Biz Builder Mike

You can't sail Today's boat on Yesterdays wind - Michael Noel

US AML watchdog wants info on all international crypto transactions over $250

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The Financial Crimes Enforcement Network (FinCEN) and Federal Reserve are looking to get more information on smaller transactions than ever before. 

According to a notice of proposed rulemaking published on Friday, the agencies want to lower the $3,000 threshold established in 1995 to $250 for international transactions, meaning that financial institutions would need to exchange client information alongside all transactions greater than $250 that begin or end outside of the United States. Which is to say, the Travel Rule, as it is known, would apply to quite small amounts of money changing hands.

The proposed change specifically calls out “convertible virtual currencies,” saying that they would also fall into the category of money for the purposes of this rule. 

The information that financial institutions need to exchange under the travel rule is:

“(a) name and address of the originator or transmittor; (b) the amount of the payment or transmittal order; (c) the execution date of the payment or transmittal order; (d) any payment instructions received from the originator or transmittor with the payment or transmittal order; and (e) the identity of the beneficiary’s bank or recipient’s financial institution.”

Which is to say, quite a lot of personal information that a crypto exchange would then need to store alongside a user’s account, posing a major data security threat. Moreover, implicit in this change is a mandate that financial institutions know the geographic origin of every transaction over the $250 threshold. 

The Financial Action Task Force is working to apply a similar rule all around the globe, which has proven highly controversial within the crypto world. The mandate to collect and exchange customer information seems diametrically opposed to the “peer-to-peer electronic cash system” that the whitepaper for Bitcoin presented. 

For now, the update to the Travel Rule remains just a proposal. FinCEN and the Fed are inviting public comment from all concerned over the next 30 days. 

US AML watchdog wants info on all international crypto transactions over $250

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PayPal’s crypto integration means Bitcoin could triple its user base

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Bitcoin (BTC) price has again punched through the $13,000 mark after yesterday’s PayPal’s announcement sparked a powerful rally which drove the price to a new 2020 high. 

Currently sitting near $13,100, Bitcoin price has rallied nearly 10% since the announcement and BTC is now close to overtaking PayPal as the 21st biggest asset by market capitalization.

PayPal’s crypto announcement comes two weeks after Square, another payments giant, announced its own foray into Bitcoin by investing roughly 1% of its assets into Bitcoin.

According to Lanre Jonathan Ige, a researcher at Amun AG, the continuing trend of large sized investments will be material in bringing institutional interest to Bitcoin. Ige said:

“Corporations are often trend-following and we can expect a number of other corporations to follow the lead of Square and Microstrategy, as the returns of the assets continue to impress.”

However, the recent news from PayPal is more likely to bring the masses to Bitcoin, rather than Bitcoin to institutions. This is because PayPal may bring a more mainstream audience up to speed with the cryptocurrency as an investment vehicle for now and as a payment method in the future, which has been one of the main focus of the Bitcoin community when it comes to mass adoption.

PayPal should boost Bitcoin’s user base

According to data from glassnode, Bitcoin currently has over 187 million users or “hodlers”. While impressive, crypto analyst Willy Woo noted that this pales in comparison to PayPal’s 487 million users.

Total Bitcoin HODLers. Source: Twitter

By adding Bitcoin, PayPal is bringing the name to a mainstream audience. While it is only possible to buy, sell and hold Bitcoin through PayPal for the time being, the company announced that it would be adding cryptocurrency payment and transfers in 2021. Once this occurs, it could cement Bitcoin’s reputation as a payment and remittance mechanism.

Transacting through PayPal and other centralized platforms could even become one of the ways in which Bitcoin is able to scale to a mainstream user base. Centralized transactions (along with other methods like sidechains and lightning network) could be used to alleviate congestion in Bitcoin’s blockchain, allowing it to be used only for bigger transactions that require more safety, transparency or immutable proof of ownership.

Bitcoin is on the path to outperforming banks

While it seems that payment processing companies and cryptocurrencies are finding more synergy as time passes, the same can not be said for banks and this struggle is reflected in their stock price.

Jon Erlichman, tech correspondent at BNN Bloomberg, noted that assets like Bitcoin, Ether and stocks for payment companies like PayPal and Square were doing quite well this year but since the COVID-19 pandemic, financial stocks have underperformed.

Bitcoin and Ether YTD performance. Source: Digital Assets Data

To date, the prices of Bitcoin and Ether have appreciated by 80.5% and 217%. Meanwhile, PayPal rallied 99% and Square 186%. Banks like JPMorgan and Bank of America, on the other hand, have lost 28% and 32% respectively. Citigroup has seen its stock value drop by 46% and Wells Fargo has decreased by 58%.

As for Bitcoin, it continues to be one of the best performing assets in existence, beating gold and the S&P 500 by a wide margin in 2020.

Macro Assets Current Year Returns. Source: Skew.com

As a growing number of people interact with Bitcoin as an investment vehicle, it is possible that consumers will turn their backs to banks and invest in cryptocurrency.

According to experts, Bitcoin may even benefit from what some call the ‘Robinhood effect’, a phenomenon where retail investors with disposable income purchase an asset via fee-free, gamified investing platforms in order to avoid the rigamarole frequently associated with banks.

If this happens to BTC, the digital asset could see the same type of hyperbolic investing frenzy that occurred as Robinhood investors poured funds into Tesla earlier this year.

PayPal’s crypto integration means Bitcoin could triple its user base

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Webinar: The Next Generation of Fintech

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Fintech is making an interesting transition — from disrupting big banks to disrupting the disruptors. Companies like Robinhood, Lemonade and Credit Karma grew by addressing consumer needs that banks had ignored. Now a new generation of fintech companies is emerging. And they say their solutions are even better. One of them is Guac. It helps ordinary folks “save as they spend.” Our Andy Gordon and KingsCrowd founder Chris Lustrino sat down with Guac’s father/son team to discuss their new company in detail. How much better is it? What’s their target demographic? And just how big do they think they can get? You’ll find the answers to these questions and much more by watching the video. Enjoy.

Thanks for watching!

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