My Opinion

The Swiss financial regulator will in future ban anonymous transactions of bitcoins and other virtual currencies. It is causing a negative excitement in the crypto industry.

According to their name and their intention, virtual currencies like Bitcoin should be "cryptic" - that is, secret, of unclear origin. Therefore, they are also a popular means of money laundering and covert financing. The Swiss financial regulator (Finma) now wants to put an end to this in its area of responsibility and requires an "address slip" for every transaction. This is making big waves in the crypto industry.

Although the announcement already took place on August 26, 2019, it is only now really being noticed by the players in this sector and is provoking some violent reactions. Critics fear a paradigm shift, speak of the "end of crypto payments", a "technology-discriminating practice" and a location disadvantage for the Swiss banking center.

In fact, the federal supervisory authority now applies the same "Travel Rule" to transactions with cryptocurrencies that already applies to banks' normal payment transactions and that makes binding information on the sender and beneficiary for each order. This is intended to enable verification and comparison with sanction lists. The introduction of this so-called "Travel Rule" is not an invention of Finma, but essentially implements the guidelines agreed in June 2019 by the OECD working group "Financial Action Task Force on Money Laundering". The aim of the agreement is to better combat money laundering and terrorist financing.

So there are also more sober voices: According to the head of the blockchain department of management consultancy PwC, Daniel Diemers, this step corresponds to "the general weather situation". The discussions of the International Monetary Fund, the Bank for International Settlements, the ECB and the European Financial Market Authority went in the same direction. After all, traditional banks are also not allowed to process anonymous payments. However, it is still unclear how the new regulation can best be implemented technically for Switzerland. The travel data could be given in the blockchain or noted centrally and then linked to the chain.

In terms of secrecy, token suisse founder and CHIEF executive Alain Kurz pours plenty of water into the wine, because "although many investors believe that bitcoin can be paid anonymously, the opposite is true". This guarantee would only be provided by private coins such as the Monero. With this digital money, most payments would now be processed on the infamous darknet.

Which technical solutions the financial service providers offer to implement the new Finma regulation is still unclear. Bitcoin Suisse has set up an open discussion platform at openvasp.org. What is certain is that the costs will increase - however, according to Daniel Diemers, crypto transactions should remain cheaper in the future than traditional payments.

Google Pay records the largest search query growth, Paypal is searched most frequently. The interest of Germans in mobile payment options is increasing rapidly. Google Pay showed growth of 3,074 percent in search queries, with Apple Pay posting an increase of 813 percent. In third place among the Germans landed Amazon Pay with an increase of 191 percent. But well-tried payment methods such as debit card (+167 percent), also known as the giro card, and direct debit (+136 percent) seem to continue to attract increasing interest among Germans. This results in a recent analysis of the online visibility management platform SEMrush.

The top 10 payment methods after growth of search queries (search queries from 2016 to 2019):

1. Google Pay (+3,074%)
2. Apple Pay (+813%)
3. Amazon Pay (+191%)
4. Debit Card (+167%)
5. Direct Debit (+136%)
6. Transferwise (+110%)
7. Bitcoin (+105%)
8. Samsung Pay (+54%)
9. Paypal (+22%)
10. American Express (+18%)

Google Pay and Apple Pay started in the US in 2015. In 2018 followed Germany. Before the German rollout at the beginning of the analysis period in November 2016, the searches with 1,600 and 14,800 searches were still manageable, but increased sharply in the following months and after the launch and with the growing number of participating partner banks, due to the users' information needs , Amazon Pay has been around since 2007. The third strongest growth is explained by the uninterrupted interest in the online mail order company and its payment method.

Looking at average monthly searches this year, regardless of growth, results in a different ranking. In 2019, Paypal ranks first (5,021,000), well ahead of Bitcoin (766,200) and American Express (110,550). The top 10 payment methods of Germans after search queries (average monthly searches of Germans between January and October 2019):

1. Paypal (5,021,000)
2. Bitcoin (766,200)
3. American Express (110,550)
4. Transferwise (83,900)
5. Apple Pay (81,000)
6. Credit Card (68,900)
7. Mastercard (60,700)
8. Google Pay (41,630)
9. Ethereum (40,740)
10. Sofortüberweisung (38,280)
    Sofortüberweisung is an online payment system of Sofort GmbH for cashless payment on the Internet. The procedure is a pseudo pre-cash system, as the trader does not receive the payment immediately, but a payment confirmation.

