Ban on the issuance of algorithmic stablecoins and cross-border crypto payments in the Russian Federation. Main events of the week

Bitcoin has fallen by 3,62% over the past seven days. The asset reached the highest values on September 17, when BTC was trading at $20 189, the lowest values were registered on September 21 — $18 125 per coin. As of September 23, 9:50 UTC, bitcoin exchange rate is $19 020 (according to Binance).

The value of the second most capitalized cryptocurrency, Ethereum, has declined 10,45% in the past seven days to $1308. The native token of the cryptocurrency exchange Binance (BNB) has lost 0,33% and is trading at $274,2.

The total capitalization of the crypto market fell from $1,002 trillion to $0,983 trillion for the week, with bitcoin dominating 37,88%. Ethereum's share is 16,3%.

Advocating for bitcoin on the PoS algorithm

The non-governmental Environmental Working Group (EWG) stated that bitcoin needs to migrate from the Proof-of-Work (PoW) consensus algorithm to Proof-of-Stake (PoS). To that end, the EWG announced the launch of a $1 million advertising campaign. According to the group, bitcoin may be “the cryptocurrency of the past” if it does not take steps to migrate.

EWG senior vice president of government affairs Scott Faber said environmentalists are ready to support all US government efforts to create standards affecting mining. Michael Brune, head of the “Change the code, not the climate” campaign, noted that Ethereum has shown a successful transition to an energy-efficient protocol with much less climate, air, and water pollution.

Russian crypto market news

Ivan Chebeskov, Director of the Financial Policy Department of the Ministry of Finance, said that the development of digital financial assets (DFAs) and digital currencies markets in Russia will not be a trigger for the transition from traditional centralized finance to a completely decentralized system. According to him, the department is now developing a draft law that offers only a mechanism for international payments in cryptocurrency. However, the business is offered to determine the details of the process.

Alfa Bank announced plans to launch its own investment platform, where digital financial assets (DFAs) will be offered for financial instruments of other companies. The initiative may be implemented by the end of 2022, the bank itself will also act as an issuer of similar products and provide access to different types of assets. The key product of the new platform will be monetary requirements.

The Bank of Russia and the Ministry of Finance agreed on the position on the regulation of cryptocurrency mining. Anatoly Aksakov, head of the State Duma Committee on the Financial Market, said that the relevant draft law will be submitted for consideration in the near future. The deputy noted that the Central Bank was “firmly against” the legalization of mining, as it saw it as a threat to the country’s financial system. But later, the regulator softened its position and agreed to legalize cryptocurrency mining in regions with a surplus of electricity. In addition, the agencies are jointly developing a draft law that will regulate the issuance, circulation and other operations with digital assets, as well as international settlements in cryptocurrency.

Boris Glazkov, Vice President for Strategic Initiatives at Rostelecom, a digital services provider, said that Russian regulators should give preferences to local companies to create a metaverse in the country by providing benefits, grants and subsidies. He noted that right now there is no unified metaverse in Russia, and over-regulation will not allow it to emerge.

Valeriy Lyakh, director of the Department of the Bank of Russia for countering misconduct, said that about 60% of illegal financial transactions or payments in favor of Ponzi schemes are carried out in cryptocurrencies. Such precedents have become more frequent in the last six months. Lyakh highlighted two main problems of digital assets. The first is the lack of an anti-money laundering (AML) tool. The second is the lack of a tool to detect manipulation of the asset's price during trading.

The Bank of Russia did not support the proposal to classify crypto investors by their level of financial literacy. The Central Bank noted that “the rate of cryptocurrencies is determined mainly by speculative factors,” so the experience of investors will not help to avoid risks. Also, the regulator once again noted that it does not support the admission of private digital assets to the financial market of the Russian Federation and their use as a means of payment.

The Moscow Exchange prepared a draft law under which depositories will be able to issue depositary receipts for digital financial assets (DFAs). Such documents will be able to circulate on the platform that issues them as securities. As soon as the client will need the underlying asset, they will have to redeem the receipt and get their DFA afterward.

NFT and metaverse news

According to the draft of the European Union Markets in Crypto Assets (MiCA) law, NFTs sold as part of large collections have almost no unique properties or utility, and are therefore subject to the same regulatory controls as cryptocurrencies. According to University of Kentucky law professor Brian Fyre, the wording of the law is equivalent to the EU classifying large NFT collections such as Bored Ape Yacht Club (BAYC), Cryptopunks, Doodles and others as securities.

The Sandbox project will bring its Hong Kong-based metaverse strategy to a new market in Dubai by launching Dubaiverse. Dubai’s virtual world will be created in the image of “Mega City,” a gaming metaverse and virtual cultural hub, created in the image of the financial hub of Hong Kong.

The European Union will present an initiative to regulate metaverses and all activities taking place in virtual worlds. The initiative, which European Commission President Ursula von der Leyen called “key,” is part of what the latest State of the Union letter called “A Europe Fit for the Digital Age.” The EU intends to implement the initiative in 2023.

NVIDIA launched its first cloud-based SaaS solution, called the NVIDIA Omniverse Cloud, which gives developers, corporate teams, and artists the ability to create and use applications for industrial metaverses. The first customers of the new solution include Croatian electric car manufacturer Rimac Group, German electrical conglomerate Siemens and British advertising holding company WPP.

