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Foreign trade and pensions: What’s next for Russia’s CBDC project?

The Russian digital ruble pilot launch was delayed until at least May, but the government still hopes to kick off the currency in 2024.

The pilot for Russia’s central bank digital currency (CBDC) pilot should have been launched on April 1, but it was delayed at practically the last moment due to the slow pace of the necessary associated legislation passing through parliament. 

However, with the launch of the pilot still possible in May and the general roll-out of the digital ruble scheduled for 2024, the Russian project remains one of the most important CBDC developments to watch — especially given its possible role in cross-border payments between BRICS countries (Brazil, Russia, India, China and South Africa) and the intent to include it in the massive state-controlled pension system.

A brief timeline of Russia’s CBDC

The first time the Bank of Russia, the country’s central bank, announced its plans to explore the possibility of issuing a digital currency was in 2017. Back then, the bank’s first deputy governor, Olga Skorobogatova, said a CBDC would be a priority for the bank and that it would be looking into it in the near future.

However, at the time, Skorobogatova’s boss — Bank of Russia Governor Elvira Nabiullina — refused to acknowledge it as a “top priority,” instead calling it “a medium-term, or, perhaps, a long-term” prospect.

In 2022, the Bank of Russia revealed it planned to roll out the digital ruble across all banks in the country by 2024. The bank said the implementation would take place in stages and involve extensive testing and infrastructure development. It stated that the digital ruble would coexist with cash and non-cash payment systems, providing consumers more flexibility.

Perhaps the most significant factor in accelerating the CBDC’s development was the need for a reliable tool for foreign trade and settlement following Russia’s invasion of Ukraine and the subsequent sanctions implemented by several countries worldwide.

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By early 2023, local media was reporting that the Bank Of Russia had begun studying two possible cross-border settlement models with the digital ruble.

In February 2023, Skorobogatova publicly announced that the first consumer pilot for the CBDC would take place on April 1, 2023. The experiment would involve 13 local banks and several merchants, as well as real consumers — though it would be limited to the employees of participating companies.

Russian state media subsequently reported that the pilot was delayed pending the passage of specific legislation by the State Duma, the lower chamber of the Russian parliament. The legislation will reportedly come into force no earlier than the beginning of May.

Elena Klyuchareva, senior associate at Russian law firm KKMP, told Cointelegraph that two laws would enable the digital ruble launch. The first is a bill on amendments to the Civil Code, which determines the legal nature of the digital ruble as “a form of non-cash money and contractual relations arising from the use of a digital account.”

The second is a bill on amendments to several laws, the main one being the “Law on National Payment System.” These amendments stipulate the basis for the functioning of the digital ruble platform and the responsibilities of its participants.

Both bills were adopted in the first reading by the State Duma on March 16, 2023. The term for commenting expired on April 14, 2023. “We may expect the continuation of its discussion soon, most likely in May,” Klyuchareva added.

Digitalization and retirees’ anxiety

Governor Nabiullina herself first suggested using the digital ruble in pension payments back in 2021, with few details regarding how it would work.

Discussions around the idea resurfaced at the end of March 2023 as the state-controlled Izvestia newspaper once again teased the CBDC pilot. Several weeks later, Nabiullina had to clarify that the digital ruble wouldn’t be the principal or even the common currency for pension payments but an additional option.

Nabiullina in 2017

The pension system, for which the state is primarily responsible, is a traditionally sensitive area of politics and economics in Russia. With the elderly often being far from tech-savvy, the mention of something “digital” can provoke anxiety. However, Chris Emms, a former business developer at Bitcoin.com who now lives in Russia, said:

“The average Russian pensioner will still be able to spend their money in the exact same way and likely won’t even realize that their money is digital.”

Aleksandr Podobnykh, head of the Saint Petersburg branch of the Association of Chief Information Security Officers, also doesn’t see any potential tension.

He told Cointelegraph that while many citizens, including pensioners, will eventually interact with the digital ruble, the government will probably use some kind of incentivization policy to help people switch to the digital form of money. In fact, digitalization has been a priority for quite some time.

“Today, there are a huge number of initiatives and events aimed at improving the culture of citizens in the field of digital technologies and electronic services. Special attention is also paid to information on investment and security issues in this area,” Podobnykh said.

Will the digital ruble find adoption?

Will the digital ruble significantly affect the use of private cryptocurrencies in the country? All over the world, CBDCs are under development, and the crypto community at large perceives this as governments’ answer to the rise of digital money.

