The Future of Money: The 3 New Ideas You Need to Know This Week (Issue 69 - 14 November 2021) - Bitcoin Logo, Coinbase Results & China e-CNY Update

Dear Friends, 

Welcome back to my weekly newsletter where I share some of the major developments on the future of money that you need to know about!

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Here we go!

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1. Where Does the Bitcoin Logo Come From?

Have you ever wondered where the Bitcoin logo comes from? Who developed the concept?

And why did they settle on such a vivid shade of orange?

The story of the Bitcoin logo has several twists and turns.

But, somewhat fitting for the crypto space and its passionate community, the saga is filled with rivalries, factionalism, and competing sets of logos.

Let's take a look!

The earliest iteration of the Bitcoin logo can be traced back to the digital asset’s enigmatic creator, Satoshi Nakamoto, and featured a rather minimalist design, nothing more than a “BC” emblazoned over a gold coin. 

Back in 2009 when this was released, users on the popular forum Bitcointalk seemed split on the concept at first, with some arguing that the adoption of a logo was entirely unnecessary and was antithetical to the true spirit and ethos of the budding cryptocurrency movement. 

A logo, they maintained, skirted uncomfortably close to centralization. 

One year later, Satoshi unveiled their new design, dumping the “BC” in favor of the now-ubiquitous “B” with the vertical strokes. 

Whilst this symbol was better received than their first version, some Bitcointalk users remarked that it nevertheless too closely resembled the Thai baht symbol and could lead to confusion, despite the Thai baht only having one vertical stroke as we can see in the image below. 

By the end of 2010, however, Bitcoin’s logo would evolve into something much more easily recognizable today. 

This logo can be traced back to an user on Bitcointalk under the handle “bitboy.”

Vividly rendered and slightly askew, bitboy managed to completely transform Bitcoin’s visual identity in a single swoop.

Interestingly enough, their comments appeared to suggest that the logos for Mastercard and Visa heavily inspired the design, with bitboy remarking:

“The irony is as much as I hate [Mastercard] and [Visa], it is all about perception when it comes to consumer confidence and behavior. Lol.”

Yet whilst bitboy’s bright orange logo would prove to be a hit, many within the Bitcoin community continued to maintain that the logo was self-defeating.

Rather, a currency like Bitcoin, they argued, should be represented by a universal symbol like $, €, or ¥. 

Supporters of this argument eventually pushed for the adoption of Ƀ, which is featured in multiple alphabets around the world.

For example, Ƀ is used as a phonetic symbol to represent and transcribe the sound [β], and is even a letter of the alphabets of the Rade, Jarai and Katu languages of Vietnam.

Obviously, this parallel symbol never gained any traction, with bitboy’s neon, off-kilter “B” growing in popularity over the years, helping to drive both the adoption of Bitcoin as a digital currency and store of value in its own right along with a surge of demand for Bitcoin-themed merchandise and apparel. 

There you go! Another fun piece of the history of money!

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I offer in-person or virtual courses that range from "Introduction to Bitcoin, Blockchain, and Crypto-assets" to more advanced and tailored topics, all ranging from 60 minutes to half-day sessions.

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2. Five Takeaways From Coinbase’s Latest Earnings Report

The benefit of having a crypto exchange as a public company is that we can go and check out what’s happening under the hood every quarter. 

 Being public and handling custody of roughly 10% of total crypto-assets market cap,  Coinbase’s results provide a reasonably good barometer of the economics of crypto exchanges. 

 Coinbase just released its latest earnings report.

Here are 5 very interesting takeaways:

1. Investors are increasingly trading crypto-assets other than Bitcoin and Ethereum

 For example, last quarter, 59% of trading volumes encompassed crypto-assets beyond BTC and ETH, up from 40% in Q1.

Not surprisingly, the majority of revenues also came from non-BTC and ETH assets. 

 Source: Coinbase

2. The majority of assets custodied by Coinbase are for institutional investors

 Out of the total $255 billion that Coinbase custodies (representing almost 10% of the total crypto market cap), the majority ($139 billion) is for institutional investors. 

3. Retail investors remain the most profitable client segment

 Over 90% of Coinbase’s revenue comes from retail investors. 

 Remember, retail volumes, in turn, attract institutional volumes and interest.

This is why retail volumes are so important for any crypto exchange.

4. Additional features will be key moving forward

For example, not only is Coinbase enabling NFT marketplaces and wallets, on top of its Earn initiative, the exchange is also allowing payroll and expense reimbursement programs.

This will create customer stickiness and bring crypto even more into the mainstream. 

5. Customer support will be key

 Coinbase became the first large exchange to announce that they will offer 24/7 live phone and messaging support.

