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Following a year of intense highs and lows in the crypto market, March 2022 saw speculation intensify around a White House Executive Order (EO) that was supposedly imminent. President Biden signed the document on Wednesday, March 9th, in what many viewed as a potential watershed moment for the industry. However, legislative upheaval is a meticulous process, and months down the line there is still a degree of uncertainty around the order’s eventual consequences. This article will assess where the process is up to, and what it means from the perspective of regulatory compliance.
Crypto Executive Order: Why Now?
The first thing to acknowledge is that March’s EO was by no means an exhaustive dossier of rules and regulations that crypto firms must now abide by. On the contrary, it contained more questions than it did answers. This was unsurprising to many, as although he was expected to "lay out his administration's game plan", President Biden, conversely, wasn’t expected to delve into any specific proposals.
The EO ‘calls for measures’ to fulfil a number of specific objectives, rather than stipulating what those measures should actually be. These objectives include developing policy recommendations to protect US consumers, investors and businesses, and researching the potential for a United States Central Bank Digital Currency (CBDC), among many others.
We appear to be reaching an end stage in negotiations between the European Parliament and the Council of the European Union on a plan to extend the EU’s financial-surveillance regime over the cryptocurrency industry. Alas, lawmakers were in such a rush that they appear not to have noticed that the hastily crafted legislative package violates fundamental tenets of the EU’s founding treaties.
Prominent within the package are new anti-money laundering and terrorism-financing rules for the crypto space.
Mikołaj Barczentewicz is a senior scholar with the International Center for Law & Economics. This article is excerpted from The Node, CoinDesk's daily roundup of the most pivotal stories in blockchain and crypto news. You can subscribe to get the full newsletter here.
Most notably, the EU would extend the so-called “Travel rule,” which currently applies to wire transfers managed by global banks, to require crypto-asset service providers to collect and report data about the originators and beneficiaries of crypto-asset transfers.
But the Court of Justice of the European Union (CJEU), the EU’s highest court, is likely to find that the Travel rule constitutes a broad and indiscriminate surveillance regime for personal data.
Even as the crypto sector shivers in the bleak winter, venture capitalists are pouring money into digital currency and blockchain startups at a pace that's set to outstrip last year's record.
In the first half of the year, VCs bet $17.5 billion on such firms, according to data from PitchBook. That puts investment on course to top the record $26.9 billion raised last year, a warmer and happier time for bitcoin and co.
"The current market conditions - I don't think they faze investors," said Roderik van der Graf, founder of Hong Kong investment firm Lemniscap, which focuses on crypto and blockchain. "The capital available is massive."
VC funds offer financing to young companies they believe have strong growth prospects. The data suggests a solid faith in the future of crypto and blockchain tech, despite a bruising six months for the industry.
A double whammy of macroeconomic headwinds and blow-ups at major projects this year have seen bitcoin plummet about 65% from its November record of $69,000, with the overall value of the crypto market tumbling by two-thirds to $1 trillion.
Tesla Inc. TSLA 6.17% said it recorded a $170 million impairment charge against the carrying value of its bitcoin holdings for the first six months of the year.
The electric-car maker also logged $64 million in gains from certain sales of its bitcoin holdings, the company said in its 10-Q filing with the Securities and Exchange Commission on Monday.
Because accounting rules define digital assets as indefinite-lived intangible assets, Tesla said it must recognize impairment charges to reflect any decrease in the fair value of cryptocurrencies held by the company below their carrying values.
“We may make no upward revisions for any market price increases until a sale,” the company said. “These charges may negatively impact our profitability in the periods in which such impairments occur even if the overall market values of these assets increase.”
New data from blockchain analytics firm CryptoQuant shows that miners are rapidly exiting their bitcoin positions.
14,000 bitcoin, worth more than $300 million at its current price, was transferred out of wallets belonging to miners in a single 24-hour period at the end of last week — and in the last few weeks, miners have offloaded the largest amount of bitcoin since Jan. 2021. The phenomenon is called “miner capitulation,” and it typically indicates that miners are preparing to sell their previously mined coins in order to cover ongoing mining expenses.
Bitcoin is currently trading around $21,600, up about 3% in the last 24 hours. Still, the wider crypto market has been in a slump for months, with bitcoin down nearly 70% from its all-time high of around $69,000 in Nov. 2021.
This article is provided by our Cryptocurrency Partner, Bitcoin Romania.