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Posts by: Sean Cope

Press Room: Glint in the news!

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Alternative currencies dominated much of the news this month. This week, Ethereum hit a new record high and broke the £2,000 barrier for the very first time. Alternatives are now firmly established amongst consumers as a viable store of value and means of exchange as we all look to take greater control over how we save and spend our money. Our commentary on the latest crypto milestone appeared in two articles in The Sun (here and here), Daily Express and Yahoo Finance.

Has the crackdown on crypto begun? One of the biggest stories this month was the creation of Central Bank Digital Currency (CBDC) taskforce by the Bank of England and HM Treasury. This is the strongest sign yet that the UK is looking to launch a CBDC and has potentially huge implications for our savings, purchasing power and privacy. Jason’s commentary appeared in some of the UK’s most influential newspapers including The TimesDaily Mail and Evening Standard as well as key financial websites including MSN, This is Money, MoneyWeek, Yahoo Finance, CryptoNews and UK Investor Magazine.

Earlier this month, the UK announced inflation continued to rise and is on track to meet the 2% target set by the Bank of England. The cash in our accounts already loses value by the day due to inflation outstripping the current miniscule interest rates – the potential introduction of negative interest rates would be catastrophic. Read our full commentary in the Daily Express.

Ever wondered how your savings have performed vs gold? We crunched the numbers and the value of gold holdings increased 41% over the last decade, whilst Cash ISAs have lost 2% in value over the same period. Our research and explanation behind cash’s fall in value appeared in Yahoo Finance and Fintech Zoom.

In last month’s Press Room we welcomed Emmanuel Ide to the leadership team, this key new hire appeared in Mondo VisioneFintech Insight and Fintech Inshorts over the last couple of weeks.

Glint Special Report: Bitcoin vs Gold – who won The Great Debate?

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Like many of you, we were glued to the Bitcoin vs Gold debate between industry heavyweights Michael Saylor (Bitcoin Billionaire) and Frank Giustra (Gold Billionaire). As expected, it was a fascinating discussion, with plenty of insight to digest.

The debate covered a huge range of key issues and arguments; we’ve reviewed and analysed some of the big talking points – as well as highlighting some of the major points that weren’t mentioned.

Asset comparison

According to Michael Saylor, Bitcoin is secure and possesses many of the characteristics of monetary gold, but without its “defects”. This echoes the classic standpoint of Bitcoin as “new” or “digital” gold and its devotees will undoubtedly believe this encapsulates the entire argument in just one pithy phrase.

Frank Giustra, on the other hand, clearly doesn’t. He makes a point we’ve demonstrated on these pages many times over the last few years – Bitcoin has never been tested in a crisis, whereas gold has been valued, relied upon and trusted as both a means of saving as well as money, for centuries. Gold has stood the test of time.

Giustra also questions whether Bitcoin will be accepted as a mainstream method of payment. Whilst Bitcoin and other cryptocurrencies are easily accessible as a store of value, it’s much more difficult to actually spend them. Whilst some of the world’s largest retailers and companies do accept payment in Bitcoin and the number is growing, it’s still very uncommon to be able to use cryptos with smaller businesses. Until this changes, Bitcoin isn’t a viable alternative as a means of everyday exchange, he argues.

There are two other major factors that are likely to prevent Bitcoin from establishing itself as an everyday currency – slow transaction processing times and high fees. Bitcoin has only been able to process a maximum of seven transactions per second and there are many factors which can slow down transactions – taking as long as five days in 2018. In terms of fees, Bitcoin transactions are prohibitively expensive – the average fee over the last week is around $45, meaning that it is an unviable option for most everyday purchases… imagine spending $5 on a coffee and being hit with ‘gas’ fees of $45!

Risk factors

As Frank Giustra highlighted, quantifying the risks of Bitcoin is hugely important. Whilst we all know that investments can fall in value as well as increase, Bitcoin can sometimes be positioned as an almost risk-free asset – this is very dangerous, especially as it is such an attractive proposition for private investors.

However, as Giustra pointed out, Bitcoin shouldn’t be worried about gold; “central banks are the ones you need to look out for”. This is a crucial point that we’ve raised here many times. Governments need to control their currency, making ownership of cryptocurrencies illegal could easily happen. We’ve already seen it in China and India is once again looking to ban Bitcoin. What would be the impact of this? It is likely to curtail Bitcoin to the point where only a minority use it. This could have a catastrophic impact on its value and the portfolios of its holders.

