the six reasons that accelerate the regulation movement

After the time of acceleration, the time of regulation arrives, according to the well-known innovation-speculation-regulation cycle. Consecrated during the Covid-related confinements, the cryptocurrency market continues to grow, reaching today a valuation of 2.3 trillion dollars, more than the subprime in 2008 (1,200 billion). Admittedly, these have been popularized in a multitude of financial products, which has caused the confidence crisis among banks. However, the Bank of England did not hesitate to make this comparison recently. The fear is all the greater as the enthusiasm for cryptocurrencies, perceived as an alternative investment, feeds on the crises and upheavals of the traditional economy.

Therefore, around the world, regulators are working to control, if not contain, this digital wave. This desire to regulate is now well established 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 a The gallery MEP Aurore Lalucq (Alliance of Socialists and Democrats) calling for the extension of European directives from the world of finance to cryptocurrencies. Among these adaptations, the vote of the MiCA (Maket in Crypto Assets) which will soon bring a first stone to regulation at European level.

What are the factors that are accelerating the regulation of cryptocurrencies? The gallery identified six.

1. Inflation fuels the search for alternative investments

The world is now facing inflation it hasn’t reached for decades, at least in developed countries. The war in Ukraine did not help, pushing energy prices to all-time highs. As a result, central banks, primarily the Federal Reserve, are engaged in a violent tightening of their monetary policy, with the effect of raising rates, particularly on government bonds, and weighing on the stock markets. Faced with this uncertain market environment, investors seek a safe haven from inflation. And cryptocurrencies could very well take on this role even though gold has gained nearly 20% since the start of the conflict.

Stimulus plans, money creation and inflation have changed behavior. One wonders more about the currency. But it’s not just about cryptocurrencies “, Temperaments William O’Rourke, lawyer specializing in the sector at ORWL. Acceleration of the settlement movement or confirmation?

“There is no obvious correlation with the Ukrainian crisis. The MiCA law was linked to Facebook and its Libra encryption project in 2018 (since it was abandoned ed). Before that, the craze for initial coin offers (ICOs) conferred “PSAN” status in 2019, introducing demanding registration with the MFA. Today the war in Ukraine creates above all political pressures and fantasies around the Russian oligarchs, especially with the AML texts (anti-money laundering) currently under discussion in Brussels “, observes the lawyer whose clients see, it is true,” the MiCA arrives quite quickly, although we will see its effects in three years, after the time of the infusion and the transposition of the states “.

2. The growing weight of cryptocurrencies in savings

The popularity of cryptocurrencies is undeniable. It is even installed in France with 8% of the French having already invested in cryptocurrencies, according to a study by KPMG / Adan. Russia also occupies the top of the world podium for the use and creation (“mining”) of cryptocurrencies. With Ukraine, the two countries ranks 4th and 18th respectively in cryptocurrency adoption worldwide, according to Chainalysis. In some regions with cold climates and cheap electricity, particularly in Siberia, many Russians have made it a supplement or even a main source of income.

But after individuals, traditional financial traders are now turning to cryptocurrencies. A private bank, Delubac & Cie, has also just obtained digital asset services operator (PSAN) status from the Autorité des marchés financiers (AMF) to offer its customers cryptocurrencies.

In the United States, as in Europe, it has become obvious. “ As of September 2021, 13% of US hedge funds and 23% of European hedge funds owned cryptocurrencies.notes the Bank of England, which nevertheless specifies that these are probably small investments.

3. A way around the penalties

Across all digital asset classes, “cryptocurrencies worry me more in the Russian context “recently declared Christine Lagarde at the helm of the ECB.

And for good reason, with the war, the Russians rushed to bitcoin. The volumes of cryptocurrency purchases in rubles reached record highs in March and bitcoin prices have risen in recent days (+ 15% from Sunday to nearly $ 44,000), galvanized by the idea that the Ukrainian crisis is proving the usefulness of a decentralized currency not controlled by a government, according to the Kaiko cabinet quoted by AFP.

