Regulatory Threats Against Crypto Are Growing

[ad_1]

It’s not a good start to the year for HODLers. If governments (other than El Salvador) succeed, it could get worse.

This week, Russia, a massive center for mining, proposed a crackdown on it and the trade. A vice-president of the European Securities and Markets Authority wants to ban certain forms of cryptocurrency mining in the EU. Earlier this month, Madrid scrapped dodgy adverts, while the UK plan to do the same.

We expect more attempts to rein in the industry during 2022. The global financial administration, which has made clear its distaste for crypto, will continue to work on rules that would govern banking activity in the sector. through the Basel Committee on Banks. Monitoring.

None of this is exactly a surprise. Who, after all, would want their quasi-monopoly power to issue money to be challenged?

Bitcoin is down more than 20% in the past month (and more than 7% in the past 24 hours).

This has more to do with the general withdrawal of risky assets than with fears that governments are about to toughen up the sector. Especially since the US authorities have not done anything significant yet (while crypto, meanwhile, has been quick to invest heavily in lobbying). But clearly mining bans in places like Russia – previously a bit of a haven for the crypto sector – are unlikely to boost sentiment.

Will these threats to regulate crypto at par with the rest of the financial system work?

Fiat’s challenge to crypto has two elements. There’s the ‘stick’ of tighter regulation, and then there’s the ‘carrot’ of sovereigns coming up with their own forms of digital currencies. For the Empire to truly retaliate, it must be able to fire from both sides.

Despite all its flaws, cryptography poses a great challenge to official currency because it allows almost instantaneous and anonymous payments to be made to people on the other side of the world. The erasure of crypto will therefore depend on the ability of states themselves to come up with a viable alternative. That is, a form of digital currency that is not only quick and inexpensive to use, but also allows payments to be made away from the prying eyes of the state.

We have written in the past about the paradox this creates for public servants. They might be keen to create 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, don’t want to miss an opportunity to hold large amounts of information about habits. people’s consumption.

The Federal Reserve, for example, indicated this week that any digital dollar would not allow people to make payments privately (check out this excellent Twitter thread from Rohan Gray for more on that).

So far, all voices from the authorities indicate that to handle the AML/KYC issue, CBDCs will need to operate as ID-based systems rather than bearer securities. At a minimum, there will be identification rankings. The larger the transaction, the more ID a person will need to provide for it to be approved and processed.

Even so, it remains a major concern for many privacy advocates, who rightly observe that having to provide a personal ID to private companies in a competitive market is very different from being required to provide a identity to the government which then connects to all your daily contacts. -day ‘financed activities’.

Without anonymity, it’s fair to wonder who would want to turn over massive amounts of their personal information to governments when many forms of payment already exist? Money is like money. And, according to current evidence, CBDCs do not.

Crypto may not be as decentralized and global as its proponents like to make it out to be. But the way the technology is configured presents complications for regulators determined to master it.

Unless states manage to fix the privacy issue – which may actually be insurmountable – you don’t have to be Yoda to figure out that someone, somewhere in a galaxy not so far away, will find a way to circumvent the rules and use technology to allow people – for legitimate reasons or not – to make payments quickly, cheaply and anonymously.

And that kind of competition, on the whole, is probably a good thing for keeping government alternatives honest and private.

[ad_2]