Značka: Bitcoin Regulation

CFTC chief says Bitcoin is the only commodity in the wake of FTX collapse

The chief of the United States Commodity Futures Trading Commission (CFTC), Rostin Behnam, claimed Bitcoin is the only crypto asset that can be viewed as a commodity during an invite-only crypto event at Princeton University, reported Fortune.Behnam’s comments are quite a contrast to his early statements in October, where he claimed Ether (ETH) could also be viewed as a commodity. The CFTC chief was answering a question on which crypto assets should be seen as commodities and which ones qualify as securities.The CFTC chief’s backtracking of his comments on ETH comes in the wake of heavy scrutiny of U.S regulators and accusations of corruption, with Republican lawmakers accusing the SEC chair of coordinating with FTX ‘to obtain regulatory monopoly.’The debate over which cryptocurrencies qualify as commodities under the law has been a long-drawn one. Bitcoin is unanimously seen as non-security because of its true decentralized nature whereas the status of Ether and several other cryptocurrencies have been a controversial topic. Ripple is currently facing a security lawsuit from the SEC as well.The American financial regulator has found itself in hot waters in the wake of the FTX crypto exchange collapse primarily because of its association with the exchange. CFTC was poised to receive oversight capacity through proposed Senate legislation called the Digital Commodities Consumer Protection Act (DCCPA), The CFTC chief faced a lot of criticism for the same but defended the commission’s actions claiming they don’t have the luxury to wait.Behnam said the committee has limited oversight powers and blamed the “matrix of regulators” as an imperfect system. However, he called for better collaboration among the long list of regulatory bodies to come up with formidable regulations.Related: Here’s how the CFTC could prevent the next FTXThe CFTC chief is slated for a congressional hearing on Dec. 1, discussing the collapse of the now-bankrupt crypto exchange FTX and the lessons learned from the debacle. Breaking: 8 Congress Members tried to stop the SEC from inquiring into FTX by questioning the SEC’s authority to inquire about Crypto5 of those 8 members also received campaign donations from FTX, ranging from $2,900 to $11,600— Nancy Pelosi Stock Tracker ♟ (@PelosiTracker_) November 25, 2022The close ties of former CEO Sam Bankman-Fried with US policymakers and his lobbying efforts to make CFTC the primary crypto regulatory body has been questioned by many in the crypto community. A recent report also alleged that 8 U.S. congressman tried to stop the SEC from inquiring into FTX.

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European Central Bank blasts Bitcoin —community responds

In light of the recent FTX collapse and liquidity scandal, regulators in the European Union have joined other global lawmakers in a push for more clear guidelines and regulations on cryptos.The European Central Bank (ECB) released a blog post titled “Bitcoin’s last stand” on Nov. 30, which summarized the financial career of Bitcoin (BTC) amid current price fluctuations. However, instead of outlining the entire picture, which would include both up and downs of the cryptocurrency’s lifespan thus far, it only portrayed its shortcomings.Written by Ulrich Bindseil and Jürgen Schaaf, the director general and advisor of the ECB, the piece says the digital currency is on “the road to irrelevance.” It also claimed that BTC is hardly used for legal transactions and that the regulatory attention it is currently receiving from lawmakers around the world can be “misunderstood as approval.” Additionally, it warned banks on interacting with the digital currency as it could taint their reputation. On Twitter the organization tweeted that any price stabilization BTC may incur now will be artificially induced: The apparent stabilisation of bitcoin’s value is likely to be an artificially induced last gasp before the crypto-asset embarks on a road to irrelevance. #TheECBblog looks at where bitcoin stands amid widespread volatility in the crypto markets.Read more https://t.co/Hk1LuYX2de pic.twitter.com/I3Uidks8Xo— European Central Bank (@ecb) November 30, 2022However, where there is crypto slander by traditional, centralized financial institutions, there is also the crypto community ready with responses to debunk and defend its assets.The tweet from the ECB alone received hundreds of responses, with the crypto community fact-checking the claims in the article and highlighting the background of its authors.One commenter tweeted on the background of Bindseil and pointed out a potential conflict of interest, as he has penned various articles on central bank digital currencies (CBDC) and their use cases.Author : Ulrich Bindseil I will just leave that here, so everybody knows about the conflict of interest. #Bitcoin pic.twitter.com/EKz9Mx3ndT— ₿aseload (@Endorsen) November 30, 2022

Another user said, while they tried to read it with an open mind, the paper’s claims of BTC not being used for legal transactions and rather “illicit activity” were outdated. I clicked on this article with an open mind, willing to have my mind changedBut it opens with a provable lieThe vast majority of Bitcoin usage is for legal spending, for-profit speculation, and gambling – not “illegal transactions”It’s not 2012 anymore… This is a joke. pic.twitter.com/037aehMyEN— FatMan (@FatManTerra) November 30, 2022

Others responded with the tried and true meme of “BTC is dead” while still having a rising value of the other. Some even reached back to Dec. 2021 to point out the ECB’s incorrect predictions of inflation decreases in 2022.In a similar vein, the decreased value of the Euro was also drawn as a comparison in many responses from the community. Related: FTX fiasco boosts Bitcoin ownership to new highs: Analysts weigh inMeanwhile, digital currency exchanges continue to spread across the European Union, with Bitpanda recently obtaining a crypto license in Germany and Gemini getting the greenlight in both Italy and Greece.

