British firms, ECB, Government and Bank of England – on the introduction of cryptocurrency

British firms are confident that introducing cryptocurrency will take less than ten years.

Companies in the United Kingdom are most confident about the future of cryptocurrencies, believing that in less than ten years, they will see its widespread adoption.

Nearly 70% of the 250 UK companies surveyed, including banks, hedge funds, pension fund managers and brokerage firms, said they currently rely on cryptocurrency products. In addition, 67% actively recommend their clients to invest in them.

“Over the years, as cryptocurrencies have moved from the fringes of the financial ecosystem to the forefront and into the centre of mainstream investment, many of the world’s largest marketplaces now cater to retail and institutional crypto needs”, said Julian Sawyer, CEO of Bitstamp.

He said that the asset class has passed its era of existence, and “now the question is about development.”

In addition to businesses, Bitstamp ‘s first survey Crypto Pulse also captured the opinions of over 1,000 consumers, with nearly 40% confirming they would use cryptocurrencies to buy products online.

Cryptocurrency regulatory framework. Security breaches and price volatility have created significant challenges for demographics, pointing to more widespread use once the risks are addressed.

A series of hacks like the Mt event Gox in 2014 and the subsequent price fall threatened the ecosystem’s future. But, slowly and steadily, retail and institutional adoption has taken place, bringing the cryptocurrency market capitalization to nearly $3 trillion.

By November 2021, Bitcoin (BTC) hit an all-time high of $ 68,789, and Ethereum (ETH) topped $4,800. In addition, leading firms such as PayPal, Cash App and Tesla both have some stake in the crypto game and are optimistic about the ecosystem’s prospects, while El Salvador has made bitcoin legal tender.

The path for cryptocurrencies may not be easy as firms face increasing pressure from regulators. However, amidst the turmoil, the adoption rate is rising step by step, much to the delight of enthusiasts.

Bank of England Governor: ” Cryptocurrencies have no intrinsic value”

Bank of England Governor Andrew Bailey warned about the risks of cryptocurrencies, saying they have no intrinsic value.

The governor compared buyers of crypto assets with collectors. From his point of view, crypto investors are the same people who collect things in the digital space. Therefore, he concludes that bitcoin is not a suitable means of payment but does not negate the value of blockchain technology.

Crypto assets are a form of digital currency that use mathematical calculations to create a unique piece of code that customers invest in.  

Bitcoin was the original digital currency launched in 2009 to reduce the influence of the role of the state and financial institutions. However, many similar cryptocurrencies and digital art called non-fungible tokens (NFTs) have recently been created.

During the pandemic, interest in such assets skyrocketed, with the market size increasing from about $780 billion (£624 billion) at the start of 2021 to about $1.23 trillion (£984 billion) in 2022.

The events of the winter of 2018-2019, which are called the “crypto winter”, brought heavy losses. As a result, many investors have lost billions. Moreover, this market phase gave rise to fears that a deep correction in the primary stock market would soon follow.

On May 12 this year (2022) alone, the cryptocurrency market saw an outflow of over $200 billion (£160 million).

Bailey said the underlying technologies for creating and running cryptocurrencies are essential, stressing that the Bank of England is considering making its digital currency. The bank’s leading position on this issue: before proceeding with the development, it is necessary to determine whether society will live in a world of digital currency and whether it will replace old-fashioned payment methods. Then it is required to determine which form of digital money is most likely to become generally accepted.

Bailey also clarified that he does not own bitcoin or any cryptocurrency.

The Financial Conduct Authority of England has warned that it is difficult to curb the public’s enthusiasm for risky assets, particularly cryptocurrencies promoted by celebrities.

The UK government will not require collecting personal data from clients of crypto companies

Unlike the EU, in England, the Treasury has decided not to require cryptocurrency companies to collect the personal data of users using non-hosted wallets.

In a June report, the Treasury of England acknowledges that so many users who legally own cryptocurrencies use non-hosted wallets, and the authorities have no evidence that they are being used for illegal activities.

Based on this, cryptocurrency companies will only collect user data in the case of transactions that are determined to pose an increased risk of illegal financing. It formed this out-of-the-box solution based on feedback received by the Treasury in consultation with regulators, industry leaders, academia, civil society and government.

The Treasury has previously reported that cryptocurrency transfers are subject to Financial Action Task Force (FATF) standards, meaning that crypto companies must identify both the sender and recipient.

But now, the decision has been made to abandon such a measure. In particular, it is proposed to use Zero-Knowledge technology Proof, which will allow you to conduct a comprehensive check of customers but not disclose users’ data.

All of the above recommendations in the report of the Ministry of Finance will most likely be presented this fall, and they must be considered and approved by the country’s parliament. Recall that the European Parliament voted to ban anonymous cryptocurrency transactions in March.

It took similar measures in Lithuania, where the government also introduced a complete ban on “anonymous wallets”.

But since England is not part of the EU, it can form its own rules in the cryptocurrency market regarding customer verification. The British authorities are confident that such a measure will not increase the number of crimes related to cryptocurrencies.

However, there are other opinions regarding this issue. Some experts believe that the weakening of control may, on the contrary, lead to an increase in illegal transactions with virtual assets. Who will be suitable will be clear only after the parliament decides and begins operating on the country’s territory.

Christine Lagarde: Staking and Lending must be regulated   

We think our readers will be interested in the opinion expressed by the head of the ECB, Christine Lagarde.

Speaking before the European Parliament, the head of the ECB, Christine Lagarde, complained to the deputies that they are slow to adopt laws regulating cryptocurrencies, known as MiCA II. According to Christine Lagarde, the EU needs to regulate staking and lending, the basis for the functioning of decentralized finance.

According to K. Lagarde, since staking and landing are not adequately regulated, companies are taking a considerable risk. For example, she pointed to Celsius, which did not indicate their financial problems, leading to market problems.

In addition, other decentralized platforms also limit the replenishment and withdrawal of deposits without explaining any reasons for such decisions. The ECB believes this creates additional financial stability risks but cannot assess them because the relevant legislation has not been adopted.

Therefore, according to Christine Lagarde, it is necessary to develop the MiSA II code of laws as soon as possible. Otherwise, this crisis will be permanent, and investors will continue to suffer severe losses.

The head of the ECB also reminded the MEPs that the share of shares of public cryptocurrency companies on stock exchanges is growing, and the number of government bonds in stablecoin funds is increasing. Therefore, if the DeFi crisis expands, stock exchanges will also be affected.

In turn, representatives of cryptocurrency companies believe that K. Lagarde’s initiatives are harmful to PoS cryptocurrencies. Recall that earlier in the European Parliament tried to make cryptocurrencies more environmentally friendly by limiting PoW. Unfortunately, this almost led to a total ban on Bitcoin throughout the European Union.

Lagarde’s position is understandable, as the financial system is under intense pressure from high inflation and declining GDP in the EU. She does not need problems with the cryptocurrency sector at all. She takes the classic position of a European bureaucrat – maximum control and regulation of the sphere of virtual assets.

When it adopted the legislation in MiSA II, the European Parliament did not specify; the debate on this issue will continue soon.

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