This week in crypto. May 17 - 23
Crypto news
Innovation vs Regulation in the crypto world
It’s always a thin line between regulating an industry and hindering innovation, and it takes time to figure out the right balance. In case of highly disruptive and constantly evolving sector of cryptocurrency this balance is yet to be found, and the country that does first will obtain a significant leverage.
Europe
Notoriously bureaucratic, Europe is clearly not on the winners list, even if has two crypto enclaves – Malta and Switzerland. The former branded itself as a “crypto island” and famously welcomed Binance Exchange HQ, and the latter enjoys independent (from the EU) and crypto-friendly regulations, attracting numerous crypto firms. It is especially true for the canton of Zug, also known as the Crypto Valley, home to many crypto unicorns.
Other European countries are not that progressive, though. In France, D.Center’s home country, many banks have been systematically denying access to bank accounts for crypto businesses to the point of driving them away. In Netherlands, stressful regulatory climate pushed off its leading exchange Deribit, which left the country in 2020… But some good news came to light this week, with another Dutch exchange Bitonic that went to court with the Dutch Central Bank and had them admit that their ridiculously stringent KYC requests were unlawful. If only this became a trend.
USA
The US are known for its innovative fintech sectors, and it’s no surprise that many important crypto fintech firms are incorporated there.
Its regulatory landscape has been modelled by different agencies: the SEC (securities & exchanges), the CFTC (commodities & derivatives), the OCC (national banks)… each of them having its own opinion on crypto, but overall making it all work. Recently it was the OCC that was encouraging crypto fintech development by granting banking charters to several crypto firms that could thus become “crypto banks” (Anchorage, Paxos and Protego) and by allowing banks to tap into crypto by issuing stablecoins or using blockchain for payments. However, with newly appointed Bitcoin sceptic at its head, the OCC now seems likely to change direction: the guidelines issued by the OCC during the previous office are being reviewed and this week’s request by a Senate Banking Committee Chair to revoke banking charters previously granted to crypto firms could be satisfied.
The Treasury also had a word to say on cryptos, publishing this Thursday a report that will require all crypto exchanges and payment services to report any transfer exceeding $10’000 to the Internal Revenue Service. If accepted, the proposal would go into effect in 2023.
These news, together with this week’s SEC’s Chair notice that the SEC "should be ready to bring cases involving issues such as crypto" have the crypto industry worried.
Asia
China has the world’s biggest community of miners, but unsurprisingly the Party’s stance on inherently independent cryptocurrencies is negative. In 2017 China banned crypto trading on exchanges and ICOs, sending its share of global crypto trading volume from 90% to under 1% in less than a year. Should we mention that all media outlets at that time screamed out in joy, predicting Bitcoin quick and painful death?.. So this week’s news about China banning financial institutions from providing services related to crypto transactions was not really the news, but an attempt to close the remaining loopholes. At an individual level Chinese can still buy crypto at foreign or P2P exchanges and trade it on DeFi. But crypto innovations are definitely out of sight here.
Other Asian countries, however, are not going to miss the crypto train. With some of the highest crypto adoption rates in the world and comprehensive regulation, South Korea, Philippines, Thailand and Singapore look like they have all the necessary tools to foster crypto innovation.
Crypto markets
Bitcoin
Bitcoin price continued its descent, loosing another -21% this week, at one moment plunging as low as $30k.
To the eco-shaming from last week were added the news about China banning financial institutions from facilitating crypto transactions, and another one about China adding Bitcoin mining as a “key sector to monitor” at China’s Financial Committee meeting. There’s nothing terrible in these news, but they may sound worrying to an unexperienced ear. What’s important to know is that China banning Bitcoin in September 2017 caused -40% price loss and the dismantling of 90% (!) of the world crypto exchange services. This did not stop Bitcoin from going to its then-all-time high 3 month later, gaining +567%.
Decentralized systems are incredibly resilient, because everyone can join. This also concerns Bitcoin miners. China’s Inner Mongolia region banned crypto mining in the beginning of 2021, and in our opinion it was a good thing – because miners will be more incentivized to search for renewable energy sources instead of using Inner Mongolia’s coal. If this would also happen to Xinjiang, another coal-rich region, that would only benefit Bitcoin, as the Chinese miners would concentrate in Sichuan and Yunnan, famous for their cheap hydro-electric power. And if mining were banned altogether… well, other miners in other parts of the world will take it from there. Even if the hash rate will certainly go down, it’ll be a matter of time until the balance is restored.
The system is resilient and we should always keep in mind a bigger picture that has not changed : crypto is a decentralized alternative to centralized authority and its flaws, and Bitcoin is the most robust cryptocurrency.
Ethereum
Ethereum’s more spectacular rise lead to a more spectacular fall of -50% this week, +30% corrected since. It’s now oscillating around $2300 – the level of last month. Altcoins often follow Bitcoin’s falls, and often in a more abrupt way.
Quote of the week
As this week’s quote we’ve decided to compile different newspaper articles predicting Bitcoin’s death – one title per year from 2013 to 2021 (BTC price at publication time in brackets). The full list can be found at https://99bitcoins.com/bitcoin-obituaries/, a hilarious page that will be appreciated by sarcastic people 😊 Enjoy!
2013 / “Bitcoin is still doomed” – Bloomberg ($641)
2014 / “The Doomsday Cult of Bitcoin” – NYMAG ($668)
2015 / “Former bitcoin companies are erasing their embarrassing bit’s” – The Guardian ($318)
2016 / “R.I.P. Bitcoin. It’s time to move on.” – Washington Post ($382)
2017 / “The Great Bitcoin Scam” – Forbes ($16’044)
2018 / “Bitcoin, the Biggest Bubble in History, Is Popping” – Bloomberg ($7’004)
2019 / “Bitcoin will soon be worth zero” – NYPost ($7’795)
2020 / “Bitcoin is a massive bubble” – Bloomberg ($22’805)
2021 / “Bitcoin is disgusting” – CNBC ($57’828)