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GK8 increases insurance cap on digital assets to $1B

Digital asset custody platform GK8 has partnered with USI Insurance Services to expand its insurance policy for institutional customers — a move the company said would incentivize banks and other financial institutions to start investing in cryptocurrency. The insurance policy offers up to $1 billion of coverage per client for digital assets stored in GK8’s cold vault and up to $125 million for assets stored in MPC custody, the company announced on Nov. 28. GK8 said the insurance caps are significantly higher than any other digital asset policies on the market today. Lior Lamesh, GK8’s co-founder and CEO, said the new insurance coverage would “incentivize new institutional players to confidently step into the crypto space” and enable existing customers to increase their holdings of digital assets. Lamesh told Cointelegraph that GK8’s clients “need access to a higher cap of insurance in order to increase the peace of mind and protect all the [assets under management] of their clients fully.”USI Insurance Services, GK8’s underwriting partner, is an insurance brokerage headquartered in Valhalla, New York. The company generated nearly $2 billion in revenue in 2021.Institutional investors have shown a keen interest in adopting digital assets, but concerns around regulation and security have limited uptake so far. The collapse of crypto exchange FTX may have exacerbated these concerns, with Binance CEO Changpeng Zhao opining that investor sentiment could take years to recover. Meanwhile, former United States presidential candidate Andrew Yang told the Texas Blockchain Summit on Nov. 18 that the FTX collapse could create an “appetite” for harsher regulation. Related: Crypto insurance a ‘sleeping giant’ with only 1% of investments coveredCalls to curtail crypto adoption have grown louder in Washington, with senators Elizabeth Warren, Tina Smith and Richard Durbin urging Fidelity Investments to reconsider offering retirement planners access to a Bitcoin (BTC) investment product.

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Canada crypto regulation: Bitcoin ETFs, strict licensing and a digital dollar

In October, Toronto-based Coinsquare became the first crypto trading business to get dealer registration from the Investment Industry Regulatory Organization of Canada (IIROC). That means a lot as now Coinsquare investors’ funds enjoy the security of the Canadian Investment Protection Fund in the event of insolvency, while the exchange is required to report its financial standing regularly. This news reminds us about the peculiarities of Canadian regulation of crypto. While the country still holds a rather tight process of licensing the virtual asset providers, it outpaces the neighboring United States in its experiments with crypto exchange-traded funds (ETFs), pension funds’ investments and central bank digital currency (CBDC) efforts. An era of restricted dealersCoinsquare, which happens to be Canada’s longest-operating crypto asset trading platform, benefits from its new legal status as none of its competitors can currently boast the same legal footing. By publishing time, all other local players must have the status of a “restricted dealer,” signaling that they’ve made their registration bid and now await IIROC’s decision. The Guidance for Crypto-Asset Trading Platforms was introduced by IIROC and the Canadian Securities Administrators (CSA) in 2021. It requires crypto businesses dealing with security tokens or crypto contracts to register as “investment dealers” or “regulated marketplaces.” All local companies have been given a two-year transitory period, during which they should start the registration process and, in some cases, obtain the “restricted dealer” temporary registration. The list of “restricted dealers” that have been granted a two-year relief period to operate amid the ongoing registration process is rather short and includes mainly local companies, such as Coinberry, BitBuy, Netcoins, Virgo CX and others. These companies still enjoy a right to facilitate buying, selling and holding of crypto assets, but what lies ahead of them is the stringent compliance procedure necessary to continue their operations after 2023. For example, Coinsquare had to obtain an insurance policy that includes an endorsement of losses of crypto assets and fund a trust account maintained at a Canadian bank. The prosecutors have been watching closely for any non-compliance. In June 2022, the Ontario Securities Commission (OSC) issued financial penalties against Bybit and KuCoin, claiming violation of securities laws and operating unregistered crypto asset trading platforms. It obtained orders banning KuCoin from participating in the province’s capital markets and fining the exchange for more than $1.6 million.The land of experiments At the same time, there are adoption cases in Canada that sound radical to the United States. For example, there are dozens of crypto ETFs to invest in the country, while Grayscale still has to lead the court battle with the U.S. Securities and Exchange Commission (SEC) for a right to launch its first ETF. The world’s first Bitcoin (BTC) ETF for individual investors was approved by the OSC for Purpose Investments back in 2021. Purpose Bitcoin ETF accumulates around 23,434 BTC, which is actually a prominent symptom of the bear market. In May 2022, it held around 41,620 BTC. The major outflow from the Purpose Bitcoin ETF occurred in June, when about 24,510 BTC, or around 51% of its asset under management, were withdrawn by investors in a single