Read this before October 2021 if you’re in crypto!

For those of us who believe in the concept of decentralization that underpins Bitcoin, I believe we are shortly going to receive a shock in the form of new regulations. The wealthiest countries in the world are snapping at the heels of the crypto universe and are looking at ways they can use financial regulations to bring fintechs, exchanges and crypto owners into line.

What do governments want to restrict?

Here’s a list of ‘things’ they are planning to target:

  • Peer-to-peer transactions
  • Stablecoins
  • Private wallets (phone, desktop, cold storage)
  • Privacy (privacy coins, decentralized exchanges, TOR and I2P)
  • Former ICOs & future projects (NFTs, DeFi, smart contracts, second layer solutions and more)

What is their intention?

At it’s most basic, you could say that they want to know EVERYTHING!

They want to:

  • Businesses active in crypto to be licensed and regulated like banks
  • Ensure full transparency for all transactions
  • Have the ability to freeze crypto assets belonging to persons or countries they believe are a ‘risk’
  • Force the disclosure of user information for all transactions
  • Revoke licenses of any that don’t comply with regulations.

They want control of a space that emerged precisely as a reaction to government and bank controls on money, both of which allowed a global financial crash to happen in 2008.

Why do governments suddenly want more regulations?

The answer is fear. Wesley Thysse in his document “Government Planning Worldwide Regulation of Bitcoin”, he points to one event that suddenly made them sit up and take real notice of cryptocurrencies, and that was Facebook’s 2018 announcement that it intended to create and launch a ‘so-called’ stablecoin. As Thysse says, “Until then they didn’t see cryptos as a risk to the global financial system.”

Why did Facebook’s Libra coin, as it was called at the time, send a ripple of unease through wealthy governments? Because Facebook’s billion users would have access to an instant payment system that was faster and more importantly cheaper than anything offered by the existing financial system.

Governments and the central banks huddled together in talks about what to do, and engaged an organization called Financial Action Task Force (FATF). Its goal is “to protect the integrity of the global financial system.” A real Big Brother!

FATF has already passed similar legislation for global governments, and it is the organization behind the rule insisting that all cryptocurrency exchanges that exchange fiat for crypto have the same KYC and anti-money laundering requirements as banks. What they will do now is turn their attention to all the elements of the industry outside this kind of control and as Thysse says, “declare what is, and isn’t acceptable.”

In 2018 FATF set out to control money laundering and terrorist financing, but now it is going much farther, and they are making swift progress. The document anyone in the crypto space should be looking at right now is FATF’s ‘Guidance for a risk-based approach to virtual assets and VASPS’ (GVA). This is due to be implemented in October 2021. Furthermore, it is impossible to move FATF out of its powerful position, because the organization is protected by the Vienna Conference on Diplomatic Intercourse and Immunities, which means they enjoy immunity with regard to their actions and are unburdened by the rules the rest of us must live by.

The so-called public consultation on the GVA was a farce, as they only chose the feedback that suited their agenda. They have delayed the implementation of the GVA until October, but after that expect to see their recommendations being implemented at national level, and in our legal systems. You should also note that the GVA will not apply to central bank-issued digital currencies. So, the agenda is very clear!

It may not be all bad news

As much as those dedicated to crypto may be horrified by all this, let’s take a moment to look at a possible upside: regulations may just pave the way for mass adoption, something the crypto community has long been waiting for. But at what cost? However, I urge you all to read the FATF GVA, because in just a few months it is going to start affecting your life, and most likely it won’t be in the way you would like.

USDC stablecoin is in the limelight

It’s noticeable that in today’s leading cryptocurrency press, i.e. Coindesk and Cointelegraph, the USDC, a Circle stablecoin, is receiving a lot of media attention.

Cointelegraph has a story based on recent Messari research, which has revealed that USDC is growing much faster than Tether in 2021 and is “emerging as the dominant stablecoin on Ethereum thanks to its popularity in DeFi.” The stablecoin has also taken a chunk of Tether’s market share, and researcher Ryan Watkins predicts that in the coming weeks, this could result in Tether’ share of the stablecoin supply on Ethereum falling below 50%.

Watkins also pointed out that half of the total USDC supply is now sitting in smart contracts and is worth around $12.5 billion. It has also become “the preferred dollar-pegged asset staked in smart contracts in DeFi protocols,” he says. Messari estimates that more than 40% of the stablecoin supply on Ethereum is USDC.

The USDC supply has surged by more than 1,820% since the beginning of 2021 when there was just 1.3 billion circulating and currently stands at about 25 billion, according to Circle’s figures.

One of USDC’s attractions now is a new product called Compound Treasury, which is offering 4% interest on USDC to institutions. Furthermore, This week Coinbase announced it would pay 4% interest on USDC holdings, giving the stablecoin a further boost.

More blockchains to adopt USDC

Meanwhile, over at Coindesk the focus is on USDC adoption by more blockchains. At the moment it is native to four blockchains, but the report says, “We anticipate that in the coming months USDC will become available on Avalanche, Celo, Flow, Hedera, Kava, Nervos, Polkadot, Stacks, Tezos, and Tron.”  Following USDC’s launch in 2018, it expanded to Algorand, Stellar and Solana in 2020.

The USDC administrator, CENTRE, which is a consortium run by crypto exchange Coinbase and payments firm Circle, said expanding to other chains helps “drive individual and enterprise adoption of open blockchain technologies.” The announcement also said, “We anticipate that USDC on these blockchain platforms and multichain protocols will further accelerate the use of the world’s fastest growing digital dollar currency.”

The potential expansion to other blockchains follows announcements “showing momentum behind USDC as an interest-generating savings vehicle.”

Integration of USDC into other chains won’t happen immediately, but will probably be spaced out over the rest of this year.