Cryptocurrency Regulation in the United States Is under the Influence of The Brussels Effect

Alexander Salazar
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Cryptocurrency Regulation in the United States Is under the Influence of The Brussels Effect

The GDPR, also called The Brussels Effect, has influenced regulation in the United States as an example of a global regulatory standard. The EU Markets in Crypto-Assets (MiCA) regulation will enter into force in the fourth quarter of 2022, with a commendable understanding of the industry.

The Fourth Amendment in the United States and Article 8 of the European Convention on Human Rights protect the right to privacy. Despite varying definitions, most people expect reasonable privacy in their correspondence, homes, relatives, and friends.

Businesses, families, and individuals started generating data unprecedently, making existing privacy mandates increasingly uncertain in the 1970s. That information explosion became a problem and gained momentum during the next ten years. Therefore, the European Union (EU) introduced its data protection directive in 1995 to guarantee some fundamental rights regarding personal data.

It is essential to know that an EU directive allows the Member States to determine how it will enter national law. It is a recommendation rather than a regulation to require members to enforce the law.

Since 1995, privacy regulation in the EU went from being a directive to the General Data Protection Regulation (GDPR). The latter became a legal requirement in Europe in 2018.

The GDPR, the benchmark for privacy law, has influenced regulation in other jurisdictions like the United States. Anu Bradford called this phenomenon The Brussels Effect, as it establishes a global regulatory standard.

Cryptocurrency Regulation to Follow the Path of the GDRP

There is a new sector ready to follow this well-traced path going from being an EU directive and regulation to being a global regulatory standard.

For example, Tornado Cash used a protocol designed to disguise financial transactions and increase privacy, but regulators shut it down due to malicious actors. A regulation for decentralized finance (DeFi) would allow the construction of the infrastructures to occur according to the law.

Like in the 1980s, the creation of digital securities and the growth of the DeFi space are unstoppable. Regulation will help support innovators, encourage innovation and protect investors, besides the wide-scale adoption of digital securities trading worldwide.

In the United States, digital stocks fall into a regulatory gray space, with neither the SEC nor the CFTC willing to control them.

Since there have been discussions on regulating digital assets in California, the Senate should push for an amendment to include digital assets. The Digital Financial Assets Act would be payable from 2025 if it received approval.

The European Union Encourages Innovation and Offers Regulatory Models

Contrariwise, regulators in the European Union have dealt with DeFi more quickly. For example, the German Federal Financial Supervisory Authority has encouraged innovation and offered a regulatory model for DeFi elsewhere. Cryptocurrencies are on par with traditional stocks thanks to an amendment to German banking law in 2020.

In addition, the regulation of cryptocurrency markets is accelerating in Brussels. The EU Markets in Crypto-Assets (MiCA) regulation will enter into force in the fourth quarter of 2022, with an 18-month transition period for member states. According to the European Financial Stability and Integration Review 2022, there has been a commendable understanding of the industry.

Although it is still early regarding DeFi, the regulation of digital securities in the EU could follow a path like that of the GDPR. This year, Brussels gave an opinion on asset-based law, which may eventually enter its directive on markets for financial institutions.

By Alexander Salazar

NFT Trading Volume Drops 97%: ENS Outshines CryptoPunks and BAYC

Audy Castañeda
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NFT Trading Volume Drops 97%: ENS Outshines CryptoPunks and BAYC

The retail interest in NFTs presented a constant decrease, observing an annual historical minimum value.

The recent market turmoil has not only affected the major cryptocurrencies, but also the larger ecosystem, also impacting the growth and adoption of non-fungible tokens (NFTs).

Data from Dune Analytics highlighted that NFT trading has experienced a major downturn. From the peak of $17 billion in January, NFT trading volume has fallen to almost $470 million in September, a drop of 97% in nine months.

Is the NFT hype finally fading?

At the beginning of the year, NFTs were the big hype in the ecosystem, as celebrities, artists, and athletes joined the craze.

Big names like GameStop and Samsung announced plans to delve into the NFT space in January, reflecting increased institutional interest in the sector. With NFT sales reaching an all-time high of $17 billion along with growing institutional interest in the space, NFTs dominated “Crypto Twitter.”

Additionally, decreased retail and institutional interest in the space could be seen, as Google search trends for the word “NFT” saw a notable drop.

Retail interest in NFTs was highest in January and has shown a steady decline, currently sitting at all-time low annual levels.

This drop in interest and NFT trading volumes was catalyzed in part by the $2 trillion shed witnessed from the crypto market capitalization, due to tightening monetary policy.

