"Bitcoin does not have the fundamental attributes needed to be a currency as it is a string of code generated by complex algorithms...But I do not deny that virtual currencies have technical value and are a type of asset," he said.

His comments come after the Chinese central bank increased scrutiny of the country's bitcoin exchanges earlier this year, a move that prompted the companies to stop margin lending, introduced trading fees and issue rules to rein in users.

Many governments around the world are still mulling how to regulate and classify bitcoin, whose value surged in June to hit a record just shy of $3,000. China has classified it as a "virtual good".

Squaring in on bitcoin, Sheng said expectations that bitcoin supply would be capped in the year 2140 would make it difficult for it to become a medium of exchange that could meet modern economic development needs as money supply should be related to economic needs.

He also said that Chinese monetary authorities should study issuing a central bank virtual currency that it could regulate and run properly.

Original post:
Bitcoin can be an asset but not a currency, says China central bank adviser - CNBC

July 7, 2017 by Corina Sas, The Conversation Credit: Shutterstock

Bitcoin reached a huge new peak in value in June 2017, when one unit of the virtual currency was worth US$2,851 (2,208), up from around US$600 just a year earlier. More than 10m people worldwide are now thought to own bitcoin and more than 100,000 merchants accept it for goods (not counting all those using it to sell drugs and other illegal items on the black market).

Part of bitcoin's appeal for many of its users is the lack of centralised control or regulation by any government or bank. Instead it relies on a technology known as blockchain to underpin and secure transactions. But research my colleagues and I have conducted suggests that the lack of any social trust in the way blockchain operates poses a challenge for bitcoin's further spread.

Blockchain is a public database that records digital transactions. These are validated by computers working within a worldwide network that solve complex coded problems. Whereas traditional bank transactions are authorised by financial institutions and controlled by governments through taxation and contracts between parties with known identities, blockchain is decentralised, unregulated and anonymous.

In our studies of blockchain's users we found that these features appeal to bitcoin users because of increasing distrust of financial institutions and governments. The technology empowers people to regain control over their money, with no restrictions over where and when they can send it.

But our findings also indicate that two core aspects of blockchain's design the fact that transactions are anonymous and irreversible pose significant challenges to the social trust among its users. Anonymity has an obvious appeal for people looking to avoid government control. And irreversible transactions were built into blockchain's original design as a positive feature to address banks' privilege of reversing transactions, even when the contract states that they were final.

But in practice, these features are a problem for many people. Most people are used to relying on the reputation of a seller to decide whether or not to buy from them and the ability of the financial and legal system to help them if something goes wrong. But neither of these things are possible through blockchain.

Paper trails have their advantages

Most transactions don't just involve moving bitcoin from one electronic wallet to another. In practice, they are often part of a larger, two-way transactions where both parties send and receive assets such as bitcoins, real world currency or physical goods.

The issue is that the blockchain only records the movement of bitcoin, not the movement of other currencies or goods. Because there is no authority to complain to, this raises a major risk that users could fall prey to dishonest traders who fail to deliver their side of the deal.

In our latest study, we interviewed 20 bitcoin users recruited from five online groups from Malaysia, most of them with more than two years experience of using bitcoins. Our research indicates that more than 50% of participants would prefer blockchain's transactions to be regulated and identifiable, so that transactions can be either reversed or the dishonest trader legally sanctioned.

This shows there is a tension between the freedom and empowerment of blockchain's unregulated nature, and the lack of security that most people are accustomed to receiving from traditional financial institutions. If this is not addressed, such tension may limit the spread of bitcoin beyond its current base. It could even reduce the number of bitcoin users involved in such two-way transactions, as more people become aware of the risks of dishonest traders. In contrast, the use of blockchain for one-way transactions such as remittance payments will continue to grow, as they are less affected by dishonest traders.

What can be done?

Even bitcoin's current users still operate largely under the traditional mindset of centralised and regulated currencies. Bitcoin advocates may need to find ways to encourage users to develop a new mental approach to unregulated blockchain technology.

