CLO IQeon - about tightening regulation of cryptocurrencies
Dear friends, we are continuing the “Opinions'' section, in which IQeon experts share their views on what is happening in the decentralized world. In this issue the CLO of the project Alexander Paramonov speaks about tightening of cryptocurrency regulation.
While the growth of cryptocurrency market capitalization takes place, digital assets are attracting more and more attention from regulatory authorities. The governors of various states are adopting new laws concerning cryptocurrencies.
Recently, the governments of both European and Asian states have set for a course of tightening of digital assets regulation, thus seeking to protect unqualified market participants from monetary losses due to price fluctuations, debar the financing of terrorism the sale of prohibited goods for cryptocurrency. Under the pretext of illegal activity, step by step, the cryptoindustry defers the will of the authorities, and, according to Alexander Paramonov, the ultimate goal of governments may be a total control over the global cryptoindustry, similar to the regulation of the financial services and securities.
So, in the territory of the EU, it is planned to introduce a total ban on anonymous electronic wallets by 2024. Also, the European Union maintains the tendency of tightening the rules for the circulation of cryptoassets and carrying out a verification of market participants for possible money laundering and involvement in terrorism. However, at the same time, regulators understand that a strict ban on cryptocurrencies can lead to a shortage of tax revenues and that in general, cryptocurrencies are difficult to ban.
“Crypto assets are still a new technology with undiscovered potential. From time to time, certain countries change their position in relation to cryptocurrencies, but both their supporters and opponents are moving at different speeds towards the well-ordered regulation in the sphere of cryptoassets. In general, it is important to note that the cryptocurrency industry with a capitalization of more than $ 2 trillion is a tasty piece of the pie, which is interesting to the authorities, at least in the context of a promising new source of tax revenues, “ Alexander comments.
In Asian countries, in particular in China, the position is even tougher than in the EU.
So, in the Heavenly Empire, since June 2021, the law has prohibited financial institutions and payment services to provide any services related to cryptocurrencies, and many suspects in illegal operations related to the use of cryptocurrencies were punished. And even on the popular Chinese social network Weibo, all user accounts with the notes of crypto were blocked.
“Alternative to the European Union, China, as the second world largest economy in the world , has begun to protect the national economy more aggressively from external influence, especially in recent decades. Therefore, cryptocurrencies, as a fairly successful example of the implementation of an autonomous and rather self-sufficient ecosystem, contradicts the vision of the Chinese authorities in the context of the future development of the country. Anything that is not under the control of the regulator must cease its operations on the territory of the country or obey the requirements of the government. The emergence of the digital yuan - DCEP - became a clear demonstration of the desire of the Chinese officials to take advantage of digital assets, but in a centralized and controlled embodiment, ”Alexander says.
From Alexander’s point of view, the current tendency with tightening regulation of cryptocurrencies will continue in the foreseeable future. At the same time, it is difficult to predict how it will affect the cryptoindustry as a whole, since the sphere of digital finance is a heterogeneous segment of the global economy.
“In addition to the cryptocurrencies themselves and such familiar tokens as USDT, the rapid growth in the capitalization of the digital asset market is at least associated with the hype around DeFi projects and NFTs, which still remain outside the sphere of effective influence of the authorities. I suppose that in the coming years the governors' attention will be directed on them, and it is possible that the next large decrease in cryptocurrency capitalization will be associated with a successful attempt of putting pressure from an influential regulator of one of the leading countries through DeFi projects, “ Alexander Paramonov believes.
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