After the European Central Bank (ECB) and Christine Lagarde, the Banque de France which compared the bitcoin phenomenon to “tulipomania”, it is the turn of the American Federal Reserve (Fed) to warn against cryptocurrencies. And rely on this April’s surprising crash to justify his warning: “These events show the need for clear regulatory safeguards,” Lael warned Brainard, the new vice president of the US central bank.
As cryptocurrencies are gaining more and more notoriety, with various categories of investors, including institutional funds, crypto-assets have experienced an unprecedented slump following an algorithmic move on a stablecoin. The market for these decentralized assets, on which the ECB has identified 16,000 cryptocurrencies, it lost more than half of its value, going from a $ 3 trillion valuation to $ 1.4 trillion – in just six months.
From bitcoin he still can’t climb the slope and cross a plateau, around $ 29,000 on Friday, a drop of more than 25% in a month according to the Bitstamp website. From a record $ 66,000, the drop is 57%.
Consequences in El Salvador
This unprecedented decline, while bitcoin has never returned to its initial value, has consequences for some states that have – or will – legalize bitcoin as an official currency. In El Salvador, traders are still required by law to accept bitcoin as a payment currency, but now the cryptocurrency is burning their fingers and most are rushing to exchange it for dollars, which is less risky.
Cryptocurrency Crash Comes Bad: IMF Negotiations for $ 1.3 Billion Loan for El Salvador, whose public debt is around 90% of GDP. There, only 23% of the population has a bank account.
But President Bukele announced that he is taking advantage of the drop in bitcoins to buy 500, which has increased the country’s cryptocurrency reserves, now to 2,301 bitcoins, each worth around $ 30,000 today.
The central authorities, who had warned against these risks, are therefore not stingy with criticism: “the measures we are taking now, both on the regulatory framework and on the digital dollar, will have to be robust for the future evolution of the financial system”, he said. added Lael Brainard.
Regulation is becoming stricter … even in Portugal
The trend towards regulation is confirmed everywhere. Portugal intends to fill the legal gap that prevents the taxation of virtual assets and made them particularly attractive to cryptocurrency investors, the Portuguese finance minister said Thursday.
“The government intends to legislate on this, we will not keep this vacuum,” said Fernando Medina during a meeting with the foreign press in Lisbon.
The government wants to present “as quickly as possible” a new legal framework that guarantees the maintenance of the balance between fiscal “fairness” and international “competitiveness” of the country, added the minister.
Portugal is currently one of the few countries in Europe where cryptocurrency transactions are not “taxable” because they are not considered currencies or financial assets, according to an opinion issued by the tax administration in 2016 and still in force.
Prioritize digital currencies of states
At the same time, Washington is considering creating a digital dollar. President Joe Biden asked the Treasury Department – equivalent to the Ministry of Economy and Finance – in March to present him with a report on the “future of money” within six months.
The Fed, which has been thinking about it for several years and published a report in January, the first phase of a public consultation, is for its part in charge of studying the steps to be taken.
“No decision has been made as to whether a US central bank (CBDC) digital currency will be part of that future,” Lael Brainard clarified. And to conclude: “It is important that the United States play a leading role in the development of standards governing international digital financial transactions involving (the digital currencies of central banks)”.