week. Recent: FTX’s collapse could change crypto industry governance standards for goodAnother breakthrough in Canadian crypto adoption erupted when the country’s largest pension funds started to invest in digital assets. In 2021, the Caisse de Depot et Placement du Québec — one of the largest pension funds in the French-speaking province of Quebec — invested $150 million into Celsius Network.The same month, the Ontario Teachers’ Pension Plan announced its $95-million investment in FTX. Unfortunately, this news didn’t age well as both companies have since collapsed and both pension funds had to write off their investments. Perhaps, in that light, the U.S. Department of Labor’s warning to employers against using pension funds that include Bitcoin or other cryptocurrencies now seems like a prudent precaution. Due to its cold climate, cheap electric supply and light regulation, Canada is among the world’s leading destinations for crypto mining. In May 2022, it accounted for 6.5% of the global BTC hash rate. However, this fall, the firm managing electricity across the Canadian province of Quebec, Hydro-Québec, requested the government to release the company from its obligation to power crypto miners in the province. As the reasoning goes, electricity demand in Québec is expected to grow to the point that powering crypto will put pressure on the energy supplier. The development of the CBDC is another direction where Canada has been moving faster than its neighbor to the south. In March 2022, the Bank of Canada launched a 12-month research project focused on the design of the Canadian digital dollar in collaboration with the Massachusetts Institute of Technology. In October, the Bank of Canada published a research report and proposed several particular archetypes of CBDC as useful for organizing “the possible CBDC designs.” While back in March, there was “no decision made on whether to introduce a CBDC in Canada,” the country’s recent budget amendment contains a small section on “Addressing the Digitalization of Money.” In the statement, the government said consultations with stakeholders on digital currencies, stablecoins and CBDCs are being launched on Nov. 3, although exactly which stakeholders will be engaged remains unclear.The partisan divide The discussion of what could have become Canada’s formal legal framework for crypto — bill C-249 — showed a sharp partisan divide around the topic. A bill for the “encouragement of the growth of the cryptoasset sector” was introduced to the House of Commons in February 2022 by a member of the Conservative party and ex-Minister Michelle Garner. The lawmaker proposed having Canada’s Minister of Finance consult with industry experts to develop a regulatory framework aimed at boosting innovation around crypto three years after the bill’s passage. Despite the voiced support from the local crypto community, the bill didn’t meet much approval among fellow lawmakers. During the second reading on Nov. 21–23, members of other political parties, including the ruling Liberal party, blasted both the proposition and the Conservative party with accusations of promoting the “dark money system,” and Ponzi scheme and bankrupting retirees and as a result, C-249 is now officially buried. While Michelle Garner introduced the bill, Conservative party leader Pierre Poilievre took most of the heat. A former Minister of Employment and Social Development, Poilievre has been advocating for more financial freedom through tokens, smart contracts and decentralized finance. Earlier this year, he urged the Canadian public to vote for him as their leader to “make Canada the blockchain capital of the world.”The next general elections in Canada are scheduled for 2025, and given C-249’s failure and the general condition of the market, it’s not likely that Poilievre and the Conservatives will get broad support in the Parliament for their pro-crypto efforts until that time. Currently, the Conservative party holds only 16 out of 105 seats in the Senate and 119 out of 338 in the House of Commons. What’s nextFrom a trading platform perspective, there are specific challenges that the industry strives to address, Julia Baranovskaya, chief compliance officer and co-founding team member at Calgary-based NDAX, told Cointelegraph. The majority of industry stakeholders would like to see “clear guidelines and a risk-based approach.” Currently, a majority of regulatory authorities in Canada have chosen to apply existing financial industry rules and regulations designed and implemented for the traditional financial industry.However, Baranovskaya highlighted that in recent years, regulators have been engaging in a closer dialogue with the crypto industry. The Securities Commission has created a sandbox and encouraged crypto asset trading platforms and innovative types of businesses offering alternative financial instruments to join. The IIROC has also been leading a dialogue with the industry participants to understand business models better and identify how the current framework can be applied to them.Recent: Bitcoin miners look to software to help balance the Texas gridBut, the challenges of the fragmented regulatory framework and the lack of crypto asset-specific regulations are still here. Most of the existing regulations are based on the product, but with the constantly evolving crypto space, the product-based approach “would always stay a few steps behind.” In Baranovskaya’s words: “Understanding the underlying technology behind crypto assets and De-Fi products that work out a flexible but robust regulatory regime that can adjust to the ever-changing crypto asset space is essential.” 

