June 15, 2021

Analyst at CEX.IO Broker: "The activation of regulators is a response to the strengthening of the position of digital currencies"

Analyst at CEX.IO Broker: "The activation of regulators is a response to the strengthening of the position of digital currencies"

Yuri Mazur, head of data analysis department at CEX.IO Broker comments:

Attempts to influence regulators on the digital marketassets are not new to the crypto community. Cryptocurrencies, in principle, were initially positioned as a meaningful ideological opposition to fiat, which became a real challenge for governments, central banks, and the financial system as a whole. When in 2018 it became clear that cryptocurrencies were serious and for a long time, the regulators of the countries decided to partially integrate blockchain technologies into fiat. This is how the CBDC, or digital currencies of central banks, came about.

In a sense, states with the aim of protectingmonopoly on money follows a long-known rule: if you can't prevent it, take the lead. Note that CBDC projects, despite all the similarities with cryptocurrencies and stablecoins, are called fiat by central banks. Therefore, the rivalry between these types of assets is gradually expanding and moving to a new level.

Why are regulators getting active right now?

Until 2020, the crypto community was able to create a fairly stable infrastructure structure for new digital assets. The crisis caused by the coronavirus pandemic has dotted the i's.

Contrary to expectations of a collapse, cryptocurrencies are not onlywithstood the global challenge, but also demonstrated impressive growth. Economic stimulus programs launched by the Fed, the ECB and other central banks have failed as people began to invest in digital assets along with such traditional financial instruments as stocks, bonds, fiat currencies.

As a result, much of the moneyaimed at supporting the manufacturing sector through financial markets, did not achieve its goal, settling on crypto-exchanges. The regulators thus indirectly contributed to the development of the crypto community and alternative finance.

The desire of governments to catch up with progress

We are now seeing an acceleration of CBDC projects sinceparallel attempts to squeeze out decentralized finance. Recall that the digital yuan is going to be launched in 2022, so the actions of the PRC's central bank are aimed at creating a leading position in the crypto market for its own CBDC.

In the US, they started talking about digital currency in 2020,despite the fact that back in December 2019, then Finance Minister Stephen Mnuchin announced that there were no plans to create and implement a digital dollar, both in the near future and on the horizon of 5 years. In my opinion, the flow of capital from the manufacturing sector towards the cryptoindustry slightly alarmed the Fed and made it seriously think about the prospects for its own CBDC. However, it is unlikely that the US government and regulators will follow in the footsteps of the PRC.

Most likely, the impact on the cryptocurrency market forthem - this is an opportunity to cheaply buy out the infrastructure of an already operating project to quickly launch the digital dollar, similar to the existing practice of large corporations to take over promising startups. I would not be surprised if the SEC lawsuit against Ripple ends up creating a digital USD based on the infrastructure and the XRP blockchain.

Situation control

To summarize, the activation of regulators isa response to the strengthening of the position of digital currencies and a desire not to lose sight of the significant financial flows that the world economy will need so much to recover from the pandemic.

Do not forget that from the fall of 2020 aboutinvestments in cryptocurrencies began to speak not only of private investors, but also large corporations, including Tesla. Based on these statements, the bitcoin rate exceeded $ 60,000, however, after a series of statements by US officials and the ban of cryptocurrencies in China, BTC / USD, according to the CEX.IO exchange, dropped at the moment to levels near $ 30,000.

Now bitcoin quotes have stabilized around$ 35,000, but in the near future, new information activity on the part of regulatory bodies cannot be ruled out. Nevertheless, as paradoxical as it may sound, the current situation is working for the development of the cryptoindustry. Governments and regulators in this peculiar way - through denial - have recognized the effectiveness of digital assets and sooner or later will come to a common denominator with the crypto community.