The cryptocurrency scandals that have plagued the industry since last spring have seriously worried regulators, and now, at least in the US, more and more terms and conditions are being imposed on the previously unregulated industry. Zero has come under the watchful eye of “stable coins” – a digital tool that connects cryptocurrencies with real-world currencies. At the same time, the enthusiasm among users does not seem to have died down – at the end of the week, the price of “Bitcoin” reached the highest point in half a year.
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For many years, the world of digital coins was governed by, as one European Union politician described it, “the laws of the jungle”. True, it is rather likened to the unregulated environment of capitalism, where large finances flow in, but neither companies nor service providers are regulated by laws, therefore there are no tools that would protect investors, especially private ones, from losing all their capital.
Well, that’s coming to an end. This week, New York state financial regulators ordered Paxos to stop issuing BUSD, one of the most popular “stable coins”. At the same time, it seems that there is hope and enthusiasm among crypto-currency investors, because, despite stricter regulation, the price of cryptocurrencies has risen rapidly in the last week.
Politicians are looking for ways
According to the US media CNN, although the issue of regulation of cryptocurrencies has been on the agenda of US politicians for some time and is already being worked on, the last straw was the collapse of the crypto exchange FTX and the multibillion-dollar fraud committed by its management. Some are calling it the cryptocurrency world’s “Lehman Brothers” moment, referring to Lehman Brothers, the company blamed for the 2008 financial crisis, which is largely blamed for the severity of the crisis. Namely, the unregulated days of cryptocurrencies are believed to be over.
“While the cryptocurrency scandal didn’t infect the broader financial system, we saw the damage that could have been done if cryptocurrency were more deeply involved in the banking system,” Senator Sherrod Brown, chairman of the US Senate committee, said in a speech this week. “These cryptocurrency disasters have revealed what many of us already knew: digital assets – cryptocurrencies, stablecoins and investment tokens – are speculative products run by reckless companies that put Americans’ hard-earned money at risk.”
Politicians are determined to agree on what safety mechanisms need to be put in place so that investors have some sort of guarantee that their money won’t disappear overnight.
Ways to protect investors are also being considered in the European Union, where laws have already been adopted that will come into full force in the coming years. Media “Coindesk” reports that the European Central Bank has encouraged banks to start complying with the regulation even before it comes into force. For example, it states that cryptocurrencies must be backed by real finance and that crypto assets must not exceed 1% of the bank’s capital.
Stable coins
At the same time, the regulators have already started work. CNBC reported that on Monday, the New York State Financial Supervisory Office ordered cryptocurrency company Paxos to stop issuing BUSD, one of the most popular stablecoins in the world. It is the stable coin of the world’s largest cryptocurrency exchange “Binance”, which aims to connect the world of traditional finance with the world of cryptocurrencies, that is, exchange participants convert their dollars, euros into BUSD (which is pegged to the dollar) to buy cryptocurrencies.
The watchdogs said the ban is because there are “unresolved issues” regarding the company’s relationship with the cryptocurrency exchange. At the same time, the Securities and Exchange Commission (SEC) plans to sue Paxos, arguing that BUSD should have been registered under federal securities laws.
The company “strongly disagrees” with the SEC, the statement said, “because BUSD is not a security under the federal securities laws.” The company said it would cooperate with the SEC on the matter, but was prepared to “vigorously litigate if necessary.”
Binance, which after the collapse of FTX, is undeniably the largest cryptocurrency exchange in the world, is also not happy with the actions of US regulators.
“Paxos has informed us that the New York Department of Financial Services (NYDFS) has ordered it to stop issuing new BUSD. As a result, the market share of BUSD will decrease over time. BUSD is a stable cryptocurrency wholly owned and managed by Paxos. The company will continue to manage the stable cryptocurrency , will buy it back and, if necessary, provide additional information. Also, “Paxos” assured that all funds are safe and fully covered by reserves in the company’s banks,” comments Polina Brotje, representative of “Binance” in Latvia, adding that, “taking into account the constant regulatory uncertainty in certain markets, we will review other projects in those jurisdictions to ensure our users are protected from further undue harm.”
“Crypto” is climbing
Despite these woes, cryptocurrencies saw gains in value during the second half of the week.
“There are increasing signs that the market bottomed out last November and has turned bullish,” Vijay Aiyar, vice president of corporate development and international at cryptocurrency exchange Luno, told CNBC. “We are gaining momentum and all the bad news is rejected, these are typical signs that the market believes that the worst is over,” the expert told the media.
At the beginning of the week, the value of “Bitcoin”, which is the main tone-setter in the world of cryptocurrencies, was around 20 thousand US dollars per coin, but at the end of the week it already exceeded 24 thousand dollars. This is the highest price seen since last August.
It should be noted, however, that part of the rapid growth and inflow of capital into “Bitcoin” could be directly related to the fact that regulators are eyeing stablecoins.
Yuja Hasegawa, an analyst at the Japanese cryptocurrency company “Bitcoin Bank”, said that thanks to the regulatory measures, there is a transition from so-called “altcoins” or alternative coins to “Bitcoin” https://www.delfi.lv/bizness/bankas_un_finanses/.”Trešdienas “The rise in cryptocurrency prices was a bit of a surprise, but one thing stood out: It was led by Bitcoin,” Hasegawa told CNBC.
At the same time as “Bloomberg” writes, the market begins to feel that the worst in the US and European economies is behind us and money can start flowing into investments again.