Hennessy Cognac House announced the release of a limited edition NFT collection, Paradis Golden Edition. The drop will take place on September 23, with a total of 500 tokens will be issued, each token will be priced at 1,96 ETH (~$2624). The token entitles the holder to receive a 700 ml bottle of the exclusive Hennessy Paradis cognac.

From the world of mining

Analysts at Hashrate Index shared bitcoin mining data for August 2022. All public miners have continued to increase their hashrate and plan to increase capacity by almost 17 EH/s by the end of the year. The combined hashrate of the entire Bitcoin network could grow to 270-280 EH/s.

Members of the Mohawk Council of Kahnawake, Canadian Indians, in partnership with Kahnawake Blockchain Technologies, will launch a hydropower mining farm in the province of Quebec. The initiative aims to increase income for the residents of the Kahnawake Reservation. The environmental impact of the project will be minimal, as the cryptocurrency mining rigs will be placed in a specially prepared area in shipping containers. This will also make it easier to remove the farm. Residents of the Kahnawake Reservation will receive a certain share of the mined coins after the project is launched.

Stablecoin and CBDC news

A new bill of the US House of Representatives will impose a two-year ban on “endogenously collateralized stablecoins” whose value depends on a cryptocurrency issued by the same issuer. The bill requires the Treasury Department to conduct a study on algorithmic stablecoins and consult with the Federal Reserve System (Fed), the Securities and Exchange Commission (SEC), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC). If authorities vote to impose the ban, it would cover stablecoins whose price depends on the value of another virtual asset of the same creator, and which can be converted, redeemed, or otherwise repurchased at a fixed price.

The European Central Bank (ECB) named partners to work jointly on the digital euro prototype. They include Amazon, which will be responsible for developing electronic payments as part of the project. Spanish bank CaixaBank will develop online peer-to-peer payments for its mobile app, while French payment service Worldline will be responsible for the offline version of the digital euro. Italian company Nexi will set up point-of-sale payments.

On September 22, the Central Bank of Iran (CBI) announced the pilot launch of a central bank digital currency (CBDC), previously planned for November. The authorities noted that the crypto-rial is designed to help improve access to finance, but the asset is not positioned as a competitor to major cryptocurrencies such as bitcoin because it is not anonymous and centralized.

Representatives of Tether agreed to provide the New York court with financial records relating to the backing of the USDT stablecoin. Tether called the procedure “a routine,” and stressed that complying with the court’s requirements does not substantiate the plaintiffs’ unfounded claims against the company.

Ethereum. Life after the Merge

On the morning of September 20, Binance completed the distribution of Ethereum's PoW fork tokens, ETHW, to holders of ETH and WETH. The asset reacted to the news with a 39,5% increase. As of September 23, ETHW is trading at $6,09, adding 4% overnight, according to CoinGecko.

Within a short period after the Ethereum blockchain switched to the Proof-of-Stake (PoS) consensus algorithm, daily ETH issuance decreased by 92,87%. The figure dropped from 48 400 coins to 3893. The growth in the number of transactions immediately after the upgrade triggered an increase in the amount of the average fee. This led to a deflation within 12 hours. According to analysts, there were more than 429 600 active validators on the Ethereum network. More than 11 360 validators were added to the network in just September, indicating growing investor confidence as the risk of technical issues associated with the upgrade decreases.

Experts at financial holding company JPMorgan reported “some concerns” that have emerged on the Ethereum network since the move to the Proof-of-Stake (PoS) consensus algorithm. According to analysts, the fork produced by the upgrade could divide the community. However, they noted that some exchanges and platforms have demonstrated support for the fork on the Proof-of-Work (PoW) algorithm. The report also indicated that about 19 former ETH mining pools are actively working on PoW. Experts emphasized that the blockchain has become less decentralized.

Predictions on cryptocurrency rates

Cryptocurrency analyst Justin Bennett warned that the Ethereum rate could collapse by almost 45% if the asset does not hold at current levels. According to the expert, the second most capitalized cryptocurrency is now testing the “neckline” within the “head and shoulders” pattern. If the asset does not hold at this level, the rate of $800 should be expected.

Crypto analyst and trader Michaël van de Poppe explained the level at which bitcoin should hold to avoid a further drop in price. In his opinion, it is the $19 300 mark, and if the asset does not hold at it, it can fall to $18 500-17 500 and set new lows.

Crypto analyst Nicholas Merten talked about a possible 27% drop in the bitcoin rate, to the $14 000 mark. He warned that the bear market may probably be much more severe than expected. Citing a correction during the previous downturn, Merten claims that in a worst-case scenario, BTC could fall as low as $10 000.

Bloomberg's senior commodity analyst Mike McGlone believes that the “macroeconomic global winter” could last up to three years. At the same time, he expects the cryptocurrency industry to become stronger than ever in the next few years, and by 2025, bitcoin will hit the $100 000 mark and Ethereum the $6000 mark.

Changpeng Zhao, CEO of cryptocurrency exchange Binance, said that bear cycles are good for cryptocurrencies. He advised investors not to use the value of tokens as an assessment of the work of the entire industry. He also added that price corrections, which occur every four years, are a healthy sign that will positively impact the crypto sphere in the long run.

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