Schlagwort: blockchain regulation

The US Treasury wants to see a little more close cooperation between various global regulators on the topic of cryptocurrency regulation.

The department, whose commentary on the need for international coordination was made in a Fact Sheet released on Thursday, says having such interactions are critical to tackling potential risks that might find fertile ground with the increased use of digital assets.

“Uneven regulation, supervision, and compliance across jurisdictions creates opportunities for arbitrage and raises risks to financial stability and the protection of consumers, investors, businesses, and markets,” the department said in the release.

The framework highlighting interagency engagements between the US and allies across the globe was handed to President Biden by the Secretary of the Treasury. 

This also involved the Secretary of State, the Secretary of Commerce, and the US Agency for International Development (USAID).

More expected of the G7, G20 and FATF among other organizations

The US Treasury’s call was part of a framework on digital assets sent to President Joe Biden, and follows an earlier Executive Order targeted at ensuring responsible innovation in the crypto industry.

The US government’s goal, according to the Treasury officials, is to have a unified approach towards promoting key innovations in digital assets. However, it also wants to forge ties across the globe to make things like investigating illegal transactions through offshore accounts easier.

Adequate regulation and cooperation will make it easy to combat money laundering, potential financing of terrorism, ransomware attacks sanctions evasion. These and other major concerns, the department said, can pose both national security and financial stability risks.

As such, the US Treasury is looking at further coordination and commitment from leading organizations such as the G7, the G20, Financial Stability Board (FSB), Financial Action Task Force (FATF) and the Organization for Economic Cooperation and Development (OECD).

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Washington is keenly watching the crypto sector in the wake of crypto lender Celsius Network’s run into liquidity trouble this past week.

The lender, the largest in the crypto industry, announced a pause to all customer withdrawals and transfers on Sunday. On Monday, the broader crypto market suffered a bloodbath that sank major digital assets to price levels last seen in 2020.

The CEL token price fell as low as $0.15 this week, before recovering to hits highs above $0.56. 

The CEL/USD pair has recovered about 70% of the losses in the past 24 hours, according to trading data from CoinGecko.

Stablecoin-targeted regulations

A report by Yahoo Finance published on Tuesday says, the developments around Celsius, and which come hot on the heels of another meltdown catalyzed by the TerraUSD collapse, have the Biden administration on the lookout.

Per the report, lawmakers in Washington are mulling the possibility of extending proposals on stablecoin regulation to the wider crypto market.

Particularly, the feeling is that the President Working Group’s report on stablecoins could be looked at in line with its application across the entire crypto industry.

Focus on exchanges

An unnamed White House official is quoted to have noted that the collapse of LUNA and Celsius’ woes have brought the sector into sharp focus. 

According to the official, the thinking is around ways of ensuring regulators mitigate the risks associated with recent events.

The potential heightening of regulatory attention comes at a time US lawmakers are also looking to place the regulation of crypto exchanges under the Commodities Futures Trading Commission (CFTC).

Among the many regulatory requirements is the restrictions on exchanges regarding lending out customers’ assets. Exchanges are also expected to adhere to liquidity and capital guidelines, as well as hold customer funds separately from the company’s.

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In a study titled “Digital Currencies and Energy Consumption”, the International Monetary Fund evaluated the impact of design elements of crypto assets on their energy consumption in order to develop an ideal framework for a mainstream central bank digital currency (CBDC).

The report brings to light the significance of making the right design choices on the overall environment-friendliness of the crypto ecosystem and its ability to go mainstream.

With the intention of facilitating further policy discussion on the current impact of crypto on green consumption, IMF recommends against the use of proof-of-work-based distributed ledger technology applications.   

Highlighting Bitcoin’s energy consumption of about 144TWh per year, the report pointed out that while scalability solutions reduce the energy cost per transaction, they do not affect the overall energy spending.

The organisation also recognised the potential and energy efficiency of non-PoW, permissioned crypto assets:

“The potential of non-PoW permissioned crypto assets to reduce energy consumption relative to the existing payment system comes about from energy savings on both core processing architectures and user payment means.”

