Tag: Financial Systems

G20 Discusses Crypto Regulations Under India Presidency

by Blockchain News

During the time that India presided over the G20, the first meeting of its kind for the group’s Finance Ministers and Central Bank Governors (FMCBG) was conducted. At this meeting, key issues pertaining to financial stability and regulatory oversight were discussed. India has urged the other member nations to acknowledge the macro-financial consequences of crypto assets and has advocated the development of a coordinated worldwide strategy. In addition, India has proposed the formation of a global strategy coordination group.

In light of the fact that cryptographic assets are traded all over the globe, Nirmala Sitharaman, India’s Finance Minister, has in the past voiced her support for the establishment of crypto regulations in collaboration with other countries. This story is now being told as part of the discussions that are being held in the mainstream while India holds the presidency of the G20.

During the 24th and 25th of February, members of the G20 gathered with the FMCBG to discuss the prospects of technological advances while placing a focus on finding a balance between the risks associated with such developments. Among the most significant subjects that were discussed during the G20 meeting were the significance of financial stability and regulatory goals, policy measures for boosting financial inclusion, and productivity increases.

Sitharaman expressed appreciation to individuals who supported efforts to modify rules pertaining to crypto assets in her closing remarks. To be more specific, the Minister of Finance asked for a concerted effort “for creating and comprehending the macro-financial ramifications,” which could be used to change crypto legislation on a global scale. Specifically, the Minister of Finance asked for a concerted effort “for creating and comprehending the macro-financial ramifications.”

She then continued by expressing her appreciation to the International Monetary Fund (IMF) for producing a thorough paper on the implications that crypto assets will have on the overall macroeconomic system. In her final comments, Sitharaman underlined the need of cooperation between the nations that are members of the G20 “to foster responsible technological breakthroughs and protect the stability of the financial system.”

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Australian crypto executives urge caution on regulation

by Blockchain News

Following recent remarks made by Australia’s assistant treasurer on the subject, cryptocurrency executives in Australia have cautioned against grouping all digital assets into the same category as financial goods. They say this is particularly important in light of recent regulatory developments.

In an interview with the Sydney Morning Herald that was published on January 22, 2018, Assistant Treasurer and Minister for Financial Services Stephen Jones provided an outline of the current position of cryptocurrency legislation in the nation.

According to the executive of a cryptocurrency exchange, he confirmed that the government was on track with its “token mapping” exercise that it was conducting this year to determine which crypto assets should be regulated. He also stated that a consultation process “to start soon” with the industry was planned. Jones, on the other hand, said that he was “not that drawn” to the idea of establishing a whole new set of laws for something that, in his opinion, functions primarily as a financial product. “I don’t want to make any assumptions about the results of the process of gathering feedback that we are going to undertake.

But I begin from the premise that if something walks like a duck, quacks like a duck, and looks like a duck, then it ought to be dealt with as if it were a duck “Jones remarked.

“Other currencies and tokens are basically being utilised as a kind of value storage in order to engage in financial speculation and investing. There is a compelling case to be made for treating them in the same manner as a financial instrument.”

According to the Sydney Morning Herald (SMH), the Australian Securities and Investments Commission (ASIC) and Commonwealth Bank, one of Australia’s “Big 4” banks, are both in favour of regulating cryptocurrencies as financial products. ASIC is Australia’s financial regulator. Commonwealth Bank is one of Australia’s four largest banks. However, players in the cryptocurrency sector have cautioned against taking a blanket approach to cryptocurrencies and their assets.

“The trick is to protect consumers without regulating away well-run domestic digital asset businesses and forcing people to use offshore exchanges subject to less rigorous checks and balances,” closing. “The phrase “the trick is to protect consumers without regulating away well-run domestic digital asset businesses” closes the loop. In the meanwhile, the Chief Executive Officer of a company that provides cryptocurrency on-ramps, named Holger Arians, expressed worry that excessive regulation might “seriously harm” the pioneering role that Australia has been playing in the cryptocurrency industry.

An “overly prescriptive approach” to regulation is something that should be avoided, according to Caroline Bowler, CEO of the Australian cryptocurrency exchange BTCMarkets. Because of this, our digital economy may fall behind in the future, which would suffocate our ability to compete internationally.

In light of the FTX catastrophe in November, Australian lawmakers and their worldwide colleagues have sensed a greater urgency for action. However, the Australian financial authorities have not yet publicly formulated their regulatory framework.

According to Jones, the failure of FTX “puts beyond question” the need for cryptocurrency regulation.

Fred Schebesta, an Australian entrepreneur and investor in the cryptocurrency space, issued a warning in September that accelerating the process of mapping tokens might be harmful for the business.

The complexities of token mapping are not entirely understood, and it is essential for Australia’s “nascent” cryptocurrency economy to “align with the other main markets and their legislation,” as he explained further.

The cryptocurrency advocacy organisation Blockchain Australia shared this sentiment, claiming at the time that if all crypto assets were considered as financial products, it would be detrimental to the investment and innovation of the cryptocurrency sector and lead to the loss of employment associated to the business.

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The Federal Home Loan Banks System is lending to cryptocurrency

by Blockchain News

According to a report that was published by The Wall Street Journal on January 21, the Federal Home Loan Banks System (FHLB) of the United States is reportedly lending billions of dollars to two of the largest cryptocurrency banks in an effort to mitigate the effects of a surge in withdrawals. This move was made in response to the surge in demand for cryptocurrency withdrawals. The Federal Home Loan Bank is a group of 11 different regional banks from all around the United States that work together to lend money to other financial institutions.

