Saturday, May 30, 2020

Instability, high remittance fees drive India digital currency adoption

 

The instability of the rupee combined with high remittance fees is driving digital currency adoption in India, according to a new report.

The report from exchange OKEx in partnership with Coinpaprika found an increasing share of global digital currency business in India, projecting significant growth relative to other countries over the coming two years.

The problem of remittance fees is particularly acute in the country, with 17 million Indian employees working overseas and remitting money home. Of the $80 billion remitted from overseas workers in 2018, some $5.67 billion in fees were incurred.

According to the report, increasing liberalization of digital currency rules in India could set the country on a similar path to Mexico, where digital exchange Bitso has grown to account for 2% of U.S.-Mexico remittance.

The growth in digital currency uptake has accelerated since the Supreme Court ruled against the Reserve Bank of India's ban on banks serving crypto businesses. OKEx has reported a 545.56% increase in traffic from India, with sign-ups during the first quarter of the year up 4,100%.

The shift to crypto also coincides with instability in the rupee, which has lost 7% of its value against the dollar since the beginning of the coronavirus crisis.

Complex rules for exchanging foreign currency in India have made it difficult for those looking to transfer rupees into more stable fiat currencies, which the report said had also been a factor in driving more people to turn to digital currencies.

While the report found digital currency was currently being used as a vehicle for ultimately transferring funds to alternative fiat currencies, it suggests more Indians could turn to digital currency directly as the market continues to mature.

The move follows similar trends seen in other countries with unstable fiat currencies, and from those with large overseas remittance industries.

Friday, May 22, 2020

Happy Bitcoin Pizza Day! But don’t think about the fees

 


Happy Pizza Day! And this year, please make mine extra spicy. Yes, it's May 22 again, the day all Bitcoiners celebrate by ordering a pizza. Any pizza is good, but to make it special you'll need to buy it with Bitcoin—don't make the mistake of using BTC these days though, because at the time of writing the average transaction fee on the BTC network is US$6.28.

What is Pizza Day and why is it significant?
Today is actually the 10th anniversary of Bitcoin Pizza Day. It's significant because it marks the first (or at least, the first documented) purchase of real-world goods with Bitcoin. Before then, mining and transacting with Bitcoin was largely a hobbyist pursuit, so the purchase proved that Bitcoin could have a real-world dollar value. This in turn sent a price signal to the nascent "market" for Bitcoin, and became the first benchmark for BTC value. The rest, as they say, is history.

On May 18, 2010, Laszlo Hanyecz of Jacksonville, Florida, posted on the Bitcoin Talk forums:
"I'll pay 10,000 bitcoins for a couple of pizzas.. like maybe 2 large ones so I have some left over for the next day. I like having left over pizza to nibble on later. You can make the pizza yourself and bring it to my house or order it for me from a delivery place, but what I'm aiming for is getting food delivered in exchange for bitcoins where I don't have to order or prepare it myself, kind of like ordering a 'breakfast platter' at a hotel or something, they just bring you something to eat and you're happy!"

It took a few days to finally get a taker—user "jercos" (Jeremy Sturdivant) ordered two large pizzas from Papa John's for delivery to Hanyecz's home, paid in USD and collected the 10,000 BTC. The pizzas themselves cost US$41.

You can see photos of the now-famous Bitcoin pizzas here.
Technically, Hanyecz didn't buy the pizzas directly for Bitcoin so you could say the price included Sturdivant's service fee. Since the Bitcoin price in May 2010 was officially $0, he did take on a $41 risk.

As we now know, that risk paid off—the current market value of BTC is $9053, meaning either owner of the 10,000 coins would now have US$90,530,000. If BTC's all-time-high price stands at $19,891 then 10,000 coins would've been worth $198,910,000. Had they kept those coins in time for the two forks that shifted Bitcoin protocol development to BCH and finally to Bitcoin SV (BSV), it would be millions more.

Only BSV now is Bitcoin according to the Satoshi Nakamoto whitepaper and the original protocol, and 10,000 BSV is currently US$1,915,900.

