Cryptocurrencies and Quantum Computing: A Future of Coexistence

Sarson Funds - The Future of Crypto - Cryptocurrency Financial Advisor

Sarson Funds - The Future of Crypto - Cryptocurrency Financial Advisor

Recent developments in both quantum computing and the crypto ecosystem indicate that neither are going anywhere. As both continue to grow, it is crucial for the crypto community to understand that quantum computing poses both an existential threat and lucrative opportunity towards crafting the future of the ecosystem. As we have expressed in previous segments, quantum computers will soon be fully capable of cracking into crypto wallets only through knowledge of wallet addresses, as they are able to use these addresses as the foundation to further derive the public and then the private keys. As this quantum functionality arises, the future of crypto depends on quantum-resistant encryption solutions.

The bottom line is that crypto and quantum computing must coexist. At Sarson Funds, we believe that an upside to quantum computing risk is that it will push blockchain to become truly unbreakable, pushing cryptocurrencies to be the indisputable medium for future commerce. Thus, quantum computing should not be viewed as an existential risk, but rather a tool to drive crypto towards a future of quantum-resistance and assured value protection. The future-proof security that will emerge from the next wave of crypto advancements will provide a pathway of irrefutability for crypto as a means of consensus for our future financial system.

The next wave of crypto advancements will likely see an emergence of two key avenues towards quantum-resistance: quantum-proof blockchains and digital assets wrapped with quantum resistant encryption algorithms. While we are only beginning to understand what the future of crypto will look like with the recent release of the Crown Sterling token, we know that the crypto community will respect the pace of innovation and understand that even the most underlying mechanisms that we’ve trusted for so long are at risk.

By Liam McDonald

Treasury Department Evaluating a Government-Sponsored Digital Dollar

Treasury Department Exploring Use of FedCoin

According to Deputy Treasury Secretary Justin Muzinich, the Treasury department is exploring multiple possible avenues to support a central bank digital currency tied to the US dollar. The Boston Fed is taking a leading role in this exploration, partnering with MIT’s Digital Currency Initiative to evaluate more than 30 different blockchain networks to test scalability, efficiency, and ability to support US financial infrastructure.

Muzinich noted in a statement, “There are clearly efficiency benefits and cost benefits to using a distributed ledger… And I also think, more broadly, it’s important for government to embrace innovation and not be scared by it.” As Muzinich states, the US must take initiative and embrace the pace of global tech innovation, especially as China is already leading the charge.

Muzinich also noted how crucial it is for the government to begin regulating cryptocurrencies, as they offer versatile solutions to many governmental and corporate financial operations. While compliance to AML rules presents a barrier for governmental adoption of digital currencies, we believe that with the rate of innovation that the crypto ecosystem is experiencing, solutions to AML and KYC concerns are not far away.

To remain a global economic superpower, the United States must position itself along the cutting edge of financial technology, and adopting blockchain technology as the backbone of its future financial system is the most progressive, stable, and secure approach to ensuring future economic competitiveness.

By Liam McDonald

Blockchain Wars: COVID-19 Edition

With United States refocusing attention on controlling the spread of COVID-19, China continues to pursue its goal of global leadership in blockchain technology.

Following on the success of last year’s blockchain initiatives, China successfully moved nearly their entire population off of paper money – a change affecting Chinese citizens of all economic levels. Panhandlers on the streets of Beijing now display QR codes for donations into their digital bank accounts.

As was reported by the Wall Street Journal in April, four large cities in China are piloting full digital currency integration. China’s Central Banked recently completed a “Certification of FinTech Products” program, a year-long public education campaign on blockchain technology. These initiatives, along with President Xi’s open and continued public support of digital currency dominance, have propelled China into a blockchain technology and cryptocurrency leadership position.

Compared to its largest global rival, the United States has not kept pace. Washington’s knowledge gap and financial regulatory ineffectiveness were showcased clearly during the early hearings on Facebook’s proposed cryptocurrency, Libra. The hearings quickly exposed that neither chamber of Congress understands nor appreciates the impact that cryptocurrency and blockchain technology are poised to have on the future of the world’s financial architecture.