This is an area in which the crypto industry in general, unfortunately, still has a lot of work to do to improve. 

This has given rise to a new breed of companies like ACX (for full disclosure, ACX is a sponsor of some of my content and I am an investor in the company) that are focused on helping crypto exchanges achieve such goals by providing 24/7, multilingual customer support to their clients.

 As we touched on earlier, the size and scope of Coinbase make the exchange a very strong indicator for how the crypto world is performing.

 Will be very interesting to see how things unfold in Q4.

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Money Quote of the Week

“I finally know what distinguishes man from other beasts: financial worries.”

Jules Renard

3. What’s the Latest with China’s e-CNY CBDC?

As we have covered in past issues of this newsletter, China is years ahead of other large economies when it comes to its retail CBDC, the e-CNY. 

Taking advantage of Hong Kong FinTech Week and the Singapore FinTech Festival, the People’s Bank of China (PBOC) has provided some updated data on where things stand with its ongoing pilots. 

Some of the key metrics that stand out include: 

• Retail adoption is growing, and growing fast. Roughly 140 million individuals in China have already activated their e-CNY wallets, representing around 10% of the national population. 
• Corporate adoption is also growing, with 10 million corporate wallets now up and running. This is almost triple the 3.5 million corporate wallets observed last summer.
• Although the e-CNY rollout is still in the pilot stage, the project has accumulated $9.7 billion in value transacted to date, which is double that of the $5.4 billion figure given in the last update in July 2021.
• Merchants are embracing the e-CNY as well, with over 1.5 million merchants now accepting the CBDC. 

Although the PBOC has not yet given a firm date for the e-CNY’s launch, instead mentioning that it “will continue to prudently advance the pilot e-CNY R&D project in line with China’s 14th Five-Year Plan, with no preset timetable for the final launch.” 

But many suspect that China will accelerate its testing rollout so as to launch the CBDC during the Winter Olympics, which is scheduled to start on February 4, 2022.

If you want to better understand the e- CNY, here are the key points you need to know:

• What Is the e-CNY?

The e-CNY is the digital version of the fiat currency issued by the PBOC and operated by authorized operators (e.g. commercial banks, licensed non-bank payment institutions). 

The e-CNY will be a substitute for cash in circulation (M0) and its issuance and circulation will be identical to that of physical RMB (1 e-CNY = 1 physical RMB).

The e-CNY will coexist with physical RMB, be a liability of the central bank, and have legal tender status. 

• How Will the e-CNY Be Distributed?

The e-CNY adopts a centralized management model with a two-tiered operational system. 

The right to issue e-CNY belongs to the state, and the PBOC lies at the center of the e-CNY operating system. 

The PBOC is responsible for issuance and disposal, inter-institution connectivity, and wallet ecosystem management. 

Additionally, the PBOC is responsible for selecting commercial banks with certain strengths in capital and technology as authorized operators to take the lead in providing e-CNY exchange services. 

But it's these authorized operators (e.g. commercial banks, licensed non-bank payment institutions) that are selected by the PBOC who will then circulate the e-CNY to the public.

• Will Physical Cash Be Banned?

No. The PBOC makes it clear that as long as there is demand for physical RMB, the PBOC will not stop supplying it nor replace it via administrative order.

The PBOC reiterates that China is a large country with a vast territory, large population, multiple ethnic groups and wide differences in regional development, and that in such a society, people’s payment habits, age, and security needs vary. 

Therefore, physical RMB enjoys advantages that cannot easily be replaced by other means of payment. 

• What Kind of Data Will Be Collected?

The PBOC makes it clear that the e-CNY system will collect less transaction information than traditional electronic payments and will not provide information to third parties or other government agencies unless stipulated otherwise in laws and regulations. 

Internally, the PBOC will also set-up a firewall for e-CNY related information, and strictly implement information security and privacy protocols, such as designating special personnel to manage such e-CNY data, separating e-CNY from other businesses, applying a tiered authorization system, putting in place checks and balances, and conducting internal audits.

Any arbitrary information requests or use will be prohibited.

However, the PBOC also mentions that it has set up a framework of big data analysis, risk monitoring and early warning for e-CNY to enhance the foresightedness, accuracy and effectiveness of e-CNY management.

• What About Privacy?

The PBOC mentions that the e-CNY follows the principle of “anonymity for small value and traceable for high value,” and that it “attaches great importance to protecting personal information and privacy.”

The PBOC aims to meet the public’s demand for anonymous small value payment services.

But at the same time, it wants to guard against the misuse of e-CNY in illegal and criminal activities, such as money laundering or tax evasion, by making sure that such larger transactions comply with AML/CFT requirements.

• Will the e-CNY Be Used for Cross Border Payments?