Million-dollar pizzas, but value is priceless
Yes, that's an expensive pair of pizzas (for pedantic reasons, remember it was two large pizzas instead of the single "198 million dollar pizza" often mentioned in the media). Naturally, Hanyecz often finds himself in demand for a quote on whether he regrets his purchase. He's on the record as saying he doesn't at all, since his move kickstarted the Bitcoin economy. Had he not sent those 10,000 coins, and had no-one else taken the plunge either, Bitcoin's value could still be $0 today.

It's a sign that, unless people are willing to take risks and do something to give Bitcoin value, it doesn't have any. What if Hanyecz had abided by BTC's "HODL" mentality, or cared about all the people who called him crazy over the years, reminding him of his (theoretically) lost millions?

Most people who've been in the Bitcoin community for many years have "Bitcoin Pizza" stories of their own to tell. This writer likes to show off his "thousand dollar" Bitcoin keychain; everyone hates to be reminded of how much money they'd have now if they'd never spent those coins.

But again, if no one had ever spent Bitcoin then the value of Bitcoin would be $0. Bitcoin only has value if it's used in the real world. And thanks to the people who invested time, effort and money building user-friendly services so more people could use Bitcoin, that value has increased even more over time.

Think about all that next time you hear someone say "HODL" (ie: save your Bitcoins, don't spend them). HODLing creates no value whatsoever. BTC wouldn't even have speculative-gambling value if no-one sold them, and that's about the only utility BTC has nowadays. If you know any committed BTC HODLers, remind them how much that $6.28 transaction fee they just paid could be worth at some random point in the future. That's extra spicy.

BSV, on the other hand, recognizes real-world usage as the main value driver and its people build services that aim to solve real-world problems. The large-volume, low-fee model is creating a global immutable ledger for enterprises, and yet remains cheap enough to send individual transactions for cents, or much less.

But enough of that—Happy Pizza Day once again, and enjoy the food!

Justin Sun’s Steem locks user funds

 


Steem is going to freeze roughly $5 million in Steem tokens that belong to supporters of Hive.IO, a hard forked version of the Steem blockchain. The battle between Justin Sun's Steem and Hive has been going on for more than three months now, and the trouble began when Justin Sun acquired Steemit.

Sun purchased Steemit, the blockchain-based blogging and social media website that rewards its users in Steem for publishing and curating content, on February 14. As part of his purchase, Sun became entitled to millions of pre-mined tokens (called the founder's reward) that belonged to former Steemit owner Ned Scott.

However, the Steem community viewed Sun's acquisition as problematic. Steem is a delegated Proof-of-Stake blockchain that is governed by the community and the community's votes—the more Steem tokens a user holds, the more voting power they have. Sun's Steem inheritance represented about 20% of the total supply of tokens, which made him one of the most powerful voters.

Sun's acquisition of Steemit will be a precedent that showcases the problems that can arise from Delegated Proof-of-Stake networks–problems that Ethereum is bound to run into when it switches from Proof-of-Work (PoW) to Proof-of-Stake (PoS) in the Ethereum 2.0 upgrade.

PoS networks can quickly turn into an oligarchy because token distributes are rarely, evenly distributed. As a result, on Proof-of-Stake network, the richest users on the network have the lion's share of power when it comes to decision making or mining new blocks—which extends the gap between the rich and the poor on the network. Proof-of-Work networks eliminate these problems because competition between miners is fierce. In addition, the gap between those who frequently mine blocks and those who don't can close very quickly in a PoW system. As Eli Afram says in his latest article, " While the majority staker inevitably grows to become a bigger majority staker in a PoS systems, it is not so in a PoW world. The competition among POW miners is fierce… a newcomer with a great new invention in ASIC mining could perhaps take the lead…A society that rewards competitiveness, risk, and investment is far superior to a society that rewards oligarchy and the descent into the hands of another."

The Steem community feared that Sun's acquisition threatened the decentralization of the blockchain because it put too much power into the hands of Sun. To solve this problem, the Steem community created a community proposal that suggested the Steem blockchain soft fork in a way that would prevent Sun from being able to access and vote with the pre-mined tokens he inherited. The community voted in favor of this proposal—which only made matters worse.

