Cryptoassets: six reasons driving regulatory action

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After the acceleration time comes regulation according to the well-known innovation-speculation-regulation cycle. Blessed during the Covid-related lockdowns, the cryptocurrency market continues to grow, reaching a valuation of $2,300 billion today. subprime in 2008 (1,200 billion). Undoubtedly, these spread across a large number of financial products, causing a crisis of confidence among banks. Yet the Bank of England has not hesitated to make this comparison lately. Fear is heightened as enthusiasm for cryptocurrencies, perceived as an alternative investment, is fueled precisely by the crises and turmoil of the traditional economy.

That’s why regulators all over the world are trying to control this digital wave, even if they don’t. This desire for regulation is now well-established in the United States, after many hesitations, and US President Joe Biden is now encouraging monetary and financial authorities to focus on the digital dollar and the risks associated with cryptocurrencies, particularly in the fraud or money domains. laundering

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“There is an awareness”to approve Gallery MEP Aurore Lalucq (Alliance of Socialists and Democrats) pleading for the extension of European directives from the financial world to cryptoassets. Among these adaptations is the vote of MiCA (Produce in Crypto Assets), which will soon bring the first stone to regulation at the European level.

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What factors accelerate the regulation of cryptocurrencies? Gallery identified six.

1. Inflation fuels the search for alternative investments

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The world now finds itself facing an inflation that has not been reached for decades, at least in developed countries. The war in Ukraine did not help and drove energy prices to historic highs. As a result, central banks, especially the Federal Reserve, are tightening their monetary policies severely with the effect of raising interest rates, especially government bonds, and focusing on stock markets. Faced with this uncertain market context, investors seek safe havens against inflation. And cryptocurrencies can take on this role even if gold has gained almost 20% since the beginning of the conflict.

Incentive schemes, money creation, and inflation changed behavior. One is more curious about the currency. But it’s not just for cryptocurrencies “, nerves William O’Rourke, industry expert lawyer at ORWL. Speeding up the editing or approval movement?

“There is no clear relationship with the Ukrainian crisis. The MiCA law was linked to Facebook and the Libra crypto project in 2018 (since abandoned editor’s note). Prior to that, the ICO spree (initial coin offerings) granted “PSAN” status in 2019 and set a tough record for AMF. The war in Ukraine today creates above all political pressure and fantasies, especially around the Russian oligarchs with AML texts (anti money laundering) currently under discussion in Brussels,” the lawyer his clients saw, of course, ” We’re getting to MiCA pretty quickly, but we’ll see the effects in three years, after the infusion and transfer of states. “.

2. Increasing weight of cryptocurrencies in savings

The popularity of cryptos is undeniable. According to a study by KPMG/Adan, it was even established in France, with 8% of French people already investing in crypto. Russia also occupies the top of the world podium for the use and creation (“mining”) of cryptocurrencies. Two countries with Ukraine It ranks 4th and 18th, respectively, in worldwide cryptocurrency adoption, according to Chainalysis. In some regions with a cold climate and cheap electricity, especially Siberia, many Russians made it an additional, or even main, source of income.

However, it is traditional finance players who turn to cryptocurrencies after individuals. Even a private bank, Delubac & Cie, has just received digital asset services operator (PSAN) status from Autorité des Marchés financiers (AMF) to offer crypto assets to its clients.

In the United States, as in Europe, it became obvious. “ In September 2021, 13% of US hedge funds and 23% of European hedge funds owned crypto assets.According to the Bank of England, however, he notes that this is likely a matter of low-stakes investments.

3. A way to circumvent sanctions

In all digital asset classes, “In the context of Russia, cryptoassets worry me the most”recently announced Christine Lagarde as head of the ECB.

And for good reason, with the war, the Russians rushed to bitcoin. Cryptocurrency purchase volumes in rubles hit record highs in March, and bitcoin prices have been climbing in recent days (+15% to around $44,000 since Sunday), prompted by the idea that the Ukrainian crisis has proven the usefulness of a decentralized currency. It is controlled by a government, according to Kaiko’s cabinet as quoted by AFP.

Another popular cryptocurrency in Russia is Tether, a stablecoin issued by a private company that guarantees to hold assets equivalent to what one Tether is issued to make it worth one dollar.