The PBOC acknowledges that the question as to whether the e-CNY will be used in cross-border payments and to promote RMB internationalization has been drawing much attention. 

And the PBOC makes it clear that although technically ready for cross-border use, the e-CNY is presently designed mainly for domestic retail payments.

However, the PBOC explicitly mentions that the internationalization of a currency is a natural result of market selection and that cross-border payments involve various complicated issues such as monetary sovereignty, foreign exchange policies and arrangements, as well as regulatory and compliance requirements. 

• What Type of Wallets Will Be Available?

Both individual and corporate wallets will be available.

Transaction and balance limits will be determined depending on the level of KYC.

But the PBOC makes it clear that “least-privileged” wallets can also be opened without any KYC to reflect the principle of anonymity, but that these wallets can then be upgraded following KYC. 

Also, both software and hardware wallets will be available. 

Software wallets will be available through mobile payment apps, SDKs and APIs. 

Hardware wallets will be available via IC cards, mobile phones, wearables and other IoT devices. 

The PBOC also mentions that parent/sub-wallet structures will also be available. 

Individuals can set payment caps, payment conditions, personal privacy protection and other functions through sub-wallets.

Corporates and institutions can also pool and distribute funds and manage finances through sub-wallets.

• Will the e-CNY Work Offline?

The e-CNY will share both the features of physical RMB (token based), such as settlement upon payment and anonymity, and the features of electronic payment instruments (account based), which are less costly, highly portable, highly efficient and hard-to-counterfeit. 

Thus the token based feature also enables the e-CNY to work offline. 

• What About Programmability and Security?

In order to encourage “business model innovation,” the e-CNY will allow programmability by deploying smart contracts that will enable self-executing payments according to predefined conditions or terms agreed between two sides.

When it comes to security, the e-CNY will adopt a variety of technologies, including digital certificate systems, digital signatures, and encrypted storage to make double-spending, illegal duplication and counterfeiting, transaction falsification, and repudiation unfeasible.

In addition, a multi-layer security system will initially be established to guarantee that e-CNY has a safe life cycle and that risks are manageable.

This is a development definitely worth following!

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See you all next week!! 

Henri Arslanian

*Please note that this newsletter reflects Henri’s personal views and not those of any organisation he is involved with.

Who is Henri?

Passionate and focused on the future of finance and money, Henri Arslanian is the PwC Crypto Leader and Partner, the former Chairman of the FinTech Association of Hong Kong, and an Adjunct Professor at the University of Hong Kong where he teaches the first FinTech university course.

Henri advises many of the world’s leading crypto exchanges, investors, financial institutions, and tech firms on their FinTech and crypto initiatives as well numerous governments, regulators, and central banks on Fintech and crypto regulatory and policy matters.

With over 500,000 LinkedIn followers and 45,000 newsletter subscribers, Henri is a TEDx and global keynote speaker, a best-selling published author, and is regularly featured in global media including Bloomberg, CNBC, BBC, CNN, The Wall Street Journal, The Economist and the Financial Times.

Henri was named by LinkedIn as one of the global Top Voices in Economy & Finance and is the host of the FinTechCapsules™ and CryptoCapsules™ social media series.

Henri was recently named by Onalytica as the #1 most influential individual on Finance globally on LinkedIn out of 50k+ individuals working at the top professional services and management consulting firms in the world.

Chambers Global named Henri the “highest-profile FinTech consultant in Hong Kong”, Blockchain Asset Review named him the “Most Influential Crypto and Blockchain Thought Leader in Asia”, and Asian Private Banker awarded him the “FinTech Changemaker of the Year” award.

Henri’s latest book “The Future of Finance: The Impact of FinTech, AI and Crypto on Financial Services” published by Palgrave Macmillan, was ranked as one of Amazon’s global top 10 best-sellers in financial services and was recognized as one of the “Best FinTech Books of All Time” by Bookauthority.

Before joining PwC, Henri was with a FinTech start-up and previously spent many years with UBS Investment Bank in Hong Kong. Henri started his career as a financial markets and funds lawyer in Canada and Hong Kong.

Henri speaks five languages including English, French, Armenian, Spanish, and Mandarin Chinese.

He holds a Masters in Chinese Law from Tsinghua University; a joint Global Executive MBA from Columbia Business School, London Business School, and Hong Kong University; a Bachelor of Law from the University of Montreal (Dean’s List of Excellence) and a Masters in Transnational Law from the University of Sherbrooke, where he was awarded the Governor General of Canada Gold Medal for Academic Excellence for having graduated with the highest grades of the university.

You can learn more about Henri on his website (www.henriarslanian.com) and you can reach him at info@henriarslanian.com