Justin Sun regains control
Once the community voted to soft-fork away from Sun controlling the pre-mined tokens, a proposal was created on Justin's behalf that would allow him to regain control of the pre-mined tokens if it was passed.

Sun enlisted the help of three digital currency exchanges—Binance, Huobi and Poloniex—and had them vote in the proposal by (illicitly?) pooling together the Steem tokens that were held on their exchanges by their users, and putting them towards the proposal to put Sun back in control of the pre-mined tokens. With the help of the three cryptocurrency exchanges, the proposal passed.

Hardfork to Hive
To combat Sun regaining control of the pre-mined tokens, Steem supporters decided to hard fork the Steem blockchain and call it Hive, a blockchain where everyone was airdropped Hive tokens in a 1:1 ratio to the Steem tokens they held—except for the founder's reward. On Hive, Justin Sun is not a central source of power that can sway community voting decisions.

Where we are today
The Hive blockchain has persisted without Sun or individuals that support the Sun's vision for the Steem blockchain. But in what seems to be a move to get back at those who support the Hive blockchain, a Steem hard fork scheduled for May 20 freezes roughly $5 million of STEEM that belongs to Hive supporters and even calls the users whose funds will be frozen out by name.

It is even rumored that Justin Sun has gotten law enforcement involved to put an end to the Hive blockchain, a chain he said was illegally created and is the work of hackers. 

Friday, May 15, 2020

Embattled ABTCoin ICO can’t pay settlement costs

 


ABTCoin, a digital currency startup that was found guilty of violating federal securities laws, has just told New York federal judge Vernon S. Broderick that they cannot pay the $250,000 settlement that they agreed to pay plaintiffs.

$20 million ICO but financially struggling
On May 12, ABTCoins lawyers from Reitler Kailas & Rosenblatt LLC wrote a letter to U.S. District Judge Vernon S. Broderick saying the company was not able to pay the settlement cost that they proposed "due to a change in circumstances." The lawyers also added that ABTCoin was not able to cover their legal costs, and therefore, Reitler Kailas & Rosenblatt LLC lawyers were requesting to withdraw from the case.

This news comes as a surprise considering that ABTCoin raised more than $20 million in its 2017 initial coin offering (ICO). Before hosting a token sale, ABTCoin told potential investors that it was going to use the funds that they raise to create "the fastest blockchain in the world." However, upon release, the ABTCoin blockchain was not able to accomplish the technological achievements they had marketed. In addition, the ABT blockchain did not see very much user adoption and decreased in value by 85% by March 2018.

The lawsuit
After experiencing ABTCoin's technological shortcomings, investors in the project took action against the company.

Raymond Balestra, the lead plaintiff in the class-action lawsuit, sued ABTCoin, claiming that they had conducted an unregistered securities sale in 2017. ABTCoin attempted to have the case dismissed, but in March 2019, Judge Broderick rejected ABTCoin's dismissal bid, saying that the plaintiffs had adequately shown that ABTCoin had violated federal securities laws.

ABTCoin may have done this because they are making a legal chess-move, or maybe ABTCoin is out of money. It looks like the ABTCoin case is coming to a close—but backtracking on the settlement that they proposed themselves was unexpected. 

Fake Libra scams pose new challenge for Facebook

 


Almost a year after Facebook's Libra was first announced, the outlook for the stablecoin looks starkly different. Once hailed as a game-changer for digital currency, the project has been beset by delays and regulatory difficulties.

Now, fake Libra scams are presenting an increasingly pressing new challenge for Libra and Facebook, with a proliferation of websites claiming to offer investment schemes denominated in fake Libra tokens.

Dante Disparte, Deputy Chairman and Head of Policy and Communications for The Libra Association, said the organization was now constantly working to suppress fake Libra scams: "As we become aware of these sites, we work diligently to address them. We respond to inquiries concerning the validity of these pages, indicating that the only official website is Libra.org."

"We are still in the early stages of this project and work to address issues like these as they arise," Disparte told Finance Magnates, urging people to report the scams.