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US Sen. Elizabeth Warren says crypto will ruin economy —community responds

The downfall of former crypto exchange FTX has had the entire industry in disarray since the situation began to unravel days before it declared bankruptcy on Nov. 11. A new op-ed from United States Senator Elizabeth Warren revealed a negative stance towards the industry with regard to the fallout.Warren wrote that the crypto industry is on a “well-worn path of financial innovation,” which starts with exciting rewards but ends in “crippling losses.” She compared it to subprime mortgages of 2008, penny stocks and credit-default swaps. The Senator said what happened with FTX should be a “wake-up call” to regulators to enforce laws on the industry. On Twitter, some agreed with the Senator, tweeting that the crypto industry is just “smoke and mirrors” and that Warren has been trying to warn the public all along. Though many have pointed the finger back at her, saying regulators don’t understand the industry and incite fear with such comments. One user pointed out a middle ground saying there is room for regulation when it comes to centralized exchanges, which are much different than the technology of crypto and decentralized exchanges.Centralized exchanges for crypto are a far cry from crypto the technology. Know the difference and only regulate the centralized exchanges. The risk is the centralized exchanges, not the crypto and not decentralized exchanges/finance. Crypto did not fail. SBF failed. SEC failed.— Steve Westhoff (@SteveWesthoff) November 22, 2022The following day, not referencing the op-ed specifically, the co-founder and CEO of Binance Changpeng “CZ” Zhao also tweeted on the topic saying where there is progress there is always failure.Some (including me) say this will “set the industry back a few years.” But thinking about it, this is natural. There will be failures with progress. Happened in regulated TradFi in 2008, after 70+ years of development. The industry will recover quickly, and become stronger.— CZ Binance (@cz_binance) November 23, 2022

In response to CZ’s tweet, many in the community said that this is the reset crypto needed. Related: Will SBF face consequences for mismanaging FTX? Don’t count on itRegulators in the U.S. have been actively voicing concerns following the FTX scandal. On Nov. 21, U.S. senators released a letter to Fidelity urging it to reconsider its Bitcoin offerings in light of FTX. On Nov. 16 Warren, along with Senator Richard Durbin, publicized a letter they sent to the former and current CEOs of FTX — Sam Bankman-Fried and John Jay Ray III. The letter had 13 requests for documents, lists and answers regarding the situation. Warren has been a major critic of the crypto industry over the last year. Previously she has called DeFi “dangerous” and has been active to expose unsustainable practices in the crypto mining scene in the U.S.Her latest op-ed also addresses those topics, along with crypto’s role in money laundering and ransomware attacks.

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FTX collapse could trigger ‘appetite' for harsher regulation, says Andrew Yang

Calls for harsher regulations around cryptocurrencies and digital assets will likely grow louder in the aftermath of FTX’s collapse — something former United States presidential candidate Andrew Yang said isn’t conducive to making America a hotbed for blockchain innovation. Speaking at the Texas Blockchain Summit in Austin on Nov. 18, Yang acknowledged that the bankruptcy of FTX and sister company Alameda Research would make common sense crypto regulation harder to pass in the short term.“I’ve always been in the camp that some intelligent regulation is a good thing. I think it would help the industry mature and make it more mainstream. But, unfortunately, we missed a beat — like a major beat,” he said, referring to the collective failures of FTX, FTX US and Alameda Research. “Because of FTX and the problems and the headlines and the real people that got hurt, there’s going to be an appetite for regulation that, in my mind, might not hit the mark,” he said. “Because you want to be able to balance the very real concerns with the need to keep America the home of innovation and development of these tools.”Yang acknowledged that the path to regulatory clarity on digital assets is more difficult because of the hyper-politicization of the two-party system. As such, the FTX fiasco will only embolden crypto’s biggest opponents to try and squash the industry. Yang said he’s working with the Bipartisan Policy Center, a D.C.-based think tank, to educate congresspeople about blockchain technology and its value proposition:“[W]e e work with the Bipartisan Policy Center to liaise with members of Congress or their offices or their policy teams and just educate them about what these tools are and what they can do and the problems they can solve and why their constituents actually care and value them. We work with the American Conference of Mayors to have various mayors stand up and say, look, the blockchain is a good thing.”Related: FTX meltdown triggers FINRA into probing crypto commsThe widening political chasm between Democrats and Republicans is something Yang has long been concerned about, telling Cointelegraph in May that the U.S. midterm elections further demonstrated the politicization of crypto. Crypto regulation is now being discussed by the White House. https://t.co/bidpXgunJt— Cointelegraph (@Cointelegraph) November 11, 2022The need to regulate crypto appears to have intensified over the past week as lawmakers continue to dissect the fallout from FTX. On Nov. 10, White House press secretary Karine Jean-Pierre said the Biden administration would “closely monitor” developments in the sector.

