What is Happening in the World of Cryptocurrencies?

Stocks have been on a rollercoaster ride.

Last week, markets around the world plummeted after there were fears of a trade war between the US and China. The S&P 500 was one of the biggest losers, dropping around 5.95% for the week.

Today, markets are rallying.

Why?

It looks like trade war worries are easing after the US and China started negotiating a solution over the weekend.

Cryptocurrencies also have had some interesting times.

For one, Twitter [NYSE: TWTR] announced it will be banning crypto ads. They join rivals Facebook [NASDAQ:FB] and Google [NASDAQ:GOOGL] in barring initial coin offerings (ICOs) and token sale ads.

At the same time, the Japanese Financial Services Agency gave Binance Exchange a warning. Binance Exchange is the largest cryptocurrency exchange in the world. The Japanese agency told the exchange it was operating in the country without a license, and threatened to press criminal charges.

Malta welcomes cryptocurrencies

So, Binance Exchange announced they would be moving to Malta. The island is quite friendly towards cryptocurrencies, and welcomed the exchange with open arms.

As reported by CCN.com, Silvio Schembri, Malta’s Parliamentary Secretary for Financial Services, Digital Economy & Innovation, said:

This is a clear vote of confidence in our country and the work being done in this sector, mainly by the latest policy launched to offer a regulatory framework of DLT operations. It is obvious that Malta has become a natural point of reference on the international sphere and companies such as Binance will continue to look into Malta to further expand their operations or establish a base. Binance’s presence in Malta sustains our vision, that of making Malta ‘The Blockchain Island.

On the other side of the world, there was the G20 meeting in Argentina, where cryptos were also a big topic.

Cryptos got a boost from the G20’s Financial Stability Board (FSB). The FSB’s chair, Mark Cartney, said in his opening letter to the G20 members that cryptos are not a global threat:

The FSB’s initial assessment is that crypto-assets do not pose risks to global financial stability at this time. This is in part because they are small relative to the financial system. Even at their recent peak, their combined global market value was less than 1% of global GDP. In comparison, just prior to the global financial crisis, the notional value of credit default swaps was 100% of global GDP. Their small size, and the fact that they are not substitutes for currency and with very limited use for real economy and financial transactions, has meant the linkages to the rest of the financial system are limited…

‘Crypto-assets raise a host of issues around consumer and investor protection, as well as their use to shield illicit activity and for money laundering and terrorist financing. At the same time, the technologies underlying them have the potential to improve the efficiency and inclusiveness of both the financial system and the economy.

That is, the G20 is not looking to regulate cryptos…yet.

And, the fact that they recognise the technology’s potential to improve efficiency is good news for cryptos.

What countries are on-board with cryptos?

On other crypto news, Malta is not the only country looking to attract cryptocurrencies. France is also looking to take part of the ‘blockchain revolution’.

As France’s finance minister Bruno Le Maire recently wrote in an article:

France has every interest in becoming the first major financial center to propose an ad-hoc legislative framework for companies making an Initial Coin Offering.

This promises to create a network of confidence without intermediaries, offers increased traceability and will boost economic efficiency.

Our target is simple: enter into the world of finance of the 21st century by guaranteeing all players the necessary security for their development … we should not miss out on the blockchain revolution.

France is looking at creating a legal framework. This would allow French companies to raise funds through ICOs, as long as they follow certain guidelines.

The fact is that the world is mixed on how to treat cryptocurrencies.

While some countries like Malta are accepting it, others are banning them.

To give you an idea of how split the world is, here is a map from Bloomberg showing the regulations in each country.

Mapping the Crypto World 27-03-2018


Source: Bloomberg
[Click to enlarge]

As you can see, China has been cracking down on cryptocurrencies. Last year it banned ICOs and exchanges, and targeted miners.

Yet, as reported by CCN.com, according to the South Korean TokenPost, the new governor of the Chinese central bank, Yi Gang, is quite upbeat about bitcoin. As he recently said, ‘bitcoin is a currency that provides freedom to anyone that uses it.

Which could mean that they could be relaxing crypto regulation in the future.

Yet it is not only countries that are struggling on how to deal with the new technology.

Remember how JP Morgan’s CEO, Jamie Dimon called bitcoin a ‘fraud’, and said he would fire any employee trading bitcoin for being ‘stupid’?

Well, in their annual report, released in February, JP Morgan recognised cryptos as ‘risk factors’ and competitors.

As the bank wrote, as reported by Fortune:

Both financial institutions and their non-banking competitors face the risk that payment processing and other services could be disrupted by technologies, such as cryptocurrencies, that require no intermediation,” the bank (jpm, +3.11%) wrote in the report.

‘Already, the bank added, new technologies have required the company to invest in adapting or modifying its products to draw and retain customers, and to compete with new offerings from tech upstarts, a trend it expects to continue. “Ongoing or increased competition may put downward pressure on prices and fees for JPMorgan Chase’s products and services or may cause JPMorgan Chase to lose market share,” according to the report.

The debate on cryptocurrencies is only starting.

And, in my opinion, cryptos are not going anywhere. The fact that regulators are not sure how to deal with them could be a sign that they are looking to regulate them.

And the more countries look at how to regulate them, the more investors will flock into this space.

Kind regards,

Selva Freigedo,
Editor, Markets & Money

PS: The crypto boom is just starting. And, as with everything, there will be winners and losers. If you are interested in getting into this space, don’t miss out on editor Sam Volkering’s step by step guide on cryptocurrencies. You can access it here.


Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.


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