Reported by Zhao Yi, Hu Jinhua, a reporter from China Times (www.chinatimes
Reported by Zhao Yi, Hu Jinhua, a reporter from China Times (www.chinatimes. net. cn) in Shanghai
On the early morning of April 25th, the price of Bitcoin suddenly plummeted, falling below $27000. Meanwhile, Ethereum, the second largest cryptocurrency, also fell below $1900. In recent days, the overall cryptocurrency market has been fluctuating and declining. Data shows that in the past seven days, Bitcoin prices have fallen by 7.73%, while Ethereum prices have fallen by 13.35%. As of the press release, the latest price of Bitcoin has retreated to $27313.59, with a fluctuation of 2.38% within 24 hours; Ethereum prices continued to decline to $1817.26, with a fluctuation of 3.7% within 24 hours.
According to Coinglas data, as of 15:00 on April 25th, 23800 people had positions sold out within 24 hours, with a total amount of 78.2471 million US dollars, or approximately 540 million RMB.
Recently, increasingly strict regulations around the world have put considerable pressure on the encryption market. On April 22nd, the US Treasury proposed that any cryptocurrency transaction with a value exceeding $10000 transferred to an unmanaged wallet or foreign account must be reported to the US Tax Bureau. Prior to this, the European Parliament approved the first overall regional cryptocurrency regulation, requiring cryptocurrency operators to provide information about the sender and beneficiary of cryptocurrency asset transfers to further prevent money laundering.
Decentralization does not mean that it is completely unregulated, and strict regulation does not mean that the decentralized model will disappear. "Yu Jianing, co chairman of the Blockchain Special Committee of the China Communications Industry Association, told reporters in the China Times. On the contrary, compliant development is a necessary prerequisite for the sustainable development of any industry, and the global cryptoasset field will move towards mainstream, compliance, and institutionalization, which is an irreversible trend. In the long run, a mature financial ecosystem will inevitably need to create the necessary conditions and frameworks with regulatory agencies and traditional financial sectors to fully unleash its potential.
The world's first cryptocurrency regulation has arrived
Recently, EU legislators voted to pass the MiCA (Markets in Crypto Assets) Act, making the EU the first major jurisdiction in the world to introduce a comprehensive cipher.
The European Parliament stated in a statement that the new rules will impose some transparency, disclosure, authorization, and transaction supervision requirements on crypto platforms, token issuers, and traders. Crypto platforms will be required to inform consumers of the risks associated with their operations, and the sale of new tokens will also be regulated. Companies will face higher disclosure standards, including preparing a detailed white paper for each asset provided.
In addition, MiCA will require any company providing encryption related services in the EU to register in a member state of the EU and then allow them to conduct business throughout the EU. The European Banking Authority and the European Securities and Markets Authority (ESMA) will be responsible for ensuring that encryption platforms comply with rules, including having sufficient risk management and governance processes to avoid the recurrence of FTX like events.
Regarding the environmental issues arising from the encryption industry, MiCA requires companies to disclose their energy consumption and the impact of digital assets on the environment.
It is reported that the European Council will hold a formal vote on May 16th to finalize MiCA as law. MaireadMcGuinness, the European Financial Services Commissioner, stated that she expects the legislation to come into effect in July after being officially approved by the 27 member states of the European Union, with specific provisions gradually implemented. For example, the rules for managing stable currencies will apply from July 2024, while other requirements will not be implemented until January 2025.
In this regard, Yu Jianing said that MiCA has clarified the scope of application of regulations, classification of encrypted assets, regulatory subjects and corresponding information reporting system, business restriction system and behavior supervision system, and has established a regulatory framework for encrypted assets beyond the existing EU financial laws, which is also the first attempt of comprehensive regulation of encrypted assets in major countries around the world. At present, the bill has sufficient effectiveness in regulating encrypted assets in EU countries. Under MiCA, the development of stable currencies and even encrypted assets in the EU will enter the next stage of compliance.
A crypto exchange practitioner told a reporter from China Times that the establishment of MiCA is an important turning point in the crypto industry. Although MiCA's management of asset classes still needs improvement, it has created a more favorable environment for industry innovation and growth by establishing regulatory frameworks and simplifying compliance processes.
Upgraded US encryption regulatory infighting
At the same time as European legislation, the legislation on cryptocurrencies in the United States has been slow to advance. On the contrary, the battle between relevant departments has intensified.