With the increasing interest of countries in developing their very own digital currencies, the IMF advised central banks to design CBDCs with the explicit goal of being environmentally friendly. This, according to the report includes but is not limited to selecting platforms, hardware and design options that come with a lower carbon footprint that the mechanisms traditionally being used by the central bank.

The report added that the green component of implementing the CBDC must be looked into right from the experimentation phase itself. The IMF also recommended that central banks integrate compliance, higher resilience, offline capabilities and other such features during the development of CBDC. 

Policymakers will weigh the environmental impact of cryptocurrencies and CBDCs and their underlying technology while considering their utility for mainstream adoption, the report concluded. 

 

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Japanese lawmakers on Firday passed a bill for stablecoins to protect crypto investors. The bill comes a month after the TerraUSD (UST) stablecoin crash that caused investors to lose billions of dollars as the stablecoin lost its value.

BREAKING: 🇯🇵 Japan has passed a bill that recognizes the legal status of #stablecoins with investor protection demands.

— Watcher.Guru (@WatcherGuru) June 3, 2022

TerraUSD crash made a majority of countries think of an alternative way of legalizing cryptos. Japan being one of the biggest countries in terms of the size of its economy, has been at the forefront of drumming up crypto regulations and will be the first to craft regulations for stablecoins if the bill is signed into law.

A stablecoin is a digital asset whose value is linked to the actual asset like gold or the US dollar to maintain price stability. Currently, all stablecoins combined have a market value of about $160 billion.

What the new Japanese stablecoin Bill entails

According to the bill, stablecoins will now be recognized as virtual money tied to the Yen or any other legal tender to ensure that investors can convert them at their current prices.

In addition, the bill noted that stablecoins will only be issued by trusted firms, registered money transfer platforms, and licensed banks. However, existing assets that are backed by stablecoins like Tether and its counterparts stablecoins are not covered by the legislative act.

It’s important to note that the bill was created by Japan’s Financial Agency (FSA) and was expected to be passed by the House in late 2021. In mid-March, 2022, the parliament accepted the bill and today it has been passed officially.

Additionally, FTX Trading Ltd, a crypto exchange platform, also announced today the launch of FTX Japan which will provide services to Japanese consumers.

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The European Central Bank (ECB), in its Decrypting financial stability risks in crypto-asset markets report, observes that crypto assets, especially unbacked ones like Bitcoin (BTC), point to a growing threat to financial stability.

It’s all happening in crypto…

It’s been a downward trajectory for cryptocurrencies in the market, with prices of crypto assets plummeting since last November.

Bitcoin (BTC), for one, has seen its value against the US dollar decline by more than 50%. The entire crypto market has lost over $1.6 trillion in market capitalization. In a bear market, the losses could yet see another leg down.

But the massive losses across the sector seem not to have stemmed a key trend seen over the last couple of years – a growing interconnectedness and integration of crypto into the financial sector. The upward trajectory, in this case, relates to institutional investors’ increased investments into the space, as well as the integration of crypto into services across the financial sector.

Decentralized finance (DeFi) and the need to diversify portfolios are also among the major trends despite the falling prices.

Regulate crypto as it poses systemic risks

Not for the first time, the European Central Bank (ECB) says a global regulatory approach is needed- and fast.

In its latest review report of cryptocurrencies and their potential to increase financial stability risks, the ECB notes that contagion from crypto’s volatility so far remains significantly small.

However, “systemic risk increases in line with the level of interconnectedness between the financial sector and the crypto-asset market, the use of leverage and lending activity,” the bank said. 

“If current growth and market integration trends persist, then crypto-assets will pose a risk to financial stability,” the bank noted, urging regulators to work towards closing gaps and arbitrage possibilities. 

According to the ECB, crypto is a global market that presents a global issue, and which therefore requires the efforts of all regulatory players across the world.

Attention towards cryptocurrencies is likely to be amplified across the regulatory landscape following this month’s dramatic collapse of Terra (LUNA) and the algorithmic stablecoin TerraUSD (UST).

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