This video goes into some detail behind the reasons to move Scotcoin away from the Counterparty protocol and shows how to complete the migration form.
Fact of the day | 10 March 2020
Quite apart from the disruption that has been caused, China has printed $170BILLION of extra cash to pump into the economy. There’s no guarantee that’s enough, and in fact it’s unlikely to be. In 2008, the US Treasury printed $600 billion, and that wasn’t enough to prevent widespread bankruptcies and zombie companies. The IMF only has about $3-4 triilion available to it and the dollar derivatives and swaps are now around $18 trillion, so a real disruption (people asking for their USD back) would have a catastrophic effect on the world economy. Far from reducing reliance on dollars, the crash enhanced and strengthened its hegemony.
So – at the risk of stating the obvious – there needs to be something else that can be used if dollars start to become unavailable. I’m not for a moment suggesting that cryptos – with a current value UNDER $300 MILLION – will replace it, but if your bank started not honouring your bank card, you just might like to have some cryptos available to buy that pint of milk.
Article by Scotcoin’s own Temple Melville published in City AM on 28/8/19
Cryptocurrencies are almost as old as money itself. Indeed, crypto simply means concealed or secret. So the first man (or woman) who tried to exchange some rocks for a sheep could be said to have been using a crypto currency. Up to that point a sheep had been worth 15 chickens. It’s simple, really. You attribute a symbolic sense to something you do not see.
Finance Houses and liquidity
Move on to the 1600s when after the Thirty Years War belief in what then passed for “money” was at a low. Something else had to be found, and it was, in the shape of strong finance houses with robust links to other similar houses. They issued their own currencies when the State currencies could no longer be trusted. Move on again to the American experience of the mid 1800s. There were over 8000 “currencies” – usually paper – being traded around the country with a big business in accepting and exchanging them. There had to be some form of currency to enable trade to take place as America expanded. These of course were seriously open to abuse and eventually the individuals and banks that had issued them had to bow to the Federal Government creating its own, reliable currency.
Liquidity created – WIR
In the 1930s there was to all intents and purposes no liquidity in any markets. Things were so bad that some of the good citizens of Zurich created their own currency to enable them to trade. This was called WIR and was, indeed, like those currencies before it, a crypto currency. Over the years it has prospered (perhaps one would expect a Swiss monetary instrument to do this) until today it is used by more than half a million people, over 70,000 businesses and transacts some CHF2.5billion annually – that’s around half a percent of Swiss GDP. By doing so, it illustrates exactly what “Money” is – a trusted medium of exchange that others will accept, and a stable store of value.
The present crop of crypto currencies rely on digital technology to give them credibility. You can’t have a run on the “Bank” for example – there isn’t one. Despite being relatively small in terms of value (only some 0.1% of total world assets) they already show what digital and crypto currencies can do to enhance people’s lives. As an example, if you want to send £1million to anywhere in the world, that will cost you between £20-30,000. Using a digital currency, it can be done for 50p. In fact, the Philippines is looking to create a Bitcoin transfer system for its overseas citizens. Using this system would save their economy over USD1.5 Billion a year – a significant sum in a poor country.
The three cryptos no one talks about
There are three interbank tools that are in effect digital currencies and have been for years. These are:
1. Target2 – the ECB system, the old Bundesbank system which is currently so politically in focus in respect of Italy
2. IMF SDRs – Special Drawing rights
3. The highly secret interbank settlement system at the BIS in Basle.
These three were absolutely crucial in getting the world through the 2007 crisis.
Hyun Song Shin of the BIS argued last year that cryptos (and he was specifically talking about Bitcoin) had issues with scalability and finality. At that time he was right as you would expect, but he was talking about first generation blockchain. We have since had second generation in Hyperledger, and now third generation called Permissioned Decentralised Blockchain. Facebook’s Libra will largely use this system and there can be no doubt this will revolutionise the use of digital and crypto currencies world-wide. We’ve gone from around 35 million wallets to a potential 2.7 BILLION. But Shin’s central thesis holds good – you need people to USE these new currencies to make them both trusted and useful, and having exchanged goods for the currency, the person TAKING the currency needs to find someone else to take it as well.
