Markets
Why EU stablecoin rules threaten to upend crypto markets – DL News
Opinion article
- MiCA risks leaving the $155 billion stablecoin industry fragmented, warn Hugo Coelho and Mike Ringer.
- The warning comes before the new rules come into force at the end of June.
Hugo Coelho is the digital asset regulation lead at the Cambridge Center for Alternative Finance, and Mike Ringer is a partner and co-lead of the Crypto & Digital Assets Group at CMS. Opinions are their own.
To warn about the impact of the EU’s impending stablecoin regulation, Dante Disparte, head of strategy at stablecoin issuer Circle, sought to distinguish it from a turn-of-the-millennium concept that has entered technological folklore.
“MiCA is not crypto’s Y2K moment that can be ignored,” Disparte he wrote on June 3 on social network X. “Really consequential developments [are] underway for digital assets in the world’s third-largest economy.”
Also known as the “millennium bug”, Y2K refers to the failure associated with the change of the year to 2000 that threatened to create chaos in computer networks around the world.
Y2K was not a hoax and much work was done to avoid its negative consequences. But “the bug didn’t bite”, as the saying goes. Washington Post I put it up the next day, and today it is remembered for the apocalyptic mood and the hysteria surrounding it more than anything else.
The contrast of this between Disparte and what is happening and what could happen to crypto markets when rules for electronic money tokens – the legal name for the single fiat currency that references stablecoins in the EU’s crypto markets regulation – come into force on June 30th, it is ready.
EMTs play critical roles in the crypto asset markets.
They facilitate crypto trading by being on one side of most trading pairs, protect investors from volatility, and provide collateral that powers decentralized applications.
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Any rules that affect their design or restrict their issuance, offering or trading in a market as large as the EU will undoubtedly have an impact.
So far, crypto markets remain undisturbed by MiCA.
According to the Cambridge Digital Money Dashboard, aggregate stablecoin supply is over $155 billion, up from $127 billion in January.
The share of supply per issuer remains largely unchanged, with the two largest stablecoins, USDT and USDC, representing over 70% and 20% of the market, respectively.
Look beyond the statistics and you might see some movement.
Leading crypto service providers have revealed plans to make changes to their services involving stablecoins in the EU in preparation for regulation.
OKX acted first, with the announcement that it would remove USDT from its trading pairs.
Kraken then said it was reviewing its position.
More recently, Binance announced that it would restrict the availability of unauthorized stablecoins to EU users for some services, although not initially in spot trading.
‘So what is it about MiCA that could require stablecoins as we know them to change?’
The inconsistency in responses suggests that there is no shared understanding of the implications of the regulation.
Compared to the weeks and days leading up to the end of the millennium, it could be said that there are far fewer obvious signs of panic, but almost the same uncertainty.
So what is it about MiCA that could require stablecoins as we know them to change?
In our opinion, the main source of disruption will likely be issuer location requirements.
For issuers trying to comply with the rules, this will be a much more difficult adjustment requirement than the prudential requirements, including the requirement to hold at least 30% or – in the case of significant EMTs – 60% of reserves in bank accounts and split them between different local banks.
And it will deal a more immediate blow than strict limits on the use of dollar-denominated stablecoins in the EU.
These were designed to force the market to switch to 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 one may request its admission to trading unless it is issued by an entity incorporated in the EU and licensed as a credit or electronic money institution – notwithstanding that the authorization regime for cryptoactive service providers will not come into force until December 30th.
Some of your reservations will also need to be located, as described above.
It is unclear how foreign issuers of stablecoins, such as dollar-denominated ones, which currently dominate the market, can continue to serve EU customers under such a regime.
In theory, issuers could move to the EU and distribute EU-issued stablecoins to the rest of the world. But this is highly unlikely in practice.
MiCA’s stringent prudential requirements would put these issuers at a competitive disadvantage in many markets outside the EU.
It is also difficult to see why other jurisdictions would not take retaliatory measures and require issuers to co-locate in the same way as the EU, thereby fragmenting the market.
An alternative route would be to issue the stablecoin from two parallel entities, one in the EU, from which it would serve EU customers, and the other from abroad, to serve customers in the rest of the world.
This option, often touted in crypto circles, is marked by legal and operational complexities that have not yet been convincingly resolved.
There are basically two challenges to be faced.
The first is to preserve fungibility between two currencies issued by two distinct entities, subject to different regulatory requirements and insolvency regimes, and backed by different sets of assets.
