Markets
Why EU rules on stablecoins threaten to upend crypto markets – DL News
Opinion article
- MiCA risks leaving the $155 billion stablecoin industry fragmented, warn Hugo Coelho and Mike Ringer.
- This warning comes before new rules come into force at the end of June.
Hugo Coelho is Head of Digital Assets Regulation at the Cambridge Center for Alternative Finance, and Mike Ringer is Partner and Co-Head of the Crypto & Digital Assets Group at CMS. Opinions are their own.
To warn of the impact of looming European regulation on stablecoins, Dante Disparte, head of strategy at stablecoin issuer Circle, sought to distinguish it from a turn-of-the-millennium concept that fell by the wayside in technological folklore.
“MiCA is not crypto’s Y2K moment that can be ignored,” Disparte wrote on June 3 on the social network [are] underway for digital assets in the world’s third-largest economy.
Also known as the “Millennium Bug,” Y2K refers to the problem associated with the turn of the year to the year 2000 that threatened to wreak havoc on computer networks around the world.
Y2K was not a hoax and many efforts were made to avoid its negative consequences. But “the insect did not bite”, as the Washington Post Put it on the next day, and today it’s remembered more for the apocalyptic mood and hysteria surrounding it than anything else.
Disparte’s contrast with what is happening and what could happen to crypto markets when rules for e-money tokens – the legal name for single fiat currency referring to stablecoins in crypto markets regulation – EU assets – will come into force. June 30 is appropriate.
EMTs play essential functions in crypto asset markets.
They make trading cryptocurrencies easy, by being on one side of most trading pairs, they protect investors from volatility and provide collateral that powers decentralized applications.
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Any rules affecting their design or restricting their issuance, offering or trading in a market as large as the EU will undoubtedly have an impact.
So far, crypto markets are not disrupted by MiCA.
According to the Cambridge Digital Money Dashboard, the overall supply of stablecoins stands at more than $155 billion, up from $127 billion in January.
The supply share by issuer remains broadly unchanged, with the two largest stablecoins, USDT and USDC, accounting for over 70% and 20% of the market, respectively.
However, look beyond the statistics and you’ll notice some movement.
Major crypto asset service providers have revealed plans to make changes to their services involving stablecoins in the EU in preparation for the regulation.
OKX acted first, announcing that it would remove USDT from its trading pairs.
Kraken then indicated that he was reviewing his position.
Most recently, Binance announced that it would restrict the availability of unauthorized stablecoins to EU users for certain services, but not initially in spot trading.
“So what might require stablecoins, as we know them, to change about MiCA?”
The inconsistency of responses suggests that there is no common understanding of the implications of the regulation.
Compared to the weeks and days before the end of the millennium, one could say that there are far fewer obvious signs of panic, but almost as much uncertainty.
So what is it about MiCA that might require a change to stablecoins as we know them?
In our view, the main source of disruption will likely be the localization requirements imposed on transmitters.
For issuers trying to comply with the rules, this will be a much more difficult requirement to meet than prudential requirements, including the requirement to hold at least 30% or, in the case of large EMTs, 60% of reserves in bank accounts. and distribute them between different local banks.
And it will deal a more immediate blow than strict limits on the use of dollar-denominated stablecoins within the EU.
These were designed to force the market towards euro-denominated stablecoins, but there is not much evidence of this yet.
Under MiCA, no EMT may be offered to the public in the EU, and no person may apply for admission to trading, unless it is issued by an entity incorporated in the EU and authorized as a credit institution or electronic money institution – notwithstanding that the authorization regime for crypto asset service providers will only come into force on December 30.
Some of its reserves will also need to be located, as described above.
It is unclear how foreign issuers of stablecoins, such as those denominated in dollars, which currently dominate the market, can continue to serve EU customers under such a regime.
In theory, issuers could set up shop in the EU and distribute EU-issued stablecoins to the rest of the world. But this is very unlikely in practice.
MiCA’s strict prudential requirements would put these issuers at a competitive disadvantage in many non-EU markets.
It is also difficult to understand why other countries would not retaliate and require issuers to locate in the same way as the EU, thereby fragmenting the market.
An alternative solution would be to issue the stablecoin from two parallel entities, one in the EU, from which it would serve EU customers, the other from abroad, to serve customers from the rest of the world.
This option, often touted in crypto circles, is fraught with legal and operational complexities that have yet to be convincingly resolved.
There are essentially two challenges to overcome.