The Russian central bank has been highly hostile to any idea of legalizing crypto and even fought the Ministry of Finance on the matter. Podobnykh has no doubts about the bank’s plans regarding the new currency:

“Undoubtedly, with such an emphasis of the central bank on the monopoly use of the ruble, its position will remain strong. And don’t forget the plans to use it in calculations in the CSTO [Collective Security Treaty Organization] and BRICS countries.”

Emms sees the launch of the CBDC as a type of compromise between the anti-crypto central bank and the Russian politicians in the Duma who are “taking a positive stance over crypto regulation in general.” He believes the central bank hopes Russians will “choose to put their money into CBDC instead of buying high-risk altcoins.”

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Klyuchareva said that the Bank of Russia expects the digital ruble to replace cryptocurrencies within Russia and be more popular as a safer instrument for settlements and investment. “Whether this expectation will come to life remains to be seen,” she concluded.

Speaking to the members of one of the parliamentary parties on April 17, Nabiullina didn’t refute the possibility of using cryptocurrency in foreign trade. Strangely enough, she didn’t specify whether this cryptocurrency would be private or issued by the central bank but mentioned the creation of “special entities responsible for mining.”

That makes the central bank’s stance on the digital ruble and private crypto less transparent — the “experimental” plan to mine some currency and the testing of a national CBDC for cross-border settlements seem to contradict each other. But one thing is certain, in Nabiullina’s words:

“Cryptocurrency shouldn’t be used inside the country.”

Brooklyn court charges former banker for allegedly defrauding crypto investors

Brooklyn federal court charged a former investment banker for allegedly taking investors’ money under the pretext of making profitable crypto investments.

The federal court in Brooklyn, New York, charged a former investment banker and registered broker for allegedly defrauding numerous investors by promising profits on fake cryptocurrency investments and misappropriating the funds received to finance his lifestyle. 

Documents with the court claim the defendant, Rashawn Russell, misused the growing interest in crypto investments to mislead investors. Russell convinced multiple investors to reinvest their fiat savings into cryptocurrencies, often promising significant or “guaranteed” returns. However, it is alleged that Russell misappropriated the investors’ money to fund his personal lifestyle.

Breon Peace, United States attorney for the Eastern District of New York, revealed the court’s intent to pursue the case against the former banker:

“As alleged, Russell turned the demand for cryptocurrency investments into a scheme to defraud numerous investors in order to fund his lifestyle. This Office will continue to aggressively pursue fraudsters perpetrating these schemes against investors in the digital asset markets.”

After convincing investors about the fake cryptocurrency investment scheme based on his credibility as a former investment banker and a registered broker with the Financial Industry Regulatory Authority, Russell allegedly used their money to gamble and repay other investors.

According to the information shared by the U.S. Department of Justice (DOJ), Russell fabricated documents to mislead unwary investors about the status of their crypto investments. The forgery involved altering an image of a bank’s website to depict fake balances and bank wire transfer confirmations.

If convicted, Russell could face a maximum of 20 years in prison. The DOJ also requested other investors to reach out if they suspect themselves of falling victim to the alleged crime.

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On April 6, the Washington State Department of Financial Institutions issued a consumer protection alert against the crypto exchange Eucoinotrade.

According to the report, Eucoinotrade facilitated an “advanced fee fraud” wherein users were asked to pay up for upgrading accounts and withdrawing funds. While users faced no problems depositing money, they encountered problems when trying to cash out.

Shapella could bring institutional investors to Ethereum despite risks

The latest fork on the “roadmap” shores up the network’s new validation mechanism while finally allowing stakers access to their ETH rewards.

Ethereum’s Shanghai/Capella upgrade — also known by the portmanteau Shapella — may not be the technical marvel of last year’s “Merge” or introduce turbocharged speeds to the network. 

Volumes of over 100,000 transactions per second will have to wait for future “danksharding” upgrades, according to the Ethereum Foundation.

But the hard fork remains an important step on Ethereum’s roadmap to the future, i.e., further shoring up the network’s new validation mechanism while (potentially) removing barriers for institutional investors.

Currently scheduled for 10:27 pm UTC on April 12, the upgrade will allow stakers to unlock their Ether (ETH) rewards — or even exit staking entirely — for the first time since September’s Merge.

Pre-fork publicity hasn’t matched that surrounding last autumn’s change of consensus mechanisms from proof-of-work to a proof-of-stake (PoS). “This time, we won’t have a war room,” Freddy Zwanzger, Ethereum ecosystem lead at Blockdaemon, told Cointelegraph. Still, “there’s always risks” when one reshuffles the deck like this.