On a related note, Bitcoin is unregulated. It is the wild west of global currencies; this doesn’t put off investors, in fact for many the lack of regulation is another advantage of Bitcoin (our debate preview delved into regulatory details). However, this also makes it very attractive to manipulators as well as another potential threat to governments – PayPal Founder Peter Thiel recently went as far as describing it as a “Chinese financial weapon”.

Once again, taxation is key. Governments won’t want to risk losing out on potentially billions in tax revenues whilst an unregulated, anonymous currency like Bitcoin flourishes. Many believe it is inevitable that central banks will look to control or curtail cryptos – in the UK, we’ve recently seen clear signs of this as the Bank of England announced the launch of a Central Bank Digital Currency (CBDC) taskforce; what is a CBDC if not an attempt to intervene in the digital currency arena?

Historical performance

No one questions the longevity of gold and its role as currency throughout moments of monumental change throughout history. However, Bitcoiners often claim that gold has had its time and suggest it is no longer fit for purpose – this is incorrect as Glint’s payments ecosystem allows gold to be spent as an everyday currency whilst also performing its timeless role as a store of value.

Saylor claims that Bitcoin has matured as an asset and is appreciating at 200% per year. This seems unsustainable – Giustra suggests as much by remarking how it “sounds more like a bubble environment than a store of value”. Whilst Saylor claims that Bitcoin is an asset rather than a currency – which should be held over the long-term – what happens if this does turn out to be a bubble?

Regardless of the hugely impressive recent performance of Bitcoin, there is one irrefutable point – Bitcoin has not been tested over the long-term and has not been around long enough to demonstrate its viability as a store of value.

Supply dynamics

Saylor made one particularly revealing comment during the debate: “Gold is a commodity, Bitcoin is a scarcity”. This provides a fascinating insight into how he, and no doubt, many other Bitcoiners, view gold’s position. Gold is a finite resource, we cannot simply create more of it – this is part of its intrinsic value and why it has been viewed by many as a trusted and reliable asset for thousands of years.

On the other hand, Bitcoin is created by humans. There may only be 21 million coins in existence but who’s to say this cannot change? History is full of surprises that were seemingly impossible, until they happened. By its very nature, Bitcoin is subject to human intervention and at risk of corruption – whether that is caused by the best intentions or through malign forces.
This poses an interesting question, does the supply dynamics of Bitcoin prevent its use as a currency? We’ll find out soon enough.

Ownership

Gold ownership is widely spread amongst people around the world. The world’s central banks only own 17% of the world’s gold.

The complete opposite is true of Bitcoin. A recent Bloomberg article revealed that 95% of Bitcoin’s market cap was owned by only 2% of wallets; even if the figure is lower (71.5% according to other research), these ‘whales’ hold undue influence over the asset and can impact its already high volatility – 75% to 125% compared to 8-20% for gold.

One of the most telling points made during the debate was Giustra’s anecdotal suggestion that Larry Fink, CEO of Blackrock, sees little real institutional investment in Bitcoin. It will be fascinating to see if this changes over time.

Market forces

“None of us have experienced an investment climate like today” – Giustra’s words certainly put 2021 into context. This supports his message to private investors of the importance of diversification. And for many, gold is the ultimate hedge in times of uncertainty.

Of course, more big-tech and finance companies are embracing Bitcoin – Tesla being one of the highest profile recent institutional investors. Saylor clearly believes that this is only likely to accelerate in the future. However, as Giustra highlights, Bitcoin isn’t owned by any central banks and it is highly debatable that it would become a reserve currency. This is partly down to a need for control and is one of the motivations behind the development of CDBCs.

Bitcoin appears to be behaving like a growth stock, time will tell how it performs over the long term.

Glint’s view

As expected, it was a forthright and hugely insightful debate, but the panel missed out on the opportunity to cover some crucial topics. Some of these we discussed in our preview earlier this week.

Firstly, it is a shame that the discussion focussed on the two assets as a store of value and offered little in terms of gold as a means of exchange. Giustra believes that gold is no longer used as everyday money, whilst Saylor even claimed it is a myth that gold is money – the opposite is exactly what Glint offers with its global payments ecosystem allowing clients to spend, save and share real gold through our app and Glint Mastercard®.

Also, the scalability of gold as a currency wasn’t discussed. Through the digitalisation of gold with Glint, instant and secure cross-border payments in real gold are possible at the touch of a screen, these don’t require huge amounts of energy either, which is often one of the main criticisms of Bitcoin.