The use of cash has been declining for years in most western countries, and the Central Banks have realised that it will have to be replaced with something. To this end both Sweden and Uruguay have run full scale crypto trials which have largely been successful, though not set for full implementation anytime soon.
The use of crypto currencies can and should mean social inclusion. Whilst Central Banks’ attitude remains “Bitcoin is not a good idea,” the idea behind it continues to fire imaginations all around the world.
The Brixton Pound
This remains a very positive initiative which is making a real difference within Brixton. Arguably it’s as old as Bitcoin. People are prepared to use it and pass it on – and the money stays in Brixton. That is different from the likes of Bitcoin which is world-wide, but it doesn’t detract from the social inclusiveness of it. We look to history for lessons on the nature of money and the role of central banks in building trust in the use of money in society. The issue of trust has again come to the fore in debates on the durability of cryptocurrencies such as Bitcoin, and how far private money can supplant central bank money as a medium of exchange.
Future payment needs
In the future, physical cash or even bank transfers as we currently know them are unlikely to be the main answer. Central banks are already working on systems and digital currencies that will be trusted and used. Existing crypto-assets have exhibited a high degree of volatility and are considered an immature asset class given the lack of standardisation and constant evolution. They present a number of risks for banks, including liquidity risk; credit risk; market risk; operational risk (including fraud and cyber risks); money laundering and terrorist financing risk; and legal and reputation risks. But new know your customer and anti-money laundering rules will mitigate much of this.
In many ways, the African sub-Saharan region has become a leader in mobile money resulting in a radical change in the delivery of financial services and significant gains in financial inclusion. Where there is a lack of payment infrastructure, the use of crypto currencies immediately enhances trade and social inclusion. You only have to think of Eastern Europe which hardly had a fixed line telephone system before 1989, and suddenly every man and his dog had a mobile phone, leapfrogging to a new world.
Christine Lagarde in an excellent speech to the November 2018 Singapore Fintech Conference, has posed the question – should central banks issue a new digital form of money?
Arguably they already have. As such, it can only be seen as a force for good.
Cryptocurrency Tax Status
On December 15, 2017, the European Council and the European Parliament finally agreed the 5th AML (Anti Money Laundering) Directive. This directive contains the first legally binding definition of virtual currencies and is the most significant regulatory action over virtual currencies anywhere in the world.
Because of a Swedish ruling a couple of years ago, upheld by the ECJ ( European Court of Justice) recently, virtual currency transactions are exempt from VAT according to the current EU laws and regulations. The binding force of case law of the ECJ is recognized without objection by all EU member states & courts i.e. virtual currencies are exempt from VAT across all jurisdictions of EU member states. At present UK does not recognise cryptos as either currency or commodity. It is certain the UK authorities will make a determination at some point in the future.
The UK leads in Fintech innovation, as the place to be for financial entrepreneurs; however, cryptocurrency regulation in the UK is behind others. All issuance of equity and debt are regulated by the FCA (Financial Conduct Authority) whose aim is seamless operation of financial markets, by providing protection for consumers and investors, plus promoting effective competition in markets. The FCA maintains that:
“cryptoassets designed primarily as a means of payment or exchange do not sit within the scope of FCA authority.”
While SEC and CFTC engage in crypto market regulation in the U.S, virtual currencies are mostly unregulated in the UK. The FCA doesn’t consider virtual currencies to be currencies or commodities under the MiFID II (markets in financial instruments directive) and, therefore, has no jurisdiction over them. It has authority over activities related to virtual currency derivatives such as bitcoin futures, options, or crypto-linked ETFs (if approved). The FCA’s position is ambivalent. On the one hand, the FCA never explicitly declared authority over security offerings in the form of ICOs/STOs, but on the other, it issues consumer warnings describing ICOs as “very-high-risk speculative investments” and unhelpful statements such as “Whether an ICO falls within the FCA’s regulatory boundaries or not can only be decided case by case.” Difficult to navigate that one…
Regulatory Authorities in the UK intend to apply AML regulations in order to comply with the EU’s 5th AML Directive. Along the same lines, the Treasury has revealed their intentions to regulate cryptocurrency traders, requiring them to abide by KYC (Know Your Customer) regulations and disclose their identities as well as report suspicious activities.