The second is to ensure that EU customers only hold currencies issued by the EU entity, including through secondary market trading.
Although this issue is more visible and imminent in the EU than elsewhere, it would be wrong to dismiss it as an EU oddity.
Jurisdictions such as Japan, Singapore and the United Kingdom have also grappled with the question of how to regulate stablecoins on a global scale.
Regulators need assurances that investors under their supervision have sufficient protections and can redeem their stablecoins at par, even in times of crisis, even when the issuer and reserves are held abroad.
If the history of finance is any guide, this will only be possible—if ever possible—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 away due to the embryonic and fragmented regulatory landscape.
For some reason, MiCA is one of the pieces of EU financial services regulation that does not contain any equivalence regime.
The United Kingdom and Singapore also continue to resist equivalence agreements and the effectiveness of Japan’s equivalence mechanism remains untested.
By pioneering cryptocurrency regulation, the EU is exposing the enigma behind global stablecoin regulation.
His blunt approach threatens to displace 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.
This week saw $722 million worth of Bitcoin spot ETF inflows, including the largest daily inflow in a month.
Cryptocurrency markets rallied on Wednesday, driven by inflows into spot Bitcoin exchange-traded funds (ETFs).
The price of Bitcoin (BTC) is up 3% over the past 24 hours to last change hands at $65,200, according to CoinGecko. Ethereum (ETH) is up 2% and is trading at $3,471. Solana (SUN) and Polkadot (POINT) increased by 4%.
Bitcoin spot ETFs saw $422 million in daily inflows on Tuesday, the highest in the past 30 days, according to Far side data, . The all-time record for a single day was $1.05 billion on March 12.
Among Tuesday’s top contributors, BlackRock’s IBIT led with $260 million in inflows, followed by Fidelity’s FBTC with $61 million. This week has already seen more than $722 million in inflows.
Among the top 100 cryptocurrencies by market cap, Worldcoin (WLD) led with a 28% increase, followed by Helium (HNT) with 20% and Lido DAO (LDO) with 15%.
Worldcoin, a decentralized identity project led by OpenAI CEO Sam Altman, announced is extending the lockups for early investors and team members. This means that tokens will be gradually released through 2029, instead of the original 2027 plan. Token unlocks are generally seen as a negative because they increase supply and early investors can sell their tokens for profit.
Meanwhile, XRP, the token of the XRP Ledger network, jumped 8% after the CME and CF benchmarks introduced new indices and reference rates for XRP.
U.S. stocks faced a downturn on Wednesday. The S&P 500 fell 1%, while the Nasdaq Composite and Dow Jones Industrial Average both fell 2%.
Markets
Altcoins on the cusp of a major breakout – WLD, AR, and INJ prices could surge by 20% in the coming days
Crypto markets appear to have been taken over by the bulls as major tokens have surged above their crucial resistance zone. Bitcoin surged above $65,000 while Ethereum was above $3,500, and XRP, which had remained passive for quite some time, surged over 40% in the past few days to hit $0.6. The uptrend has been captured in most altcoins, with Worldcoin (WLD), Arweave (AR), and Injective (INJ) leading the rally. Here’s what to expect for these tokens in the coming days.
Worldcoin (WLD) Price Analysis
O Worldcoin Price has been trading inside a descending wedge since it marked a new ATH near $12 in the final days of Q1 2024. The recent price action helped the price break out of the upper resistance of the wedge, breaking above the crucial resistance zone between $2.21 and $2.39. Market sentiments have changed, but technicals suggest that the bulls may remain passive for a while, which could offer some room for a bearish pullback.
The price broke out of the wedge with a significant increase in volume, but the current volume suggests that the bulls have taken a step back. Meanwhile, the RSI is about to reach the upper boundary, which could attract bearish forces. Additionally, the DMI has undergone a bullish crossover, but the decline in the ADX suggests that the rally may remain consolidated above the gains. Therefore, the WLD price is expected to maintain a horizontal consolidation between $3 and $3.3 and trigger a fresh rally to $4.4 during the next bullish rally.
Arweave (AR) Price Analysis
Arweave formed a strong base around $25, which helped the rally trigger a recovery during the bearish attack. Mt. Gox and German terror forced the price to fall below $20. However, the recent price action has brought the altcoin within the bullish range and raised expectations of maintaining a decent uptrend for a few more days.
