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Key regulatory measures to reduce cryptocurrency risks should come from developed countries

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Between September 2019 and June 2021, the crypto ecosystem expanded by 2,300%, especially in developing countries, the United Nations reported in a paper titled “Not All That Glitters Gold.” According to some estimates of digital currency ownership, 15 of the top 20 economies in the field in 2021 were emerging and developing countries.

Using cryptocurrencies has become attractive regarding the price and speed of sending a transfer. Cryptocurrencies are mostly owned by middle-income people in developing countries. In countries facing currency depreciation and rising inflation, cryptocurrencies were perceived to protect household savings.

Regardless of the reasons for using cryptocurrencies, exchanges play a crucial role in enabling their wider use. There are now more than 450 crypto-exchanges, which reached a joint peak daily trading volume of $500 billion in May 2021.

Risks. The UN cautions that using cryptocurrencies could lead to risks of financial instability. If prices fall, monetary authorities may need to intervene to restore financial stability. It is important to note that in developing countries.

Crypto use also undermines the effectiveness of capital controls, a critical tool in developing countries that can help contain the build-up of macroeconomic and financial vulnerabilities, as well as expand policy space.

Finally, if left unchecked, cryptocurrencies could become a widespread means of payment and even informally replace national currencies (a process called cryptocization), which could threaten countries’ monetary sovereignty.

Regulation. All of these risks have forced politicians around the world to start regulating. The proliferation of cryptocurrency has served as a wake-up call for central banks, some of which have begun to discuss creating public alternatives to private digital currencies. Developing countries have also begun to take steps to regulate. 

As of November 2021, 41 countries, up from 15 in 2018, had banned banks and other financial institutions from conducting cryptocurrency transactions or prohibited exchanges from offering services to individuals and businesses. Nine developing countries, namely Algeria, Bangladesh, China, Egypt, Iraq, Morocco, Nepal, Qatar and Tunisia, have completely banned cryptocurrencies. Some other countries have imposed income taxes on capital gains derived from trading. Finally, crypto exchanges are subject to national anti-money laundering and terrorist financing laws in jurisdictions such as Australia, the Bahamas, Greece, Romania, the Philippines and Uzbekistan.

Despite the recent regulatory response, cryptocurrencies remain in a legal gray area in most developing countries. The ecosystem is global in nature, and many of its components are outside the jurisdiction of states, making regulation of cryptocurrencies a challenge. Accordingly, the main regulatory measures to mitigate the global risks associated with cryptocurrencies should come from developed countries, where most of these providers are headquartered.

Developing countries may have less room to maneuver, but regulation is possible. The UN has highlighted measures that could curb the further spread of risks:

  • Require mandatory registration of crypto exchanges and digital wallets and make using cryptocurrencies less attractive;
  • Prohibit regulated financial institutions from holding stablecoins and cryptocurrencies or offering related products to customers;
  • Regulate decentralized finance;
  • Restrict or prohibit advertising of exchanges and digital wallets in public places and on social media;
  • Create a public payment system, such as a central bank digital currency. 

There is no universal policy response to the growing use of cryptocurrencies in developing countries, the UN summarized. Countries need to adapt to recommended policies, considering the specifics of their national financial systems, regulatory infrastructure and enforcement capacity. Also, regarding financial regulation, policymakers should consider that the crypto ecosystem is constantly evolving.


BTC price holds 6% gains as Bitcoin battles for ‘crucial’ $28K support

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Bitcoin (BTC) passing $28,000 hints at bullish sentiment, but reclaiming it for good is essential, analysis says.

In an X (formerly Twitter) post on Oct. 17, Yann Allemann and Jan Happel, co-founders of on-chain analytics firm Glassnode, described the $28,000 mark as a “critical milestone” for the BTC price.

Glassnode: “Keep an eye out” for $28,000

After snap volatility, which caused Bitcoin to hit $30,000 for the first time since August, the largest cryptocurrency has managed to preserve some of its gains.

At the time of writing, BTC/USD is circling $28,500, per data from Cointelegraph Markets Pro and TradingView — still up around 6% since the weekly open.

For Allemann and Happel, the pair is now at a defining crossroads.

“The crypto market is hinged on BTC’s ability to breach and consistently maintain a value north of $28k,” part of their commentary stated.

$28,000 has formed a battleground ever since Bitcoin first crossed it in early 2021, and liquidity has traditionally surrounded it as bulls and bears fight to secure control over long-term trajectory.

Data from the trading suite DecenTrader, among others, confirms that the status quo remains despite recent BTC price moves, with $28,000 lying in a zone between major longs and shorts of varying leverage.