The fake Libra problem is one that has been around for some time, with reports dating back to July 2019. At the time, a report in the Washington Post discovered dozens of fake social media accounts and pages linked to fake Libra scams—including many on Facebook itself.

In an article published on July 23, 2019, the Washington Post said this would continue to be a problem for the social media giant: "Roughly a dozen fake accounts, pages and groups scattered across Facebook and its photo-sharing app Instagram present themselves as official hubs for the digital currency, in some cases offering to sell Libra at a discount if viewers visit potentially fraudulent, third-party websites."

Libra had originally been penciled for launch in the first half of 2020, a milestone that has nearly been reached with limited progress towards a wider rollout.

Thursday, May 7, 2020

ErisX obtains BitLicense, gets green light to serve New Yorkers

 


ErisX has become the latest digital currency company to make an entry into New York after Eris Clearing, its clearing and settlement arm, obtained the coveted BitLicense. The license, issued by the New York Department of Financial Services (NYDFS), allows digital currency firms to legally offer their services to New Yorkers.

ErisX is now licensed to offer its services in 47 states and jurisdictions in the U.S., the company revealed in a press release.

In granting the BitLicense, the NYDFS has recognized the high standards that ErisX applies to its trading platform, CEO Thomas Chippas believes. ErisX has borrowed these standards from the existing capital markets and applied them to digital currencies, ensuring the industry adheres to globally accepted standards, he said.

He added, "Our technology stack as well as regulatory framework, operations, and transparent marketplace are building blocks from the established commodity markets bringing familiarity, reliability and conventionality to the crypto markets."

On its part, the NYDFS cited the approval as a show of its commitment to fostering financial innovation in New York. Linda Lacewell, the Superintendent of Financial Services remarked, "Today's approval is another step in expanding virtual currency activities in the State and promoting New York's support for financial innovation, which will be especially important as we work to reopen the economy of the world's financial capital."

ErisX becomes the 25th digital currency company to obtain the BitLicense since its launch in 2015. Other companies that have received the license include Robinhood, Coinbase, bitFlyer, Square, SoFi Digital Assets, Bitstamp and Genesis Global Trading.

Upon launch, the strict requirements to get the license forced many digital currency companies to exit New York in what was known as the Great Bitcoin Exodus. The application fee stood at $5,000, with the legal fees to comply running up to $50,000. The companies also had to share information about their users.

Companies like Kraken called it quits, stating that the license "comes at a price that exceeds the market opportunity of servicing New York residents." Others who left include ShapeShift, Poloniex, Bitfinex and LocalBitcoins.

Boston-based Circle became the first recipient of the BitLicense, with itBit –now Paxos Trust Company- and Gemini being the second and third recipients respectively.

Bitmain admits hardware problems with Antminer S17

 


Chinese processing hardware manufacturer Bitmain has admitted there are problems with its Antminer S17, following a growing number of complaints posted to social media.

The company acknowledged that some users were experiencing problems, the first time it has acknowledged the difficulties many of their customers had been reporting online. According to a spokesperson for the company, Bitmain was beginning to negotiate with customers who had run into difficulties with their hardware.

Antminer is paying close attention to the issues of some products from the 17 series, which has recently been mentioned by the media.

The issue first raised its head earlier this month, after an entrepreneur started a Telegram group to highlight what he described as a "bad batch" of S17 units. According to the group, some 30% of the models delivered had experienced serious glitches or failed within a single month of operation.

Having grown to some 160 members, the group now contains several other mentions of users experiencing problems with their units.

The reports echo similar findings published by blockchain infrastructure company Blockstream, which suggested 20-30% of S17 customers were experiencing problems with their technology. CoinGeek has also spoken to several to large transaction processing companies in the space that have confirmed this news, saying that they've also experienced "failure rates of 2-3x for the T17 units compared with the S9s" while "Bitmain have reduced and closed repair centers in various global locations."

The embarrassing acknowledgement comes as Bitmain prepares to ship out its latest batch of S19 units, which are expected to be delivered from May 11.

The S19 has been designed to process digital currencies more productively, ahead of the BTC halving due to take place soon.