Ethereum’s stakers and validators will shortly be able to withdraw $32 billion of Ether from the Beacon Chain, which accounts for about 15% of the ETH’s circulating supply, according to Coinbase’s April 5 newsletter. Some worry that the upgrade, also known as the Shanghai hard fork, may lower the overall number of validators and put selling pressure on the network, among other concerns.

“Every hard fork brings some upgrade risk,” Paul Brody, EY’s global blockchain leader, told Cointelegraph, especially in cases like this where you’re enabling withdrawals. On the technical side, there could be bugs latent since “day zero” in some of the network’s staking smart contracts, for example, that may not emerge until the withdrawal date — though Brody doesn’t think that’s likely.

The upgrade should mitigate risks for investors. “Lower volatility plus a yield makes for a more familiar and less risky asset to hold long-term,” Rich Rosenblum, co-founder and president at GSR, a crypto market-making firm, told Cointelegraph.

More institutional investors?

Will Shapella really attract more institutional investors to the blockchain, as some believe? Research and brokerage firm AB Bernstein stated in a late-February research report that the upgrade could bring in staking from new institutional investors, and Blockdaemon’s Zwanzger, whose firm has many institutional clients, foresees more interest in Ethereum staking opportunities from large professional investors. Some institutional investors have been reluctant to lock up funds without a clear withdrawal option.

“There’s probably going to be a queue for the first couple of weeks,” Zwanzger said. “So they might be better off waiting until that comes down to normal levels.”

According to Rosenblum, “Once the PoS network is fully operational, more institutions will feel comfortable holding ETH, especially once the staking yield becomes more accessible.”

EY’s Brody, on the other hand, doesn’t see much of a change. “A lot of the big institutional investors that we know and work with are basically sitting on the sidelines. They want to comply, but they want to be more comfortable that they know what the rules are.” Comprehensive crypto reform legislation in the United States would probably be more likely to get them off the sidelines.

Longer-term risks

So what about regulatory risk, particularly in the United States? For years Bitcoin (BTC) and Ether were thought to be impervious to Securities and Exchange Commission (SEC) scrutiny, with many U.S. regulators tacitly agreeing that the native coins for decentralized systems like these were more like commodities than securities, placing them under the Commodity Futures Trading Commission’s jurisdiction. But with Ethereum’s move to a staking validation mechanism, some think the SEC may now have Ethereum in its sights.

Still, “I wouldn’t consider it a significant risk for the network,” even if that happens, said Zwanzger. The Ethereum protocol is global, and not all jurisdictions will likely share the SEC’s view of what needs regulating. Of course, other countries could ultimately choose to follow the U.S., so one never knows.

Others worry that Ethereum’s move to staking may herald increasing network centralization. In March, Cointelegraph reported that “concentration of ETH staked through third parties raises concerns over decentralization at Lido and Coinbase in particular.”

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“The battle to keep Ethereum sufficiently and properly decentralized is probably one of the most important ones out there in terms of governance and organization,” Brody told Cointelegraph. If any single staking partner were to have 33% of the ecosystem, that “could potentially — and I say potentially — have an impact on transaction finality, although you would get slashed for doing so.” If any single or cooperating group of entities controlled two-thirds of the staking infrastructure, “you would have the potential to change the governance of the chain” — something that would be “very suboptimal,” he said.

But these dangers remain largely theoretical given how things have evolved since the Merge. “A relatively vibrant staking ecosystem” has emerged, said Brody, with “a few highly centralized custodial players” but also “some semi-centralized custodial players” like Lido, which is a liquid staking pool leader that invests with funds from tens of thousands of individual crypto wallets. There are also prominent staking groups that are “trying to be more fully decentralized,” like the Rocket Pool, he added.

“As long as this remains a very competitive ecosystem,” dangers from centralization are unlikely, Brody continued. Moreover, as more enterprise users join the network and become de facto stakeholders, including “Fortune 1000” companies, the system “becomes quite heavily decentralized.”

Zwangzer said that centralization was more of a threat in the pre-Merge days when a few proof-of-work pools dominated ETH mining. In any event, he added:

“I don’t think this is going to become a problem as long as we can keep the centralized [cryptocurrency] exchanges at bay.”

“The golden age of digital monopolies”

One might wonder why decentralized digital networks are even important for commerce and society. Cointelegraph posed this question to EY’s Brody, who believes that public blockchains, especially Ethereum’s, “are going to be the big global winners,” with the caveat that public blockchains will first need to be “privacy-enabled.”

