The European Investment Fund is investing €400 million in blockchain and AI initiatives View in browser

“Governments that are open to blockchain, Bitcoin, and AI, along with virtual governments, will be big winners of the next 4 decades” ~ Tim Draper, American venture capital investor

Market State

During the last week more than $30 billion have been wiped off from the overall cryptocurrency market capitalization. The entire cryptocurrency market has fallen below $200 billion. Bitcoin dropped from trading around $8000 and dipped below $7000 for the first time since May 2019. Most cryptocurrencies are down between 5%-20%. Ether fell by 20% to $145 and XRP fell by 14% to $0.21. Bitcoin Cash fell by 19% to $208. the firm owned by Roger Ver, Bitcoin Cash promoter has announced it is planning to launch $200 million fund to promote the growth of BCH ecosystem. The fund will invest in businesses like payment gateways, remittance processors, wallet, merchants and acquirers according to the announcement

Bitcoin is known for its wild price swings. Just last month Bitcoin rose by 40% in two days, which was the third biggest daily price gain in Bitcoin’s history. In the last few days Bitcoin dropped by 20%. Several events might have had a big impact on the market. The People's Bank of China's Shanghai headquarters released a public warning against any form of Bitcoin or cryptocurrency trading. Another potential factor that might explain this drop is due to mining revenues decrease. As the price of Bitcoin drops, miners need to sell more of their mining reward to cover their cost.

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Quiz of the week

What is Merged Mining?

  1. Process of mining Bitcoin with other people and sharing the block reward
  2. Mining two different cryptocurrencies with same algorithm simultaneously
  3. A way of mining Bitcoin for one block and then another cryptocurrency for the next

Scroll down to see the answer at the end of the newsletter.

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Top stories of the week
The European Investment Fund is investing €400 million in blockchain, AI initiatives

In a blog post last week the European Investment Fund (EIF) had stated that it is launching a dedicated investment scheme together with the European Commission that will finance the development of artificial intelligence (AI) and blockchain companies. According to the International Data Corporation the European Union is the second biggest spender on blockchain with its $674 million spend in 2019, coming after the United States with its $1.1 billion, but ahead of Chinese $319 million. Though the EU is already investing heavily in blockchain technology, most investments focus on research, while spending very little on development and growth. The AI and blockchain fund will make available €100 million to companies that are developing these new technologies. The EIF also stated that this is only “laying the cornerstone” and is expected to generate an additional € 300 million from private investors. The investment scheme will also allow co-investments with national promotional banks, which will increase the capital even further. The process will start in 2020 and more information about how to apply for funding will be available soon.

US Federal Reserve is exploring digital dollar

Federal Reserve Board Chairman Jerome Powell provided a response to US Representatives French Hill and Bill Fosters’ request on whether the Federal Reserve plans to launch a national digital currency. In the response letter to lawmakers Powell wrote "While we are not currently developing a central bank digital currency, we have assessed and we continue to carefully analyze the costs and benefits of pursuing such an initiative. We are carefully monitoring the activities of other central banks to identify potential benefits that may be relevant in the US context." Powell revealed that the Federal Reserve is now running small-scale, research focused experiments on the technology to better understand the opportunities and limitations of central bank digital currencies (CBDC) and what issues and risks it could potentially pose. He also raised a number of legal and operational questions, including monetary policies, supervision and vulnerability to cyber attacks.

Chinese central bank has warned that it will take action against crypto exchanges

Shanghai headquarters of the People’s Bank of China (PBoC), the country’s central bank, has announced that it will take severe measures against cryptocurrency exchanges operating illegally in China. After the president Xi Jinping, publicly endorsed the adoption of the blockchain the crypto trading speculation has shown signs of rising. Previously China had blocked all websites related to cryptocurrency exchanges and initial coin offerings (ICOs). In its warning statement the Chinese central bank vowed to dispose of any such activity it discovered under its jurisdiction. The central bank stated “Once it is discovered, it will be disposed of immediately.” The bank also added investors should not confuse blockchain with cryptocurrencies. Meanwhile The Block cryptocurrency news site falsely claimed that Binance’s China office got raided by the police which never happened according to Changpeng Zhao, CEO of Binance as they don’t have office in Shanghai. Changpeng said they would sue The Block for damaging their reputation.

According to FinCEN stablecoin issuers are money transmitters

Kenneth Blanco, director of the US Financial Crimes Enforcement Network’s (FinCEN) made comments on stablecoins during the Chainalysis Blockchain Symposium. He said that “Stablecoins are covered by our definition of money transmission services. This means that accepting and transmitting activity denominated in stablecoins makes you a money transmitter under the Bank Secrecy Act (BSA) . Administrators of stablecoins have to register as a money services business (MSB) with FinCEN.” This means firms dealing with stablecoin must follow federal know-your-customer (KYC) and AML laws under the Bank Secrecy Act. Blanco added “FinCEN applies the same regulatory framework to any activity that provides the same functionality at the same level or risk, regardless of its label. It is not what you label it, it's the activity you actually do that count.” However it is complicated for decentralized stablecoins such as MakerDAO’s Dai to comply with FinCEN’s rule as DAI doesn’t have centralized reserve instead it is backed by individual cryptocurrency holders and runs on smart contracts.

PayPal CEO admits that he owns Bitcoin and reveals why PayPal left Libra

The CEO of PayPal, Daniel Schulman admitted in a recent interview with Fortune that he personally owns Bitcoin. He was asked a number of questions regarding why the company decided to leave Facebook’s Libra and PayPal’s blockchain and cryptocurrency projects. PayPal was the first member to exit the Libra Association, the developer of the Facebook-led global digital currency Libra. Previously David Marcus, the head of Libra project was the CEO of PayPal. Fortune asked whether the regulatory scrutiny was the reason behind PayPal’s exit from the Libra project. Schulman replied that regulatory and compliance wasn’t what spooked PayPal. They realized that the Libra Association still had a lot to do and PayPal already had a similar goal outside of Libra. He said “If we focus on our own roadmap, we’d be able to advance financial inclusion faster than if we put all these resources against Libra.” He didn’t reveal much when he was asked about PayPal’s own blockchain project.

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Quiz answer

What is Merged Mining?

The correct answer is “B”.

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