How are the best projects going?

In general, the minimum prices of major NFTs have fallen significantly from their all-time highs. Nonetheless, CryptoPunks have managed to stay afloat and even gain some ground in the short term.

The current CryptoPunks price floor is 67.45 ETH and the 24-hour trading volume is 4.3123 ETH with 15 sales, while in the last 24 hours the CryptoPunks price floor is up 2.37%, according to data from NFT Price Floor.

Last 30 Days NFT Collection Rankings by Sales Volume explained that while top NFT collections such as BAYC, Sorare, Mutant Ape Yacht Club, Otherdeed, and CryptoPunks all saw a loss in floor price as well as buyers and vendors, Ethereum Name Service (ENS), however, was in the green.

ENS sales, unlike most projects, saw a 126.18% increase in the last 30 days, while buyers and sellers also saw a healthy increase. However, during the last 24 hours, CryptoPunks had the highest sales, followed by Sorare.

Recent reports disclosed that over $100 million worth of NFTs were stolen between July 2021 and July 2022. With trading volumes declining and scams still prevalent, it remains to be seen what the fate of NFTs will be this year.

By Audy Castaneda

CoinGecko Co-Founder Talks about Investing During the Bear Market

Audy Castañeda
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CoinGecko Co-Founder Talks about Investing During the Bear Market

CoinGecko COO Bobby Ong sat down for a chat at the Token2049 conference.

Speaking at Token2049, CoinGecko COO and co-founder Bobby Ong offered his thoughts on the future of crypto and how crypto adoption fared in 2021.

Token2049, a forward-thinking crypto conference that attracts the likes of Vitalik Buterin, Ethereum co-founder, and FTX CEO Sam Bankman-Fried, chose the brains of Bobby Ong, one of the co-founders of crypto data aggregator CoinGecko, on September 29, 2022.

Ong’s Views on the Matter

With a bird’s-eye view of trading volumes, prices, and exchanges, Ong assessed where he sees the crypto markets going in the next five to ten years.

“We will see millions of tokens, both fungible and non-fungible tokens. Blockchain is eating the world,” said Ong, borrowing a famous mantra, “software is eating the world,” from a16z venture fund Marc Andreessen.

In the long term, Ong says that cryptocurrencies will have their Airbnb and Uber moments to catalyze mass adoption, ushering in tens or hundreds of millions of users.

Simply put, just follow the money. And the money will be in decentralized finance and NFTs, considering the recent capital investment in the space.

According to Ong, it will be a successful GameFi app that will catalyze mass adoption. GameFi is a niche in the DeFi ecosystem that brings monetization frameworks to Blockchain-based games and often incorporates NFT elements.

“Ninety-nine of them will fail. But maybe just one, and all we need is just one. Like the PUBG of cryptocurrencies, for example, or the Fortnite of cryptocurrencies, everyone plays it.”

Ong founded Coingecko with CEO TM Lee in 2014 to “democratize access to crypto data and empower users with actionable insights,” according to the company website.

Where will the new adoption come from?

According to Ong, future crypto adoption will likely come from countries with weak currencies such as Turkey, Vietnam, and Venezuela.

“People work hard to save, but they have no way to store their wealth safely. And they’re looking for a way to have an intertemporal store of value. And they store value through cryptocurrencies like Bitcoin or Ethereum, or just pure stablecoins like DAI, USDC, USDT instead of holding the national currency,” observes Ong.

And the data seems to support Ong’s theory. In 2021, CoinGecko saw an increase in traffic to the Axie Infinity SLP token page, coming from players in countries like the Philippines. These players turned to playing Axie Infinity to earn more than “$1 or $2” a day, Ong said.

Ong gives his opinion on the personal investment strategy

According to Ong, the increased institutional adoption of cryptocurrencies has led them to take on the properties of a risky asset like tech stocks, a trend that is unlikely to stop during this current bear market cycle.

As for his personal investment strategy, Ong believes in the long game. “So I’m definitely a bag holder,” he joked. You have spent most of the bear market researching rather than investing.

He advises investing 1-10% of an investment portfolio in Bitcoin and Ether, over five to ten years, to beat the current five-year market cycle. If crypto goes up, that number could go to 30% or 40%, but keep in mind that crypto is risky and it could drop to zero.

“And I tell people, if you can’t sleep at night and you keep thinking about your crypto holdings and your crypto portfolio, you probably have too much exposure,” he said.