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FTX acquisition no more: Canadian exchange Bitvo backs off the deal

The Canadian cryptocurrency exchange Bitvo has terminated its expected acquisition agreement with FTX to continue operating independently.Bitvo’s shareholder, Pateno Payments, has discontinued the acquisition deal with FTX Canada and FTX Trading in accordance with the agreement terms, Bitvo announced on Nov. 15.The firm emphasized that its operations have not been affected as Bitvo has no material exposure to FTX or any of its affiliated entities. Bitvo trading operations, including withdrawals and deposits, are intact.Bitvo also stressed that it’s not party to the bankruptcy proceedings entered into by FTX and its affiliated entities. Bitvo has also never owned, listed or traded the FTX Token (FTT) or “any similar token,” the announcement notes.“Since inception, Bitvo has operated as an independent, Canadian crypto asset trading platform,” the company stated, adding that the platform has not been offering lending or borrowing services:“Bitvo operates on a full reserve basis, meaning it does not lend customer funds. Bitvo has always chosen to operate in this fashion, and it is a requirement of Bitvo’s regulatory status as a Restricted Dealer registered with the Canadian Securities Administrators […].”As previously reported by Cointelegraph, the troubled cryptocurrency exchange FTX entered into an agreement to purchase Bitvo in June 2022 as part of the company’s expansion plans in Canada. But the plan went wrong as FTX became subject of a massive industry scandal, with the exchange misappropriating user funds for trading on its sister firm Alameda.On Nov. 14, Bitvo officially announced that its acquisition by FTX was still a pending transaction that wasn’t closed. “Digital assets are held with independent third-parties BitGo Inc. and BitGo Trust Company, with over 80% of assets held in cold storage,” the company said.“We are happy the acquisition didn’t close, it would have been devastating to our staff, and just as importantly our customers,” Bitvo CEO Pamela Draper told Cointelegraph. The process between the announcement of the deal in June involved working to satisfy the closing conditions, the most significant of which was regulatory approval, she added.“The Alberta Securities Commission is our principal regulator and Bitvo and FTX were working with them to obtain the required approvals,” Draper said.While Bitvo appears to have managed to back off the deal, there are some crypto companies that have been affected by the FTX crisis due to being acquired by the crypto mogul.The FTX-owned crypto exchange Liquid suspended its fiat and crypto withdrawals on its Liquid Global platform in connection with FTX’s issues, according to an official statement released on Nov. 15. FTX acquired the Japanese exchange and its affiliates in February 2022.Related: Bahamian liquidators reject validity of FTX’s US bankruptcy filingBankrupt crypto lender Voyager Digital took to Twitter on Nov. 16 to update its clients on reorganization efforts following the Chapter 11 filing by FTX and FTX US, stating that customer vote will be canceled and the proposed sale will not move forward. Voyager went bankrupt in July 2022, with FTX US acquiring its assets in September.FTX US Derivatives, another subsidiary of FTX US formerly known as LedgerX, continued to offer fully-collateralized swaps, futures and options on crypto, CEO Zach Dexter said on Nov. 14. He also pointed out that LedgerX is not included in this bankruptcy filing by FTX. “Customer funds remain safe on the LedgerX LLC derivatives platform, which remains available 24/7,” Dexter noted in another tweet on Monday. As previously reported, FTX US acquired LedgerX in an undisclosed deal in August 2021.

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Nayib Bukele announces Bitcoin prescription for El Salvador: 1 BTC a day

As the world’s first nation to adopt Bitcoin (BTC) as a legal tender in September 2021, El Salvador is going back to its BTC buying days after a pause for months amid bearish market conditions.El Salvador President Nayib Bukele announced on Nov.16 that the Central American nation will start purchasing BTC on a daily basis starting from Nov.17. The announcement comes nearly three months after the nation made its last BTC purchase in July 2022.We are buying one #Bitcoin every day starting tomorrow.— Nayib Bukele (@nayibbukele) November 17, 2022El Salvador started buying BTC in September 2021, right after mankind it a legal tender. At the time BTC was in the mid of a bull cycle and every purchase made by the nation looked lucrative as the price was hitting a new all-time high every other week. However, with the advent of the bear market by the second quarter of 2022, El Salvador’s early BTC purchases started to look like a gamble that incurred heavy losses.According to public records, El Salvador currently holds 2,381 BTC at an average buying price of $43,357. Thus, the country has spent nearly $103.23 million on its BTC purchase and the value of the same BTC currently sits at $39.4 million.El Salvador’s total BTC purchase historyThe announcement of a new BTC purchase routine at a time when the top cryptocurrency is trading at a new cycle low could help El Salvador offset some of its losses in the coming months. Looking beyond the losses incurred by the small nation on their BTC purchases, the top cryptocurrency has been instrumental in helping reduce the cross-border remittance cost significantly and has also given a boost to the tourism sector. Related: El Salvador’s Bitcoin decision: Tracking adoption a year laterCointelegraph reporter Joe Hall is currently on the ground in El Salvador and only surviving on BTC. Some early updates from Hall suggest that BTC is accepted at majority of tourist spots, but mobile applications and services need more refinement.Lunch yday afternoon at El Navegante HUGE sign: #Bitcoin accepted here ⚡️ Waiter is wearing a @Strike t-shirt, chef is wearing a Strike hat (srsly).Tried to pay the bill. Waiter spends 15 mins looking for PoS. He gets his neighbour to fire up Chivo so I can pay ‍♂️ pic.twitter.com/9HaHG8qclQ— Joe Nakamoto (@JoeNakamoto) November 14, 2022

El Salvador’s BTC adoption might not look very promising at the moment due to the intense crypto winter. However, looking at the Bitcoin price cycle history, the nation can easily offset its losses in the next bull cycle by simply holding onto its BTC purchase.

