How did Spain book the digital currency market?

The growing popularity in Spain of the cryptocurrency market has reached a point that may make governments and central banks uncomfortable, as voices calling for the regulation of this market are increasing among politicians, authorities, central bank governors, or economists. This regulation aims to protect investors who trade cryptocurrencies, but above all to preserve the monopoly of control over money that public authorities (governments and central banks) have today, as they emphasized from Deutsche Bank in a new work on cryptocurrencies. Although currently speculation or illegal activities continue to be the activities that mostly underlie the use of cryptocurrencies, more and more people or companies are looking to crypto and its networks for new forms of payment, financing or even concluding contracts (the Ethereum network is famous for its utility for smart contracts). The last straw was the acceptance of Bitcoin as legal tender in El Salvador, according to economists at Deutsche Bank.

How did Spain reserve an early place in the digital currency market? Spain's Bitcoin market along with other crypto assets has crossed the threshold of widespread use and can no longer be ignored as cryptocurrencies begin to compete seriously with traditional currencies and fiat currencies. Regulators and legislators will take active action, German bank experts reassured.

Deutsche Bank stated that the growth of cryptocurrency may lead to its demise. Cryptocurrencies pose an increasing threat to monetary and financial stability, and central banks and governments are unlikely to give up their monetary monopolies. This Deutsche Bank report emerged after the Basel Committee on Banking Supervision launched a public consultation in which the body suggests that banks face stricter capital requirements when trading Bitcoin and other crypto assets. Specifically, the proposal is to divide digital assets into two groups, putting Bitcoin and other cryptocurrencies in the group with the highest risk.

Risks of the digital currency market How did Spain book the digital currency market? Accordingly, any asset from this group held in the portfolio will receive a risk weighting of 1.250%, which is the highest that Basel expects, and is usually used for doubtful assets. In practice, this means that the bank will need $1 of capital for every $1 of Bitcoin, all based on a minimum capital requirement of 8%.

Although some received this proposal as a kind of baptism of Bitcoin and other digital currencies into the banking world, voices quickly multiplied warning that these stricter requirements would discourage entities from working with cryptocurrencies. Will China and the United States regulate? On the other hand, both China and the United States have confirmed their desire to regulate cryptocurrency assets, especially Spain, in the digital currency market. Hopefully the rules of the game will change this year; Next year, most advanced economies will establish a solid framework.

From DB they believe this means the end of the beginning for Bitcoin (not the beginning of the end), i.e. that cryptocurrencies should face regulation that might erode some or many of the properties (absolute anonymity, ease of tax evasion) that make them so attractive to certain groups. Without these attractions, the price investors are offering Bitcoin might have been different from the current price, which is around $37,000 (it reached $64,000 a week ago). Governments around the world have fragmented approaches to regulating Bitcoin and other cryptocurrencies. Some countries, such as El Salvador, have allowed Bitcoin to become legal tender, to paraphrase Neil Armstrong.

This is a small step for El Salvador, but a big step for Bitcoin. El Salvador's decision paves the way for other emerging economies to take similar actions. This is especially true for economies that suffer from instability and heavy dependence on the US dollar

Deutsche Bank experts confirm this. Do cryptocurrencies overwhelm basic currencies? Major countries will try at all costs to prevent cryptocurrencies from overshadowing the currencies that dominate the monetary system today, especially since Spain is in the currency market. Most of the G20 countries have encrypted assets that regulate their agenda. These countries do not want to allow private cryptocurrencies to compete with government-backed fiat currencies. In terms of regulatory measures, we expect 2021 to be a game-changer and that by 2022 most developed economies will have a strong regulatory framework for crypto assets.”

Although most of the authorities' desires for further regulation of cryptocurrencies currently remain in words rather than deeds, the message seems quite clear. The first indication of this greater concern was the appointment a few weeks ago of Michael Hsu as interim head of the Office of the Comptroller of the Currency (OCC), the government agency responsible for carrying out the oversight function in this area. That Treasury Secretary Janet Yellen chose Hsu as a career public servant and grassroots banking supervisor already sends a message of break with the Trump administration and not being very vigilant with cryptocurrencies.

One of Hsu's first decisions at the helm of the OCC was to review the Trump administration's decision to grant national bank charters to companies providing cryptocurrency custody services. Why the regular obsession with the cryptocurrency market?

First, to prevent cryptocurrencies from endangering dominance

At risk, public powers today are exercised over the monetary system, money and monetary policy. But on the other hand, DB also believes that with over five thousand (highly volatile) cryptocurrencies in circulation, consumers will have difficulty navigating these opaque markets. Also, “Some cryptocurrencies are used for criminal activities, by hackers and scammers.

Darknet and ransomware activity has grown steadily since 2019. In 2020, ransomware schemes increased by more than 30%. “These scams, often using cryptocurrencies, remain the largest source of illicit activity in the world, with fraudsters receiving nearly $2,500 million in 2020,” said Deutsche Bank.

“For Spain, governments and central banks, who are often seen as the lender of last resort, cryptocurrencies represent a systemic risk. With a market capitalization of nearly $2 trillion, including all cryptocurrencies, crypto assets have reached a point where they can no longer be ignored. However, this growth may lead to their demise. Cryptocurrencies represent a growing threat to monetary and financial stability, and central banks and governments are unlikely to abandon their innovations. Cash.

Therefore, as Bitcoin and other private cryptocurrencies begin to compete seriously and thanks to fiat currencies for governments, regulators and legislators will take stronger action.”

#Cryptocurrency market