But developers could also build tools to address some of bitcoin users' concerns. For example, there may be a way to record whether the real-world elements of bitcoin transactions are also verified, authorised and stored on the public ledger. Electronic wallets could be linked to a reputation file that users could view before agreeing to a deal, much like sites such as eBay allow consumers to rate sellers. And new mechanisms built on top of the irreversible blockchain protocol could enable individual two-way transactions to be reversed.

Without doing something to tackle these challenges, the very thing that caught people's attention about bitcoin in the first place could end up stifling its growth and eventually consigning it to history.

Explore further: Bitcoin's popular design is being exploited for theft and fraud

This article was originally published on The Conversation. Read the original article.

Google parent Alphabet is spinning off a little-known unit working on geothermal power called Dandelion, which will begin offering residential energy services.

Elon Musk's Tesla will build what the maverick entrepreneur claims is the world's largest lithium ion battery within 100 days, making good on a Twitter promise to ease South Australia's energy woes.

Qualcomm on Thursday escalated its legal battle with Apple, filing a patent infringement lawsuit and requesting a ban on the importation of some iPhones, claiming unlawful and unfair use of the chipmaker's technology.

France will end sales of petrol and diesel vehicles by 2040 as part of an ambitious plan to meet its targets under the Paris climate accord, new Ecology Minister Nicolas Hulot announced Thursday.

Japanese designer Yuima Nakazato claimed Wednesday that he has cracked a digital technique which could revolutionise fashion with mass made-to-measure clothes.

Volvo plans to build only electric and hybrid vehicles starting in 2019, making it the first major automaker to abandon cars and SUVs powered solely by the internal combustion engine.

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Bitcoin's central appeal could also be its biggest weakness - Phys.Org

Digital currencies are all the rage in 2017. A decade ago these assets did not exist. Five years ago, they were a novelty for a few. Last year, cryptocurrencies began to get some press, and in early 2017 the infamous Winklevoss twins unsuccessfully attempted to convince the SEC to allow them to open a Bitcoin ETF product on the equity exchange.

Those poor Winklevoss twins seem to always come up on the short side of things when it comes to gratifying their collective egos. While they have hundreds of millions, they had to fight for in the court from the wildly successful Facebook (NASDAQ:FB); the twins argued it the company's technology was their idea at Harvard and not Marc Zuckerberg's. The twins settled with the enterprise, but they lost out on the billions in wealth the company created.

This year, the twins were all ready to go when it came to an ETF product to make trading Bitcoin a lot easier for market participants. After they had been turned down, the price of the digital currency exploded higher. The Winklevoss twins are two very smart cookies, they have been at the starting gate for two assets that have taken off beyond anyone's wildest dreams. However, while the two millennials have profited and now have enough assets to lead a privileged existence for the rest of their lives, they must feel jinxed. Facebook billions slipped through their fingers, and the SEC stood in the way of their Bitcoin ETF just a few short months before the price of the asset exploded to the upside.

Huge gains during the first six months of 2017

At the end of 2016, Bitcoin was trading at $986, and many analysts believed the price was at a bubble level. After all, in 2010, the price of the cryptocurrency was at 6 cents. At the same time, the price of Ethereum ended 2016 at around the $8 level. Source: Bitcoin Price Index - Real-time Bitcoin Price Charts

In June, Bitcoin traded to a high of $3018.54, more than triple the price six months earlier and an astronomical gain since 2010. Source: Bitcoin Price Index - Real-time Bitcoin Price Charts

Ethereum peaked at $370.25 on the day that Bitcoin traded to its most recent high, over forty-six times the price at the end of 2016.

On Wednesday, July 5 Bitcoin was at around $2600, and Ethereum was $270, both digital currencies are still at lofty levels. These cryptocurrencies have been gaining acceptance by many around the world as they are a global means exchange where bids and offers in the market determine their values. Moreover, they fly below the radar of the central banks, monetary authorities, supranational financial organizations, and regulatory bodies of the world.