AR price has hit one of the major resistances around $30 to $31.5, which could act as a strong base once overcome. The buying volume is slowly increasing, which could keep the bullish hopes for the rally high. Moreover, the supertrend has just flashed a buy signal, indicating a clean reversal of the trend. Therefore, AR price seems primed to maintain a healthy uptrend and rally above $40. However, if the bulls maintain a similar trend, making new highs above $50 may not be a tedious task for the bulls.
Price Analysis of Injective (INJ)
Injective price has been showing sharp strength since the beginning of the year and hence, the recent turnaround is expected to revive a good uptrend going forward. The bears engulfed the rally to a large extent, but the recent price action suggests that the bulls have regained their dominance. Therefore, INJ price is expected to maintain a strong uptrend with a bearish interference on the way down.
INJ price has surged above the lower support zone and has registered consecutive bullish candles. Although the volume is below the required levels, the OBV is maintaining a sharp uptrend. Furthermore, the Ichimoku cloud lead span B is heading towards the lead span A and a healthy crossover indicates the start of a new uptrend. However, INJ price may be out of the bears’ reach once it secures the resistance zone between $30.77 and $32.12, which seems to be on the horizon.
Ethereum (ETH) supply on exchanges has hit a 34-month high as the asset’s price surpassed the $3,500 mark.
ETH has risen 2.3% over the past 24 hours and is trading at $3,490 at the time of writing. The second-largest cryptocurrency — with a market cap of $419 billion — briefly touched an intraday high of $3,517 earlier today.
ETH Price, Whale Activity, RSI, and Exchange Supply – July 17 | Source: Santiment
Ethereum’s daily trading volume also increased by 7.6% to reach $19.8 billion.
According to data provided by Santiment, the supply of Ethereum on exchanges has reached $19.52 million ETH. This level was last seen in September 2021, when the asset was trading around the same price.
On the other hand, data from the market intelligence platform shows that the number of whale transactions has fallen by 12% in the last day — falling from 8,730 to 7,629 unique transactions per day.
The move shows that the supply of Ethereum on exchanges has been increasing with small deposits rather than large transactions from whales.
Additionally, the ETH Relative Strength Index (RSI) is currently hovering at the 60-mark, per Santiment. The indicator shows that Ethereum is slightly overbought at this price point, but it may not be in a critical position due to its large market cap.
One of the main drivers of Ethereum price increase is ETH spot expectations ETFs in the US Investment products are scheduled to start trading on July 23rd.
Markets
Bits + Beeps: How to Play the ‘Trump Trade’ in Cryptocurrencies After the Assassination Attempt
Also, how much will the Fed cut rates (and when)? What will be the inflows into ETH ETFs? And what is the near future for Bitcoin?
Posted on July 17, 2024 at 12:00 PM EST.
Listen to the episode at Apple Podcasts, Spotify, Capsules, Source, Podcast Addict, Pocket molds, Amazon Musicor on your favorite podcast platform.
In this episode of Bits + Bips, hosts James Seyffart, Alex Kruger and Joe McCann, joined by guest Jack Platts, dive into the market reaction to the recent assassination attempt on former President Donald Trump, analyzing how this event will influence the 2024 US presidential election and the cryptocurrency markets.
They also cover potential rate cuts: Could there be a cut in July? How big could the September rate cut be? Could the decision be influenced by the upcoming election?
They also give their predictions on what percentage of BTC ETF inflows the ETH ETFs will reach, and James talks about what he expects for Grayscale’s ETHE (hint: his outlook would be positive for ETH).
Finally, they delve into what’s next for Bitcoin as the German government runs out of BTC and Mt. Gox distributions begin. Just now?
Program Highlights:
- Whether Trump’s shooting decided the election and whether the event caused a “flight to safety”
- How election markets are becoming a place to watch election probabilities and whether cryptocurrencies “lean right”
- Whether rate cuts will occur in July or September and by how much they will cut: 25 bps or 50 bps
- How Joe sees the relationship between global liquidity cycles, rate cuts, and the potential rise of Bitcoin
- What are the new updates about Ethereum ETFs and their expected launch?
- Why Solana Hasn’t Performed Significantly Better Since Trump News
- What Market Breadth Indicates About the Current Market Rally and the Impact of Rates on Small Caps
- Everyone’s predictions on ETH ETF inflows and how much outflow we’ll see on Grayscale’s ETHE
- What’s Next for BTC After German Government Exits Bitcoin and Mt. Gox Giveaways Starting This Week
Hosts:
Guest:
- Jack PlattsCo-Founder and Managing Partner of Hypersphere Ventures
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