According to the Bitmain representative, the company has "begun to negotiate solutions with customers who have encountered issues from the product. Antminer has always been adhering to the concept of placing customers first. If any customer has any product issues, please contact the official customer service of Antminer at any time."

Friday, May 1, 2020

Japan Implements Significant Changes to Cryptocurrency Regulation Today

 


Major changes are happening in the cryptocurrency space in Japan as new cryptocurrency regulation enters into force today. Among notable changes are the regulation of crypto custody service providers and crypto derivatives businesses. Japan has 23 regulated crypto exchanges; unregulated platforms have modified their terms of service affecting Japanese residents.

Japan Adopts New Way to Regulate Crypto Industry
The amendments to the Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA) that revise the regulatory framework for cryptocurrency in Japan go into effect on May 1. They were proposed by the country's top financial regulator, the Financial Services Agency (FSA), and adopted by the Diet on May 31 last year. The finalized rules were published on April 3 along with the FSA's answers to public comments. International law firm Morrison & Foerster described:

The regulations coming into effect as of May 1, 2020, represent a significant change in the way the FSA will regulate cryptocurrency-related business activities of operators in Japan going forward.

Among the major changes are the regulation of cryptocurrency custody service providers that do not sell, purchase, or intermediate the sale and purchase of cryptocurrencies and cryptocurrency derivatives businesses. The former now falls under the PSA while the latter must register under the FIEA. A crypto derivatives business that also provides crypto custody service may need to register as a cryptocurrency exchange. In addition, the FSA previously explained to news.Bitcoin.com the implication of the new law on the possibility of a bitcoin exchange-traded fund (ETF) being approved in Japan.

The amendments "are quite extensive and many issues regarding the scope, applicability, and relevance of the regulations remain open to interpretation," the law firm opined. The regulatory changes are summarized here.

Japanese Cryptocurrency Landscape Changing, Unlicensed Crypto Exchanges Exiting
Japan currently has 23 FSA-approved cryptocurrency exchanges. As the new regulation takes effect, unlicensed crypto trading platforms modify their terms of service to exclude Japanese users in compliance with the new law.

Global cryptocurrency exchange Bitmex, for example, announced that it would stop providing services to Japanese residents starting from 11 p.m. JST on April 30 for first-time registered users and 12 a.m. on May 1 for existing registered users. "We are restricting access to users who are Japan residents," the exchange confirmed on Tuesday, adding:

The restrictions are in response to the amendments to the Japan Financial Instruments and Exchange Act and Japan Payment Services Act effective as of 1 May 2020.

"We will continue to work with the Japanese regulatory authorities to support their aims for the Japan market and will keep our Japan users updated," Bitmex wrote.

Furthermore, the FSA announced on April 30 that it has approved two self-regulatory organizations (SROs) in the crypto sector: the Japan STO Association and the Japan Virtual and Crypto Assets Exchange Association (JVCEA). These organizations work closely with the FSA to enforce strict standards on the country's crypto sector.

Early signs of BTC downturn show up in China

 

Times have changed for BTC block processors in China. Once considered a pariah by many Chinese government officials, the sector is now finding itself in demand by local municipalities as attitudes towards blockchain have shifted this past year with central government regulators.

The city of Ya'an, located in China's mountainous Sichuan province, is publicly encouraging blockchain industry firms to come set up shop and consume excess hydroelectricity ahead of the summer rainy season. This encouragement comes in the form of recently jointly issued public guidance by the Municipal Economic and Information Bureau and the Municipal Development and Reform Commission.

The Sichuan region is well known for its abundance of digital currency processing facilities, which are estimated to account for over 50% of the BTC network's computing power. Although not expressly mentioned in the guidance, BTC processing is the primary activity with the sector which consumes the most electricity.

According to other online reports, the city officials are looking to promote the city's infrastructure advantages and make it a high-quality example for consuming excessive hydropower electricity and build itself into "an impactful blockchain industry hub" in the country.

Is this a case of better late than never or indicator of trouble brewing for BTC processors in China?

