regulation

FCA will ‘absolutely’ consider recent stablecoin depegging when drafting crypto rules: Report

The United Kingdom’s Economic and Finance Ministry announced in April that it would work to incorporate stablecoins into a regulatory framework on digital assets.

Sarah Pritchard, the executive director of markets at the United Kingdom’s Financial Conduct Authority, or FCA, reportedly said the regulator will look at the recent volatility in the crypto markets when creating rules for the space in 2022.

According to a Friday Bloomberg report, Pritchard said the financial regulator will “absolutely” take into account stablecoins like TerraUSD (UST) and Tether (USDT) depegging from the U.S. dollar in drafting regulatory guidelines with Her Majesty’s Treasury for release later this year. While the USDT price only briefly dropped to $0.97 on May 12, UST’s has fallen more than 93% since May 9 to reach roughly $0.06 at the time of publication.

“It really shows at front of mind the really significant issues that exist here, both in terms of a well-functioning market and obviously consumer protection,” said Pritchard. “In the last week where we saw significant price movements, it brings that into the fore and it shows the importance of making sure that people understand that that is a risk of where they put their money.”

The United Kingdom’s Economic and Finance Ministry announced in April that it would work to incorporate stablecoins into a regulatory framework on digital assets, given they could become “a widespread means of payment” for retail customers. In addition, HM Treasury said it would move forward with initiatives including reviewing tax legislation as applied to crypto assets, commissioning a nonfungible token, or NFT, for the Royal Mint, and exploring distributed ledger technology for use in U.K. financial markets.

Related: The new HM Treasury regulations: The good, the bad and the ugly

U.K. regulators as well as the Bank of England Financial Policy Committee said in March they were assessing crypto regulations in the country, specifically noting they “welcomed” HM Treasury’s proposals for incorporating stablecoins into the existing framework. The FCA also announced it had extended the temporary registration status of some firms offering crypto services beyond its original March 31 deadline. At the time of publication, five companies are permitted to “carry out crypto asset activities” under this temporary status, including Copper, CEX.IO, and Revolut.

FCA will ‘absolutely’ consider recent stablecoin depegging when drafting crypto rules: Report

The United Kingdom’s Economic and Finance Ministry announced in April that it would work to incorporate stablecoins into a regulatory framework on digital assets.

Sarah Pritchard, the executive director of markets at the United Kingdom’s Financial Conduct Authority, or FCA, reportedly said that the regulator will look at the recent volatility in the crypto markets when creating rules for the space in 2022.

According to a Friday Bloomberg report, Pritchard said the financial regulator will “absolutely” take into account stablecoins like TerraUSD (UST) and Tether (USDT) depegging from the United States dollar in drafting regulatory guidelines with Her Majesty’s Treasury for release later this year. While the USDT price only briefly dropped to $0.97 on May 12, UST has fallen more than 93% since May 9 to reach roughly $0.06 at the time of publication.

“It really shows at front of mind the really significant issues that exist here, both in terms of a well-functioning market and obviously consumer protection,” said Pritchard. “In the last week where we saw significant price movements, it brings that into the fore and it shows the importance of making sure that people understand that that is a risk of where they put their money.”

The United Kingdom’s Economic and Finance Ministry announced in April that it would work to incorporate stablecoins into a regulatory framework on digital assets, given that they could become “a widespread means of payment” for retail customers. In addition, HM Treasury said it would move forward with initiatives including reviewing tax legislation as applied to crypto assets, commissioning a nonfungible token, or NFT, for the Royal Mint, and exploring distributed ledger technology for use in U.K. financial markets.

Related: The new HM Treasury regulations: The good, the bad and the ugly

U.K. regulators and the Bank of England Financial Policy Committee said in March that they were assessing crypto regulations in the country, specifically noting they “welcomed” HM Treasury’s proposals for incorporating stablecoins into the existing framework. The FCA also announced it had extended the temporary registration status of some firms offering crypto services beyond its original March 31 deadline. At the time of publication, five companies are permitted to “carry out crypto asset activities” under this temporary status, including Copper, CEX.IO and Revolut.

Panama’s president says he won’t sign crypto bill into law ’at this moment’

“If the law has clauses related to money laundering activities — Anti-Money Laundering activities — that’s very important for us,” said Panama President Laurentino Cortizo.

Laurentino Cortizo, the president of Panama, has said he won’t sign off on a crypto bill recently approved by the country’s National Assembly without additional Anti-Money Laundering rules.

