After the time of acceleration comes the time of regulation, according to the well-known cycle of regulation of innovation and speculation. The cryptocurrency market has been perpetuated during the Covid-related restrictions, as it continues to grow, reaching $2,300 billion today, more than Mortgage In 2008 (1200 billion). Admittedly, it was published in many financial products, which caused a crisis of confidence among banks. However, recently the Bank of England has not hesitated to make this comparison. The fear is growing as the enthusiasm for cryptocurrency, which is seen as an alternative investment, is specifically fueled by crises and turmoil in the traditional economy.
Therefore, regulators all over the world are working to control, if not contain, this digital wave. This desire for regulation is now firmly entrenched in the US, after much hesitation, 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 areas of fraud or money laundering.
“there is a realization”confirm to exhibition MEP Aurore Lalucq (Alliance of Socialists and Democrats) which calls for the extension of European directives from the world of finance to crypto assets. Among these amendments is the MiCA (Maket in Crypto Assets) vote that will soon lay a first stone for regulation at the European level.
What are the factors accelerating the regulation of cryptocurrencies? exhibition Select six.
1. Inflation fuels the search for alternative investments
The world now finds itself facing inflation it has not reached in decades, at least in developed countries. The war in Ukraine has not helped push energy prices to historically high levels. As a result, central banks, led by the Federal Reserve, are engaging in a violent tightening of their monetary policy, with the effect of raising interest rates, particularly on government bonds, and influencing stock markets. In the face of this ambiguous market context, investors are looking for safe havens from inflation. Cryptocurrencies can play this role even if gold has gained close to 20% since the beginning of the conflict.
“ Stimulus plans, money creation and inflation have changed behaviour. One wonders more about the currency. But it’s not just about cryptocurrency ‘, anger William O’Rourke, a lawyer specializing in the sector at ORWL. Accelerate the movement of regulation or installation?
There is no clear relationship with the Ukrainian crisis. MiCA was linked to Facebook and its Libra crypto project in 2018 (since abandoned editor’s note). Prior to this, the ICO (Initial Coin Offering) craze gave “PSAN” status in 2019, which led to an application being registered with the AMF. Today, the war in Ukraine above all creates political pressures and illusions about the Russian oligarchy, especially with anti-money laundering texts (Anti money laundering) which is currently being discussed in Brussels,” notes the lawyer who, admittedly, his clients see, MiCA arrives very quickly, although we will see the effects in three years, after the time of the infusion and switch cases “.
2. The increasing weight of cryptocurrencies in savings
The popularity of cryptocurrencies is undeniable. It is installed in France with 8% of the French already investing in cryptocurrency, according to a study by KPMG/Adan. Russia is also at the forefront of the global platform for the use and creation (“mining”) of cryptocurrencies. With Ukraine, the two countries It ranks fourth and 18th in a row in cryptocurrency adoption worldwide, according to Chainalysis. In some regions with a cold climate and cheap electricity, notably in Siberia, many Russians made it a supplement or even a major source of income.
But after individuals, it is now traditional financial players who are turning to cryptocurrency. One private bank, Delubac & Cie, has even just secured digital asset services operator (PSAN) status from financiers Autorité des marchés (AMF) to offer its clients crypto assets.
In the United States, as in Europe, it became clear. “ In September 2021, 13% of US hedge funds and 23% of European hedge funds owned crypto assets.notes the Bank of England, which specifies, however, that the issue is likely to be related to investments of low amounts.
3. A gimmick of penalties
across all digital asset classes,”Crypto assets are what worries me the most in the Russian context.”Recently, Christine Lagarde was announced as the head of the European Central Bank.
And for good reason, with the war, the Russians rushed to bitcoin. Crypto-ruble purchase volumes hit record levels in March, and bitcoin prices have surged in recent days (+15% since Sunday to nearly $44,000), spurred on by the notion that the Ukraine crisis is proving the utility of a government-controlled decentralized currency, according to the government. Kaiko for AFP.
Another popular cryptocurrency in Russia is Tether, a stablecoin issued by a private company that ensures that assets equivalent to its issuance are held to ensure that Tether is worth $1.