Decentralized blockchain-based networks simply offer the world’s best hope to develop monopoly-resistant global digital marketplaces, he said. “We live in the golden age of digital monopolies” like Amazon, Google and Facebook, mainly because that is simply the nature of networks. According to Metcalfe’s Law, as a network grows, its value increases exponentially. The first to market has a good chance to dominate.

But monopolies come at a social and economic cost. New York University finance professor Thomas Philippon has estimated that monopolies cost the median American family $300 a month, and the inefficiencies they entail “deprives American workers of about $1.25 trillion of labor income.” According to Brody, “If we want to fully digitize the economy, and we want to do it without digital monopolies, we should be doing it on public decentralized systems.”

In recent years, EY Global has been devoting significant resources to “industrializing blockchain privacy technology” through its Starlight project, a zero-knowledge proof compiler that enables secure, private business logic on the public Ethereum blockchain. The project is still in beta, but developers can now experiment with building privacy-enabled features for solidity smart contracts. The goal is to enable blockchain-based business agreements where business logic is shared at the network level, but privacy from potential competitors is still preserved.

This last point is critical. In the business world, no company wants another firm to know its commercial secrets, after all. A pharmaceutical manufacturer, for instance, may want to track its medicine packets through its supply chain, beginning with the drug’s raw materials, through to distributors and hospitals.

Each packet can be attached to a nonfungible token recorded on a public blockchain. The pharma firm may also want to attach some business agreements as well. For example, a distributor selling one million units of the manufacturer’s drug could trigger an automatic rebate payment to the distributor via a smart contract. But the pharma firm doesn’t want the whole world to know about this rebate agreement.

“We are starting to build a blockchain-based inventory management system that’s going to use privacy technology to manage those individual tokens,” said Brody. It’s starting on a private chain, but they “are building it with privacy technology because they want to go on to the public chain so that anybody can join with them using these standards.” Brody added:

“So essentially, you’ll be able to take an entire business contract and supply chain operations and run it under privacy on public Ethereum at a cost-effective level.”

Tasks like tracking products and attaching business agreements to digital ledgers may seem mundane, but their economic impact could be huge. “Somewhere between 2 and 5% of all the money on earth in corporations is spent administering stuff, keeping track of it, moving it around,” said Brody. “By using smart contracts and tokenized assets, we could drive that down dramatically.”

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All of this brings us back to Shapella and why such upgrades matter. A trouble-free launch would be further evidence that Ethereum is still on course to achieve the three key goals laid out in the Ethereum Foundation’s roadmap: scalability, security and sustainability. Or as Blockdaemon’s Zwanzger told Cointelegraph:

“It also will reinforce the confidence in the network and in the protocol design so that a developer launching a project can be sure that, for example, gas fees and scalability will not be a big problem over the next one or two years.”

Africa: The next hub for Bitcoin, crypto adoption and venture capital?

Cointelegraph’s Elisha Owusu Akyaw shares how cryptocurrency is changing the financial landscape in Africa — and the opportunities and challenges that come with it.

The cryptocurrency space has no shortage of skeptics. While many people criticize the environmental impact of proof-of-work blockchains or the proliferation of scams, one particular argument against crypto often stands out: Blockchain has no real use cases. 

Every two weeks, Cointelegraph’s The Agenda podcast breaks down this critique and explores the various ways blockchain and crypto can help everyday people.

On this week’s episode of The Agenda, hosts Jonathan DeYoung and Ray Salmond chat with Elisha Owusu Akyaw, Cointelegraph’s own social media specialist and host of the Hashing It Out podcast, to break down how Africans are using crypto to strengthen financial inclusivity and potentially turn countries into hubs of technological innovation.

How crypto is helping everyday Africans

According to Akyaw, crypto offers a more convenient, affordable way to send money both regionally and around the world. “Western Union, MoneyGram and all of these money transaction firms or rails have made millions from Africa for so long” by charging high fees, said Akyaw, whereas the cost required to send money via crypto is significantly lower.

Bitcoin (BTC) also offers a better store of value for most Africans than local fiat currencies, Akyaw argued. Speaking on his own experience of living in Ghana, he said that “you can buy Bitcoin and keep it for the next one year or six months. It’s a better hedge against inflation than keeping the Ghanaian cedi.”

Finally, the crypto industry is opening up new opportunities on the continent. “At every point of development, Africa has been left behind,” said Akyaw. But the global nature of the industry and the fact that it’s still in its early development present a unique opportunity to participate and benefit from its growth.