Speaking at the Bloomberg New Economy Gateway Latin America conference on Wednesday, Cortizo said the bill recently passed by Panama’s legislature must go through legal checks before reaching his desk, but added he needed more information before potentially signing it into law. Describing the legislation as an “innovative law” and a “good law,” the president said he approved of certain aspects of the bill but hinted at possible illicit uses of cryptocurrencies that needed to be addressed.

“I will not sign that law at this moment,” said Cortizo. “If the law has clauses related to money laundering activities — Anti-Money Laundering activities — that’s very important for us.”

Panama President Laurentino Cortizo speaking at the Bloomberg New Economy Gateway Latin America conference on Wednesday

Panama’s “Crypto Law” passed in the National Assembly following the third debate on April 28. According to the legislative body, the bill was aimed at regulating “the trading and use of crypto assets, the issuance of digital value, the tokenization of precious metals and other assets, payment systems and other provisions.” 

In contrast to El Salvador’s Bitcoin Law, which required local businesses to accept Bitcoin, the Panama Crypto Law, if passed, would likely give residents and businesses the option of using and accepting cryptocurrency. According to an early draft of the bill, many businesses would not need a special license to accept crypto.

Pro-crypto lawmaker Gabriel Silva has suggested passage of the Crypto Law would help foster financial inclusion in Panama and create additional opportunities for employment. However, economist Ernesto Bazán has called for President Cortizo to veto the bill, claiming the lack of clear regulations in the country was unlikely to inspire trust in cryptocurrencies, risking the financial stability of banks and the local economy.

“It is essential to have competent professionals, supervisory capacity and sufficiency, even more so in such a novel and specialized subject,” said Bazán. “Weak regulation would open a window of opportunity for greater fraud, cyberattacks and criminal activities that would imply a loss of confidence in the country and its International Banking Center […] We await the veto of the law and that a comprehensive analysis of the risks that this regulation implies be carried out. For the good of the country.”

Related: Ukraine’s president signs law establishing regulatory framework for crypto

Silva helped introduce the Panama Crypto Law to the National Assembly in September 2021, on the same day El Salvador officially began recognizing Bitcoin (BTC) as legal tender. The bill moved out of the Economic Affairs Committee on April 21 before being approved by the National Assembly on April 28 and is currently awaiting approval or veto from President Cortizo.

Biden’s pick for Fed vice chair for supervision calls for congressional action on stablecoins

Fed nominee Michael Barr said that the government agency potentially releasing a central bank digital currency was an issue that required “a lot more thought and study.”

Michael Barr, a law professor and former advisory board member of Ripple Labs who is United States President Joe Biden’s pick for vice chair for supervision at the Federal Reserve, called for U.S. lawmakers to regulate stablecoins in an effort to address “financial stability risks.”

In a confirmation hearing before the Senate Banking Committee on Thursday, Barr said innovative technologies including cryptocurrencies had “some potential for upside in terms of economic benefit” but also “some significant risks,” citing the need for a regulatory framework on stablecoins to prevent the risk of runs. Barr added that the Fed potentially releasing a central bank digital currency was an issue that required “a lot more thought and study,” echoing Fed chair Jerome Powell’s views concerning due diligence.

Prospective Fed vice chair for supervision Michael Barr addressing the U.S. Senate Banking Committee on Thursday

According to Barr, “other agencies” within the U.S. government were responsible for addressing investor protection around cryptocurrencies. In attendance at the same hearing were prospective commissioners for the Securities and Exchange Commission — Jaime Lizárraga and Mark Uyeda — who, if confirmed, would serve under chair Gary Gensler. 

Responding to questioning from Massachusetts Senator Elizabeth Warren at the hearing, Barr confirmed that he would not work in “any financial services company” potentially having assets under the Federal Reserve’s purview for four years following his prospective time at the government agency. Warren cited the recent market volatility, which included TerraUSD (UST) depegging from the dollar and then attacked unnamed celebrities for endorsing certain crypto projects.

“Any investment involves risk — that’s how markets work,” said Warren. “But a market without rules is theft, and right now regular investors in stablecoins and crypto aren’t getting the baseline protections available in other financial markets.”

Related: Bitcoin shakes off Fed volatility as analysts remain split on return under $24K

Barr was Biden’s second nomination for Fed vice chair for supervision following the withdrawal of Sarah Bloom Raskin in March. If approved by the full Senate, Barr’s position at the Fed would allow him to help develop policy recommendations on supervision and regulation for other board members, including governors Michelle Bowman, Christopher Waller, Lisa Cook and Philip Jefferson, vice-chair Lael Brainard, and chair Powell — the latter four of which were confirmed in May. 

