Central Banks Call for International Regulation or Ban of Cryptocurrencies
It seems that the central banks of some countries are taking an example from the Chinese government when it comes to restricting the crypto industry. Not so long ago, cryptocurrency mining was suddenly banned in China, and soon after that a complete ban on the possession and trading of cryptocurrencies followed.
According to Coinmarketrate.com to date, there are more than 15,800 cryptocurrencies with a total capitalization of 2.1 trillion US dollars, and they are very disliked by some regulators.
The Bank of England, the central bank of the United Kingdom, recognizes that banks, financial institutions and institutional investors are increasingly working with cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH). Therefore, the central bank wants stricter regulation of cryptocurrencies on an international scale.
Sarah Breeden, managing director of the Bank of England, said in an interview with The Sunday Times that the central bank will discuss a new regulatory framework for cryptocurrencies with its international counterparts next year.
According to the director of the bank, this is necessary as more and more banks support the trading of cryptocurrencies and their storage. However, finding out how many cryptocurrencies institutional investors own in general is a “difficult task”. This is not a problem that the UK can solve alone, she adds:
“We do not yet have a regulatory framework suitable for cryptocurrencies, but what we are doing is rolling up our sleeves and preparing for its creation”.
According to the director, the UK will have to cooperate with the Financial Stability Board (FSB), an international regulator created by the Group of 20 (G20).
Bank for International Settlements
In related news, Benoit Kere, director of the Bank for International Settlements (BIS), also reports that the FSB needs to create an international framework for regulating cryptocurrencies. BIS is a kind of central bank for central banks.
In an interview with the Financial Times, Kere called the rise of decentralized finance (DeFi) a “wake-up call.” He says the growth rate of this market means it’s time for more consistent regulation.
“These services will compete with traditional finance, and money will flow from one universe to another. This creates a compelling reason to start discussing the global principles of crypto regulation.”
But that’s not all.
India’s Central Bank Calls for a Complete Ban on Cryptocurrencies
Reports from India about possible regulation of the cryptocurrency sector are not entirely positive. If earlier it was assumed that a course on legalization would be pursued, combined with clear regulation, now it looks more and more like a complete ban. In any case, the Central Bank of India has made it clear that it supports a complete ban.
The country’s central bank, the Reserve Bank of India (RBI), has informed the government Council that it supports a complete ban on cryptocurrencies in India, an anonymous source told The Economic Times newspaper.
During an extensive presentation, the Council was informed that this would be the case. Among other things, cryptocurrencies can jeopardize macroeconomic stability, and the issue of managing crypto exchanges was also discussed in detail.
According to the central bank, it is almost impossible to properly regulate the digital asset sector. Many of these assets have their origin abroad. The fact that transactions are not always traceable is also a thorn in the ”side” of the RBI.
However, not all RBI board members agreed with the bank’s position. There were also those who would prefer a more moderate approach to the cryptocurrency sector. However, the official position of the RBI is still that a comprehensive ban on the crypto industry is the way to success.
Of course, such a decision remains with the Indian government. After extensive consultations, the Indian parliament will make a final decision on the status of the crypto sector in the country in the near future.
In the end, Prime Minister Narendra Modi will have the last word. More recently, he was still somewhat positive about the possibilities of the crypto industry. He pointed out that the governments of the countries of the world should work together to regulate the revolutionary sector.
But now, let’s see how the United States feels about all this.
Fed: Cryptocurrencies will not harm financial stability
Recently, there has been a lot of noise about the United States and the possible steps that the country will take to regulate the cryptocurrency sector. Yes, a lot depends on the decisions of this power, both in the global economic plan and in the crypto space. Against the background of the promotion of bans in some countries, in general, the reports about the United States are quite positive, and crypto investors seem to have nothing to worry about. Even the US central bank, the Federal Reserve, is now stating that it does not expect the crypto industry to cause any serious problems.
Federal Reserve Chairman Jerome Powell said during his speech that he sleeps peacefully at night without worrying about the growing spread of the crypto industry in the country. He simply does not see the world of cryptocurrencies as a serious threat to the financial stability of the US markets.
Stable coins are the biggest pitfall for many American regulators. Many senators and even the US Securities and Exchange Commission (SEC) regularly speak negatively about the stablecoin sector. Powell, however, takes a more nuanced view.
He fully supports the report prepared by the working group of the President’s Committee on Financial Markets. This report was published in early November, and it says that stable coins should be regulated in the near future, and that these types of cryptocurrencies can also be very useful.
“Stable coins can certainly become a useful part of the financial system for consumers if they are properly regulated. Currently, this is not the case. They have the potential to scale, especially if they are connected to one of the major technology networks that currently exist.”
Obviously, Powell is also in favor of regulating the stablecoin sector. Therefore, it will not be surprising that we see concrete steps on the part of the US government to subordinate the stablecoin sector to the regulatory system once and for all.
Powell’s words are not news to the crypto community. As chairman of the central bank, he keeps his finger on the pulse when it comes to possible new regulations, and in fact he is very positive. But…
Authorities Are Now Checking Bitcoin Lightning Transactions
The Bitcoin (BTC) Lightning Network is developing rapidly, so more and more people are using it to send BTC. Unsurprisingly, the blockchain analysis company Chainalysis is now also closely monitoring this part of the Bitcoin network, helping governments, in particular, detect suspicious transactions. In a recent statement, the company said that it is now also monitoring the Lightning Network.
The Bitcoin Lightning Network (LN) is a scaling solution that handles transactions outside of the Bitcoin main chain. This means that if wallet A sends 1 BTC to wallet B, this transaction is not immediately recorded in the blockchain. In LN transactions, this happens later, which, among other things, unloads the blockchain. According to many, LN opens the door to the mass adoption of Bitcoin, allowing for a huge number of transactions at low transaction costs.
As we reported in the crypto news earlier this month, LN has grown strongly, by 20%. This shows that the solution is really being used for its intended purpose. Let me remind you of El Salvador example, the country where the network is an important link for the Chivo wallet. Now Chainalysis will investigate transactions on this network:
“We are pleased to announce that Chainalysis will be the first blockchain analytics company to offer customers a solution for monitoring transactions on the Lightning Network.”
Although many opponents of Bitcoin associate cryptocurrency with crime and money laundering, the opposite is actually true. The transparency of the blockchain allows the authorities to view all transactions and thus conduct complex analysis. This allows them to track suspicious transactions and the suspects themselves.
Due to the growing popularity of LN, Chainalysis is now adding transactions on this network to its “Know-Your-Transaction (KYT)” Chainalysis platform, a solution used by US agencies such as the FBI:
“Early next year, we will implement Lightning Network transaction monitoring in Chainalysis KYT, the world’s leading cryptocurrency transaction monitoring software. Our customers can use KYT to monitor Lighting Network transactions, identify risky activity and obtain valuable information”.
Summing up
As you can see“ “tightening the screws” is getting more and more momentum. China is an excellent example.
China is currently experimenting with the introduction of the so-called central bank digital currency (CBDC), being at the last, final stage. This is a virtual cryptocurrency, the value of which is tied to the base fiat currency and which is issued by the central bank of the country. From this it should be understood that no central bank will allow the existence of alternatives to its digital currencies.