The first is to preserve fungibility between two coins issued by two separate entities, subject to different regulatory requirements and insolvency regimes and backed by different asset pools.
The second is to ensure that EU customers only hold coins issued by the EU entity, including through secondary market trading.
Although this problem is more visible and more imminent in the EU than elsewhere, it would be wrong to dismiss it as a European oddity.
Jurisdictions such as Japan, Singapore, and the United Kingdom have also grappled with the question of how to regulate stablecoins globally.
Regulators must have confidence that investors under their supervision have sufficient protection and can redeem their stablecoins at par even in times of crisis, even when the issuer and reserves are kept offshore.
If the history of finance is to be believed, this will only be possible – if ever – when there is sufficient alignment of rules to allow regulatory deference or equivalence and cooperation between supervisors in different jurisdictions. .
Equivalence regimes are more urgent and necessary in the crypto sector than in other sectors due to the borderless or digital nature of many activities.
Paradoxically, they are also further apart due to an embryonic and fragmented regulatory landscape.
For some reason, MiCA is one of the elements of EU financial services regulation that does not have any equivalence regime.
The UK and Singapore also continue to oppose equivalence agreements, and the effectiveness of Japan’s equivalence mechanism remains to be tested.
As a pioneer in crypto regulation, the EU is exposing the conundrum behind the regulation of global stablecoins.
Its heavy-handed approach threatens to dislocate a $155 billion market.
We will soon know whether, for stablecoins in the EU, June 30, 2024 is the new January 1, 2000, or something worse than that.
Over the past 24 hours, Jupiter and JasmyCoin emerged as the top gainers among the top 100 crypto assets, while Bittensor and Mantra plunged as the top losers.
Top Winners
Jupiter
Jupiter (JUP) led the charge among the biggest gainers on July 27.
At the time of writing, the crypto asset had surged 12.6% in the past 24 hours and was trading at $1.16. JUP’s daily trading volume was hovering around $282 million, according to data from crypto.news.
JUP Hourly Price Chart, July 26-27 | Source: crypto.news
Additionally, the cryptocurrency’s market cap stood at $1.56 billion, making it the 62nd largest crypto asset, according to CoinGecko. Despite the recent price surge, the token is still down 42.6% from its all-time high of $2 reached on Jan. 31.
Jupiter functions as a decentralized exchange aggregator that allows users to trade Solana-based tokens. The platform also offers users the best routes for direct trades between multiple exchanges and liquidity pools.
In addition to being a DEX aggregator, Jupiter has expanded into a “full stack ecosystem” by launching several new projects, including a dedicated pool to support perpetual trading and plans for a stablecoin.
JasmyCoin
JasmyCoin (JASMI) has increased by 12% in the last 24 hours and is trading at $0.0328 at press time. JASMY’s daily trading volume has increased by 10% in the last 24 hours, reaching $146 million.
JASMY Hourly Price Chart, July 26-27 | Source: crypto.news
The asset’s market cap has surpassed the $1.5 billion mark, making it the 60th largest cryptocurrency at the time of reporting. However, the self-proclaimed “Bitcoin of Japan” is still down 99.3% from its all-time high of $4.79 on February 16, 2021.
JASMY is the native token of Jasmy Corporation, a Japanese Internet of Things provider. The platform seeks to merge the decentralization of blockchain technology with IoT, allowing users to convert their digital information into digital assets.
The initiative was launched by Kunitake Ando, former COO of Sony Corporation, along with Kazumasa Sato, former CEO of Sony Style.com Japan Inc., Hiroshi Harada, executive financial analyst at KPMG, and other senior executives from Japan.
Kaspa
Kaspa (KAS) saw a 100% increase in trading volume and an 8% increase in price over the past 24 hours, trading at $0.19 at the time of publication.
KAS Hourly Price Chart, July 26-27 | Source: crypto.news
According to data from CoinGecko, Kaspa now ranks 27th in the global cryptocurrency list, with a circulating supply of approximately 24.29 billion KAS tokens and a market capitalization of $4.59 billion.
Kaspa is a cryptocurrency designed to deliver a high-performance, scalable, and secure blockchain platform. Its unique Layer-1 protocol includes the GhostDAG protocol, a proof-of-work (PoW) consensus mechanism that enables faster block times and higher transaction throughput compared to standard blockchains.
Unlike Bitcoin, GhostDAG allows multiple blocks to be created simultaneously, speeding up transactions and increasing block rewards for miners.