The vice chair for supervision position at the Fed has been vacant since governor Randal Quarles’ term ended in October 2021.

SEC chair uses crypto enforcement in justification for FY2023 budget

“We’re not trying to grow really significantly, but resources to grow at least six percent to grow our enforcement arm in this space,” said Gary Gensler.

Gary Gensler, Chair of the United States Securities and Exchange Commission, or SEC, has cited concerns about cryptocurrency enforcement in its budget request for the next fiscal year.

In written testimony for a Wednesday hearing of the U.S. House Committee on Appropriations, Gensler said he supported President Joe Biden’s request to budget more than $2.1 billion for the SEC in FY2023, allowing the regulatory body to increase its enforcement division by 50 people. The SEC chair cited concerns about the crypto space, referring to markets as “highly volatile and speculative,” as well as the need for “new tools and expertise” to address enforcement.

“The additional staff will provide the Division with more capacity to investigate misconduct and accelerate enforcement actions,” said Gensler. “It also will strengthen our litigation support, bolster the capabilities of the Crypto Assets and Cyber Unit, and investigate the tens of thousands of tips, complaints, and referrals we receive from the public.”

SEC Chair Gary Gensler addressing the U.S. House Committee on Appropriations on Wednesday

Addressing Michigan Representative Brenda Lawrence at the hearing, Gensler reiterated his view that “most” offerings from token projects fell under the SEC’s regulatory purview as securities and should be registered accordingly. According to the SEC chair, investors were currently “not well protected,” given the regulatory body’s limitations on enforcement: 

“We’ll use our enforcement tools to bring enforcement actions [against crypto trading platforms], but I prefer if they come in […] We’re not trying to grow really significantly, but resources to grow at least six percent to grow our enforcement arm in this space.”

Gensler later added he wanted more funding to dedicate to issues related to the growing crypto space, citing 85-90 enforcement actions the SEC had brought against digital asset firms in the last year. He also referred to the recent price volatility of a crypto asset “that went from $50 billion of value to near zero just in the last three weeks,” possibly referring to TerraUSD (UST).

Related: SEC doubles down on crypto regulation by expanding unit

The recent volatility among major cryptocurrencies, including Bitcoin (BTC) and Ether (ETH) and following the collapse of Terra (LUNA), has caught the attention of more than a few regulators and lawmakers in the United States. On May 12, Treasury Secretary Janet Yellen addressed the House Financial Services Committee, including in her testimony that TerraUSD (UST) and Tether (USDT) depegging from the U.S. dollar was not a “real threat to financial stability” given the scale of the stablecoin market.

2 key Ethereum price metrics suggest traders will struggle to hold the $2K support level

ETH bulls are aiming to flip $2,000 back to support, but these two metrics point toward further downside.

Ether (ETH) price has been trying to establish an ascending channel since the May 12 market-wide crash that sent its price to $1,790. Currently, the altcoin’s support stands at $2,000, but the high correlation to traditional markets is causing traders to be highly skeptical s cryptocurrency market recovery. 

Ether/USD 4-hour price at Bitstamp. Source: TradingView

To date, the Federal Reserve continues to dictate the markets’ performance and uncertainty has been the prevailing sentiment because the central banks of major economies are trying to tame inflation. Considering that the correlation between crypto markets and the S&P 500 index has been above 0.85 since March 29, traders are likely less inclined to bet on Ether decoupling from wider markets anytime soon.

Currently, the correlation metric ranges from a -1, meaning select markets move in opposite directions to a +1, a perfect and symmetrical movement. Meanwhile, 0 would show disparity or a lack of relationship between the two assets.

U.S. Federal Reserve Chairman Jerome Powell emphasized on May 17 his resolve to get inflation down by raising interest rates until prices start falling back toward a “healthy level.” Still, Powell cautioned that the Fed’s tightening movement could impact the unemployment rate.

So from one side, the traditional markets were pleased to be reassured that the monetary authority plans a “soft landing,” but that doesn’t reduce the unintended consequences of achieving “price stability.”

Regulatory uncertainty also had a negative impact

Further pressuring Ether’s price was a document published on May 16 by the U.S. Congressional Research Service (CRS) that analyzes the recent TerraUSD (UST) debacle. The legislative agency that supports the United States Congress noted that the stablecoin industry is not “adequately regulated.”

In the same time, the Ethereum network’s total value locked (TVL) has dropped by 12% from the previous week.

Ethereum network total value locked, ETH. Source: Defi Llama

The network’s TVL dropped from 28.7 billion Ether to the current 25.3 million. The doomsday scenario brought on by Terra’s (LUNA) collapse negatively impacted the decentralized finance industry, an event which was felt across the board on the smart contract blockchains. All things considered, investors should focus on the Ethereum network’s resilience during this unprecedented event.