On April 24th, Republicans in the Financial Services Committee of the United States House of Representatives released a new draft regulation on stable currency, which aims to transfer jurisdiction over stable currency from the Securities and Exchange Commission (SEC) to federal and state banking and credit union regulators.
The new bill no longer involves algorithmic stable currencies or requires research on central bank digital currencies, with a focus on stable currencies used for payments, managing the registration process of individual potential stable currency issuers, and aiming to become a supporting document for legislation managing the US digital asset market.
The draft stipulates that states in the United States can use their own standards to approve stable currency issuance, but the bill sets a bottom line for state regulatory agencies to evaluate projects. If the stable currency does not meet these benchmark standards, even if the project is approved by the state, the Federal Reserve can stop the project.
The bill also declares that stable currencies are not securities, which will determine which institution will oversee their trading - the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC).
CFTC Chairman Behnam stated in March this year that before the new comprehensive regulatory framework was introduced by Congress and the Biden administration, the stable currency would fall under the jurisdiction of the CFTC.
According to Yu Jianing, both the SEC and CFTC are regulatory agencies directly under the federal government of the United States. The former has jurisdiction over the securities market, while the latter has exclusive jurisdiction over "rights and interests in bulk goods" traded in the United States, including futures contracts, option contracts, swaps, foreign exchange contracts and other leverage products. However, due to the fact that the nature of encrypted assets has not been accurately defined for a long time, the SEC and CFTC have been striving for regulatory authority over encrypted assets.
In Jianing's view, how the regulatory power of the SEC and CFTC will be distributed in the future mainly depends on the qualitative assessment of encrypted assets by US legislators and policy makers. For example, the SEC has announced on its official website that it will prioritize the regulation of emerging technologies such as crypto assets in 2023, and will conduct investigations into brokers, dealers, and investment advisors using emerging financial technologies (including crypto technologies), including whether they have met the "prudent standards" expected by investors and whether they regularly review and update risk management procedures.
Hong Yong, an associate researcher at the Research Institute of the Ministry of Commerce, told reporters from China Times that the competition for cryptocurrency regulation among different regulatory agencies in the United States reflects the increasing status and influence of cryptocurrencies in the financial market, and also demonstrates the regulatory challenges faced by the government in the face of emerging technologies.
The SEC and CFTC are both important financial regulatory agencies in the United States, with responsibilities covering the regulation of cryptocurrency exchanges and related financial products. However, due to the overlapping responsibilities of these two agencies, there are certain conflicts in the regulation of cryptocurrency. The competition for cryptocurrency regulation between different regulatory agencies in the United States reflects the gradual change in the government's regulatory approach to emerging technologies In the process, it is necessary to balance the innovation and compliance development of the cryptocurrency market to avoid excessive regulation or regulatory gaps Hong Yong said.
Due to regulatory uncertainty, US encryption companies are planning to 'escape'. Recently, Coinbase and the cryptocurrency exchange Kraken both announced that they have obtained a virtual asset service provider license in Berlin. Blockchain company Ripple also stated that it is seeking permission from the Central Bank of Ireland.
On April 18th, Brian Armstrong, the CEO of Coinbase, stated that if the industry's regulations were not clear, Coinbase would consider withdrawing from the United States. I believe the United States has the potential to become an important market for cryptocurrencies, but currently we have not seen the regulatory clarity we need. I believe that if we do not see clarity in US regulation in the coming years, we may have to consider investing more in other parts of the world. Armstrong said that the company is preparing to engage in years of court battles with the US Securities and Exchange Commission.
On April 20th, Coinbase announced that it had obtained an F-class license from the Bermuda Monetary Authority (BMA), and sources revealed that it may launch an offshore derivatives exchange next week.
In addition, Coinbase has officially launched an attack on regulatory agencies. On April 25th, Coinbase, the largest listed cryptocurrency exchange in the United States, filed a lawsuit against the Securities and Exchange Commission (SEC), demanding that the regulatory agency publicly share its response to a petition submitted by Coinbase last year regarding whether to allow the use of the existing SEC framework to regulate the cryptocurrency industry.
The petition submitted in July last year requires the SEC to "propose and adopt rules to regulate the regulation of securities offered and traded through digital native methods. So far, the SEC has not made a specific public response to Coinbase's petition, but in recent months, the SEC has increased its enforcement actions and warnings against cryptocurrency exchanges, including Coinbase.
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