So what has been the net effect? Facebook is moving forward with Libra – but they are leaving American investors out and instead partnering with companies and countries outside of Washington’s regulatory reach. More evidence of American crypto-flight came in the form of PayPal’s decision this week to test its new Bitcoin buying feature in Europe instead of its home country, the United States. The United States is increasingly seen as hostile toward digital currency integration and is driving financial innovation offshore in the process .

Fortunately, there is legislation being proposed that will allow for companies in the United States to safely compete for positions in the coming digital economy without the fear of being caught on the wrong side of yet to be written legislation. Voices on both sides of the political aisle seem to understand failing to act is a failure to provide American business with the framework they need to compete on the future global stage.

Blockchain technology stands poised to rebuild the way data, digital assets and currencies move around the globe. The global financial landscape will be restructured to reflect the immutability and instant transferability of blockchain-based assets and currencies. Waiting for third-party transaction validations are becoming a thing of the past. Goldman Sachs, Fidelity, IBM, The Bank of England, The Bank of Japan, the ECB, the Federal Reserve and the IMF have all commented on the inevitability of this changing paradigm.

Without action to support the adoption of cryptocurrency and blockchain technology, it is all but assured that the United States will see a decline in its political and economic influence. The abandonment of the US dollar as the world’s favored “transaction currency” (the currency the world uses to trade international goods like oil and gold) will be the first sign in this decline of US economic hegemony – but it won’t be the last.

Politicians are starting to take notice but are uncertain as to how to proceed. Looking backwards and hanging on to the past is not a winning strategy. The United States must once again embrace its innovative spirit and evolve.

China has taken the first steps toward dominating the future of the internet and of finance. Indeed, the first shots in the coming “Blockchain Wars” have been fired!

American Crypto: A Peek at Digital Wallets Under Federal Evaluation Shows the US May Not Be as Far Behind the Blockchain Curve as Feared

The Coronavirus pandemic has revealed a need for digital banking in the United States.

The United States has been accused, not always unfairly, of complacency as other countries around the world race toward digital currency adoption and claim leadership in shaping the future of digital finance. Information shared by Sarson Funds with insights into conversations happening at the highest levels in Washington, DC reveals that the United States may not be as far behind as assumed in the Blockchain Wars with China and other digital currency focused nations.

Digital Wallets Being Evaluated by the US Treasury Include Offerings from Crypto Payments Firm Metal, as Shown Here.

Few countries have more to gain from a rebuilding of the international financial system than China. Despite efforts to the contrary, capital restrictions on the movement of money into and out of China stopped the Chinese RMB from ever becoming a viable trade currency. China’s development of a two-tiered blockchain-based currency system – with a domestic currency and an international currency (the conversions of which must go through the PBOC) – seek to finally address this problem. China remains the global leader for the adoption of a digital currency, with digital wallets (shown below) and blockchain-based digital currencies already being implemented, such as the test programs recently launched in four Chinese cities.

China’s Digital Wallet, Launched in May 2020.

John Sarson, CEO of Sarson Funds, a Wall Street-focused digital asset investment management firm, comments that he believes the digital Yuan will be the first government-backed digital dollar to be utilized worldwide.

With the digitization of the Yuan and the support of neighboring countries, it is no shock that Sarson believes the Yuan will be the first globally accepted central bank digital currency, but where is the United States in this effort?

According to Sarson, the United States is not very far behind. “The United States government works most effectively when it looks to private industry for leadership,” notes Sarson, while also saying that it is encouraging to see the US Treasury soliciting technology solutions from crypto industry veterans like Metal Pay. Sarson continues, “Metal’s digital payment platform makes distributing and receiving digital payments anywhere in the world as simple as Venmo, without the barriers for citizens without bank accounts. Moves like this will catch the U.S. up to the rest of the digital-finance world in a hurry.”