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Crypto adoption via regulation: Setting rules for centralized exchanges

Centralized cryptocurrency exchanges have become the backbone of the nascent crypto ecosystem, making way for retail and institutional traders to trade cryptocurrencies despite a constant fear of government crackdowns and lack of support from policymakers. These crypto exchanges over the years have managed to put self-regulatory checks and implemented policies in line with the local financial regulations to grow despite the looming uncertainty. Cryptocurrency regulation continues to occupy mainstream debates and experts’ opinions, but despite public demand and requests from stakeholders of the nascent ecosystem, policymakers continue to overlook the rapidly growing sector that reached a market capitalization of $3 trillion at the peak of the bull run in 2021. Over the past five years, many local and national governments have shown interest in regulating the crypto market but often got perplexed by the vast ecosystem and complexities involved in regulating certain decentralized aspects of the market. As a result, most of the governments that have issued some guidelines or rules related to crypto have done so based on the existing financial regulations, but the evolving market has proven too fast-paced.Some countries have moved to recognize crypto trading as a legal activity, while others have approved Bitcoin (BTC)-based exchange-traded funds. Many countries have also made way for crypto platforms to operate with a license, but the strict requirements often deter certain small platforms to stay away. As a result, there is no universal blueprint for regulators to adhere to, and experts believe leading centralized crypto exchanges can change that.In traditional markets, it is perfectly normal for regulators to work closely with industry participants, including exchanges, to ensure that regulations and guidance work well and keep pace with fast-changing technological advances. However, the same can’t be said for the crypto market, as regulators have maintained a safe distance from the nascent industry.Oliver Linch, CEO of global crypto exchange Bittrex Global, said that the regulators must interact with service providers of the crypto ecosystem to get a better grasp of the industry. He cited the example of Bermuda and Liechtenstein, where the crypto exchange has been working with local lawmakers to make way for positive regulations. He noted that even though decentralized exchanges continue to remain the flag bearer of crypto’s decentralized ethos, which are thus more complex to regulate, centralized exchanges will be key to major adoption:“Centralized exchanges have perhaps the most important role to play here. While decentralized exchanges tend to be the ‘poster boys’ for the industry’s cutting edge, they are naturally hesitant to get involved in regulatory matters. In any event, the majority of activity, especially for ordinary retail users (who are front of mind for regulators) happens on centralized exchanges.”He added that regulating the entire crypto market will follow, but the approach of “Liechtenstein, Bermuda and now the European Union, of regulating service providers, including centralized exchanges, is a good starting place. By properly regulating centralized exchanges, regulators and legislators create a legitimate path for users — from individuals to giant corporates — to get involved in crypto in a safe and regulated manner.”A Binance spokesperson told Cointelegraph that being a centralized exchange, it needs a centralized entity to work well with regulators.“Binance believes it has a fundamental responsibility to work with regulators and believes that a well-regulated crypto market provides greater protection for everyday users. We strongly believe that a stable regulatory environment can support innovation and is essential to establishing trust in the industry that will lead to long-term growth,” the spokesperson added.Centralized exchanges prove to be regulators’ alliesIn major economies and developed countries, regulators have not been very keen on involving industry players, but those nations that see the future in the nascent tech have actively partnered and on-boarded leading centralized crypto exchanges to not only help them build the infrastructure but also assist them with formulating right policies for the crypto market.Binance recently signed a memorandum of understanding with Kazakhstan to help fight financial crimes. The program further aims to identify and block digital assets obtained illegally and used to launder criminal proceeds and finance terrorism. Similarly, Busan onboarded Huobi to develop blockchain infrastructure in the region.Many countries already regulate centralized exchanges, but there is still a lot of uncertainty about what regimes apply and how they will be enforced. For example, United States-based exchanges operate under licenses from the Financial Crimes Enforcement Network but have been alleged to list tokens and offer financial products (like derivatives, staking and interest-bearing deposits) that fall under the purview of the Securities and Exchange Commission or the Commodity Futures Trading Commission. The Lummis–Gillibrand bill is considered one of the most comprehensive pieces of legislation proposed on crypto in the United States. South Africa recently classified crypto as a financial product and will be regulating it accordingly. South Korea implemented strict regulations last year that require exchanges to track all transfers to and from their platform, including identifying the owners of wallets. As a result, exchanges there restricted transfers to and from unverified private wallets.Thus, it is evident from existing regulations that centralized exchanges have become the main point of interaction for not just traders but regulators as well.Mohammed AlKaff AlHashmi, co-founder of Islamic Coin, told Cointelegraph that regulating centralized exchanges will help in regulating the broader crypto market, explaining:“Firstly, it’s Know Your Customer and Anti-Money Laundering. I see that most of the exchanges will outsource it to very famous and authentic KYC/AML entities, as it will bring more reliability and trust rather than doing these procedures by exchanges themselves. Secondly, taxation is an important theme when we talk about regulation. Many countries will regulate crypto if they can do the taxation, and I suggest that exchanges will develop the taxation on the crypto transactions and be the one who collects this data and hand it over to the government.”Habeeb Syed, senior associate attorney at Vicente Sederberg and co-organizer of the Blockchain Technology, Law and Policy Meetup, told Cointelegraph, “Crypto exchanges often determine the winners and losers of the crypto world, as listed on one is an almost surefire way to raise your token price and provide early investors an opportunity for liquidity. Well-thought-out regulation of centralized exchanges could also ripple out into the broader ecosystem.”He added that regulating crypto exchanges would force legitimate projects to know they can’t engage in certain acts “if they ever want to list a token on say Binance, FTX or Coinbase, which would be a powerful motivating force. With regulated options for trading, staking and lending, actors could choose to forego riskier and unregulated DeFi ecosystems.”Regulators must proceed with cautionCrypto exchanges play a central role in the vast crypto ecosystem, as they have numerous services and facilities with many trying to become an all-in-one platform. Some experts are of the opinion that, while regulating centralized exchanges can certainly be the first step toward broader crypto market regulations, that is not enough to ensure smooth operations for the whole industry.Aleksandra Shelepova, head of legal at crypto-backed loan service provider CoinLoan, told Cointelegraph:“When it comes to imposing regulations to any new and evolving market, everything should be done step-by-step. Moreover, the regulators should have a proper understanding of how this market operates in detail, technological aspects included. Regulation should come from the middle-bottom, meaning the contribution of the market’s participants’ know-how is crucial.”She added that regulating just the exchanges is not enough since there are many popular and widely used crypto products, including crypto loans, deposits, etc. that must be regulated as well. Expanding regulation to all aspects of the crypto environment ensures a unified understanding of the products themselves.While monitoring centralized exchanges can definitely pave the way for a better understanding of the crypto market, regulators should refrain from a “one size fits all” formula. Nicole Valentine, fintech director at Milken Institute, told Cointelegraph that regulators should be more focused on decentralized platforms:“Just like there is variation in the digital assets themselves, there is variation in the types of exchanges that enable buyers and sellers to trade those digital assets. Although regulating centralized exchanges can be seen as helpful, there are nuances in decentralized exchanges that should be considered, including the use of digital wallets and smart contracts.” Centralized exchanges are a key part of the cryptocurrency ecosystem; they are where most new crypto users go to buy their first coins. Many leading centralized exchanges already have strict onboarding and identification procedures in place and would welcome more clarity from regulators on questions such as whether or not digital assets are securities.Increased regulation for centralized exchanges is a double-edged sword where, on one hand, it would lead to more new interactions and greater adoption, but on the other hand, increased regulation may drive the more experienced crypto users toward decentralized exchanges, something that experts believe regulators would have a hard time dealing with.