To understand how professional traders are positioned, including whales and market makers, let’s look at Ether’s futures market data.

Ether futures shows signs of distress

Quarterly futures are whales and arbitrage desks’ preferred instruments due to their lack of a fluctuating funding rate. These fixed-month contracts usually trade at a slight premium to spot markets, indicating that sellers request more money to withhold settlement longer.

Those futures should trade at a 5% to 12% annualized premium in healthy markets. This situation is technically defined as “contango” and is not exclusive to crypto markets.

Ether futures 3-month annualized premium. Source: Laevitas

As displayed above, Ether’s futures contracts premium went below 5% on April 6, below the neutral-market threshold. Furthermore, the lack of leverage demand from buyers is evident because the current 3.5% basis indicator remains depressed despite Ether’s discounted price.

Ether’s crash to $1,700 on May 12 drained any leftover bullish sentiment and more importantly, the Ethereum network’s TVL. Even though Ether price displays an ascending channel formation, bulls are nowhere near the confidence levels required to place leveraged bets.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Global financial regulators will discuss crypto at G7: Report

Bank of France Governor François Villeroy de Galhau reportedly said that the recent crypto market volatility had been a “wake-up call” for global regulators.

Central bank governors and finance ministers from the Group of Seven, or G7, are reportedly planning to discuss the regulation of cryptocurrencies.

According to a Tuesday report from Reuters, Bank of France Governor François Villeroy de Galhau said representatives from the United States, Canada, Japan, Germany, France, Italy and the United Kingdom will likely speak on issues related to a regulatory framework for cryptocurrencies at a meeting in Germany’s cities of Bonn and Königswinter starting on Wednesday. Villeroy reportedly said that the recent crypto market volatility — likely referring to some stablecoins depegging from the U.S. dollar and prices of major tokens dropping — had been a “wake-up call” for global regulators.

“Europe paved the way with MiCA,” said Villeroy at an emerging markets conference in Paris, referring to the European Parliament’s legislation aimed at forming a regulatory framework on crypto. “We will probably […] discuss these issues among many others at the G7 meeting in Germany this week.”

The Bank of France governor added in a speech to the Emerging Market Forum in Paris on Tuesday:

“Crypto assets could disrupt the international financial system if they are not regulated, overseen and interoperable in a consistent and appropriate manner across jurisdictions.”

According to the G7 website, finance ministers and central bank governors will meet in Germany from May 18–20 to discuss policies related to member nations’ recovery and financial stability due to the COVID-19 pandemic, “shaping the upcoming transformation processes in the context of digitalization and climate neutrality,” and business policy at the International Monetary Fund. The group issued guidelines around the possible rollout of central bank digital currencies in 2021 and reportedly warned that certain stablecoins could threaten the global financial system in 2019.

Related: Bank of Japan official calls for G7 nations to adopt common crypto regulations

Villeroy has previously urged EU officials to develop a regulatory framework given crypto’s growing role in regional markets, saying they only had “one or two years” to act. Prior to his election victory in France, Emmanuel Macron said he supported the European Parliament’s recent efforts to regulate crypto — including MiCA — adding that any rules should not hinder innovation.

US federal judge approves of Justice Dept criminal complaint on using crypto to evade sanctions

An unnamed individual allegedly sent more than $10 million in Bitcoin to an exchange in a country for which the U.S. currently imposes sanctions.

The United States Department of Justice may move forward on a criminal prosecution case against a United States citizen who allegedly violated sanctions through cryptocurrency.

According to a Friday opinion filing in U.S. District Court for the District of Columbia, the unnamed individual, who is the subject of a criminal investigation by the Justice Department allegedly sent more than $10 million in Bitcoin (BTC) from a U.S.-based crypto exchange to an exchange in a country for which the U.S. currently imposes sanctions — suggesting Russia, Cuba, North Korea, Syria or Iran. The filing alleged the individual “conspired to violate the International Emergency Economic Powers Act” and conspired to defraud the United States.

The individual allegedly “proudly stated the Payments Platform could circumvent U.S. sanctions” using BTC and knew about sanctions on the country. According to the filing, the U.S.-based crypto exchange had the user’s information through Know Your Customer (KYC) compliance policies.

“The Department of Justice can and will criminally prosecute individuals and entities for failure to comply with [Office of Foreign Assets Control]’s regulations, including as to virtual currency,” said agistrate Judge Zia Faruqui in his opinion. “Prohibited financial services include any transfer of funds, directly or indirectly […] from the U.S. or by a U.S. person/entity, wherever located, to the sanctioned entity/country. And lest there be any doubt, financial service providers include virtual currency exchanges.”

