Crypto weekly update
7. July 2022  • clock 5 min •  Daniel Mitrovsky

European Union unveils regulatory framework for cryptocurrencies – Crypto Weekly Update

This week, the total market capitalization exceeded 896 billion EUR. The increase at the 7-day interval is 7.43%. Bitcoin increased by 3.01% during the week to a current value of over €19,900. Bitcoin dominance is 42.4%.

Source: Coinmarketcap

European Union Unveils Regulatory Framework for Cryptocurrencies

Officials from the European Union have agreed on a landmark law that will make life tougher for crypto issuers and service providers under a new single regulatory framework. 

Known as the Markets in Crypto-Assets (MiCA) framework, the provisional agreement includes rules that will cover issuers of unbacked crypto assets, stablecoins, trading platforms and wallets in which crypto assets are held.

In the stablecoin area, in the wake of the dramatic collapse of the Terra platform, regulators will require stablecoin issuers to create a sufficiently liquid reserve to back the stablecoin. Member of the European Parliament Ernest Urtasun explained on Twitter that the reserves will have to be legally and operationally segregated and insulated” and must also be “fully protected in case of insolvency.”

The big oddity in the stablecoin area is the introduction of a transaction limit of $200 million per day for individual stablecoins. This transaction limit is significantly lower than the current transaction volumes of the popular USDT or USDC stablecoins, which cumulatively total up to 55 billion per day. Many users on Twitter have already labeled this condition as completely unrealistic and unworkable.

Cryptocurrency service providers will now have to comply with strict requirements aimed at protecting consumers and may also be held liable in the event of loss or theft of crypto assets. In addition, trading platforms will be required to provide a white paper for any tokens that don’t have a clear issuer, such as Bitcoin (BTC), and they will be liable for any misleading information. Also, crypto platforms will be required to inform clients about risks of losses associated with crypto assets and rules on fair marketing communications.

As regards so-called “unhosted crypto wallets”, the new rules foresee that exchanges or other crypto platforms will be obliged to ascertain information about the holder of such a wallet for transactions above €1,000. This means that if a customer of an exchange sends or receives more than €1,000 to or from its own unhosted wallet, the exchange will have to verify that the unhosted wallet is actually owned or controlled by that customer.

However, this is currently only a preliminary agreement on the rules, which still needs to be approved by the European Council and the European Parliament. Source

Bitcoin Had One of the Toughest Quarters in History

The king of cryptocurrencies, Bitcoin, posted its steepest quarterly loss in 11 years during the last quarter. According to data from blockchain analytics platform Skew, the price of Bitcoin plunged by a staggering 56.27% between April and June under the impact of unfavorable market conditions and events.

Last quarter was not only Bitcoin’s worst quarter in 11 years, but also the second worst in its history. The only time Bitcoin experienced a bigger drop was in the third quarter of 2011, when Bitcoin fell by 66.62%, from $15.40 to $5.14

The latest market meltdown happened amid a cascade of dramatic events, such as the collapse of Terra ecosystem in May and the liquidity crisis faced by some crypto lending firms and hedge funds, including Celsius and Three Arrows Capital (3AC).

However, the unfavorable situation does not only affect the cryptocurrency market. Geopolitical tensions, growing uncertainty in global financial markets or the Federal Reserve’s moves towards raising interest rates have created selling pressures in traditional equity markets too. The tech-focused Nasdaq Composite is down by more than 30% since the start of the year, the S&P 500 is down 21%, while the Dow Jones Industrial Average fell 15.88% over the span.

But investment giants know that huge declines in financial markets are a great buying opportunity. Earlier this week, Microstrategy stated that it bought an additional 480 bitcoins for around $10 million at an average price of $20,817 per BTC, while the president of El Salvador announced that the country under his leadership bought another 80 bitcoins during the dip at an average price of $19,000 per BTC.

Feel free to take advantage of the cryptocurrency market slumps with Fumbi. Source

Italian Government to Provide Subsidies Aimed at Blockchain Projects

The Ministry of Economic Development of Italy has announced that certain blockchain-focused projects will be eligible to apply for government subsidies from September.

According to Tuesday’s announcement, public and private research firms will be able to apply for funding from the government for the development of projects related to artificial intelligence, the Internet of Things and blockchain technology. The fund aimed at projects in these spheres will have an initial budget of €45 million.

“We support companies’ investments in cutting-edge technologies with the aim of encouraging the modernization of production systems through management models that are increasingly interconnected, efficient, secure and fast,” said Minister of Economic Development Giancarlo Giorgetti.

According to the decree, companies of any size will be eligible to apply for subsidies provided the funds will be used for IoT, AI or blockchain in sectors including industry and manufacturing, tourism, health, the environment and aerospace. Source

Celsius is Partially Safe

New Jersey-based lending platform Celsius repaid $114 million of its bitcoin loan on Monday, which was subsequently joined by another $40.8 million repay on Tuesday. The WBTC-A vault 25977, owned by Celsius, is now tagged as low risk.

Following the gradual addition of collateral and repayment of the loan, the liquidation price of the open position has been reduced to $2,722.06, whereas as recently as Monday the liquidation price was at $8,838.57. Many crypto experts agree that there is a very low probability of Bitcoin’s value falling below $2,722.06 during the current bear market.

In addition, Celsius paid off its $50 million debt on the Aave platform on Sunday. Recently, Celsius has been steadily reducing its collateral in positions and gradually paying off debts. Thus, it seems that the platform is making a really high effort to restructure its liabilities in an attempt to eliminate speculations regarding insolvency. 

Over 22 days have passed since the platform’s activities were halted. Investors are still in tension and waiting impatiently to see how the situation surrounding Celsius will develop. Celsius, however, continues to pay its users weekly bonuses, which cannot be withdrawn from the platform yet as withdrawals are still suspended. Source

Bankruptcy of Three Arrows Capital

Crypto investment firm Three Arrows Capital, also known as 3AC, filed for Chapter 15 bankruptcy on Friday. The Chapter 15 bankruptcy filing prevents creditors from seizing the company’s assets in the U.S. With this move, 3AC is trying to salvage at least some of its assets.

A British Virgin Islands court ordered the liquidation of Three Arrows Capital earlier this week. The fund, founded by former Credit Suisse traders Zhu Su and Kyle Davies, managed an estimated $10 billion of assets as recently as March.

They were likely doomed by the collapse of blockchain platform Terra, where 3AC reportedly lost more than $200 million. In addition, the massive drop in the value of Bitcoin and other cryptocurrencies caused the company to not have enough capital to add collateral in over-leveraged positions, causing them to liquidate.

The investment company is currently represented by the law firm of Latham & Watkins. Its representatives said that “the debtor’s business collapsed due to extreme fluctuations in the cryptocurrency markets,” adding that they are currently unaware of the whereabouts of 3AC founders Zhu Su and Kyle Davies. Source

Interesting Fact: JP Morgan Expects an Early End to the Bear Market

The historic deleveraging of the cryptocurrency market could be coming to an end, which could signal the close of the worst of the bear market, according to a JPMorgan analyst.

JPMorgan strategist Nikolaos Panigirtzoglou, in a commentary on Wednesday, highlighted the increased willingness of healthy crypto firms to bail out other companies that have run into trouble through their irresponsible actions. In addition, Panigirtzoglou added that the net leverage indicator in the cryptocurrency market suggests that deleveraging is already well advanced.

In addition, Panigirtzoglou added that the severity of deleveraging of some crypto firms may be so severe, that they “suggest that the tremors from this year’s crypto market fall continue to reverberate.” Source

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Daniel Mitrovsky


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