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The regulatory threats to crypto are mounting



It wasn’t a great start to the year for the HODLers. if governments

This week, Russia, a massive mining center, proposed restrictions on this and trade. The Vice President of the European Securities and Markets Authority wants to outlaw some forms of cryptocurrency mining in the EU. Earlier this month, Madrid called for risky advertising time, while the United Kingdom plans to do the same.

We expect further attempts to dominate the industry during 2022. Global financial authorities, which have made their dislike of cryptocurrencies crystal clear, will continue to work on rules to control the activities of banks in this sector through the Basel Committee on Banking Supervision.

None of this is a surprise. After all, who would want his almost monopoly power to issue currency to be called into question?

Bitcoin has fallen by more than 20 percent in the last month (and by more than 7 percent in the last 24 hours).

This is more related to the general reduction in risky assets than to concerns that governments are preparing to tighten in the sector. Especially since the US authorities have not yet done anything meaningful (while the cryptocurrencies have not wasted time in investing in lobbying in the meantime). However, it is clear that mining bans in places like Russia – formerly a bit of a safe haven for the crypto sector – are unlikely to boost sentiment.

Will these threats regulate cryptocurrencies in parity with the rest of the financial system?

Fiat’s call for cryptocurrencies has two elements. There is a “stick” of stricter regulation and then a “carrot” of sovereigns coming up with their own forms of digital currencies. In order for the Empire to truly strike back, they must be able to fire from both wings.

For all its mistakes, the cryptocurrency poses a great challenge to official money because it allows almost instant anonymous payments to people on the other side of the world. Thus, the erasure of cryptocurrencies will depend on whether states are able to come up with a viable alternative on their own. That is, a form of digital money that is not only used quickly and cheaply, but allows payments to be made outside the prying eyes of the state.

In the past, we have written about the paradox that this creates for officials. They may want to come up with their own coins, but at the same time they are reluctant to undermine their own anti-money laundering laws or, in the case of China, they do not want to waste the opportunity to keep huge amounts of money. information on people’s habits to spend.

For example, the Federal Reserve said this week that any digital dollar would not allow people to make private payments (see this great thread on Twitter by Rohan Gray for more information).

So far, all indications are that the CBDC will have to operate as ID-based systems, not bearer securities, to manage the AML / KYC problem. At a minimum, there will be an evaluation ID. The larger the transaction, the more IDs the person will need to provide in order to be approved and processed.

Even so, it is still a major problem for many privacy advocates, who rightly point out that the obligation to provide personally identifiable information to private companies in a competitive market is very different from the obligation to provide identifying information to the government, which then remains in all your daily worries. -day “funded activities”.

Without anonymity, it is fair to ask who will want to pass on huge amounts of their personal data to governments when there are already many payment methods? Money is like money. And according to current CBDC evidence, no.

Crypto may not be as decentralized and global as its proponents would like to say. But the way technology is set up is a complication for regulators trying to keep it under control.

If states fail to address a privacy issue – which can actually be insurmountable – then you don’t have to be Yoda to find that someone somewhere in the galaxy not so far finds a way to circumvent the rules and use technologies that allow people – for legitimate and other reasons. – make payments quickly, cheaply and anonymously.

And this kind of competition is probably a good thing overall to maintain the fairness and privacy of any government alternatives.

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