HODL Your Horses, Cryptos Face Possible Hurdles, Experts Say
(Reuters) – Changing rules, environmental concerns and competition from central banks threaten to undermine many fast-growing crypto assets around the world, crypto and macro experts said, while creating opportunities for those who are able to adapt.
Europe and the United States are both working on regulating digital assets and their providers – measures welcomed by investors, who hope the new ground rules will encourage institutional investors to get started.
Anatoly Crachilov, co-founder and CEO of Nickel Digital Asset Management, which manages assets worth $ 200 million, told the Reuters Global Markets Forum that regulatory uncertainty is holding back the development of the crypto space.
He described the promise of the new chairman of the United States Securities and Exchange Commission, Gary Gensler, to provide “guidance and clarity” to the market at his confirmation hearing in March, as a turning point.
For its part, the European Commission’s Crypto-Asset Markets proposal, or MiCA Regulation, will regulate crypto-assets and their service providers in the European Union.
“It will be a new banking industry, with passport possibilities,” said Vytautas Zabulis, CEO of digital asset trading solutions company, H-Finance, referring to the prospect of cryptocurrency trading licenses. at EU level.
Along with the changing regulatory framework, some countries including China, Britain and Russia are considering launching their own central bank digital currencies (CBDCs).
This will likely be followed by legislation to tax the earnings, said Robert Carnell, chief economist and head of research at ING Asia. “It may be the death knell for these other cryptocurrencies, although central bank coins are increasing more and more,” he said.
Zabulis said if CBDCs were developed in a way that they were “easy to interact with,” most digital currencies used for settlements would likely lose their purpose and value.
There wasn’t a big argument for bitcoin to become a settlement tool, Zabulis warned. “Blockchain technology is for that, so CBDCs will be built on blockchain.”
Bitcoin BTC = BTSP traded around $ 54,000 after rising 10% on Monday, prompted by reports that JPMorgan Chase JPM.N is considering offering a managed Bitcoin fund.
CBDCs are expected to have a limited impact on Bitcoin in particular, due to its progressively limited supply, which contrasts with traditional fiat systems, Crachilov said.
“No central bank currency, however digital, can offer scarcity at this point, because its supply can be inflated by a respective central bank issuing entity,” Crachilov said.
If China sees bitcoin as a threat to its own planned digital currency, it could affect the entire industry, Zabulis said.
THE GREEN REVOLUTION?
The creation of crypto assets leaves a large carbon footprint and is increasingly seen as environmentally unsustainable.
ING Asia’s Carnell said there was “a strong argument for environmental reasons to limit crypto mining, or at least have them offset their wasteful practices.
However, Bitcoin enthusiast Raoul Pal said he was not worried about the “non-sustainability narrative”.
Pal, founder and CEO of on-demand financial television channel Real Vision, said he believed it would lead to a “green revolution” because in the end, it was “the only way to win.”
Nickel Digital’s Crachilov said his fund was seeing increased demand for ESG-compliant cryptos. “Price competition pushes miners towards the cheapest energy sources – renewables increasingly fall into this category,” he said.
Ethereum 2 will use “proof of stake versus proof of work,” said Zabulis of H-Finance. “This means it will drastically reduce the energy needed” to operate it.
Garrett Minks, chief technology officer at Delaware-based RAIR Technologies, said the idea was “to exchange brute-force electricity with more sophisticated mathematics.”
(These interviews were conducted as part of the Reuters Global Markets Forum, a chat room hosted on the Refinitiv Messenger platform. Register here to join the GMF: refini.tv/33uoFoQ)