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Bitcoin miners rethink business strategies to survive long-term

The Bitcoin mining industry continues to face a challenging year as the price of Bitcoin (BTC) hovers below $20,000, coupled with rising energy costs in North America and Europe. Regulators have also recently started clamping down on crypto mining, as a recent report from the Bitcoin Mining Council (BMC) found that Bitcoin has seen a 41% increase in energy consumption year-on-year (YoY). As a result, a number of crypto mining companies have been forced to sell off equipment, while others have filed for bankruptcy. Yet, this hasn’t been the case for some miners, particularly those focused on clean energy solutions and strategic approaches. For example, in September, crypto mining firm CleanSpark announced an agreement to acquire Mawson’s Bitcoin mining facility in Sandersville, Georgia, for $33 million. The crypto mining company White Rock Management also recently expanded its mining operations to Texas.Why some Bitcoin miners are thriving in a bear marketMatthew Schultz, executive chairman of CleanSpark, told Cointelegraph that he views mining as a unique way to decrease energy costs when leveraged for reasons other than making profits. According to Schultz, this perspective has differentiated CleanSpark from other crypto-mining companies. “Bitcoin mining is a potential solution for creating more opportunities for energy development,” he said. Schultz elaborated that CleanSpark partners with cities in the United States, like Georgia and Texas, to buy excess energy. For example, he noted that CleanSpark works with local areas in Georgia that receive energy from the Municipal Electric Authority of Georgia.“These cities essentially become our utility provider. They make a margin on every kilowatt hour we buy to conduct our mining operations. Yet, we are buying such high quantities of energy that it brings down energy costs for the communities we work with. We aim to impact cities posivetly by driving energy costs down,” he said.CleanSpark CEO Zach Bradford inspects a mining pod with techs at the company’s College Park Bitcoin mining campus. Source: CleanSparkSchultz also pointed out that CleanSpark formed a partnership with the energy company Lancium to support their data center in West Texas by buying excess renewable energy to create grid stability. As a result, Schultz shared that CleanSpark currently has half a billion United States dollars worth of assets on its balance sheet and less than $20 million in debt, along with support from investors like BlackRock and Vanguard. Given this, Schultz believes that the crypto bear market has impacted CleanSpark differently in comparison with other crypto miners. For instance, he noted that when one Bitcoin was worth $69,000 a year ago, many miners were discussing plans to hold BTC. “These miners also made huge commitments to companies like Bitmain for the future delivery of mining rigs,” he said. Yet, according to Schultz, CleanSpark conducted extensive analysis of the number of mining rigs being ordered last year while also looking at future energy projections. He stated:“We reached the conclusion that rather than sending a deposit for mining equipment to providers last November that are just now being delivered, we saw the possibility of an oversupply of rigs and an increase in energy costs. Therefore we sold Bitcoin when it was in the $60,000 range and invested proceeds in infrastructure instead.” Not only did this allow CleanSpark to acquire its new mining facility in Sandersville, Georgia, but Schlutz also noted that the firm is currently purchasing Bitcoin mining rigs at a very low rate. “We are buying rigs for $17 per terahash that one year ago cost $100 per terahash.”As a number of miners are forced to sell their equipment, both used and new mining rigs are being sold at below market prices, creating buying opportunities for firms like CleanSpark. Scott Offord, owner of Scott’s Crypto Mining — a service that provides new and used mining equipment, along with mining training courses — told Cointelegraph that prices for miners are now very inexpensive, partly based on a lack of demand due to the low price of Bitcoin. Offord added that many of the used miners he is currently selling have come from hosting facilities in debt. He said:“During the last bull run you couldn’t get miners without a 6-month lead time. It’s the opposite now since many miners aren’t capitalizing. Usually, Bitcoin miners get rid of their gear because equipment is old and something newer is on the market, but it seems like now people are selling because they need cash flow.”Offord also pointed out that he is seeing a lot of new mining gear hit secondary markets. “Many new generation Antminers are being resold. For example, things like S-19s, which are some of the most efficient miners in the world right now,” he said. In terms of pricing, Offord explained that crypto miners may be able to buy a new Antminer S-19j pro for about $20 per terrahash. “This same machine would have cost three times as much with a three-month lead time one year ago,” he added. Echoing Offord, Andy Long, chief operating officer of Bitcoin mining firm White Rock Management, told Cointelegraph that miners who are selling equipment are generally doing so to cover debt payments for hardware bought when prices were higher. “Hardware is now being bought by well-capitalized miners and will continue to be used to secure the network,” he said. White Rock Management Texas Mining Site. Source: White Rock Management According to Long, White Rock Management’s operations in the United States have not been impacted by the bear market, adding that its facility in Texas operates completely off-grid. “White Rock’s U.S. operations are powered by flared natural gas, while our mining operations in Sweden are also 100% hydroelectric powered.”Bitcoin miners rethink business strategiesWhile miners like CleanSpark and White Rock Management continue to grow, others may need to rethink their business strategies. Elliot David, head of climate strategy and partnerships at Sustainable Bitcoin Protocol — a green Bitcoin mining certification protocol — told Cointelegraph that he believes conditions for miners are going to get worse before things improve. “Miners that want to survive the long term will have to change their strategy,” he said. Indeed, some miners are making adjustments. For example, Jonathan Bates, CEO of crypto mining firm BitMine, recently mentioned in a press release that due to the sharp decline in mining rig prices, the firm will currently only focus on self-mining rather than hosting for others. “Given the sharp drop in ASIC prices, we feel that focusing on self-mining is a better use of our datacenter equipment and a better use of firm capital at this time,” he stated. He added that the firm plans to “pursue joint ventures and partnerships where our infrastructure equipment can be paired with ASIC miners valued at current prices.”The press release further noted that on Oct. 19, Bitmine entered into a repurchase and hosting agreement with The Crypto Company (TCC), a publicly listed blockchain company. Under this agreement, Bitmine agreed to repurchase certain ASIC miners previously sold to TCC while also purchasing additional ASIC miners owned by TCC. Bitmine will also terminate the hosting agreement that it had established with TCC. To be specific, Bitmine sold TCC 70 Antminer T-17s for $175,000, along with 25 Whatsminers for $162,500, for a total purchase of $337,500 during February this year. Simultaneously, Bitmine and TCC entered into a hosting agreement under which Bitmine agreed to host the miners, along with other miners owned by TCC. Due to current conditions, it’s been noted that Bitmine will accept the return of the 70 Antminer TY-17s for a credit of $175,000 as a warranty claim. Bitmine will also purchase the 25 Whatsminers for $62,500 and the 72 Antminer T-19s from TCC for $144,000. This marks a significant decrease in price from when the units were initially sold.In 2021 — during the height of the crypto bull run — Bitmine entered into an agreement with a telecommunications company located in Trinidad and Tobago. The agreement allows Bitmine to co-locate up to 125 800-kilowatt containers for hosting miners over 93 potential locations. Bitmine is also able to co-locate containers at its own pace, paying a fixed amount per container, along with the electricity costs incurred by its containers. At the time of the agreement, Bitmine noted that the electricity rate expected to pay for the hosting containers was $0.035 cents per kilowatt-hour. This was based on the rate currently paid by the telecommunications company. In October of this year, Bitmine completed the installation of its initial hosting containers in Trinidad. However, prior to commencing operations, Bitmine shared that the telecommunications company advised that the electric company would not honor its existing agreement and instead indicated that the rate would be approximately $0.09 per kilowatt-hour. Although the telecommunications company has protested this decision, Bitmine has chosen to delay the installation of additional containers in Trinidad until the dispute is resolved. The future of crypto miningGiven recent changes being made by miners, David believes that the crypto-mining industry is approaching a junction. “Miners will need to diversify their revenue streams,” he said. With this in mind, he explained that there has been growing interest from clean energy miners that want to work with Sustainable Bitcoin Protocol to ensure sustainable mining practices as a way to be more financially resilient.Echoing this, Offord mentioned that he is seeing more interest from miners regarding their environmental impact. “Miners are seeking opportunities in places where there is flare gas that needs to be mitigated, or where biofuel is being created from farm waste. Miners are not just focused on building a Bitcoin mine, but want to build something sustainable that can be carbon negative.” In addition to sustainability, David pointed out that regulations are becoming more important than ever before for crypto miners. He noted that this is especially true within the United States, noting:“The industry in the U.S. is becoming increasingly aware that unless they regulate themselves that the various levels of government might step in. I’ve spoken with a number of policymakers and staffers, and in a crunch the Bitcoin mining industry will be a likely first target.”

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What does the global energy crisis mean for crypto markets?

