Cryptocurrency roundup: US and EU impose tougher regulations

Cryptocurrencies have had a volatile week with news of regulatory crackdowns across different continents dominating the news. Saloni Sardana looks at the stories that caught our eye this week.

Cryptocurrencies have had a volatile week with news of regulatory crackdowns across different continents dominating the news.

Earlier in the week cryptocurrencies were hit with a “double whammy effect” with both the EU and the US imposing new regulatory requirements. Bitcoin fell below the key support level of $30,000, but later recouped its losses and rose above the support level later in the week.

Here are the top stories that caught our eye.

EU unveils plans to make it easier to trace cryptocurrencies

European regulators announced plans on Tuesday to make it easier to trace cryptocurrency transactions.

“Given that virtual assets transfers are subject to similar money laundering and terrorist financing risks as wire funds transfers, it is to requirements of the same nature they must also be submitted and it therefore appears logical to use the same legislative instrument to address these common issues,” the European Commission said in a statement.

The new rules pave the way for any company that transfers any crypto to store information about both the recipient and the sender. The aim of this is to prevent crypto being used for criminal purposes.

Any companies participating in the crypto space will also be required to ask for personal details such as the customer’s name, account number, date of birth and details of the recipient too. There will also be a limit of €10,000 on very large payments.

The US calls for greater oversight of stablecoins

US Treasury Secretary Janet Yellen on Tuesday moved to establish a regulatory framework for stablecoins, which have also alarmed regulators.

Stablecoins are a rapidly growing class of virtual currencies which involve the cryptocurrency being fixed to another cryptocurrency, fiat currency or a basket of commodities. The USD Coin and Tether are the most popular stablecoins.

It is not hard to see why regulators are getting uneasy about stablecoins. In effect, they are “shadow currencies” – notionally pegged to the value of a major currency such as the US dollar but without any of the regulatory or governance apparatus.

Regulators agreed at a meeting that greater due diligence is required for stablecoins.

“In the meeting, participants discussed the rapid growth of stablecoins, potential uses of stablecoins as a means of payment, and potential risks to end-users, the financial system, and national security. The Secretary underscored the need to act quickly to ensure there is an appropriate US regulatory framework in place,” the US Treasury said.>

Crypto miner Core Scientific will go public via $4.3bn Spac deal

Cryptocurrency mining firm Core Scientific –one of the world’s largest digital asset miners, based in North America –revealed on Wednesday it is going public through a Spac deal with Power & Digital Infrastructure Acquisition Corp. The deal, which is roughly worth $4.3bn, will see Core Scientific list on the Nasdaq exchange, but it remains unclear when shares will start trading on the exchange.

The Spac deal puts the company on track to be valued at more than rival firms, Riot Blockchain and Marathon Digital each of which are respectively worth $2.18bn and $2.25bn.

BNY Mellon backs crypto platform Pure Digital

Bank of New York Mellon this week joined the pact of six banks that are supporting cryptocurrency trading platform Pure Digital, three months after State Street first backed the exchange.

It is worth paying attention to this, as it reflects a growing interest by custodians to participate in the crypto space. It also comes at a time where cryptocurrency markets have lost some steam and the future direction looks less rosy than just a couple of months ago when bitcoin hit a peak of almost $65,000.

Pure Digital will also be the first crypto trading venue which involves key participation by banks. So far only BNY Mellon and State Street have been named, the other banks are not known.

JPMorgan becomes first major bank to offer crypto to retail clients.

US bank JPMorgan became the first big bank to offer its retail clients access to investing in cryptocurrencies, Business Insider reported on Thursday.

The bank said that its customers are now allowed to take orders to buy and sell five different cryptocurrency products. The orders, which take effect from 19 July, include four from Grayscale Investments and one from Osprey Funds.

Business Insider reported that the move applies to most of its clients including its “mass affluent” ones which are managed by financial advisers, and its ultra-high-net-worth clients served by the private bank.

JPMorgan’s decision to allow crypto is the latest move in the bank’s push to expand its $630bn wealth management division.

Crypto markets update

Here’s what happened in the crypto market over the last seven days

  • Bitcoin rose 2% to $32,345
  • Ether rose 7% to $2,050
  • Dogecoin rose 4% to $0.19
  • Cardano fell 3% down to $1.18
  • Binance Coin fell 6% to $294

What investors need to watch out for next week

Regulatory crackdowns

On 28 July, the Senate Banking Committee’s subcommittee on economic policy is expected to respond to US senator Elizabeth Warren’s concerns.

The Democratic senator, who also chairs the Senate Banking Committees’ subcommittee on economic policy, warned of the risks of investing in “highly opaque and volatile” cryptocurrency market in a letter earlier this month addressed to Gary Wensler, chair of the Securities and Exchange Commission, the US financial regulator.

Recommended

Share tips of the week – 2 December
Share tips

Share tips of the week – 2 December

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
2 Dec 2022
Latest issue
Investments

Latest issue

Latest issue of MoneyWeek magazine.
2 Dec 2022
Is it cheaper to leave the heating on low all day?
Personal finance

Is it cheaper to leave the heating on low all day?

The weather is getting colder and energy bills are rising, but is it really cheaper to leave the heating on low all day or should you only turn it on …
1 Dec 2022
The best offers for switching banks – get up to £200 free cash
Personal finance

The best offers for switching banks – get up to £200 free cash

Looking to move bank accounts? You can now bag as much as £200 for switching current accounts from two major banks
1 Dec 2022

Most Popular

Fan heater vs oil heater – which is cheaper?
Personal finance

Fan heater vs oil heater – which is cheaper?

Sales of portable heaters have soared, as households look to cut their energy costs. But which is better: a fan heater or an oil heater? We put them t…
21 Nov 2022
Best regular savings accounts – December 2022
Savings

Best regular savings accounts – December 2022

You can earn an attractive rate on the best regular savings accounts. We tell you the best on the market to take advantage of right now
1 Dec 2022
2 investment trusts with growing dividends: which one should you invest in?
Investment trusts

2 investment trusts with growing dividends: which one should you invest in?

They might not have spectacular yields but these two trusts have increased their dividend every year for 55 years.
24 Nov 2022