UK Tax with regard to virtual currencies
On tax though the UK is ahead of the game. In 2014, HMRC published guidance regarding the tax treatment of virtual currencies. The UK was one of, if not the first to have a clear legal position on the issue – albeit “for tax purposes only.” HMRC guidelines clarify that:
(i) mining income is not subject to VAT,
(ii) any loss or gain arising from the holding and/or selling of virtual currencies will be treated in the same way as gains made in other commodities or currencies,
(iii) virtual currencies acquired and held for personal reasons instead of speculative purposes will probably not be subject to capital gains tax.
You can compare this with buying a painting and sticking it on your wall rather than popping it into Sothebys. The UK authorities are under pressure to produce a comprehensive strategy on virtual currencies as soon as possible. Other EU countries are currently ahead in legislative support. Theresa May has suggested the UK might follow South Korea in banning anonymous trading and regulating exchanges.
Scotcoin leading the way on digital currency legislation
#We at Scotcoin are well ahead on all these matters. On a related note, the World Bank sees the further enhanced development of blockchain as fundamental to cryptocurrency development
For the past 2 years, Scotcoin has performed KYC checks on all purchasers via the official exchange. We wholeheartedly welcome better regulation – and are leading the way!
Bitcoin and other digital currencies are a “Wild West industry” and need to be regulated to protect investors, a committee of MPs has urged. | BBC News
– A speech by Temple Melville to Scottish Fintech on Wednesday 19th September 2018
“Good afternoon! I represent Scotcoin, Scotland’s own digital currency, a World Coin with a Scottish Ethos.
I have just three things to tell you about today, all of them important. One is potentially profitable for you, one will benefit all the people of Scotland and one will target individuals and groups in need.
But before I do that, does everyone here know what blockchain is? And do you know that blockchain is an enabling technology, that it can exist without Bitcoin or any other coin, but that Bitcoin could not exist without the blockchain? Scotcoin is on a blockchain – more a little later.
So number one, how will what I have said be profitable be for you?
A little history. Scotcoin began in 2013 and is now one of the longest-lived country crypto currencies. We presently sit on the Counterparty Protocol which makes use of the Bitcoin blockchain. The problem is this particular blockchain has several drawbacks. Not the least is that in the world of regulation that is coming to cryptos, there is no method for ensuring who is sending what to who. So we at Scotcoin decided a couple of years ago we had to do something different.
As you can see, Bitcoin can only do seven transactions per second. It takes 12 minutes to confirm a transaction, the cost per transaction when volumes are high is extremely volatile, and it uses more electricity than Denmark. None of that is very good.
Scotcoin, on the other hand, intends to move to its own permissioned blockchain shortly which will encompass KYC (know your customer) and AML (Anti-money laundering) to comply with all present and potential future regulations. We at Scotcoin are well ahead on this track – a committee of MPs has just published a paper daying that crypto currencies and Bitcoin in particular should be regulated.
You can see from the graphic which shows results from our testing that we should be able to do more than 50 transactions per second. We should also be able to confirm transactions in mere seconds, and the power usage should be infinitesimal in comparison to Bitcoin. If we can deploy our new blockchain with these parameters, Scotland will have another world beating industry.
We have several thousand holders of Scotcoin and have holders in more than 50 countries worldwide. On migration to our new blockchain, present holders of Scotcoin will be rewarded for their support by receiving a 4-for-1 bonus, an effective increase in value of up to 5 times.
Yes, you heard that right. I’ll repeat that. An effective increase in value of 5 times. That means if you have £10 of Scotcoin in its present form, in its NEW form you will have £50. So point one, that is how it will be profitable for you in the first instance, as long as you already have Scotcoin, or buy some very shortly.
In respect of point 2, we intend to occupy the social good works ecosystem and our plans are well advanced to do this. Scotcoin has been offered to the Scottish Government and discussions are ongoing. But in essence, the idea is that there will be established a commonweal fund that will be able to be used throughout Scotland to assist where the powers that be may not be able to step up to the mark. The point is that everyone in Scotland should benefit from this fund, and quite frankly this will be helping the Scottish economy to progress in the future.