There’s no denying that the world is currently facing an unprecedented energy crisis, one that has compounded severely in the aftermath of the COVID-19 pandemic so much so that countries across the globe — especially across Europe and North America — are witnessing severe shortages and steep spikes in the price of oil, gas and electricity.Limited gas supplies, in particular, stemming from the ongoing Russia-Ukraine conflict, have caused the price of essential commodities like fertilizer to shoot up dramatically. Not only that, but it has also resulted in the heightened use of coal and other natural resources. Coal consumption within Europe alone surged by 14% last year and is expected to rise by another 17% by the end of 2022.To expound on the matter further, it is worth noting that European gas prices are now about 10 times higher than their average level over the past decade, reaching a record high of approximately $335 per megawatt-hour during late August. Similarly, the United States Energy Information Administration’s recently published winter fuel outlook for 2022 suggests that the average cost of fuel for Americans will increase by a whopping 28% as compared to last year, rising up to a staggering $931.With such eye-opening data out in the open, it is worth delving into the question of how this ongoing energy shortage can potentially affect the crypto sector and whether its adverse effects will recede anytime soon.The experts weigh in on the matterMatthijs de Vries, founder and chief technical officer for AllianceBlock — a blockchain firm bridging the gap between decentralized finance (DeFi) and traditional finance — told Cointelegraph that the global economy is in bad shape thanks to a multitude of factors including the power crisis, looming recession, surging inflation and rising geopolitical tensions. He added:“These issues are interlinked, primarily in the way that capital flows in and out of impactful industries. The worse the macroeconomic climate, the lower the capital (liquidity) that flows in and out of the digital asset industry. This liquidity is what enables the incentivization mechanisms of blockchain to continue working. So, for miners, if there is a shortage of liquidity, this means fewer transactions for them to confirm, lesser fees and decreased incentives.”Moreover, de Vries believes that rising energy costs could provide additional incentives for miners to move toward the validator ecosystem of Ethereum 2.0 that relies on a far more energy-efficient proof-of-stake (PoS) mechanism.Recent: The Madeira Bitcoin adoption experiment takes flightA somewhat similar sentiment is echoed by Yuriy Snigur, CEO of Extrachain — an infrastructure provider for distributed applications, blockchains and decentralized autonomous organization (DAO) platforms — who believes that the ongoing energy price surge will impact proof-of-work (PoW) blockchains the most.“They are the most dependent on the energy sector. In my opinion, the value of a blockchain should not come from the meaningless burning of energy, which is why PoW is doomed eventually,” he noted. Worsening macroeconomic climate will hurt crypto in near termNero Jay, founder of the crypto YouTube channel Dapp Centre, told Cointelegraph that the challenges being witnessed will continue to have an overall negative impact on the crypto market, as a result of which most investors will continue to look at this yet nascent sector as being speculative and risky, at least for the foreseeable future.However, as a silver lining, he noted that the aforementioned challenges could serve as an opportunity for increased crypto adoption, especially as many countries like Venezuela, Turkey, Argentina, Zimbabwe and Sudan continue to be ravaged by hyperinflation and sanctions, which may give crypto assets more utility and use cases.Lastly, Jay believes that the worsening energy situation could result in increased scrutiny of the mining sector, especially since proponents of the zero carbon emission campaign will now have more fuel to criticize the space.“Many are questioning the impact that crypto mining may have on the environment. The great news is we are already seeing many cryptocurrency projects, including Ethereum, that are making their blockchain platforms very efficient and low carbon emission based,” he said.Bitcoin’s price and its relationship with the energy market From the outside looking in, increased energy prices will raise costs for miners, which in turn could force them to sell their held Bitcoin (BTC), thereby pushing down prices. Furthermore, heightened production can result in miners demanding higher prices to cover their daily operational costs and, in some cases, even forcing them to shut down their operations entirely or sell their equipment.Also, even if miners continue to go out of business, the total volume of BTC being mined will remain the same. However, the block rewards will be distributed among fewer individuals. This suggests that miners who can stave off the bearish pressure induced by rising energy costs stand to make massive profits. Andrew Weiner, vice president for cryptocurrency exchange MEXC, told Cointelegraph:“Electricity shortages can lead to higher electricity prices, raising the cost of Bitcoin mining substantially. In the event of a regional long-term power shortage, it will cause the migration of miners to other jurisdictions where relatively cheap electricity prices offer safety and stability.”Hope still remains for a trend reversalWeiner said that, while the energy crisis could put pressure on Bitcoin’s price, the poor lackluster state of the global economy could potentially counter this.In Weiner’s view, the U.S. Federal Reserve’s monetary policy in the current global economic environment has had the most significant influence on the cryptocurrency market, adding:“Beginning with the implementation of loose monetary policy by the Federal Reserve in 2020, institutions have digitally transformed their back-offices and accelerated their purchases of Bitcoin. When fiat depreciates, institutions adjust their strategy to allocate bitcoin as value-preserving assets.”He further noted that the cryptocurrency market, especially Bitcoin, is becoming increasingly correlated with Nasdaq and the S&P 500, while its correlation with energy, oil and electricity will not be significant unless BTC mining becomes affected by a future global electricity shortage.Moreover, the ongoing energy crisis can potentially trigger more government spending programs resulting the them “printing” more money to get themselves out of trouble. This can potentially result in a loss of confidence in fiat assets and more demand for digital currencies. This trend is not beyond the realm of possibilities since it is already being witnessed across several third-world nations and could even permeate into certain larger economies as well.Recent: Ethereum at the center of centralization debate as SEC lays claimJust a couple of months ago, inflation in the eurozone scaled up to an all-time high of 8.9%, a situation that was also witnessed in the United States, where inflation surged to a forty-year high of 8.5% back in August. And, while many individuals continue to be divided on the positive/negative impact of the stimulus packages on the global economy, the fear of increased inflation alone stands to raise the demand for cryptocurrencies.Therefore, as we head into a future plagued by potential energy shortages and price surges, it will be interesting to see how the future of the digital asset market continues to play out, especially as rising geopolitical tensions and worsening market conditions continue to make matters worse.

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El Salvador focused on bringing investment to Bitcoin City, says ambassador

El Salvador, the first nation to make Bitcoin (BTC) a legal tender in September last year, is currently focused on building a Bitcoin City. There have been several delays and disruptions in the plans since its announcement last year owing to the bear market-led investment drought and geo-political tensions.Cointelegraph reporter Joseph Hall got in touch with Héctor Enrique Celarié Landaverde, the deputy ambassador of El Salvador to the kingdom of the Netherlands, to get some insights into the country’s progress with its much-hyped project. Landaverde told Cointelegraph that the government is following a “first come first serve” basis, where businesses that are early with their investment will get better profits. He explained:“The dream of El Salvador is to have a Bitcoin City and from there to make our society bigger, stronger. We are trying to attract more and more investments to this area so we can develop these communities.”The deputy ambassador noted that BTC use in the country has definitely made an impact on the impact and also invited people to the country to see for themselves how BTC is changing lives.Related: El Salvador’s Bitcoin decision: Tracking adoption a year laterThe iconic Bitcoin City was announced in November last year, which would be partly funded by the sales of $1 billion Bitcoin volcano bonds, the world’s first cryptocurrency sovereign-debt product. The debt product was a center of attraction at the bull market’s peak. However, several delays in the past and a downturn in the bear market have cast a shadow of uncertainty.Last month, Bitfinex CTO Paolo Ardoino told Cointelegraph that they were awaiting a license of issuance from the government first, which would be granted after the passing of the digital securities bill that was slated for September. However, there hasn’t been any update on the launch of the Bitcoin bond mid-way through October.

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