Finally, gold is increasingly relevant to younger consumers – recent research from the Royal Mint shows a 32% increase in millennials turning to gold. Through Glint, gold can now be used in the same way as many cryptocurrencies – traded, spent and sent to friends and family. We’re working hard to develop a payments alternative that positions gold as a relevant and viable currency for the 21st century.

Special Report: The debate of the year – Gold vs Bitcoin with Frank Giustra & Michael Saylor

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Like all proponents of alternative currencies, we’re eagerly awaiting the much-hyped debate between billionaire goldbug Frank Giustra and billionaire Bitcoiner Michael Saylor on gold vs bitcoin to be streamed live on the Stansberry Research YouTube channel!

Gold is a currency, occupying the same position as cryptocurrencies; after all, they have the same common enemy – fiat currencies; they share the same mission, to provide a reliable alternative to government-backed money. Both gold (used as a currency and digitally with Glint’s bespoke app and Mastercard®) and cryptos such as Bitcoin, are alternative global currencies allowing consumers to take greater control over their finances and help protect their purchasing power over the long-term.

Currently, the financial system punishes us all; through a combination of low interest rates, rising inflation, record-high government borrowing and continuing quantitative easing, the value of national currencies erodes, hitting our savings and the lasting value of our money.

Whilst the value of gold can obviously decline, as we’ve seen since its summer peak last year, the fundamentals that ensure that gold is seen by many as a more reliable long-term store of value remain in place – gold prices are up almost 50% over the last five years, despite the recent dip.

Glint has enabled gold to be used as everyday money all over the world via electronic payments. Thanks to Glint’s fast and secure platform, gold can now, not only be used to save for the future, but it can also be spent on a daily basis, anywhere in the world using your Glint Mastercard® or increasingly with Glint’s direct peer to peer (P2P) transfer, Glint it!

Bitcoin’s recent performance has obviously been hugely impressive – it’s up over 600% on the year – however, there is huge volatility which can impact its viability as an everyday currency. Bitcoin’s volatility lies between 75% to 125% compared to 8-20% for gold.

This volatility is also enhanced as around 95% of all Bitcoin is controlled by just 2% of accounts, meaning that the ‘whales’ have undue influence on the performance and value of the currency. Other research suggests 2% of ‘whales’ control 71.5% of Bitcoin, even taking this lower figure into account, ownership is hugely disproportionate.

In addition, the high transaction fees of purchases with Bitcoin – the average fee for a Bitcoin transaction in the last 7 days is over $45 – suggest that it is of limited use as an everyday currency in its current format. By comparison, Glint’s Mastercard® and Glint it! transfer and payments transactions are free to our users – although we do charge a small fee on some services such as currency exchange, or for taking cash from an ATM.

Let us compare some of the key characteristics of both gold and Bitcoin.

CONCENTRATED OWNERSHIP

Gold

Gold ownership is widely spread amongst people around the world. The world’s central banks only own 17% of the world’s gold.

Bitcoin

95% of the market cap of Bitcoin is held by only 2% of Bitcoin wallets – even if it is less than this – 71.5% according to some research – this is creating a new generation of oligarchs (the initial coin holders) to replace the old.

SCALABILITY & SPEED

Gold

Glint has enabled gold to be used in payments and unlike Bitcoin, transactions are fast – within 200ms, this can be maintained regardless of volume of transactions. The transfer of gold ownership from one Glint wallet to another is therefore scalable.

Bitcoin

The bigger the Bitcoin network gets the slower it is likely to become – there are variety of causes from congestion to increased block size. Bitcoin can take days for transactions to be confirmed when busy: 5 days in 2018. Plus, since its launch, Bitcoin has only been able to process a maximum of 7 transactions per second.

Although the Lightning Network is designed to speed up transaction processing times, there are still issues with fees as each transaction can be subject to several fees.

REGULATION

Gold

For thousands of years, gold has been accepted as both a currency and as store of value, with a long-established position within the financial system. Gold is used as money and stored by central banks. In the UK, Glint is authorised and regulated by the Financial Conduct Authority, under the Electronic Money Regulations 2011, for the issuing of electronic money (FRN 900657). Gold is not regulated by the FCA.

In the US, Glint is a U.S.-based authorized Card Program Manager. Funds are held at Sutton Bank, Member of the Federal Deposit Insurance Corporation (FDIC), in an FDIC-insured account. Glint Pay Inc. employs effective Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT), and fraud prevention systems and controls to mitigate and combat risks.

