CBDCs are often seen as an alternative or competitor to cryptocurrencies. Only BTC and XRP managed to end the first quarter of the year on a positive note.
Thomson Reuters Regulatory Intelligence has issued the special report “Cryptos on the Rise”, which expands beyond cryptocurrencies like Bitcoin.
Considering the need to develop a regulatory framework, it investigates other cryptocurrency-related instruments such as central bank digital currencies (CBDCs), non-fungible tokens (NFTs), and stablecoins, and highlights policy work in key countries.
Some Misconceptions Examined
The report examines some of the misconceptions that persist about cryptocurrencies, as well as the ramifications for financial stability and the future of money.
In this regard, while there are some structural similarities between crypto assets and central bank digital currencies, CBDCs are best described as the digital equivalent of a country’s fiat currency. The most advanced CBDC so far is China’s digital yuan.
Within the universe of cryptoactives, we also find stable coins or stablecoins, which are a liability of private entities that seek to maintain stability in their price (generally in relation to stable assets such as fiduciary currency).
The report defines a cryptoasset as “a type of digital asset that depends primarily on cryptography and distributed ledger or similar technology.” Such is the concept supported by the Financial Stability Board. In contrast, the Financial Action Task Force, using the term ‘virtual asset’, conceptualizes it as “a digital representation of value that can be digitally traded, or transferred, and can be used for payment or investment purposes”.
The latter definition is not limited to digital assets that depend on cryptography; instead, it encompasses Bitcoin and stablecoins.
Market Technical Analysis
According to a report delivered by CoinGecko, the top five cryptocurrencies suffered losses in the first quarter of 2022, in stark contrast to the exuberance and astronomical gains of 2021. Below we explain further.
Cardano (ADA): its price has increased by 4.69% in the last 7 days, but has fallen by 2.37% in the last 24 hours. The current price is $0.51565 per ADA. Cardano is 83.37% below the all-time high of $3.10.
PAX Gold (PAXG): its price has increased by 2.66% in the last 7 days. The price has increased by 0.17% in the last 24 hours. The current price is $1,767.69 per PAXG. PAX Gold is 49.32% below the all-time high of $3,487.68.
Chainlink (LINK): its pricehas increased by 10.87% in the last 7 days. The price has decreased by 4.72% in the last 24 hours. The current price is $7,484 per LINK. Chainlink is 85.85% below the all-time high of $52.88.
Ocean Protocol (OCEAN). Its price has increased by 9.12% in the last 7 days. The price has decreased by 5.87% in the last 24 hours. The current price is $0.194782 per OCEAN. Ocean Protocol is 89.96% below the all-time high of $1.94.
IOTA (MIOTA): its price has increased by 12.32% in the last 7 days. The price has decreased by 2.02% in the last 24 hours. The current price is $0.325777 per MIOTA. IOTA is 94.27% below the all-time high of $5.69.
In short, In the midst of a bear market declared in technical recession in July 2022, opting for a crypto investment now may be a bit risky, due to its high volatility.
However, many governments have already enacted laws or tax statutes, which can contribute to the regulation of prices in these assets that are currently considered high-risk investments.
By Audy Castaneda