And finally, point 3. I’m sure you’ve all heard of Social Bite and The Big issue. These organisations help people that have problems to get on their feet again. This is both our goal and our desire. I can think of no better future monument to Scotcoin than if people are able to say, Scotcoin eradicated homelessness in Scotland. And we are in good company here – Jeff Bezos has just announced a $2 billion fund to do exactly that.
So from all our perspectives, let’s pull together to make Scotcoin a World Coin, But with a Scottish Ethos.
And to be clear, what do we mean by a Scottish Ethos? Scotland has a long history of financial innovation and strong security for its money. We aim to keep to these traditions for Scotcoin. But the Scots also have a long and noble tradition of good works, charitable giving, of invention and forward looking. We aim to bring all these to bear by using Scotcoin in a way to enhance people’s lives right here in Scotland.”
If you are a chocoholic like me, you just might know that Belgium has been involved with the manufacture and sale of chocolate for nearly 400 years. Yes, 400 years. It has more than 2000 chocolate shops selling just – chocolate. They manufacture over 170,000 tons a year. It’s a big business. And it’s been growing for 400 years.
And that is actually the point here. It’s been growing for 400 years. What was it like after say…. 10 years? Around 1645……
Well, I’m not pretending I know exactly how much they produced, but I do know (from historical records) there were less than ten chocolate shops. So let’s just think what that means. In the last 373 years, the number of shops has grown from 10 to 2000. It represents an increase of just over 5 chocolate shops per year, every year, from then until now. That may not sound like much but look where it has ended up.
Now go back just say… 10 years from today. And hey, there’s this new thing called blockchain. And it does something called Bitcoin. And hey, usage, knowledge, and acceptance is growing.
My point is this blockchain business is absolutely in its infancy. It’s probably less accepted than chocolate was in Belgium after 10 years. From my point of view there is no contest between chocolate and the blockchain, but suppose blockchain grows as we all think it will.
All our present institutions and technology has had years to mature. Banks, as we know them, are 300 plus years old. The UK Parliament has been growing and evolving for more than 700 years.
So as regulators and central banks try to frame responses to where we are with blockchain and crypto currencies, let’s just reflect on how young this all is.
Let it grow. Let it evolve. Let it mature. And let it enrich – exactly has chocolate has done.
A Boston College research paper entitled Digital Tulips has found that fewer than half of all ICO projects survive more than 120 days after the completion of their sales of tokens to the public.
That is really scary. And this fact does not seem to be putting people off. Another $10-12 billion of ICOs will be out there during this year.
I was reflecting on the longevity of Scotcoin.
In the same way that most small businesses go bust within one to three years, it appears that ICOs ( ok it’s digital so it’s faster) go bust in 3-4 months.
It’s not surprising really. Most of them are designed as get rich quick schemes for the perpetrators with no economic or financial sense. That’s why some of the earlier coins and tokens have lasted – they have a purpose and a measurable impact, unlike their imitators. In the same way that it is said there are only 7 plots in total for literature, there may not even be 7 in crypto-currencies.
So Scotcoin, actually in existence for 5 years, is almost a granddaddy. In fact, in terms of country coins we might actually be the oldest – if anyone else knows better please let me know.
But I wanted to reflect on the words of an Economics Professor – Hyman Minsky. Being a true Keynesian myself – and believe me what we have had for a long time is NOT what Keynes said – I find Minsky’s idea of his Financial Instability Hypothesis extremely enticing. Basically he says on the economic upswing, people take greater and greater risks – until the bubble bursts and we end up back down at the bottom of the boom and bust cycle again. Sadly, Gordon Brown no more banished it than controlled it – and then made a mess of the Banks’ recapitalisation. In fact, it means we are on a treadmill we can’t get off. Digital money, espoused by Milton Friedman more than 20 years ago, has enormous attractions when all around is collapsing.
But Minsky said something very wise.
“Everyone can create money; the problem is to get it accepted.”
That’s what we are working on at Scotcoin.