Bitcoin liquidity data. Source: DecenTrader

“While this pivotal milestone was momentarily attained on futures, the spot market price peaked at $27.98k earlier today. It’s evident just how crucial this price point is in the larger scheme,” Allemann and Happel added.

“The rapid movements and these price thresholds aren’t just numbers. They signify investor sentiment, market dynamics. Keep an eye out for the 28k level.”

BTC/USD 1-day chart. Source: TradingView

Road to Bitcoin halving contested

As Cointelegraph reported, predictions over what the future will bring for Bitcoin both before and after its next block subsidy halving in April 2024 differ considerably.

Related: Mining BTC is harder than ever — 5 things to know in Bitcoin this week

In an interview last month, DecenTrader co-founder Filbfilb eyed BTC price galvanizing itself for upside during Q4, possibly reaching $46,000 by the halving.

Some well-known market participants, however, remain risk-averse. Among them, popular trader Crypto Tony and others are betting on a pre-halving return to $20,000 for a final local bottom.

“Many can scream they are long right now and caught that move, but if your not taking profit here at resistance your doing something wrong,” he told X subscribers about the recent surge.

“I personally will not be long unless we flip that $28,500 level into support.”

BTC/USD annotated chart. Source: Crypto Tony/X

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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Ripple job posting hints at possible IPO, XRP community says

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Fintech payments company Ripple released a new job posting on Oct. 16 for a shareholder communications senior manager across multiple locations in and outside the United States. The job posting prompted many crypto enthusiasts to label it as an official hint about the company’s plans to go public.

The job posting outlines that the role will require direct communication with shareholders — a concept generally associated with publicly traded companies. The chosen candidate would be responsible for developing and implementing communication and relationship management strategies for “existing and prospective investors, current shareholders, and financial analysts.”

The job description emphasizes the candidate’s need to create strategic plans specifically suited for situations like “M&A [mergers and acquisitions], investments, liquidity events, and other high-impact moments.“

The role includes creating investor-focused materials like “presentations, fact sheets, case studies, and analyses“ to inform and educate potential investors about the company’s prospects and performance — a necessary component of the initial public offering (IPO) preparation process. The responsibilities of the post also include maintaining a shareholder database and managing routine communications like quarterly updates.

Related: How are crypto firms responding to US regulators’ enforcement actions?

Many XRP (XRP) proponents and the pro-Ripple community on X (formerly Twitter) are referring to the job posting as a hint that there may be an IPO. Some key executives from the company have also alluded to the possibility that Ripple might go public but haven’t given any indication of timing.

The crypto-focused payments company has recently been in the limelight due to the U.S. Securities and Exchange Commission’s (SEC) lawsuit alleging XRP is a security. Ripple scored a major win in the lawsuit in July when a judge ruled that XRP is not a security in terms of sale on digital asset exchanges.

Key Ripple executives have claimed that even though the SEC lawsuit has cost them many business opportunities in the U.S., most of its remittance business lies outside America.

Magazine: US enforcement agencies are turning up the heat on crypto-related crime

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Banks’ crypto exposure must be disclosed — BIS’ Basel Committee

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The Basel Committee on Banking Supervision of the Bank for International Settlements (BIS) released a consultation paper on Oct. 17, proposing to make it compulsory for banks to disclose their crypto exposure.

The Basel Committee comprises central banks and financial authorities from 28 jurisdictions and is a forum for regulatory cooperation on banking supervisory matters. The latest consultation paper is based on the disclosure guidelines in the final prudential standard on how banks should handle their exposure to crypto assets released in December 2022.

The consultation paper aims to set a standardized “disclosure table and set of templates for banks’ crypto-asset exposures,” with a proposed implementation date of Jan. 1, 2025. The Basel Committee has opened the proposal for public comment until Jan. 31, 2024, after which the results will be published on its website.

Under the new proposed regulations, banks would be required to provide quantitative data on exposures to crypto assets and the corresponding capital and liquidity requirements. Banks would also be required to offer qualitative data on their activities linked to cryptocurrencies.

Additionally, banks would be required to offer information on the accounting classifications of their exposure to crypto assets and liabilities. In its proposal, the committee claimed that using a uniform disclosure format will encourage the application of market discipline and lessen information asymmetry between banks and market participants.

Related: Ripple joins BIS cross-border payments task force

The committee also reviewed crypto assets and bank exposure in June. At the time, the committee didn’t delve deeply into the topic, mentioning only that it was focusing on permissionless blockchains and the eligibility criteria for “Group 1” stablecoins.

The BIS has been actively involved in crypto consultations and examining the regulatory aspect of decentralized technology. Recently, the BIS and a handful of European central banks published details of a concept to develop a system to track international flows of cryptocurrencies.

Magazine: Blockchain detectives: Mt. Gox collapse saw birth of Chainalysis

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