Crypto regulation continues to occupy the center stage amidst structural flaws and potential benefits. A recent report sent to G20 by the Bank for International Settlements (BIS) claims that the inherent limitations of crypto assets corrode their viability in the monetary system. Believing that these issues stem from incentive economics rather than technology constraints, BIS criticizes crypto for failing to harness innovation for social benefit, not contributing to real economic activity, having stability and efficiency issues, as well as shortcomings related to accountability and integrity.
However, there’s also a glimmer of optimism. The UK Treasury released a consultation paper suggesting that a regulatory reprieve of five years could be beneficial for digital assets such as bonds and equities. With the potential to make markets more efficient, transparent, resilient and radical, digitization could be a game changer. The one thing the Treasury emphasises on is the safe realization of these benefits, maintaining current regulatory outcomes.
While regulators mull over their stance, innovation surges ahead. An example comes from Bitcoin developer Entero Positivo unveiling an open-source tool called “BIP39Colors” that translates a BIP39 mnemonic phrase into a set of colors, adding an extra layer of obfuscation. Color-coding will make these phrases less conspicuous to cyber criminals.
But as excited as some might be about this new development, others harbor concerns. Sizeable worries come from Pedro Magalhães, a tech consultant from Iora Labs, who claims he found features in the source code of Brazil’s pilot Central Bank Digital Currency (CBDC) to freeze funds or reduce balances – eerily contradicting to the decentralization principle that cryptocurrencies were built on.
In other news, Algofi, a prominent player in the DeFi ecosystem, announced its shutdown due to a “confluence of events”. This could serve as a cautionary tale, reminding us how the future of this promising tech could be derailed if not supported by favorable regulations.
Disputes over jurisdiction of crypto secondary markets have also begun. An example is the US Securities and Exchange Commission’s case against the Bittrex crypto exchange. Investment firm Paradigm criticized the regulator’s effort to expand its jurisdiction, arguing that such a move to redefine securities laws should be reserved for Congress.
As a parting note, we have Jeremy Allaire, CEO of the USDC stablecoin, who, despite confessing to limited expectations for cryptocurrency adoption in mainland China, remains hopeful for progress in Hong Kong, especially concerning the regulation of stablecoins. He expresses optimism for the eventual global usage of the RMB via stablecoins rather than CBDCs. Quid est veritas?
Source: Cryptonews
