An elephant in the room that can no longer be ignored. With a total volume of $ 1.3 trillion, the crypto market is no longer a fad and is longing for a maturity that is still far from coming. They are safe haven assets for some and purely speculative products for the majority. Investors, companies and institutions are praising the thousand and one possibilities of distributed ledger technology (DLT) and taking a glancing look at the development of digital currencies by central banks, which could undermine the development of crypto assets.
Digital assets registered a real boom in the beginning of 2021 in the heat of the spectacular revaluation registered by bitcoin. The cryptoactive par excellence started the year below $ 30,000 and climbed above $ 63,000, supported by Tesla and its founder, Elon Musk, as well as by its adoption by other companies and catapulted by the platform’s IPO. sale of digital assets Coinbase. But up to there. Since the end of April, the universe of crypto assets has seen more than a trillion dollars disappear at a stroke, penalized by the tightening of China’s veto and problems with the Binance platform in the United Kingdom.
Ronit Ghose, Citi’s global sector head for banks and co-head of the fintech theme group, believes that “digital assets and currencies will grow in the coming years as many central banks are undertaking CBDC projects. [siglas de central bank digital currency]. In addition, decentralized cryptocurrencies, such as ethereum, have the advantage of being programmable and allow you to build digital projects on them. We hope that existing currencies, such as the euro or the dollar, will continue to exist in digital form. “
More skepticism exists about the maturity of crypto assets in the eyes of investors. Simon Peters, an expert at eToro, believes that “like many assets, cryptocurrencies are a nascent technology and still very volatile. Although we have come a long way since the introduction of bitcoin, we have not yet really penetrated the global public.” It is not a payment system to use.
The arrival of digital assets to the forefront of large investors and small savers set off the alarms of the global regulatory authorities, due to its impact on the financial industry, its alleged role as a safe haven asset and its reception by small investors as a investment asset.
For the moment, the substitution of gold as the quintessential safe-haven asset for bitcoin is far off. In fact, a recent UBS survey of the 30 largest central banks in the world claimed that about 85% do not expect cryptocurrencies to replace the precious metal in their foreign exchange reserves and 57% of them do not believe that it will have “a significant impact. in its reserve operations “. JP Morgan has detected, for its part, that institutional investors have reduced their exposure to bitcoin in exchange for gold in the midst of the fall in assets from the all-time highs reached in April, although it remains optimistic in the long term: it believes it will reach 140,000 Dollars.
On the effect that crypto assets will have on the global financial system, the Vice President of the ECB, Luis de Guindos, has allayed fears by ensuring that “they do not pose a risk to financial stability at this time.” Along the same lines, Citi’s Ronit Ghose notes that “we do not consider crypto assets to be a threat to financial stability. They represent around 0.5% of total world wealth. They are too small in the context of the economy. global or financial system to create instability. “
However, the Bank for International Settlements (BIS) is already working on determining which rules should govern banks with respect to their exposure to crypto assets. The international organization recognizes that for now that exposure of the financial sector is residual but it considers it necessary to create a specific prudential treatment. For the moment, it has classified them into two groups: traditional tokenized assets and so-called stablecoins, such as tether or DAI.
But there are also several countries that are striving to implement ad hoc regulations for this type of assets. In Europe, the EC is working on the MICA regulation (acronym for markets in crypto-assets), which will regulate crypto assets and the platforms that operate with them and which will be ready by the end of 2021 or the beginning of 2022.
Pending its implementation, some countries have adopted their own initiatives. In the case of Spain, the Government has empowered the CNMV to regulate the advertising of crypto-asset platforms. Massive advertising campaigns for these are expected to have to undergo a prior check. In Germany, in turn, all digital asset platforms have to be authorized by the Federal Financial Supervisory Authority (BaFin), although from this month the funds destined for institutional investors can invest in digital assets a maximum of one fifth. from your wallet.
In the case of the United Kingdom, the Financial Conduct Authority (FCA) has taken up arms against platforms for buying and selling crypto assets for their role in money laundering. In the United States, on the other hand, the different regulators – Federal Reserve, the SEC and the Treasury – have different concepts and powers, which makes homogeneous regulation difficult. The Treasury department dedicated to the fight against money laundering, FinCEN, has placed cryptocurrencies as its main priority in this matter and in the fight against the financing of terrorism.
Beyond the impact that crypto assets can have on global financial stability, these types of assets are receiving strong interest from small investors at a time when they have increased their tolerance for risk, while traditional bank deposits They have seen their returns vanish in the face of ultra-lax interest rates to boost the economy. A greater tolerance for risk that has led some to invest in crypto assets, in the heat of the strong rises experienced by bitcoin or dogecóin.
However, cases of alleged crypto asset scams are becoming more and more frequent. Last April, two of the main trading platforms for digital assets in Turkey –Thodex and Vebitcoin – were closed, leaving the investments of more than 390,000 investors in the air. In Spain there are already several processes opened by the justice for alleged pyramid schemes. The National Court is already investigating the alleged frauds of Arbistar, Algorithmics, Kuailian and Nimbus, which under the premise of succulent guaranteed returns would have caused losses to some 90,000 affected. The CNMV and the Bank of Spain have warned of possible losses due to investment in crypto assets. And in the United Kingdom banks such as TSB, a subsidiary of Sabadell, Barclays, HSBC or Santander have blocked their clients’ transfers to some crypto-asset exchange platforms such as Binance in order to prevent high fraud rates. A fraud that last year rose 57% in the country, according to a report by Action Fraud, which puts the losses caused to retailers at 132 million.
In the corporate sphere, by contrast, crypto assets are still at a very incipient level. Deutsche Bank explains that “lack of regulation and great price instability have proven to be the main barriers against the adoption of cryptocurrencies for corporate transactions.”
However, from eToro they assure that “although there are still obstacles to overcome before crypto assets become mainstream and institutional and retail investors participate in greater numbers, we believe it is a question of when, not if this happens” . Cryptocurrencies will keep searching for your site.