Is this enthusiasm dangerous? “yesThe President of the European Central Bank, after noting that cryptocurrencies escaping the traditional banking system are “It is certainly used as a way to try to circumvent the sanctions that many countries around the world have decided against Russia and specific actors“.
Russian individuals or companiesIt is clear that they are trying to convert their rubles into crypto assets.”, noted Christine Lagarde, noting that the volumes of the converted ruble have reached a particularly high level since the sanctions imposed by the West. In particular, the sanctions imposed by Europe with the exclusion of some Russian banking institutions from the Swift international interbank system.
This renewed interest in cryptocurrencies has also been confirmed in other sanctioned countries, such as Iran and North Korea.
4. In return, a way to receive help
The flow of cryptocurrencies is also increasing in the other direction. Since the early hours of the conflict, the Ukrainian government has opened crypto addresses and wallets that allow it to receive bitcoin and other cryptocurrencies. Other personalities involved in these donations, such as Twitter head Jack Dorsey, also support Bitcoin, which today is $40,089 a unit.
Thus anyone with cryptocurrency can send it to these crypto addresses. Since the beginning of the war effort, these donations received flow through the blockchain, according to Chainalysis. Eastern European transactions are particularly high for addresses outside the region.
5. Multiplication of uses
Bitcoin has long faced the issue of its use in everyday life, since its inception in the wake of the financial crisis in 2009, it is still trying to get out of its image as a volatile and purely speculative asset.
Faced with it, its rival Ethereum, thanks to its protocol, is the origin of a new situation that regulators have to catch: NFTs. These non-replaceable symbols allow the use of a file Buyer to obtain a verified digital code, which proves that the purchased work is original. Tangible use meets profitable success in art and beyond. Already, new startups are appearing in the NFT to populate the virtual worlds of brands, metaverses that Facebook promised, and now Meta.
In addition to the collection, brands are seeking to create new payment systems in their metadata barriers, such as the craze for stablecoins, these cryptocurrencies backed by the dollar (or other currency) that allow instant, secure and no intermediate exchange in the digital worlds created for the consumer user.
So these stablecoins are in the sights of the regulators. in the UK, The Treasury considers that it should be regulated in the same way as existing means of payment, by the Payment Systems Regulator (PSR), and the Bank of England (BoE) if its scale poses a systemic risk, it said in a report.
The Treasury also plans other measures, such as “Exploring ways to make the UK tax system more competitive to encourage the development of the crypto-asset market.”
Another use that these assets seek is the use of a store of value. But for now, regulators are warning: Bitcoin “It does not constitute (…) a store of value, but is a speculative origin, somewhat similar to the tulip lamps of Holland in the seventeenth century”Bank of France Governor Francois Villeroy de Gallo said in March.
6. Ending the Dominance of the Dollar
With the reduction of sanctions on Russia, the government is intensifying measures to support the ruble and reduce its dependence on the dollar. The idea of accelerating on the digital ruble, in the family of Central Bank (MNBC) digital currencies, is gaining ground in Moscow, like many experiments.
At a time when the Europeans are seeking to put pressure on Russia by reducing hydrocarbon demands, Moscow is forcing a payment in rubles in return … and perhaps tomorrow, in bitcoin, as an elected official in the State Duma recently suggested. Idea referring to the Petro project in Venezuela, a digital currency backed by oil prices.
To regain control of the digital sphere, after Facebook’s first alert with its digital currency project (which has since been abandoned), all major central banks are working on the topic of digital central bank currency. In Europe, the European Central Bank is counting on the creation of the digital euro within 5 years as a secure and anonymous central bank currency for domestic payments, in terms that have yet to be defined. Because commercial banks always fight back
After its first use case during the Beijing Olympics, the Chinese government is putting pressure on the electronic yuan, even though all crypto-related activities will be banned in 2021.
Finally, regulating cryptocurrencies could, in the second step, lead to new taxes. After blocking these assets, theIndia will introduce a state-backed “digital rupee” and levy a 30% tax on profits from virtual currencies as part of the new financial measures. This will also generate new tax revenue at a time when countries may have more difficulty financing themselves in the markets.