Group items tagged

Norges Bank published the results of a survey, conducted in January and February 2024, on the Norwegian population's awareness, ownership and use of crypto-assets. 96% of the Norwegian population aged 16 and over are aware of crypto-assets. 15% of the population have owned or own crypto-assets, and 11% of the population owned crypto-assets at the time of the survey. 73% of those who know about crypto-assets rate their own knowledge of crypto-assets as "very little" or "quite little". 2 out of 3 current crypto-asset owners have 5% or less of their financial savings in crypto-assets.

When guessing at the future of crypto, keep in mind that the future of crypto exchanges and the future of crypto assets are very different things. For many pure crypto bugs, the exchanges are a sellout and a concession to older methods of finance and settlement. The exchanges can be regulated, controlled and co-opted, even turned against the notion of individual monetary sovereignty. Instead, the pure crypto vision stresses the notion of "every person their own bank," through the medium of a personal wallet and beyond easy purview of the central authorities. So if the major exchanges are damaged or co-opted by the establishment, pure crypto bugs might celebrate rather than mourn. It is thus a mistake to see the possible demise of crypto in the possible demise of FTX. Instead, the purer crypto vision will be given more of a chance to flourish - or, for that matter, to fail.

U.S. federal bank regulatory agencies issued a statement summarizing their interagency crypto-asset "policy sprints" and providing a roadmap of future work related to crypto-assets. It summarizes the agencies' plan to provide greater clarity throughout 2022 on whether certain crypto-related activities conducted by banking organizations are legally permissible, and related expectations for safety and soundness, consumer protection, and compliance with existing law and regulations. The focus includes crypto-asset safekeeping and traditional custody services, ancillary custody services including staking, facilitating crypto-asset lending and distributed ledger technology governance services, facilitation of customer purchases and sales of crypto-assets, loans collateralized by crypto-assets, issuance and distribution of stablecoins, and activities involving the holding of crypto-assets on balance sheet.

Most crypto-asset users prefer to hold their crypto as part of a long-term investment strategy, according to a Binance Research global survey (61,000 crypto users across 178 countries and regions from September 15 to October 25, 2020. 39% of respondents stated that their "usage" of crypto is dominated by hodling, 28% prefer to use most of their crypto for buying other cryptos, and 22% said that they mainly use their crypto for staking and lending. The remaining 11% said that they mainly use their digital coins for payments.

Banking crypto exposes banks to an unpriceable type of credit risk related to chargebacks. If a consumer claims that a transaction was unauthorized or that they did not receive the goods and services ordered, they can initiate a chargeback with their bank. When that happens, the consumer's bank has a right to claw the funds back from the merchant's bank. That leaves the merchant's bank holding the bag unless it can recover the funds from the merchant. If the merchant is bankrupt or absconds, the merchant's bank-the payment processor-is stuck with the loss. As long as chargeback levels are predictable, payment processors can price for them. However, not only is there probably a relatively high baseline level of chargebacks for crypto, the chargebacks are also likely to be highly correlated whenever there is a market crash or allegations of fraud about a particular coin. So, if cryptos crash, chargebacks are likely to soar at the very time when the risk of the crypto company customer going bankruptcy rises. So the scenario that the payment processor is facing is that it will be hit with a tidal wave of chargebacks and that it will not be able to recover them from the crypto company, but will instead just have an unsecured claim in the crypto company's bankruptcy. The implication here is that no amount of crypto-friendly bank regulation is going to change the fact that prudent risk management committees will eschew crypto companies.

The IMF now recognizes crypto-assets in its Balance of Payments and International Investment Position Manual. It divides cryptos into fungible and non-fungible tokens. Cryptos without backing liabilities are treated as non-produced nonfinancial assets under the capital account, which means cross-border transactions involving them will be tracked as acquisitions or disposals of non-produced assets. Stablecoins and other cryptos backed by liabilities are considered financial instruments. Platform-based cryptos, such as Ethereum and Solana, may be classified as equity-like instruments, reflecting ownership rights similar to traditional equities. The manual also addresses staking and crypto yield activities, which are to be treated as sources of income akin to dividends, depending on the holder's intent and scale of holdings. Additionally, services related to crypto mining and staking are now recognized as exportable computer services, aligning with broader trends in the digital economy.

Most crypto-asset users prefer to hold their crypto as part of a long-term investment strategy, according to a Binance Research global survey (61,000 crypto users across 178 countries and regions from September 15 to October 25, 2020. 39% of respondents stated that their "usage" of crypto is dominated by hodling, 28% prefer to use most of their crypto for buying other cryptos, and 22% said that they mainly use their crypto for staking and lending. The remaining 11% said that they mainly use their digital coins for payments.

The IMF published a paper that analyzes the relationships between crypto prices and global equity markets and US monetary policy. It identifies a single price component it labels the "crypto factor" that explains 80% of variation in crypto prices, and shows that its increasing correlation with equity markets coincided with the entry of institutional investors into crypto markets. As for equities, US Fed tightening reduces the crypto factor through the risk-taking channel-in contrast to claims that crypto assets provide a hedge against market risk.

The University of Georgia (UGA) published a summary of a paper that investigated the associations between social media usage and crypto investment behavior. It found that The study found that about half of social media users surveyed have invested in digital currencies. And the more social media platforms a user was active on, the more likely they were to invest.. Meanwhile, only 10% of non-social media users had invested in crypto. YouTube, Reddit, Twitter and Clubhouse users were the most likely to invest in crypto. Instagram users weren't as keen on crypto. The researchers found men and those with a higher risk tolerance were more likely to invest in crypto, but people with a higher education level and older people were less likely to invest in crypto.