BTC transaction processing may have been taboo in certain quarters of China but never prohibited. In the past, officials would publicly complain about the environmental and economic impact of BTC processing while privately granting business permits and selling off excess power and commercial occupancy space to firms at customized rates.

It's reasonable to ask why now. Cities, and their surrounding areas, now actively embracing the industry might signal that the sector's demand for space and electricity has waned as the halving quickly approaches.

If this were 2016, the guidance issued by these government bodies would come as a welcome sign that China is finally embracing a rapidly growing sector.

In 2020, Chinese BTC processors are facing unprecedented troubles as they seek to navigate the halving against the backdrop of the COVID-19 pandemic which has wiped out fresh investment capital from coming in to prop up the BTC token price. Many publicly traded block reward mining companies are blaming the pandemic on guidance calls, but the reality is these operations were not properly prepared for life at the 2020 Bitcoin halving. BTC hash power is projected to decline as unprofitable nodes go offline, and smaller companies close or get acquired.

Friday, April 24, 2020

AirAsia launches Freightchain, a blockchain-based air cargo network

 

AirAsia has launched a blockchain-based air cargo network, aiming to make it easy and convenient to book for cargo space on its airlines. Known as Freightchain, it seeks to eliminate the tedious manual process previously involved, making it convenient for both the clients and the airline.

AirAsia, which is Malaysia's largest airline, launched the network through Teleport, its logistics arm. It allows the clients to view the available cargo spaces on its airlines and make bookings in real time. It relies on a bidding process, enabling the clients to make informed decisions on costs and convenience.

Freightchain will replace the previous system where the clients would manually search for the cargo airlines that best suit their needs. This process was quite tedious, with the clients often having to send several emails and make calls to several airlines. Even then, they were not sure they were getting the best deals and often had to settle for what they got.

Launching Freightchain under the current COVID-19 pandemic was strategic, the network's CTO Vishal Batra said. The crisis has brought global supply chains to their feet, with many critical players being forced to shut down operations. Freightchain can take advantage of this, and help bridge this gap, Batra believes.

He commented, "We deliberately launched Freightchain during this period of uncertainty within global supply chains, caused by the coronavirus pandemic. Agile software platforms like Freightchain help to connect uneven supply and demand amidst a rapidly evolving environment. Trust and transparency are needed now more than ever."

In its pilot, Freightchain shipped pharmaceutical products from Bangalore in India to Ulan Bator in Mongolia. Since direct flights from the two locations weren't available, the system scheduled connecting flights via Malaysia and South Korea, connecting three different carriers. The network utilized smart contracts and according to AirAsia, the process was ten times faster.

AirAsia revealed that the network will benefits the airlines as well, allowing them to manage their cargo space better. For instance, it will allow clients to take advantage of underutilized flights to ship their cargo at a lower rate, with both the airline and the clients standing to benefit.

AirAsia has seen a big turnaround since businessman Tony Fernandes took over in 2003. It was only then that the company, previously owned by the government, became profitable. Fernandes has gone on to make AirAsia one of the world's leading low-cost airlines. The savvy businessman has sought to expand the company's interests into payments with the BigPay e-wallet. As he told CoinGeek a few years back, his goal is to democratize remittances.

Sunday, April 19, 2020

Russia not letting up in bid to bring Alexander Vinnik home

 


Russia has requested the home detention of Alexander Vinnik amid concerns over COVID-19, in its latest attempt to secure the extradition of the alleged money launderer.

Vinnik is currently in the custody of authorities in France, after being implicated in a $4 billion BTC money laundering scandal. The former BTC-e founder has been the subject of an intense legal struggle in recent months, with several states, including his native Russia, asserting their own rights to prosecute.

However, while Vinnik is wanted by authorities in France and the U.S. on money laundering charges, Russia has been attempting to secure his extradition on less serious charges. This is widely believed to be a legal tactic by Russia to extradite Vinnik, and to ensure he faces less serious charges in his home country.

The latest extradition request, reported by Russian media, highlights concerns for Vinnik's safety amid the COVID-19 outbreak.