Metal is one of a small number of FDIC-insured crypto payment platforms in the United States, as it allows users to send and receive payments with 0% transaction fees on cash – a presumed must for federal partnerships.

So, while China has expressed interest in developing a compatible infrastructure for cryptocurrency coexistence, Metal Pay is pioneering the effort on the American front. According to Sarson, the United States will need to lean heavily on its private sector – and would be wise to do so – if it hopes to keep up with the increasingly digital future of finance.

China Lands First Blow in Global Blockchain Wars

As lawmakers jockey to chastise technology leaders like Facebook’s Mark Zuckerberg (for the dastardly future crime of earning potential profits by providing a payment service to millions of people), America’s greatest economic foe, China, has quietly built a substantial lead in the race for leadership in technology’s newest battleground: Blockchain Technology.

This was an exciting week for cryptocurrency holders. Bitcoin prices surged as much as 40% Friday after China’s Xi Jinping urged his fellow citizens to “seize the opportunity” afforded by blockchain technology. The Chinese leader’s statements on blockchain are believed to be his first in-depth remarks on the technology. His comments stressed the importance of stepping-up research on the standardization of blockchain to increase China’s influence and rule-making power in the global arena.

2019 has been a busy year for China. While the United States bemused itself with bipartisan bickering, China quietly pursued global leadership in blockchain technology. During the year, China successfully moved nearly their entire population off of paper money and onto digital currency solutions. This change affected Chinese citizens of all economic levels. Even panhandlers on the streets of Beijing no longer solicit coins and bills, they instead display their QR code for donations to their digital bank accounts.

China’s central bank also announced a verification system this week called the Certification of FinTech Products that will certify 11 types of financial technology hardware and software widely used for digital payments and blockchain services. This initiative follows a year-long public education campaign where China’s central bank published and disseminated pamphlets and other educational materials heralding the benefits of digital currencies and explaining the capabilities of blockchain technology to streamline commerce and fight corruption.

China’s intention of dominating this new technology has been made clear – first with covert foundational initiatives and now overtly with President Xi’s announcements and the sponsoring of these programs. This is all advantageous for a command economy like China, which can now recapture lost innovation through streamlined implementation, a phenomenon now materializing. Washington’s struggles with endless equivocation and ineffectiveness reflects the Western world’s general indecisiveness, allowing China to establish itself as the global blockchain technology and cryptocurrency leader.

Blockchain technology stands poised to rebuild the way that data, digital assets and currencies move around the globe. The global financial landscape will be restructured to reflect the immutability and instant transferability of blockchain-based assets and currencies. Gone are the days of waiting for third-party transaction validations. Goldman Sachs, Fidelity, IBM, The Bank of England, The Bank of Japan, the ECB, the Federal Reserve and the IMF have all commented on the inevitability of this changing paradigm, but no operator has gone as far as the Bank of China to position itself as a leader for this coming reality.

The Chinese government has moved forward with formal policy to ready itself and its population for a digital economy, passing a new law (effective January 1st) aimed at “facilitating the development of the cryptography business and ensuring the security of cyberspace and information”. Among other things, this law also makes it illegal to falsely claim that blockchain technology is fraudulent. The new legislation, and indeed President Xi’s comments, were anticipated by many as China readies the country for the launch of its state-backed cryptocurrency – which is expected as soon as December.

When we finally see the inner workings of China’s national cryptocurrency, we can be certain that its blockchain architecture will likely be a long way from the decentralized, trust-less principles upon which Bitcoin, Ethereum and other public blockchains are based.

China’s interest in the space appears to have had a positive impact on already established cryptocurrencies like Bitcoin, by adding global legitimacy to the cryptocurrency industry overall. Only time will tell the true cost of America’s war on its innovators. China has taken the first steps toward dominating the future of the internet and of finance. The first shots in the “Blockchain Wars” have been fired and America barely noticed.

John Sarson

Managing Partner & CIO