Twitter's CEO Jack Dorsey on Friday announced the founding of a new endowment on bitcoin development, initially focused on Indian and African teams, in association with musician Jay-Z/Shawn Carter.
The endowment, dubbed '₿trust', will initially get 500 bitcoin from them. According to cryptocurrency exchange data from Coinbase on February 13 (1pm, IST), this sum is just north of $2.38 million or ₹173 crores.
Dorsey, in his announcement, said that it would be a "blind irrevocable" trust, taking no direction from them. His tweet also had a link to a Google form page inviting applications for three board members, whose mission is described as "making bitcoin the internet's currency."
However, if recent media stories are any indication, this trust comes just before the Indian government may pursue a total ban on "private cryptocurrencies" through legislation whose announcement is still impending. Cryptocurrencies remain a regulatory grey area in India, and this bill, listed on January 29 on the agenda in the Lok Sabha as the 'The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021' aims to address it.
This bill purports:
To create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India. The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.
The technicalities other than this are scarce, but according to BloombergQuint, India would be adopting the Chinese model of regulating cryptocurrencies; where dealing in them other than those virtual currencies backed by the state - something the Indian regulation looks to achieve - is prohibited. This would also extend to dealings in cryptocurrencies through foreign exchanges and initial coin offerings (ICOs).
But the ban won't be instantaneously enforced, and existing investors would be given a grace period to exit their holdings. This has made Indian crypto-exchanges nervous, even though exchanges like WazirX and CoinCDX seem to be enjoying robust business right now.
Right after the previous record surge in the price of bitcoin in 2017, the RBI on April 8, 2018, banned institution regulated by it - banks, financial companies and NBFCs - from offering services to these exchanges, though the ban did not extend to cryptocurrencies themselves. On March 4, 2020, the Supreme Court struck down this ban.
The journey of cryptocurrencies in Africa has been potholed too. In its most populous country, Nigeria, the central bank imposed an India-style ban on its banking institutions from providing services to crypto traders on February 5. Its upper house, the Senate, called the governor of its central bank, Godwin Emefiele, for a briefing on cryptocurrencies. Some elements in the legislature do not support any ban on cryptocurrencies, and favour regulating it. In Egypt, cryptocurrencies got a religious overtone when its Grand Mufti in 2018 declared cryptocurrencies to be against Islamic law due to the risks associated with them. The government, however, in 2019 indicated its willingness to permit licensed exchanges.
Institutional support for cryptocurrencies
While India and countries in Africa may be looking at cryptocurrencies only lukewarmly; bitcoin and ethereum have received substantial institutional backing abroad.
The world's largest carmarker by market capitalisation - Tesla - recently announced that would accept bitcoin as payment for its products, and also that it had announced it had an existing $1.5 billion investment in it, sending its value to record highs. It's CEO - Elon Musk - himself an advocate of bitcoin and cryptocurrencies, regularly tweets his support and memes for bitcoin and alternatives like dogecoin, which often leads to sharp surges in their prices.
The Chicago Mercantile Exchange - the world's first futures exchange established in the 19th century - introduced ethereum-based future contracts on February 7. Already, 427 contracts have been traded with there being an open interest of 595 contracts, according to data on February 12. It is the second largest cryptocurrency after bitcoin by market cap. Bitcoin was accepted as an underlying commodity for future contacts by the CME in 2017 itself.
In a fillip to cryptocurrency payments, Mastercard seems to be embracing cryptocurrencies on its network. "We are preparing right now for the future of crypto and payments, announcing that this year Mastercard will start supporting select cryptocurrencies directly on our network", it said on February 10.
Dorsey himself is a long-time proponent of bitcoin. His payments company, Square, has crypto worth 1% of its assets to start with, and he recently made a $1 million donation to a cryptocurrency-focused think-tank, Coin Centre.