Another popular cryptocurrency in Russia is Tether, a stablecoin issued by a private company that guarantees to hold assets equivalent to its issuance to ensure a Tether is worth a dollar.

Is this enthusiasm a threat? “Yup“, Said the boss of the European Central Bank, after noting that cryptocurrencies fleeing the traditional banking system are”certainly used as a means of trying to circumvent the sanctions decided by many countries of the world against Russia and specific actors“.

Russian individuals or companies “they are obviously trying to convert their rubles into cryptocurrencies “, noted Christine Lagarde, noting that the volumes of converted rubles reached a particularly high level after the sanctions imposed by the West. In particular, the sanctions imposed by Europe with in particular 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. Conversely, a way to receive help

The flow of cryptocurrencies is also increasing in the other direction. Since the first hours of the conflict, the Ukrainian government has opened cryptocurrency addresses and wallets allowing them to receive bitcoin and other cryptocurrencies. Other personalities participate in these donations, such as Twitter boss Jack Dorsey, also a supporter of bitcoin whose price today reaches $ 40,089 per unit.

Anyone who has cryptocurrencies can then send them to these crypto addresses. Since the war effort began, these donations received via the blockchain have poured in, according to company Chainalysis. Eastern European transactions are particularly high to addresses outside the region.

5. The multiplication of uses

Long confronted with the issue of its use in everyday life, since its creation in the aftermath of the financial crisis in 2009, bitcoin is still trying to get out of its image as a volatile and purely speculative asset.

Faced with it, its rival Ethereum is, thanks to its protocol, at the origin of a new modality that must be learned by regulators: NFTs. These non-fungible tokens allow the buyer to obtain a verified digital token, which proves that the purchased work is an original. A concrete use that meets lucrative success in art and beyond. New NFT startups are already emerging to populate the virtual worlds of brands, the metaverses promised by Facebook, now Meta.

Crypto-asset: French startups organize themselves around the NFT factory

In addition to the collection, brands seek to create new payment ecosystems in its metaverses, such as the craze for stablecoins, these digital cryptocurrencies backed by the dollar (or another currency) and which enable instant, secure, and no brokerage fees. in digital worlds created for the user-consumer.

These stablecoins are therefore in the sights of regulators. UK, the Treasury believes they 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 their size creates systemic danger, it said in a report.

Other measures are also envisaged by the Treasury, such as “explore ways to make the UK tax system more competitive to encourage the development of the cryptocurrency market ”.

Another use sought by these assets is as a store of value. But for now, regulators warn: bitcoin it is not (…) a store of value, but rather a speculative good, somewhat similar to the tulip bulbs in the Netherlands in the 17th century “Bank of France Governor Francois Villeroy de Galhau said in March.

6. End the dollar rule

As sanctions loom over Russia, the government is stepping up measures to support the ruble and reduce its dependence on the dollar. The idea of ​​speeding up on a digital ruble, in the central bank’s digital currency family (MNBC) is gaining ground in Moscow as well, like several experiments.

As Europeans try to pressure Russia by reducing hydrocarbon orders, Moscow demands payment in rubles in exchange … and possibly tomorrow, in bitcoin, as an elected Duma official recently suggested. . An idea that refers to the Petro project in Venezuela, a digital currency supported by oil prices.

To regain control of the digital sector, after the first alert launched by Facebook with its own digital currency project (later abandoned), all the major central banks are working on the issue of a digital central bank money. In Europe, the ECB is aiming to create a digital euro as a secure and anonymous central bank currency for local payments within 5 years, according to terms yet to be defined. Because commercial banks always resist

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

Finally, cryptocurrency regulation could lead to new taxes at a later date. After the prohibition of such goods, theIndia will introduce a state-backed “digital rupee” and impose a 30% tax on virtual currency profits as part of new tax measures. This will also generate new tax revenues at a time when states may find it more difficult to finance themselves on the markets.

The digital ruble, Putin’s joker to circumvent Western sanctions

(With AFP)