By Audy Castaneda

A Crucial Victory by Ripple in the SEC Lawsuit Causes the XRP Price to Rising by 10%

Alexander Salazar
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A Crucial Victory by Ripple in the SEC Lawsuit Causes the XRP Price to Rising by 10%

Judge Torres considers the speech by William Hinman could allow obtaining potential impeachment evidence or accusing witnesses at trial. Meanwhile, Judge Netburn ruled that the statements by the former executive about the status of cryptocurrencies as securities were his thoughts, not those of the SEC.

Judge Analisa Torres ordered the SEC to deliver documents from a speech given by William Hinman in 2018. That ruling regarding the former SEC Director of the Division of Corporate Finance allowed Ripple Labs to score a crucial victory.

That happened after a lengthy legal battle that might help determine the fate of many crypto assets.

A previous ruling by Judge Sarah Netburn stated the due process privilege did not protect e-mails and drafts related to the former director. Although the SEC requested clarification and reconsideration of the ruling, Judge Netburn denied it and upheld the clarification motion. A due process privilege is a confidential discussion leading to the announcement of government or policy changes.

After the SEC reiterated its PLR argument, Judge Netburn ordered them to hand over the documents. Then the government agency filed objections to the orders, which Judge Torres overturned.

That forces the SEC to seek documents from the speech of William Hinman in 2018. At the time, the former director said the Ethereum network, cryptocurrencies, and trading do not relate to securities.

Regarding the Ethereum network and its decentralized structure, he pointed out that the offers and sales of Ether are not securities transactions.

The problem with the statements of William Hinman relates more to an SEC lawsuit against Ripple Labs in 2020. The legal process included its former CEO, Chris Larsen, and its current CEO, Brad Garlinghouse. The SEC claimed that the company and the two executives have profited from the illegal sale of XRP as an unregistered security.

Judge Torres Confirms the Previous Court Sentences regarding Ripple

According to Judge Torre, the documents from the speech given by Hinman in 2018 speech were relevant to the case. She said they could allow obtaining potential impeachment evidence or accusing witnesses at trial, including Hinman. Unconvinced that Judge Netburn wrongly ruled that the documents were pertinent to the case, Judge Torres overturned the first objection of the SEC.

Judge Netburn ruled that the speech of William Hinman on the status of cryptocurrencies as securities were his thoughts, not those of the SEC. Since the DPP did not protect them, Judge Torres dismissed the objections of the SEC to this ruling.

Judge Torres agreed with the evaluation of the content of the documents by Judge Netburn, saying it was not legal advice about future or past conduct.

One Step toward Clearer Guidelines for the Cryptocurrency Industry

Ripple and its two executives score a crucial victory thanks to the order to the SEC by the judge. That situation potentially brings them one step closer to dismissing the nearly two-year lawsuit.

The finding is relevant to the future characterization of cryptocurrencies, which the industry has watched closely.

XRP is trading at USD 0.487512 and has accumulated a 3.6% gain over the last week. While its daily trading volume is above USD 3.38 billion, its market capitalization is about USD 24.31 billion, according to CoinGecko.

While the price of XRP is still down 85% from its all-time high, Ripple blames the SEC lawsuit for hoarding coins.

By Alexander Salazar

Road to Sustainability in Ethereum… no matter what?

Audy Castañeda
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Road to Sustainability in Ethereum… no matter what?

Ethereum’s move to PoS makes it much easier, if not easy, to manipulate Blockchains.

The Blockchain world is happy that the long-awaited implementation of “The Merge” change in the Ethereum network has occurred. Not everyone shares this optimism.

This change, which some have already called “the greatest milestone in the history of cryptocurrencies”, aims, among other things as one of its main objectives, to reduce the energy consumption of the network, thanks to the modification derived from the procedure of network mining execution, the “Proof-of-Work” consensus protocol, having changed it to the “Proof-of-Stake” protocol.

The Ethereum community has estimated that energy expenditure will be approximately 99.5% lower than before with PoW. If so, it will be great news for the entire planet; not so good news for the companies in the energy sector that profited at the expense of the miners; and not so desirable news, really, for those who think that Blockchain networks must be fully decentralized if they want to make a significant difference with other technologies.

The Merge: an evil for the decentralization of Ethereum

We have to start by looking at the distribution of mining nodes in the world. We could already observe, even before this milestone, a certain tendency towards centralization in large mining pools associated with venture capital funds, both in China and the US and, to a lesser extent, in other parts of the world.

This was not good news for the health of the Ethereum network since it ultimately meant that an “association” of these miners could alter the chain and, in the worst case, rewrite it. It had not happened yet because the difficulty of the PoW protocol counteracted that hypothetical plan of perverse associated miners.