“This is one of the first times where there is a big shift happening and Africans are able to contribute. Africans are able to benefit directly from the shift that is happening without it having to pass through an intermediary, which is usually the state. And I think it’s an amazing thing.”

The next Silicon Valley?

When asked about what it would take for countries in Africa to become “magnets for crypto builders or a new kind of Silicon Valley,” Akyaw pointed to two factors that need to be improved for developers, startups and fintech companies to want to make the continent their home: regulation and infrastructure.

The majority of African countries lack proper regulation, according to Akyaw, while also condemning the use of crypto. This means companies are often unable to obtain licenses to set up shop and residents are dissuaded from interacting with Web3 protocols and firms:

“You can’t get a license. You can’t work with a bank in the country. You can’t do a lot of things. So, it makes no sense for you to come in.”

The other thing that needs to change, said Akyaw, is that electric grids need to be more stable and internet needs to be more reliable. “If you want a lot of Big Tech companies to come in, they must have great, 24/7 electricity. Internet must be awesome because a lot of what we do in the crypto space is virtual.”

To hear more from Akyaw’s conversation with The Agenda — including his backstory, whether outside funding has any negatives and the potential near-term future of crypto in Africa — listen to the full episode on Cointelegraph’s Podcasts page, Apple Podcasts or Spotify. And don’t forget to check out Cointelegraph’s full lineup of other shows!

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

Crypto-friendly banks mismanaged traditional risks, FDIC head tells Senate hearing

It all started with FTX, FDIC head Martin Gruenberg said; he emphasized that the American banking system remains sound.

The United States Senate Banking Committee held a hearing on March 28 regarding the regulatory response to recent bank failures. Officials from the Federal Deposit Insurance Corporation (FDIC), Federal Reserve and Treasury testified. FDIC chair Martin Gruenberg spoke about the causes of the failures of Silicon Valley Bank (SVB) and Signature Bank, including the role of digital assets and the agency’s responses to the crisis.

High levels of uninsured deposits and rapid growth were common factors in the bank collapses in March, Gruenberg said. Gruenberg’s narrative began with the closing of digital asset-focused Silvergate Bank, which was announced on March 8, although that story began with the bankruptcy of FTX.

FTX represented less than 10% of Silvergate Bank’s total deposits, but the bank lost 68% of its deposits in the aftermath of FTX’s bankruptcy, setting off a fatal chain of events for the bank. Gruenberg said:

“The troubles experienced by Silvergate Bank demonstrated how traditional banking risks, […] when not managed adequately, could combine to lead to a bad outcome.”

The FDIC was informed of the run on SVB on the evening of Thursday, March 9. SVB closed on March 10 and the FDIC worked with the bank throughout the weekend, succeeding in reopening the bridge bank the following Monday. Gruenberg noted that, like Silvergate Bank, SVB had concentrated its activities in a single sector — venture capital firms.

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Signature Bank was more diversified than Silvergate Bank or SVB. That was partly because of the bank’s decision to reduce its exposure to digital assets after the FTX bankruptcy and media scrutiny of the bank’s ties to the crypto exchange. The bank received more negative attention related to FTX in February, when it was sued for allegedly facilitating FTX’s commingling of accounts.

Deposit outflows from Signature Bank began March 9 and became acute the following day, Friday, with about 20% of deposits being withdrawn in hours. Management was unable to provide accurate financial data and the situation deteriorated. Gruenberg said:

“Resolution of the negative balance required a prolonged joint effort among Signature Bank, regulators, and the Federal Home Loan Bank of New York to pledge collateral and obtain the necessary funding from the Federal Reserve’s Discount Window to cover the negative outflows.”

“This was accomplished with minutes to spare before the Federal Reserve’s wire room closed,” he added.

Gruenberg noted that Silvergate Bank and Signature Bank used digital platforms that made it possible to carry out transactions round-the-clock. They were “the only two known platforms of this type within U.S. insured institutions.”

Gruenberg gave a preliminary estimate of $22.5 billion for the cost to the Deposit Insurance Fund for resolving SVB and Signature Bank losses. Echoing several government officials in recent days, he added:

“The state of the U.S. financial system remains sound despite recent events.”

The FDIC will release a comprehensive report on the deposit insurance system; the FDIC’s chief risk officer will release a report on the corporation’s supervision of Signature Bank by May 1. In addition, the FDIC will issue a proposal on new rulemaking on the special assessment that month.

