to make it competitive against SWIFT really is.
Just as interesting from their perspective, even though Bitcoin is beyond the direct control of any government, the BRICS countries are not threatened by that lack of control. They all have actual hard assets and population at the core of their wealth. They are directly threatened by the financialisation of the world which disproportionately benefits the US and it's close allies to the BRICS detriment. The SWIFT system is one of the major components of that financial system.
Only the elites of the west (and not the general public), are threatened if US control of world finances is reduced via a competitor for SWIFT.
I am surprised that the various economics and treasury advisors in the BRICS countries have not suggested this obvious solution. A solution that is available almost instantly to a sovereign nation, without any major risk if it does not work.
In the mean time, even minor 'whales' from the wider Forex world could trigger this upward re-pricing if they want to!!
So I wonder who will be first to move.
Final note: Sovereign nations like China have a unique advantage. China could achieve the same out come by decree - simply by fixing an exchange rate for one Satoshi equal to one external Yuan (CNH) ... that would leave their capital controls intact, but instantly create the competitor to SWIFT that they need.

 

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