Are Bitcoin and Ethereum commodities or currencies?

Bitcoin, Ethereum, and other digital currencies have attracted lots of attention from people all over the globe as well as central banks who seek to monitor money supply. These assets operate like currency as they have applications as a means of exchange. However, they are not easy to fit into any traditional asset class. Cryptocurrencies are not stocks or debt instruments. They have some of the properties of currencies like the dollar, euro, yen, RMB, or other world currencies but there are many differences. Central banks and governments do not issue them, and they are far more volatile than fiat currencies. Given the price action and value appreciation over recent months, the only assets that can compare when it comes to price variance are commodities as raw materials prices have a long history of doubling or more in value or halving in short periods. However, Bitcoin and Ethereum's volatility makes commodities prices seem tame by comparison.

Defining digital currencies in an asset class vertical is not an easy task, but one regulator in the United States has attempted to take control of the market or at least to monitor the new market.

The CFTC defines the assets

In 2016, the Commodities Futures Trading Commission (CFTC) identified digital currencies as commodities. Their action was more an attempt to understand the new asset class rather than an effort to control the cryptocurrencies. When the Winklevoss twins approached the Securities and Exchange Commission (SEC) to list a Bitcoin EFT product, the SEC had a difficult time with the product. Regulating and controlling digital currencies would be like riding a psychotic horse through a burning barn these days given the price variance and secretive nature that is the overriding factor that has attracted so many to the market. Additionally, it has been the price action that has fostered the growth of these digital currency assets over recent months. After all, everyone loves a bull market, and when it comes to Bitcoin and Ethereum, there are few comparisons these days and even on a historical level for the appreciation.

In early 2017, under the leadership of acting CFTC Chairman J. Christopher Giancarlo, the agency set up Lab CFTC to "promote responsible FinTech innovation and fair competition for the benefit of the American public. LabCFTC is designed to be the hub for the agency's engagement with the FinTech innovation community." The initiative has given the CFTC a chance to study blockchain technology, high-frequency trading, and digital currencies in a lab environment. As other regulators in the U.S. and around the world have had a difficult time putting their hands around digital currencies and financial technology, the CFTC has carved out an area under their umbrella to plant the seeds of regulation. While many regulators and governments are quietly studying and pondering the impact of financial technology these days, the Commodities Futures Trading Commission is doing something about the new asset class. The CFTC may be in the best position to understand digital currencies as the most volatile and highly-leveraged assets in the world fall under their purview.

Tax issues for U.S. citizens

One of the issues that face those active in the digital currency markets in the United States is taxation on profits and losses when participating in Bitcoin and Ethereum these days. I recently came across an interesting article on the tax treatment for Bitcoin published on a website called "Taxes For Expats." The article outlines some of the important issues facing those active in the new market and could serve as a good ready-reference when it comes to taxation. In the volatile digital currency markets, that regulators continue to struggle with these days, anyone trading or investing in these assets need to understand the tax ramifications of their activities.

Bubble markets, but the technological age means these assets are here to stay

The price action in both Bitcoin and Ethereum has been nothing short of a classic bubble. There may have never been a bubble quite like the one going on in digital currencies. The only comparison that is even close is to the tulip bulb mania that gripped the Netherlands back in the 1600s, but the utility of digital currencies makes for a weak contrast.

We are living in the age of technology. At 57 years old, it is unbelievable to me the changes I have seen over the span of my lifetime. Innovation has made so many things that I grew up with obsolete. The library I studied in throughout my school days can now be accessed through a smartphone in my back pocket. There are too many examples of how technology has changed our lives to list in this short article.

