Where is the regulation of cryptocurrencies around the world?

“I would particularly be more focused on observing the North American scene”, comments Orlando Telles of Mercurius Crypto (Image: Reuters/Jonathan Ernst)

The enormous visibility that the cryptocurrency market has gained this year worries large institutions and governments around the world. The reason is simple: cryptocurrencies and the entire ecosystem that surrounds them can no longer be ignored.

Like any emerging market, the cryptoactive market attracts all kinds of people – from serious investors who want to diversify their portfolio and see digital currencies as a store of value, to adventurers and criminals who deliberately act to harm the most unsuspecting.

But as large professional and institutional investors become interested in cryptocurrencies, authorities around the world are beginning to discuss how to regulate this market. For now, postures are divided between the support and adoption of digital currencies, as in the case of El Salvador, to attempts to ban them, as in China.

U.S
The world's largest economy is making positive progress on the regulatory front. On October 19, the first bitcoin futures fund (ETF) in the country was listed on the New York Stock Exchange.

The ProShares Bitcoin Strategy ETF ($BITO) Fund, created by the manager ProShares, represented a giant regulatory milestone for the market. After him, other exchange-traded funds followed suit and sought approval from the SEC, the body that regulates the US capital market.

However, not everything is flowers. The “American CVM” has entered into some disputes in relation to stable coins (cryptocurrencies that are pegged to the value of the dollar). The reason is that, precisely because they have their value linked to the American currency, their issuance must comply with a series of norms.

Some companies, such as the Theter coin issuer, are heavily targeted by regulators. The backing of so many cryptocurrencies pegged to the dollar worries the SEC, largely due to a lack of transparency regarding how the process is carried out.

According to Orlando Telles, from Mercurius Crypto, an analysis house for the cryptocurrency market, the regulation of stable coins should take place soon. Telles recalls that Gary Gensler, president of the SEC, often compares this market to the private currency market that existed in the last century in the United States.

“It seems to me that he will put a lot of pressure, both on the issue of ballast and on the transparency of these assets. Therefore, it is possible that there are assets that may have more problems, such as Theter, the main stable coin in the market.”

China
China is a case of restrictive regulatory policy. The Asian country has always fought against the tide of cryptocurrencies. Midway through this year, the government banned the mining of any cryptocurrency on Chinese soil, triggering a drop in bitcoin. Beijing has also banned the purchase of this type of digital asset across the country.

After the ban, there were still miners who operated irregularly, leading to a government effort to end such practices. As for the purchase of cryptocurrencies, investors also tried to circumvent the ban, buying cryptoactives with the help of programs that mask the location of networks (VPNs).

The result was the adoption of mining in other countries. Before the ban, China was responsible for more than 50% of the validation rate (hashes) of the bitcoin network.

El Salvador
From one extreme to the other, we arrived in El Salvador. In this case, the country drew global attention when it adopted bitcoin as its official currency this year.

In addition to the dollar, bitcoin is officially a bargaining chip in the country. Nayib Bukele, president of the country, has been buying bitcoins in times of low, and has accumulated 1,120 BTC.

Furthermore, the government also created a bitcoin portfolio, Chivo, so that the population can have a better usability of the asset. The wallet uses the Lightining Network, the second layer of the bitcoin network, which enables faster and cheaper transactions.

The population's adherence to the novelty was reasonable. More than 3 million people (out of a total population of 6.5 million Salvadorans) have downloaded the Chivo app. Bitcoin ATMs have been installed across the country and some incentives, such as discounts, are granted to those who use digital currency as a means of payment.

The adoption of bitcoin as the official currency made the country almost an economic experiment for the rest of the world. The attention of many investors and economists will be focused on the country in the coming months. Telles, from Mercurius Crypto, sees El Salvador as a milestone for the market, but not as significant.

"The reason is that El Salvador does not have such economic or political strength to have such a large representation." For him, the listing of the American ETF and the non-prohibitive speech are matters of greater impact.

Brazil
In Brazil, the subject gained great prominence at the Central Bank. Last year, there was a position of not even talking about the subject, and regulation was something that seemed distant. The focus was on the PIX and the CDBC [Central Bank's digital currency].

This year, there was a movement to regulate cryptocurrencies as an investment, but not as a bargaining chip. However, in recent months, there has already been a change in the position of the president of the Central Bank, Roberto Campos Neto, towards a possible regulation as a means of payment.

Another trigger that could be a positive advance for the cryptocurrency market is precisely Real Digital, the Brazilian CDBC. This coin, despite not qualifying as a cryptocurrency, will use blockchain technology to circulate transparently.

That's why it can be a great stimulus for the regulation of this market. CDBC technology is being studied by several countries. The forecast of Fábio Araújo, coordinator of the Central Bank project, is that tests will start next year, and Real Digital will be launched by the end of 2024.

Telles, from Mercurius Crypto, recalls that currently some proposals are being discussed in relation to the cryptocurrency market, but they are still very vague. "I don't see such a clear specification regarding the terms, or what the guidelines will be."

He says that it could be a positive thing, considering that the market changes frequently, so a broader scope could be valid. But without these specifications, it's hard to know what the next steps will be.

“I, particularly, would be more focused on looking at the American scene. He is a little clearer, both about how the discussions on the taxation of assets should be, and about what Gary Gensler has as a perspective that can be seen within the applications as security.”

https://www.moneytimes.com.br/em-que-pe-esta-a-regulamentacao-das-criptomoedas-ao-redor-do-mundo/