The other speakers at the hearing gave briefer testimony. Treasury Under Secretary for Domestic Finance Nellie Liang described how the Treasury engaged with the FDIC and the Federal Reserve during the bank failures. Fed Vice Chair for Supervision Michael S. Barr discussed in fairly technical terms the failure of SVB and the subsequent steps taken by the government.

Magazine: Can you trust crypto exchanges after the collapse of FTX?

European Banking Federation shares its vision of digital euro, wCBDC, bank tokens

The EBF calls itself the voice of the European banking sector; it expressed its support for European digital money, with suggestions of its own.

The European Banking Federation (EBF) has released a paper detailing its vision for the digital money ecosystem of the future, and the retail digital euro in particular. The carefully worded paper expressed values and concerns about the digital euro from the perspective of commercial banks. 

The paper, released on March 28, emphasized the bank’s values, such as stability and privacy. It called for closer public-private partnership in the introduction of the digital euro. “There is currently no dialogue in place to address the fundamental changes and risks to the monetary and financial system,” the paper said. At the same time, it stated that there needs to be a framework for permanent high-level engagement.

The EBF ecosystem vision emphasized the role of the private sector in all aspects, beginning with infrastructure, where Europe needs to lessen dependence on outside “actors.” That ecosystem would contain three elements: the digital euro, a wholesale central bank digital currency (CBDC) and bank-issued money tokens.

Related: ECB executive board member outlines plans for digital euro to European Parliament

In the EBF vision, the digital euro should have three levels, with a European Central Bank role and two industry levels — the first to interact with the Single Euro Payments Area and an “Industry Level B” that “would be subsequently developed and operated by the private sector, in compliance with the principles set out in the previous layers.” Those principles have yet to be developed fully. The paper continued:

“The European market needs the authorities to clarify the interaction of different and converging policy objectives, especially when it comes to the development of pan-European payment solutions at the Point of Sale / Point of Interaction.”

The paper was careful to refer to blockchain technology only in reference to certain parts of its envisioned ecosystem. A wholesale CBDC, where interoperability is key to enabling cross-border transactions with central bank money, was assumed to operate on distributed ledger technology (DLT).

In addition, bank-issued money tokens had a crucial role in the EBF vision for “business needs such as automated industrial processes that run on DLT and use smart contracts.” These tokens apparently correspond to Industry Level B of the digital euro scheme. More standardization would be needed for these solutions as well, the paper noted.

The EBF represents 33 national banking associations and 3,500 individual banks.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

UBS’s acquisition of Credit Suisse brings some good and bad for crypto

Many in Switzerland have said that UBS’ takeover of Credit Suisse was necessary to avoid a calamitous banking crisis like that seen in 2008.

On Sunday, March 19, the 167-year history of banking giant Credit Suisse ended with a takeover by the largest Swiss bank, UBS. Under pressure from the Swiss government, UBS took over its ailing competitor for 3 billion Swiss francs ($3.25 billion) — less than half the $8 billion market value of Credit Suisse just two days before, on Friday, March 17. 

A day later, on March 20, shares in Credit Suisse plunged more than 60% in European trading, with UBS down 9%.

To cover any losses UBS may incur in the deal, the Swiss government will provide $10 billion. The Swiss central bank will also make a $108 billion bankruptcy loan available to the banks.

Swiss publication, the Neue Zürcher Zeitung, called the takeover the “biggest economic earthquake in Switzerland since the rescue of UBS in 2008 and the grounding of Swissair in 2001.” A rescue should prevent a crisis that spreads to other banks, akin to what happened 15 years ago after the bankruptcy of Lehman Brothers in the United States. The takeover of Credit Suisse was “necessary” not only for Switzerland but for the stability of the entire global financial system, argued Swiss Confederation President Alain Berset.

Billion-dollar merger over a weekend

The deal spurred mixed reactions in the Swiss political arena. The Free Democratic Party of Switzerland (FDP) praised it, stating that the takeover was necessary to avoid severe damage to Switzerland as a financial and economic center.

Criticism came from the co-president of the Social Democratic Party of Switzerland, Cédric Wermuth, who tweeted that nothing had changed since the 2008 financial crisis. “The whole financial system is sick and absurd,” he said, adding that the state must step in again and save it.

The “Occupy” movement at Paradeplatz in Zurich, where UBS and Credit Suisse branches are located next to each other. Source: Ronald Zh

Marcel Fratzscher, president of the German Institute for Economic Research, believes the takeover could lead to one giant bank, which would provoke instability across the board in the event of a notional collapse.