Bitcoin

All cryptocurrencies are likely to face increased regulation. In the US, recently there has been the SEC lawsuit against Ripple and previous comments from Janet Yellen have focused on the need to curtail Bitcoin to stop illicit financing. Globally, Bitcoin is already banned in China, and India has drafted legislation to ban digital currencies once again. The viability of Bitcoin as a currency and store of value could be called into question if more countries follow China.

DECENTRALISATION

Decentralisation is freedom from government control and influence. It can refer to the means of exchange as well as the ledger or even ownership.

Gold

Gold is centralised, which means because of its physical nature it cannot be easily stolen if it is stored in a secure and insured vault. Its means of exchange is centralised which has benefits as it means that it cannot be hacked digitally.

Glint’s clients know their gold is secured in a Brinks Vault in Switzerland. Brinks is insured by Lloyds of London and their policy covers the replacement value of Glint client’s Gold as held in their vault.

Gold is not concentrated in one particular country – in terms of both mining and ownership (see above). Gold is mined in many countries – the World Gold Council provides data on gold production for over 40 countries – and although China is the largest producer in the world, it accounts for around 11% of the global total.

 

Bitcoin

The Bitcoin community see the decentralised nature of Bitcoin as one of its main strengths that define its value, however the perceived independence that decentralisation gives is misplaced because:

• Blockchain: The distributed ledger is inherent to Bitcoin’s nature. However, although a distributed ledger has some benefits it is of less use when the nature and value of the currency is centralised.

• Although Blockchain is in place, people increasingly buy Bitcoin through exchanges which use centralised ledgers.

• Bitcoin miners are centralised in physical premises that rely on centralised human /energy resources. This means that there is a risk that they could be shut down by governments easily – for example, around 65% of Bitcoin mining originates from China. Government intervention could cause huge issues on a global scale and lead to price increases in mining costs as well as devaluation of Bitcoin.

• There is a risk that governments could severely curtail Bitcoin to the point where it loses its ambitions to become a global alternative currency – currently Bitcoin can remain anonymous, while this is the case, increased regulation and state interference could be more likely.

Bitcoin exchanges which have seen huge thefts via hacking. E.g. clients of Mt.Gox lost over 850,000 Bitcoin in 2014. Last year, a data breach saw the personal details of 270,000 crypto users published online.

ENERGY CONSUMPTION

Gold

Many gold mining companies adhere to the World Gold Council’s Responsible Gold Mining Principles, which cover ESG criteria for the industry, including environmental topics such as water management and climate change.

Gold is created naturally. Once a unit of gold is mined and extracted, it does not consume further energy and can be transacted or used as a store of value without detriment to the planet.

Bitcoin

Cambridge University have calculated that operating and maintaining the Bitcoin blockchain and its transactions requires extremely large amounts of energy estimated to be the equivalent of that used by a country of over 200m people, around 3 times the UK population.

Bitcoin requires mining and therefore considerable energy consumption for not just creation but all transactions. Currently, 60% of Bitcoin mining originates in China, with a huge carbon footprint – expected to hit 130.50 million metric tons of carbon emission by 2024.

ANONYMITY

Gold

Physical gold can be transferred anonymously. Physical gold can be taken across borders, although with be subject to customs checks and restrictions.

However, digital gold through Glint isn’t anonymous. All Glint customers have their identity verified in line with global laws relating to financial crime.

Bitcoin

Bitcoin wallets can remain anonymous if the holder wishes to ensure this. This means that instant payments between accounts remain anonymous and can be untraceable. These payments can also be borderless.

This can be viewed as a threat to government and suggests that increased regulation and state intervention is likely to control or curtail Bitcoin.

STOOD THE TEST OF TIME

Gold

Gold has been used as money for at least 3,000 years. It has survived as money and a medium of exchange through the greatest of disruptions including world wars, dramatic leaps in technology, government intervention as well as seismic shifts in social frameworks and politics. Over time, gold has proven to be a reliable hedge against inflation and uncertainty.

The nature of anything defined by human beings is subject to corruption, sometimes with the best intent. Gold is created naturally and is a finite resource – this is part of its intrinsic value.

Bitcoin

As yet, Bitcoin has not had to face any of these challenges and is therefore untested over time.
Whether you’re a goldbug or a Bitcoiner, it’s sure to be a fascinating debate.

Register HERE to watch live on the Stansberry Research YouTube channel.