Is this enthusiasm a threat? “Yes“The European Central Bank boss said that cryptocurrencies escaping the traditional banking system”it is certainly used by many countries of the world as a tool to try to circumvent the sanctions that have been agreed against Russia and certain actors.“.

Individuals or Russian companies”they are obviously trying to convert their rubles into crypto assets”Christine Lagarde noted that the volume of converted rubles has reached a particularly high level since the sanctions imposed by the West. In particular, sanctions imposed by Europe by the exclusion of certain Russian banking institutions from the Swift international interbank system.

This renewed interest in cryptocurrencies has also been confirmed in other countries subject to sanctions such as Iran and North Korea.

4. Conversely, a way to get help

Crypto flow is also increasing in the other direction. From the first hours of the conflict, the Ukrainian government has opened addresses and cryptocurrency wallets that allow it to receive bitcoin and other cryptocurrencies. Other personalities, such as Twitter boss Jack Dorsey, are also participating in these donations and are supporting bitcoin, whose price today has reached $40,089 per unit.

Therefore, anyone with cryptocurrencies can send them to these crypto addresses. Since the beginning of the war effort, these donations received via blockchain have been pouring in, according to the firm Chainalysis. Eastern European transactions are particularly high for addresses outside the region.

5. Proliferation of uses

Long faced with the problem of its use in daily life since its emergence after the financial crisis in 2009, bitcoin is still trying to get rid of its image as a volatile and purely speculative asset.

Against it, its rival Ethereum, thanks to its protocol, is at the source of a new mode to be caught by regulators: NFTs. These non-tradable tokens the buyer to obtain a verified digital token that proves the originality of the purchased work. A tangible use that meets lucrative success in the arts and beyond. Already, new NFT initiatives are emerging to populate the virtual worlds of brands, the metaverses promised by Facebook, now Meta.

Cryptoassets: French startups organize themselves around the NFT Factory

In addition to the collection, brands are trying to create new payment ecosystems, such as digital cryptocurrencies, stablecoin craze, which allow instant exchange in metadatabases, secure and without intermediary costs in digital worlds backed by the dollar (or any other currency) and created. for user-consumer.

These stablecoins are therefore in the eyes of regulators. Britain, The Treasury said it thinks if their size poses a systemic hazard, they should be regulated by the Payment Systems Regulator (PSR) and the Bank of England (BoE) in the same way as existing payment instruments.

Other measures are also planned by the treasury, for example “It is exploring ways to make the UK tax system more competitive to encourage the development of the crypto-asset market.”

Another use these assets look for is as a store of value. But for now, regulators warn: Bitcoin (…) not a store of value, but a speculative entity akin to the 17th century Dutch tulip bulbs”Bank of France Governor Francois Villeroy de Galhau said in March.

6. End dollar domination

As sanctions against Russia are lowered, the government is stepping up measures to bolster the ruble and reduce its reliance on the dollar. The idea of ​​accelerating on a digital ruble in the family of central bank digital currencies (MNBC) is gaining ground even in Moscow, like a few experiments.

As Europeans try to put pressure on Russia by reducing its hydrocarbon orders, Moscow is paying in return in rubles, and perhaps tomorrow in bitcoin, as an elected official of the Duma has recently suggested. An idea referring to the Petro project in Venezuela, a digital currency backed by oil prices.

After Facebook’s initial warning with its own digital currency project (since abandoned), all major central banks are working on digital central bank currency to regain control of the digital space. In Europe, the ECB is counting on the creation of a digital euro within 5 years as a secure and anonymous central bank currency for local payments, according to as yet undefined terms. Because commercial banks always resist

After a first use case during the Beijing Olympics, the Chinese government is putting the fires on the e-yuan, even though all crypto-related activities were banned in 2021.

Finally, regulation of cryptos could lead to new taxes in the second step. After these assets were banned,India will introduce a state-backed “digital rupee” and impose a 30% tax on profits from virtual currencies as part of the new fiscal measures. This will also create new tax revenue at a time when States may have more difficulty financing themselves in markets.

The digital ruble is Putin’s joke to circumvent Western sanctions

(with AFP)

Jeanne Dusseuil

Apr 13, 2022, 17:41

Source From: Google News

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