In an interview with Die Tageszeitung, the German economist said the current situation is nowhere near as worrying as before the global financial crisis of 2008. “Today, it is the sharp increases in interest rates by the central banks that have taken many financial institutions by surprise and have led to massive losses.”

In other words, the problem today is “not systemic interdependence between financial institutions or inadequate provisioning in terms of liquidity and capital, but unusually aggressive monetary policy.”

‘Regulatory pressure is likely to increase’

“This takeover of Credit Suisse by UBS has sent many into a deep shock,” said Olga Feldmeier, co-founder of Swiss investment platform Smart Valor, speaking to Cointelegraph. Until 2014, she was an executive director and head of sales in the wealth management business at UBS.

“It had been known for a long time that things were not going so well at the bank. But who would have thought that the bank, which was once worth $80 billion, would be the subject of a $3 billion takeover by its arch-rival UBS?” According to Feldmeier, it’s not just the 50,000 employees who are shocked. The lenders have been hit even harder, especially those with a special high-grade bond type — the so-called Additional Tier 1 Capital.

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But when asked what the alternative would be, Feldmeier agreed that without this takeover, the consequences would be catastrophic. “After all, where is it safe if one of the top 30 systemically important — and Swiss — banks go bankrupt? In a systemic bank run, neither the European Central Bank nor the Fed would be able to help.”

Mauro Casellini, board member at CCA Trustless Technologies Association and, until January 2023, CEO at Bitcoin Suisse Liechtenstein and head of Bitcoin Suisse Europe, shared a similar view.

He told Cointelegraph that it was right that the government and regulators in Switzerland acted quickly to find a solution with the least possible negative impact on the market.

“Although there had been signs for some time that things were not going smoothly at Credit Suisse, it was difficult for outsiders to see just how critical the situation was. It is too early to say whether this was the right solution, but the sheer size of this new ‘super bank’ is impressive and regulatory pressure is likely to increase,” Casellini said.

The good and the bad

The banking crisis has brought some good and some bad for crypto. Despite negative macroeconomic developments, the crypto market performed well when news broke that UBS would take over Credit Suisse. Bitcoin (BTC) won the crypto rally with a gain of 15.5% (reaching $28,671 on March 22). Ether (ETH) gained 3.9%. Driven by the BTC price rally, the share prices of listed Bitcoin mining companies have risen by as much as 120% since the beginning of the year.

According to Feldmeier, it’s a positive phenomenon for crypto exchanges, both big and small. “More trading, higher sales, some of the long missed tailwind would not hurt our industry,” said Feldmeier. “This also increases the certainty that the Bitcoin cycle keeps what it promises — namely, the next bull run around Bitcoin halving in March 2024”.

The loss from clients and investors in traditional financial institutions could positively affect the crypto market as investors turn to alternative assets, such as cryptocurrencies.

However, the Credit Suisse acquisition and the fact that the banking industry faces many different risks and challenges worldwide also has a negative side. Banks are still important partners for crypto companies. If banks are not doing well, they will be even less willing to work with crypto companies or raise fees, which will not make life easier for the crypto industry.

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The recent closures of fiat on- and off-ramp banks such as Silvergate and Signature, followed by the collapse of Credit Suisse, have created “significant risks for the crypto market,” said Casellini. According to the expert, it was necessary “to address issues such as regulation, security, and transparency to build trust with investors and ensure the long-term viability of the market. Regulation will help our industry in the long run to build a successful and more decentralized alternative to the traditional financial system.”

Casellini also expects to see more challenges and risks in the future due to the changing interest rate landscape and additional requirements on banks.

“It will be interesting to see how governments and especially national banks react, and whether they will save struggling banks or let them fail.”

German Dwpbank to offer Bitcoin trading to 1,200 affiliate banks on new platform

Securities processor Deutsche WertpapierService Bank will provide its affiliates with seamless integration with their current offerings, with more digital assets to come.

Deutsche WertpapierService Bank (Dwpbank), which offers securities processing to around 1,200 banks in Germany, is creating a new platform, wpNex, that will offer Bitcoin (BTC) to all of its affiliates’ retail customers in the second half of this year. 

The new service will feature crypto accounts alongside bank customers’ other accounts and will not require additional Know Your Customer procedures, according to local media reports.

Wallet-as-a-service provider Tangany and Bankhaus Scheich’s Tradias digital asset trading service will also participate in the new offering. Retail customers will not hold private keys. Dwpbank CEO Heiko Beck said the bank planned to add other cryptocurrencies, digital assets and tokenized securities to the service in the future.