Established payment methods have less need for explanation and are less sought. Instead, customers are interested in alternatives to established payment methods. Although PayPal has been around since 2002, it enjoys uninterrupted popularity without strong growth in search queries, as it has long been a common, secure and easy payment method, whether mobile or desktop.

The US Internal Revenue Service (IRS) has announced that it will once again pay more attention to the crypto market. And three proposals have already surfaced online showing what it would look like in the future in the US, and worldwide, with taxes on Bitcoin and Co.

Bitcoin is declared by the IRS not as currency, but as property. Especially microtransactions create big headaches for the tax office. Therefore, the tax regime is facing reform. Reason enough for crypto experts to show us three possible scenarios of Bitcoin taxation:

1. No taxes below a limit of $ 600. This option solves the problem of microtransactions, but could lead many to avoid general taxation through transactions below this limit.
   
   
2. Taxes are currently legally levied on crypto-to-crypto trading pairs and capital gains - a clear double taxation. This could end in taxes being incurred only when cryptos are converted to non-crypto assets.
   
   
3. Finally, simple by removing the classification to be a "property". This, however, would turn Bitcoin into a currency, putting it under the obligation to act - including on the Bitcoin ETF.

It is even possible that tougher policies may even trigger a capital flight towards anonymous old coins (e.g., Monero).

According to research, the US crypto-exchange Coinbase is said to hold around 966,000 BTC. This could be a risk.

Opinions differ widely about future price developments. At the moment the courses are in a sideways movement. And this, after it went down noticeably in recent weeks. And although the prospects are not the best, many investors still find their holdings on the wallets of crypto exchanges like Coinbase, Binance and Co.

As a study by Binance Research shows, most (92%) Bitcoin holders still hold their crypto assets in the wallets of crypto exchanges. A viral blog post on Reddit showed yesterday a picture of crypto exchanges that hold the most bitcoins. According to the illustration, the largest exchange is Coinbase, which manages just under one million bitcoins. According to Coinbase, more than 30 million users are registered on the platform. More than 8 million newly registered users joined in last year alone.

Managed Bitcoin on crypto exchanges (Source: reddit r/Bitcoin)

But, according to Coinbase CEO, this company is not just a provider of cryptographic services, but also an organization that contributes to the global adoption of cryptocurrencies. As the software company DataLight reported earlier this year, the United States is the most active country in crypto trading with over 22 million monthly visitors to crypto exchanges

With these powerful numbers, the question of risk is relatively close. In fact, Coinbase and Co. are becoming banks more and more. And when they make wrong decisions, they can quickly get into trouble and become systemic. During the financial crisis, the "too big to fail" made the rounds. And indeed, Coinbase could become a risk to the entire industry if things are going wrong.

One of the world's largest asset managers, WisdomTree, headquartered in New York, has listed its first Bitcoin Exchange Traded Product (ETP) on the SIX Swiss Stock Exchange. The company announced this in a press release published on December 3, 2019.

New York-based WisdomTree, one of the largest providers of Exchange Traded Funds (ETFs) in the United States, yesterday launched a new Bitcoin Exchange Traded Product (ETP) on the SIX Swiss Stock Exchange. This is the first product of the company that tracks Bitcoin and gives investors the ability to invest in cryptocurrency without having to manage their own wallet.

Such products theoretically open up bitcoin investment to mainstream traders, bypassing the need for individual private keys and reducing the likelihood of theft and cyber-attacks. According to the WisdomTree announcement, all Bitcoin funds that support the ETP are kept offline in the Cold Wallet.