Technology has made our lives easier, but government institutions are struggling to keep up with the innovations that appear on almost a daily basis these days. When it comes to the world of digital currencies and Fintech, as the CFTC has labeled it, understanding tax ramifications and the potential for regulation could influence the prices of these assets in the future. Digital currencies and blockchain technology is here to stay. Many people of my generation were late to the computer revolution that took place in the 1980s. It is likely that Bitcoin, Ethereum, and other digital forms of currency instruments will grow in acceptance in the years ahead. Those who write this sector of the financial market off as a scam or Ponzi scheme these days are likely to be using these instruments in the years to come. Meanwhile, keep your eyes on those Winklevoss twins; they seem to always be on the cusp of the next billion dollar idea.

Each Wednesday I provide subscribers with a detailed report on the major commodity sectors covering over 30 individual commodity markets, most of which trade on U.S. futures markets. The report will give an up, down or neutral call on these markets for the coming week and will outline the technical and fundamental state of each market. At times, I will make recommendations for risk positions in the ETF and ETN markets as well as in commodity equities and related options. You can sign up for The Hecht Commodity Report on the Seeking Alpha Marketplace page.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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Bitcoin - History, Regulation, And Taxes - Seeking Alpha

The Bitcoin mempool is always atopic of debate and controversy. Since the mempool contains transactions waiting for confirmations, it isoften used to determine whether or not the network suffers from congestion. Currently, the Bitcoin mempool has been far emptier than it has for the past few months.There are many theories for the mempools recent lack of congestion and this article will go over some of them.

The Bitcoin mempoolis often a good gauge of the Bitcoin networks overall health. A mempool filling up slowly means there is a backlog related to network transactions awaiting confirmations. Usuallythere are around 30,000 Bitcoin transactions waiting for confirmations. They need to queue since only a certain amount of transactions will fit in one block andnew blocks on the Bitcoin network are only generated once every ten minutes.

Thenumber of unconfirmed transactions is less than half of what it normally is (at the time of writing). With under 10,000 pending transfers, some are confused by the recent dip in mempool numbers. However, the statistics indicate there are still 3.51 Bitcoin transactions every second, which is quite a healthy number. This suggests that the number of transactions and users are still withinnormal levels.

Looking at the Blockchain.info statistics, wesee the number of transactions is going down slightly. This trend started in June of 2017 and it seems to be snowballing. The number of transactions excluding long transaction chains is almost cut in half. This seems to indicate there is less blockchain bloat going on right now. The Bitcoin network has seen several spam attacks over the past year. It seems those nefarious methods have finally come to an end for now.

What is rather interesting is how it appears the number of Ethereum transactions is increasing. One reason may bethe influx of popular cryptocurrency ICOs. So it is probablynot a sign of people switching from Bitcoin to Ethereum. A lot of people want to invest in cryptocurrency ICOs, which will spike the number of transactions on the network. ICOs have pumped Ethereum the past few months, andthis increase in number of transactionsis likely the result of ICO investment.

From a speculative point of view, it is not entirely surprising to see the mempool go down in size either. The Bitcoin price has not seen a big breakout since its last bull run.This often affects the number of transactions on the network. This is not really a cause for alarm. Some speculators feel this stagnation is a sign of an imminent price decrease. It is impossible to correlate those two factors. As more people echo these (false?) statements, the market will eventually respond. However, a lower mempool does notautomatically result in a lower Bitcoin price.

Thischart shows how the mempool was pretty small in April of 2017 as well. The number of transactions started picking up again due to the Bitcoin price going up. At its peak, the mempool contained over 234,000 unconfirmed transactions. Everything needs to be put in perspectivewhen dealing with any investments, Bitcoin included and its mempool. There is absolutely no reason to panic whatsoever.

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Bitcoin Transaction Backlog Reaches Lowest Point in Months - The Merkle

Wall Street Journal (subscription)

Why You Won't Be Buying a Coffee With Bitcoin Anytime Soon Wall Street Journal (subscription) The cost for investors and consumers to buy or sell bitcoin hit an average of $5 per transaction in early June, the highest rate of its eight-year history as an alternative means of payment. The fee has since come down to about $3.50. Two years ago, it ... and more »

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Why You Won't Be Buying a Coffee With Bitcoin Anytime Soon - Wall Street Journal (subscription)