MLB Banking was the first Dwpbank affiliate to sign on to the platform and has already performed a transaction on it. MLP Banking’s account and securities processing head, Paul Utzat, said in a statement:

“In our MLP customer portal, it is a logical addition to the existing wealth management offering.”

Crypto accounts are linked to euro cash accounts, so transactions can take place without going through a separate payments account.

Related: Almost half of Germans to invest in crypto: Report

Germany has been named one of the world’s most favorable countries for crypto. DZ Bank announced in February that it was adding crypto to its asset management service. DZ Bank is Germany’s second-largest bank by assets and a central institution for a network of bank coops with 8,500 branch offices.

German crypto bank Nuri, however, shut down in November under stress of the crypto bear market. It had half a million customers. On the traditional finance side, Deutsche Bank shares plummeted on March 24 as instability spread among European banks. Deutsche Bank asset management division DWS was reportedly in talks with tradias on investment in the service.

Magazine: Best and worst countries for crypto taxes — plus crypto tax tips

Bitcoin likely to outperform all crypto assets following banking crisis, analyst explains

The banking crisis is a catalyst for the next crypto bull run, in which Bitcoin will likely outperform all crypto assets, says Bloomberg analyst Mike McGlone.

The banking crisis could be the spark that will kick off the next crypto bull run, in which Bitcoin (BTC) is likely to outperform all other cryptocurrencies — according to Mike McGlone, senior commodity strategist at Bloomberg Intelligence. 

Following the collapse of major banks such as Silicon Valley Bank and Credit Suisse, confidence in traditional financial institutions is being shaken and Bitcoin is becoming more attractive as a “hedge against banking risk,” thinks McGlone. 

According to him, the United States Federal Reserve’s unwillingness to ease monetary policy despite the banking crisis is driving the U.S. economy into a recession. 

He believes this macro environment will ultimately favor Bitcoin, which is going to outperform all other cryptocurrencies. 

“The more the Bitcoin can sustain above $25,000, then the more the S&P 500 potentially pressures below 4,000, you’re going to have an indication that Bitcoin is going to take off,” McGlone stated. “I think Bitcoin will outperform virtually all cryptos, including Ethereum,” he concluded. 

To find out how the banking meltdown may spark the next Bitcoin bull market, watch the full interview on our YouTube channel, and don’t forget to subscribe!

Ethereum faces 6-month lows versus Bitcoin — Will ETH price rebound?

Ethereum price has turned oversold against Bitcoin, raising the possibility of a rebound in the coming weeks.

Ethereum’s native token, Ether (ETH), continues its multimonth downtrend against Bitcoin (BTC) in March, rising 5.5% versus the latter’s 19.5% gains on a month-to-date timeframe.

Bitcoin overshadows Ethereum amid banking crisis

As of March 23, the ETH/BTC pair was down about 9% month-to-date to 0.0633 while staying on course to record its worst month since September 2022, when it fell 11.75%.

ETH/BTC monthly price chart. Source: TradingView

From a fundamental perspective, traders preferred Bitcoin over Ether, hoping it would protect them from the ongoing banking turmoil in the U.S. and other parts of the world. The narrative gained momentum in recent weeks as Wall Street investors like Cathie Wood see Bitcoin as a potential “flight to safety” asset.

As a result of the growing speculation, Bitcoin outperformed traditional assets after March 8, when signs of trouble appeared at Silicon Valley Bank. In doing so, BTC also fared better than the altcoin market combined, including Ethereum.

Bitcoin, S&P 500, gold and altcoin market performances in March. Source: TradingView 

ETH paints bullish fractal vs. BTC

However, from a technical perspective, Ethereum is positioned for a comeback versus Bitcoin.

At least two technical indicators pose the possibility that ETH/BTC will rebound sharply in the coming weeks.

Related: Ethereum price at $1.4K was a bargain, and a rally toward $2K looks like the next step

First, the pair’s three-day relative strength index has dropped below 30, which technical analysts consider an “oversold” area.

Second, Ether’s drop versus Bitcoin has landed its price near its ascending support level (buy zone in the chart below).

ETH/BTC three-day price chart. Source: TradingView

A similar scenario in the June–July 2022 session preceded an approximately 60% rally toward ETH/BTC’s descending trendline resistance (sell zone in the chart above). If the fractal plays out, the pair could rally toward the same resistance level by June 2023.

In other words, Ether has a decent chance of rebounding by more than 15% to around 0.075 BTC. Conversely, a break below the ascending trendline support will invalidate the bullish fractal.

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.