The system, which was established in the midst of the Great Depression to provide assistance for home financing, now has over 6,500 members and 1.1 trillion dollars in assets.

According to reports, during the last three months of 2022, the organisation extended a loan of about $10 billion to the commercial bank Signature Bank, making it one of the biggest deals involving a bank borrowing money in recent years.

The Signature’s blockchain-based digital platform was given the go-ahead by the New York Department of Financial Services in the year 2018.

The study compiled by Silvergate indicates that the average deposits made by digital asset customers during the fourth quarter of 2022 were $7.3 billion. This figure represents a considerable decrease when compared to the amount attained during the third quarter, which was $12 billion.

Following the failure of FTX, traditional finance has been immune to crypto contagion; but, according to the paper, FHLB loans to crypto-exposed institutions might raise that risk.

Senator Elizabeth Warren made the following statement to the WSJ: “this is why I’ve been warning of the dangers of allowing crypto to become intertwined with the banking system.” She claimed that taxpayers should not “be left holding the bag for collapses in the crypto industry,” which she referred to as a market that is full of “fraud, money laundering, and illicit finance.” Senator Warren is a member of the Democratic Party.

The bankruptcy of the FTX group produced a ripple effect across the cryptocurrency business, which affected a number of other firms.

The most recent event to take place was on January 19, when cryptocurrency lender Genesis filed a petition for protection under Chapter 11 of the Bankruptcy Code. Genesis is reported to have liabilities ranging between $1 billion and $10 billion.

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GameStop saga reveals legacy finance is rigged, and DeFi is the answer

by Cointelegraph

Earlier this week, Elon Musk made history when he placed his full support behind Bitcoin (BTC) during a Clubhouse stream. When discussing Bitcoin and the GameStop debacle with Robinhood CEO Vlad Tenev, Musk said: “I am late to the party, but I am a supporter of Bitcoin.” This came a few days after Musk changed his Twitter profile, adding “Bitcoin” to his bio.

Interestingly enough, Musk’s public endorsement of Bitcoin comes at a time when legacy financial markets have been openly caught defrauding their own customers, and the Robinhood app is at the center of this fraud. Indeed, the richest man alive told the world that he believes Bitcoin is on the verge of mass adoption amid a backdrop of criminal stock market behavior.

The GameStop saga

For those unfamiliar with these events, the GameStop saga is a “David and Goliath” story that started out with a community of online traders on the subreddit r/Wallstreetbets bringing down hedge funds — clawing away at billions of dollars in institutional short orders. A short order is a type of order that allows investors to profit from the demise of a company.

After retail investors realized that hedge funds shorted GameStop for 150% of its entire public stock — i.e., more shares than existed — a group of 2 million (now 8 million) Redditors figured out that by buying the stock and not selling, hedge funds that shorted GameStop would lose billions. And thus it was. By Jan 29, the loss tallied $19.75 billion as word spread through the power of the internet.

However, as soon as retail investors began winning, the long-reaching tentacles of centralized corporations were able to stop the game entirely, freezing trading on key exchanges and trading infrastructure so that hedge funds could reposition without losing everything.

Decentralization and the “American dream”

Indeed, one of the largest fictions of our time is the story of free markets. This concept embodies the “American dream,” whereby anyone who chooses to follow their dreams can do so (at considerable personal risk). This includes the ability to be rewarded (or punished) for having a stake in the financial game, which should operate under strict rules.

Whether it’s high-frequency trading, synthetic derivatives, infinite money-printing or some combination of all three, the stock market rewards a handful of insiders who game the system and play by a different set of rules than everyone else.

It’s important to realize that the issue is not the game itself — free markets are the most efficient way of proper value transfer, if done correctly. The issue is that rules only apply if institutional players win, otherwise they can be broken, suspended and revised with minimal consequences for those with friends in high places.

This drove many Redditors to the point where, knowing that the market is rigged, they did not care about losing money, provided hedge funds lose billions. It started out as retribution against those responsible for the 2008 financial crisis and the misery that many had to endure because of it.

This Reddit post paints a good picture of the motivations that inspired millions of people to band together against crooked financial conglomerates. Of course, other motivations — such as profit motives — were undoubtedly at play as the market fed on its own self-reinforcing mechanisms. Regardless, the system’s true colors are now out there for all to see.

And while legacy financial media has attempted to steer the narrative in a certain direction, the truth of the matter is that this story is apolitical and exposes the fact that ordinary everyday people are not allowed to win. Irrespective of intentions, the stock market is shown to be a means to entrench and exacerbate poverty in a rigged game that only benefits those who are already wealthy.

The start of a journey

However, the journey doesn’t end here — for there is a parallel system that is not controlled by Wall Street or central bankers, and it’s growing as we speak. With a market capitalization of over $1 trillion, cryptocurrencies are fast becoming the new frontier for financial markets that have no allegiances.

On top of being a new technology that democratizes markets, there is now a crystal-clear reason for investors to opt out of the old system and enter the new one.

Bitcoin started this revolution 11 years ago, and it does not stop there. An entirely new financial ecosystem is being built on Ethereum from the ground up, which has sprung a wealth of decentralized finance products with various trade-offs and use cases.

This time last year, capital in DeFi products reached the $1 billion landmark. Today, that figure is approaching $30 billion, according to DeFi Pulse.

With this backdrop, the future of financial markets seems closer than ever before.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Christopher Attard is a journalist turned cryptocurrency writer and analyst. Having worked in both the blockchain events sector and traditional finance over the years, he now covers Bitcoin extensively in a semiweekly newsletter. Christopher also works with various small and medium-sized enterprises in the space as a writer and content strategy consultant.