There was no guarantee that a small miner could mine a block, as has in fact happened a couple of times this year, and ruin the plan.

The PoS protocol is based on the concept that a node that wants to be a validator must commit to the network, keeping a series of blocked ethers as a guarantee of its good work, and that the blocks are proposed by a validator and endorsed by a select group of other validator nodes.

Although the protocol establishes certain randomness in the assignment of validators from time to time, it is very likely that the pool, as a whole, can manipulate the data if the validators of the rounds are all “friends” associated with the same pool.

This would happen more frequently when the benefit now does not come from the mining process itself, but from the tips that the transactions leave to the validating miners, with which the lucrative business they previously had has diminished.

Vitalik Buterin always wanted to use Proof-of-Stake for Ethereum

In statements to certain media, Buterin has defended that he always wanted to have PoS from the beginning, but that he was advised to initially implement PoW in order to extend the Ethereum network to a large enough number of people and cause adoption of the technology along with a perverse situation of dependency of use cases on the network.

It is likely that PoW was used rather because it is a good decision decentralization algorithm, and because a few years ago there was no awareness of reducing the associated energy consumption, nor was there a war in Europe, or a global inflationary economic environment.

By Audy Castaneda

CEOs from Leading Cryptocurrency Companies Quit Due to the Bearish Market and Tight Regulations

Alexander Salazar
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CEOs from Leading Cryptocurrency Companies Quit Due to the Bearish Market and Tight Regulations

Decisions at the peak of the bullish market caused Michael Moro from Genesis and Alex Mashinsky from Celsius Network to resign. Prioritizing decentralization challenges existing regulatory frameworks that strengthen governments, which led Bitcoin fundamentalist Jesse Powell to quit.

Different reasons led the above CEOs to quit the positions they had loved and held for many years. Alex Mashinsky from failed Celsius Network regrets collapsing its balance sheet for USD 1.2 billion.

Regarding Sam Trabucco from digital asset trading firm Alameda Research, he felt so stressed that he decided to relax and prioritize other things. Meanwhile, Jesse Powell from cryptocurrency exchange Kraken found it exhausting to run a large company he co-founded eleven years ago.

Michael Moro from Genesis Trading paid the price for exposing USD 2.4 billion of the company to failed hedge fund Three Arrows Capital (3AC). It became a victim, along with Celsius Network and Voyager Digital, of the credit contagion due to the USD 40 billion collapse of TerraUSD (UST).

Brett Harrison from FTX US never said why he quit his job after just over one year. He raised the number of employees of the nascent cryptocurrency exchange from three to 100.

The Conditions in the Crypto Market Are Changing

According to analysts, the high-profile earnings of CEOs show that the conditions in the crypto market are changing. Profits and cash flows have plummeted due to the current bearish market, a recession characterized by war, high inflation, and runaway founders.

Decisions at the peak of the bullish market caused Moro from Genesis and Mashinsky from Celsius Network to resign. The plan for the reassignment of Saylor as the CEO of MicroStrategy also occurred in that way.

Mobile software will be the main focus of the new CEO of the business intelligence firm. Some consider its move away from Bitcoin as a regret of involvement with the cryptocurrency.

Alex Malkov, the co-founder of Islamic Coin, believes movie makers like Mashinsky have resigned due to cascading bankruptcies. Although the bearish market may be the main reason, he said lawsuits and outright violations of financial laws contributed to it.

Malkov stated that the close attention of financial regulators and the legislative activity cause many senior managers reconsider their actions. He commented that the usual salary privileges for large cryptocurrency companies have decreased due to the bearish trend.

Tighter Regulations on Cryptocurrencies Force CEOs to Quit Massively

After the collapse of the Terra blockchain in May, governments have tightened regulations on cryptocurrencies. That means there is direct intervention from regulators as the industry is entering a new phase.

For centralized cryptocurrency exchanges like Kraken, prioritizing decentralization challenges existing regulatory frameworks that strengthen governments. It is important to remember that decentralization is a crucial principle of the crypto industry.

That situation may have led Jesse Powell, a Bitcoin fundamentalist who defends privacy and individual freedom, to resign. The founder of Kraken said he wanted to promote the industry and refused to block accounts linked to Russia unless the law required so.

Brett Harrison, former president of FTX US, stated that he resigned because the cryptocurrency industry was at various crossroads. However, he expressed his main concern about the arrival of more considerable market participants and the increasing market fragmentation.

By Alexander Salazar

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