Bonk
Bonk (BONK) is the only one coin meme which made it to this list of biggest gainers and jumped 8.6% in the last 24 hours. Trading at $0.000030, the Solana-based meme coin’s market cap has surpassed $2.1 billion, surpassing Floki (FLOKI), another competing dog-themed coin with a market cap of $1.78 billion.
BONK Hourly Price Chart, July 26-27 | Source: crypto.news
BONK’s daily trading volume hovered around $285 million. However, BONK is still down 33.5% from its all-time high of $0.000045, reached on March 4.
Bonk, a meme coin that rose to prominence in 2023, has contributed significantly to Solana’s value increase amid the meme coin frenzy.
Bonk started out as a simple dog-themed coin. It has since expanded its features to include integration with decentralized finance. The project also partners with cross-chain communication protocols, NFT marketplaces, and various other cryptocurrency ecosystems.
BONK trading pairs are now listed on major exchanges including Binance, Coinbase, OKX, and Bitstamp.
The big losers
Bittensor
Bittensor (TAO) was the biggest loser among the 100 largest crypto assets, according to data from CoinGecko.
At the time of writing, TAO, the native token of decentralized AI project Bittensor, was down 5%, trading around $344. The crypto asset had a daily trading volume of $59 million and a market cap of $2.43 billion.
TAO 24 Hour Price Chart | Source: CoinGecko
Bittensor, created in 2019 by AI researchers Ala Shaabana and Jacob Steeves, initially operated as a parachain on Polkadot before transitioning to its own layer-1 blockchain in March 2023.
Mantra
Mantra (OM) fell 6%, trading at $1.13 at press time. The digital currency’s market cap fell to $938 million. Additionally, the 82nd largest crypto asset has a daily trading volume of $26 million.
OM Price Hourly Chart, July 26-27 | Source: crypto.news
Mantra is a modular blockchain network comprising two chains, Manta Pacific and Manta Atlantic, specialized in zero-knowledge applications.
Coat
Coat (MNT) also saw a 2.4% drop in price, now trading at $0.8413. Currently, Mantle has a market cap of around $2.75 billion, which ranks 36th in the global cryptocurrency rankings by market cap, according to price data from crypto.news.
MNT Hourly Price Chart, July 26-27 | Source: crypto.news
Over the past 24 hours, MNT trading volume also fell by 6%, reaching $240 million.
Mantle, formerly known as BitDAO, is an investment DAO closely associated with Bybit. The MNT token is essential for governance, paying gas fees on the Mantle network, and staking on various platforms.
Built on the Ethereum network, Mantle provides a platform for decentralized application developers to launch their projects. It has become particularly popular for GameFi applications, leading to the formation of an internal Web3 gaming team.
Markets
Bitcoin Price Drops to $67,000 Despite Trump’s Pro-Crypto Comments, Further Correction Ahead?
Pioneer cryptocurrency Bitcoin has registered a 1.13% decline in the past 24 hours to trade at $67,400. Despite a strong pro-crypto stance from US presidential candidate Donald Trump at the Bitcoin 2024 conference, this massive selloff has raised concerns in the market about the asset’s sustainability at a higher price. However, given the recent three-week rally, a slight pullback this weekend is justifiable and necessary to regain the depleted bullish momentum.
Bitcoin Price Flag Formation Hints at Opportunity to Break Beyond $80,000
The medium-term trend Bitcoin Price remains a sideways trend amidst the formation of a bullish flag pattern. This chart pattern is defined by two descending lines that are currently shaping the price trajectory by providing dynamic resistance and support.
On July 5, BTC saw a bullish reversal from the flag pattern at $53,485, increasing its asset by 29.75% to a high of $69,400. This recent spike followed the market’s positive sentiment towards the Donald Trump speech at the Bitcoin 2024 conference in Nashville on Saturday afternoon.
Bitcoin Price | Tradingview
In his speech, Trump outlined several pro-crypto initiatives: he promised to replace SEC Chairman Gary Gensler on his first day in office, to establish a Strategic National Reserve of Bitcoin if elected, to ensure that the U.S. government holds all of its assets. Bitcoin assets and block any attempt to create a central bank digital currency (CBDC) during his presidency.
He also claimed that under his leadership, Bitcoin and cryptocurrencies will skyrocket like never before.