Faruqui added:

“The question is no longer whether virtual currency is here to stay (i.e., FUD) but instead whether fiat currency regulations will keep pace with frictionless and transparent payments on the blockchain.”

Related: US Treasury Dept sanctions 3 Ethereum addresses allegedly linked to North Korea

The Treasury Department’s Office of Foreign Assets Control, or OFAC, is responsible for administering sanctions for the United States. Following Russia’s military invading Ukraine, the government office warned U.S. residents not to use digital assets to benefit certain Russia-based entities and individuals and added Russia-based darknet marketplace Hydra, crypto mining services provider BitRiver and digital currency exchange Garantex to its list of “Specially Designated Nationals,” a designation which generally prohibits Americans from doing business with them.

California regulator will revisit long-running ban on crypto donations on May 19

“This has been on our radar since late last year,” said California’s Fair Political Practices Commission communications director Jay Wierenga.

A California state regulator may be looking at overturning a ban on cryptocurrency donations to political campaigns which has been in effect since 2018.

According to its May 2022 agenda, California’s Fair Political Practices Commission, or FPPC, has scheduled a “pre-notice discussion” on Thursday on the use of cryptocurrencies for campaign contributions in the state, opening the topic to public comment before officially revisiting it. The commission said it will be considering drafting amendments to its regulations requiring that “no contribution may be made or received in cryptocurrency.”

In September 2018, the FPPC voted to ban both sending and receiving crypto contributions for political campaigns in the state of California, due to concerns the donations “might be utilized to circumvent contribution limits and prohibitions, or by foreign entities to contribute to campaigns.” FPPC’s communications director Jay Wierenga told Cointelegraph that the commission “look[s] at trends and [tries] to stay ahead of them,” citing a March opinion in which its legal division said a campaign selling nonfugible tokens to raise funds must count “the entire amount received” as a “reportable contribution.”

“This has been on our radar since late last year,” said Wierenga. “Crypto […] obviously has grown in usage and visibility since 2019. So the Commission wants to review it and determine if any changes should be made, or not.”

According to Wierenga, the current ban on crypto political campaign contributions has not affected candidates running for office in California at a federal level, just state and local. For example, Aarika Rhodes, an elementary school teacher running to represent California’s 32nd congressional district currently held by Democrat Brad Sherman, has openly called for her supporters to donate Bitcoin (BTC) via the Lighting:

Related: Crypto-focused PAC has used $9M to support Democratic candidates since January

Commissions and other governing bodies in U.S. states are responsible for determining whether to enforce bans on crypto political donations for state and local campaigns. South Carolina’s House of Representatives ethics committee said in 2018 that the definition of a campaign contribution did not include cryptocurrency, and Colorado capped the amount of donated in crypto to the same levels as fiat.

Digital euro could come as soon as 2026 — ECB official

Commenting on the recent market volatility, Fabio Panetta also said stablecoins were still “vulnerable to runs,” just as investing in cryptocurrencies carried certain risks.

Fabio Panetta, an executive board member of the European Central Bank, or ECB, has said that a digital euro could come within four years, potentially designed with a person-to-person payment solution.

In a Monday speech at the National College of Ireland, Panetta said the ECB could start the development and testing of solutions toward providing a digital euro for members of the European Union in 2023, a phase that could take up to three years. He added that making the digital currency legal tender and for use in P2P payments could help promote adoption.

Panetta also commented on the recent market volatility for cryptocurrencies, with TerraUSD (UST) depegging from the U.S. dollar and the price of many major coins including Bitcoin (BTC) dropping. According to the ECB official, stablecoins, including Tether (USDT), were not “risk-free” and still “vulnerable to runs,” just as investing in cryptocurrencies carried certain risks.

“Recent developments in the market for crypto-assets illustrate that it is an illusion to believe that private instruments can act as money when they cannot be converted at par into public money at all times,” said Panetta. “Despite claims that cryptos are a trustworthy form of “currency free from public control, they are too risky to act as a reliable means of payment. They behave more like speculative assets and raise multiple public policy and financial stability concerns.”

Related: Chairman of the Digital Euro Association: ‘The primary aim of the digital euro is still not clear’

Estimates from many EU officials suggest that legislation and policy focused on the launch of a digital euro could be coming within five years. Panetta said in March that Europeans would be more likely to accept a digital euro aimed at addressing their payment needs, and so also accepted in physical and online stores.