There are many reasons why the Philippines is becoming increasingly crypto-friendly. Not only has its central bank registered more crypto exchanges recently, but the Securities and Exchange Commission has also been actively finalizing crypto guidelines. The country has an active crypto community, and one of its largest banks has engaged in multiple crypto projects.

Paxos Trust Company launched Paxos Crypto Brokerage, a new product offering that enables companies to integrate crypto-asset buying, selling, holding and sending capabilities into their own applications. Paxos Crypto Brokerage is an API-based solution that provides access to the crypto-asset market while managing the underlying regulatory and technological complexity. Revolut US is the first partner to leverage Paxos Crypto Brokerage for US customers of its consumer banking application (see above).

A new draft of Russia's new crypto and digital asset legislation passed second reading. The previous draft would make any business issuing or trading crypto using Russia-based infrastructure illegal. There are three rounds of hearings for any bill to pass, but after the second one, the text of a bill is considered final. The new draft suggests that crypto is a kind of property that cannot be accepted as a means of payment. Any lawsuits related to crypto ownership can only be considered by the courts if plaintiffs report their crypto holdings and deals for tax purposes. https://sozd.duma.gov.ru/bill/419059-7

This Bank of Canada paper examines how the cost structure of crypto-asset mining affects the response of miners to price fluctuations and the immutability of crypto-asset ledgers that rely on proof-of-work. It shows that the amount of mining power supplied to crypto-assets that rely on application-specific integrated circuits (ASICs), such as Bitcoin, responds less to adverse price shocks than other crypto-assets respond to such shocks, a fact that is instrumental to avoiding double-spending attacks. These results weaken doomsday predictions for bitcoin and other crypto-assets with declining block rewards. However, smaller crypto-assets that rely on the same specialized hardware as larger ones may be less protected.

Visa launched its Global Crypto Advisory Practice to help clients and partners advance their crypto journeys. Through their work with more than 60 crypto platforms, Visa's global network of consultants and product experts have deep expertise to help financial institutions evaluate the crypto opportunity, develop concrete strategies, and pilot new user experiences and innovations like crypto rewards programs and CBDC-integrated consumer wallets.

Uzbekistan President Shavkat Mirziyoyev set a regulatory framework for the country's crypto industry and assigned a newly renamed Perspective Projects Agency to oversee the industry. Cryptocurrency exchanges, mining pools and crypto custodians operating in the country must be registered locally, and as of Jan. 1, 2023, Uzbekistan residents will be able to buy or sell crypto only on the local exchanges. Crypto service providers will not be allowed to facilitate trading with "anonymous crypto assets," a term not explained in the document.

The IMF published a blog on African countries' approaches to regulating crypto-assets, finding that only one-quarter of countries in sub-Saharan Africa formally regulate crypto. However, two-thirds have implemented some restrictions and six countries-Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of Congo-have banned crypto. Zimbabwe has ordered all banks to stop processing transactions and Liberia directed a local crypto startup to cease operations (implicit bans). The blog also warned that public finances could be put at risk if crypto-assets are adopted as legal tender, as the Central African Republic recently did.

Mastercard is launching Crypto Secure to help banks assess the risk of crime associated with crypto merchants on its network. The service, powered by Mastercard-owned blockchain security startup CipherTrace, combines applies artificial intelligence to blockchain data and public records of crypto transactions, along with other sources, to determine crime-related risks of crypto exchanges within the Mastercard network. On the Crypto Secure platform, banks and other card issuers are shown a dashboard with color-coded ratings representing the risk of suspicious activity, with severity of risk ranging from red for "high" to green for "low."

The U.S. Financial Accounting Standards Board (FASB) published a standards update that will let corporations recognize "fair value" changes in crypto holdings. The move will benefit companies with crypto on their balance sheets, like MicroStrategy. Under the existing rulebook, companies have to report a loss if the crypto they hold is worth less than the purchase price, even if they haven't sold the assets, but they couldn't report gains when the crypto holdings are worth more. Under the new rules, both losses and gains on crypto holdings are to be recognized in net income. https://www.fasb.org/page/getarticle?uid=fasb_Media_Advisory_12-13-23

A paper by Douglas Arner, Dirk Zetzsche, Ross Buckley and Jamieson Kirkwood argues in order to function properly, crypto-asset markets require appropriate regulation and supervision to address market failures and externalities, and to support transparency and efficiency. While it appears the "Crypto Winter" of 2022-2023 has prompted the world's financial regulators to act, policymakers need to overcome the difficulties posed by decentralization as the underlying paradigm of the crypto industry, which results in a multi-jurisdictional environment of crypto markets, participants, infrastructure and intermediaries. The paper argues that regulatory systems can (and must) now be instituted to ensure the proper functioning of crypto and its interconnections with traditional finance.

The U.S. SEC published guidance about how companies should account for the custody of crypto-assets on behalf of clients. Affected companies will have to disclosure the nature and amount of crypto-assets that they hold for their users, with separate disclosure for each significant crypto-asset and any vulnerabilities the business has due to any concentration in its users' crypto holdings. Also, an estimate of potential liabilities from safeguarding failures may need to be included with the initial recognition of those crypto holdings, as well as later accounting of their fair value. Caitlin Long tweeted that this "brazenly violates 'same activity/same regulation' principle" because such treatment isn't required of securities custodians.