Speaking to RT, former Russian agent Maria Butina said Vinnik has existing health conditions which make his ongoing detention in France risky: "Vinnik's health situation is indeed very complicated, and the coronavirus infection could pose him a risk of fatal outcome. I hope that the French authorities will be guided by their own stance of humanism and choose to save the life of a person who is at severe risk by giving Vinnik the opportunity to await the trial under house arrest."

The request asks France to hand over Vinnik to Russian authorities, promising to detain him on behalf of French authorities under house arrest. According to the proposal, Vinnik will be detained by Russian authorities in a state-provided apartment, to allow him to avoid exposure to the potentially deadly coronavirus.

So far, requests for extradition have been ignored by French authorities, who remain determined to prosecute Vinnik on the outstanding money laundering charges.

Since his arrest in Greece in 2017, Vinnik has been in detention for some 30 months, as various states grapple to secure his extradition.

With the new Russian proposals on the table, it looks like his future remains uncertain.

Corona Money Printing Worries – Housing Prices Slide Downwards First Time in 10 Years in Northern Europe

 


Real estate price reports from March in northern countries like Denmark and Sweden now show negative developments for the first time in over 10 years. If furloughed workers continue into unemployment, the effects on the housing markets will be even more significant, says Claudia Wörmann at SBAB Bank.

Spring Real Estate Price Increase, Trend Broken
Inhabitants of the northern countries of Finland, Sweden, Norway and Denmark have gotten used to very low interest rates and constantly increasing real estate prices. In Sweden, interest rates were dipping into negative territories and in Denmark, famously some homeowners have been offered payments for taking out a mortgage (negative interest rates).

Normally, homeowners in these regions see price increases each spring but this year the trend is broken and prices of apartments, houses and land plots have instead decreased a few percentage points. The change is large compared to the regular price increases. The development is worrying many citizens and has slowed the pace of sales to a virtual halt in April.

In Denmark, prices have decreased in seven out of 10 regions, including in Copenhagen where prices fell around 1.5% in March, according to Birgit Daetz, communications officer at housing watch outlet Boligsiden. She continued:

The real estate season normally starts in March and that means increasing prices. This year that hasn't happened and due to the health crisis we expect prices in Copenhagen to continue to fall in the coming months.

Swedish Real Estate Statistics Agency Mäklarstatistik concurred with the Danes' outlook and reported a drop in the number of sales in Sweden. During the last two weeks of March, the number of sales dropped more than 15% and continued on a downward trend into April.

Norway's stats look almost the same and in Finland, prices fell slightly in most regions. Real Estate Norway reported single-digit decreases in prices last month, with an average decrease of 1.4%.

Early morning on April 19 in Stockholm city, where real estate prices started to slide in March due to the effects from actions taken to combat the coronavirus. Cafés and restaurants are still open but every second table stays unoccupied for social distancing reasons.

Banks Must Continue to Provide Financing
Since the start of the coronavirus crisis, the Swedish government and central bank have been starting up the printing presses and made over 100 billion Swedish kronor available to the banks. Government parties are now suggesting printing more than 100 billion kronor ($12 billion) per month. Even with falling prices, the question is if this unprecedented money printing will later result in increased inflation, and possibly a Cantillon effect on housing prices — again leading to higher nominal real estate values while at the same time devaluing currencies like the dollar or the Danish krone due to the increase in money supply.

"What is important now is that banks continue to provide intermediate financing," Real Estate Norway CEO Henning Lauridsen said. He continued:

Experience from the financial crisis shows that a change in the dynamics of buying first and selling afterwards is counterproductive and destructive to the housing market. Although a more restrictive credit policy may seem rational to the individual bank, this collective is irrational.

The capital city of Stockholm saw the biggest price falls by an average of minus 1.7%. Real estate in cities in the Nordic regions lost more on average than in the countryside.

To counteract the slowdown in sales and the falling prices, governments in the region abruptly changed many rules and regulations pertaining to mortgages. From last week, citizens in Sweden can skip their mortgage payments until further notice. Similar actions are either underway or being discussed in neighboring Nordic countries, where politicians hope to boost the price of their real estate holdings.