Alexis Marinof, Head of Europe, WisdomTree:

We have been monitoring cryptocurrencies for some time and are excited to bring investors secure access to this developing asset class. We have seen enough to believe that digital assets, like Bitcoin, are not a passing trend and can play a role in portfolios. WisdomTree has a history of bringing innovative investment themes to a broad market through institutional-class products, allowing investors to take exposures in difficult-to-access asset classes - we see many parallels between the cryptocurrency space and commodities in this regard. The introduction of cryptocurrencies in an ETP structure will enable investors to find new ways to introduce digital assets into portfolios while still relying on the safety and security that they have come to expect from WisdomTree.

ETPs are slightly different from ETFs, which Bitcoin and other crypto lovers have undoubtedly become familiar with in recent years, as such proposed products have attracted attention. Put simply, ETFs are a kind of ETP, although ETFs are subject to different legal requirements and thus to greater regulatory control. However, both products offer the promise of a generous, institutional investment in the world of Bitcoin and other cryptocurrencies for which WisdomTree expects strong demand.

Rafi Aviav, Head of Product Development, Capital Markets and Technology at WisdomTree, adds:

Cryptocurrencies are potentially the next asset class to benefit from increased interest when they become accessible in an ETP structure. We have developed a solution which addresses the difficulties investors face in accessing digital assets and are bridging the gap between the underlying decentralised online blockchain technology and traditional investment structures. The ETP wrapper will add new dimensions to the cryptocurrency universe including institutional class custody solutions for investors, easier trading incorporated into standard brokerage and account maintenance procedures, more liquid and transparent trading and a broader array of more sophisticated market participants entering the arena for these products.

WisdomTree is the market leader in physical gold ETPs in Europe. In 2003, the company launched the world's first physically backed gold ETP2. Today's launch of the WisdomTree Bitcoin ETP continues this tradition of innovation, expressing the company's deep expertise in the field of physically secured ETPs.

Similar to physical gold ETPs, WisdomTree Bitcoin ETP investors are entitled to a certain amount of bitcoins. Investors can view their pro rata bitcoin entitlement as well as the total amount of covert bitcoins held on the WisdomTree website. To ensure the highest level of security, WisdomTree employs digital asset managers that manage high-security cold storages. These specialists use sophisticated physical and digital security procedures, as well as state-of-the-art technologies to securely generate keys, encrypt data, and create and verify digital signatures required to handle and preserve cryptocurrencies. WisdomTree uses this approach to address one of the key barriers currently hindering the introduction of cryptocurrency by investors.

At the moment, WisdomTree uses the cryptocurrency ETP only for professional investors. However, the company is confident that regulatory approval for this product will be available to broader audiences in the near future, thereby addressing the important regulatory barrier.

Jonathan Steinberg, CEO of WisdomTree, sums up:

WisdomTree has always been at the forefront of innovation and we see blockchain technology and digital currencies as being transformative for the asset management industry. Much like how the ETP structure has out-shined the antiquated mutual fund structure in significant ways, blockchain and cryptocurrencies have the potential to change how investors participate in financial markets, globally.

As the Swiss online bank Swissquote communicates in parallel, it will take over the custody of cryptocurrencies in Switzerland. The product is tradable in USD on the SIX (Symbol: BTCW) and is intended for professional investors. The cover is provided 1:1 by provisions and the product is fully covered by Bitcoin, which is held by Swissquote in Switzerland. Swissquote secures the underlying Bitcoin assets offline using secure cold storage technology. This opens up the opportunity for investors to invest in Bitcoin through a traditional financial product that ensures high security

WisdomTree currently manages more than $ 60 billion in assets globally, Reuters said. Financial instruments based on Bitcoin are becoming increasingly popular as demand among institutional investors continues to increase. However, there are still some obstacles that keep investors from investing in the market. This includes a secure storage option in the context of a certified custody solution or a corresponding hedging of the capital with warrants or a deposit insurance by the provider itself or external service providers.

Furthermore, the legal framework conditions are not sufficiently clarified in all, so that investors in some countries continue to face difficulties in the mere possession or subsequent taxation. It remains to be seen whether there will soon be a single regulatory framework in the EU and the United States.