Despite Donald Trump’s optimistic promises, the BTC price failed to reach $70,000 and is currently trading at $67,400. As a result, Bitcoin’s market cap has dipped slightly to hover at $1.335 trillion.
However, this pullback is justified, as Bitcoin price has recently seen significant growth over the past three weeks, which has significantly improved market sentiment. Thus, price action over the weekend could replenish the depleted bullish momentum, potentially strengthening an attempt to break out from the flag pattern at $70,130.
A successful breakout will signal the continuation of the uptrend and extend the Bitcoin price forecast target at $78,000, followed by $84,000.
On the other hand, if the supply pressure on the upper trendline persists, the asset price could trigger further corrections for a few weeks or months.
Technical indicator:
- Pivot levels: The traditional pivot indicator suggests that the price pullback could see immediate support at $64,400, followed by a correction floor at $56,700.
- Moving average convergence-divergence: A bullish crossover state between the MACD (blue) and the signal (orange) ensure that the recovery dynamics are intact.
Related Articles
Frequently Asked Questions
A CBDC is a digital form of fiat currency issued and regulated by a country’s central bank. It aims to provide a digital alternative to traditional banknotes.
The proposal for a strategic national Bitcoin reserve is a major confirmation of Bitcoin’s legitimacy and potential as a reserve asset. Such a move could position Bitcoin in a similar way to gold, potentially stabilizing its price and encouraging other countries to adopt similar strategies.
Conferences like Bitcoin 2024 serve as essential platforms for networking, knowledge sharing, and showcasing new technologies within the cryptocurrency industry.
Markets
Swiss crypto bank Sygnum reports profitability after surge in first-half trading volumes – DL News
- Sygnum says it has reached profitability after increasing transaction volumes.
- The Swiss crypto bank does not disclose specific profit figures.
Sygnum, a Swiss global crypto banking group with approximately $4.5 billion in client assets, announced that it has achieved profitability after a strong first half, with key metrics showing year-to-date growth.
The company said in a Press release Compared to the same period last year, cryptocurrency spot trading volumes doubled, cryptocurrency derivatives trading increased by 500%, and lending volumes increased by 360%. The exact figures for the first half of the year were not disclosed.
Sygnum said its staking service has also grown, with the percentage of Ethereum staked by customers increasing to 42%. For institutional clients, staking Ethereum has a benefit that goes beyond the limitations of the ETF framework, which excludes staking returns, Sygnum noted.
“The approval and launch of Bitcoin and Ethereum ETFs was a turning point for the crypto industry this year, leading to a major increase in demand for trusted, regulated exposure to digital assets,” said Martin Burgherr, Chief Client Officer of Sygnum.
He added: “This is also reflected in Sygnum’s own growth, with our core business segments recording significant year-to-date growth in the first half of the year.”
Sygnum, which has also been licensed in Luxembourg since 2022, plans to expand into European and Asian markets, the statement said.
Markets
Former White House official Anthony Scaramucci says cryptocurrency bull market could be sparked by regulatory clarity
Anthony Scaramucci, founder of Skybridge Capital, says the next cryptocurrency bull market could be sparked by a new wave of clear cryptocurrency regulations.
In a new interview On CNBC’s Squawk Box, the former White House communications director said he and two other prominent industry figures traveled to Washington, D.C. to speak to officials about the dangers of Sen. Elizabeth Warren and U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler’s hardline approach to cryptocurrency regulation.
“Mark Cuban, myself, and Michael Novogratz were in Washington a few weeks ago to speak with White House officials and explain the dangers of Gary Gensler and Elizabeth Warren’s anti-crypto approach. I hope that message gets through…
“Overall, if we can get regulatory policy around Bitcoin and crypto assets in sync, we will have a bull market next year for these assets.”
Scaramucci then compares crypto assets to ride-hailing company Uber, saying regulators were initially wary of the service but eventually decided to adopt clear guidelines due to public demand.
“Remember Uber: Nobody wanted Uber. A lot of regulators didn’t want it. Mayors and deputy mayors didn’t want it, but citizens wanted Uber and eventually accepted the idea of regulating it fairly. I think we’re there now.”
The CEO also says young Democratic voters believe their leaders are making the wrong choices when it comes to digital assets.
“I think President Trump’s move toward Bitcoin and crypto assets has shaken Democrats to their core, and I think very smart, younger Democrats are recognizing that they are completely off base with their positions, completely off base with these SEC lawsuits and regulation by law enforcement, and now they need to get back to the center.”
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