Cryptocurrencies like Bitcoin have not reduced financial risks in emerging economies, but instead, have amplified them, according to a study conducted by central banks and published by The Bank for International Settlements (BIS).
The cryptocurrency market has experienced a notable downturn, with the total market capitalization falling by 10% and triggering significant liquidations on futures contracts, attributed to factors such as rising interest rates, inflation, delays in approving a Bitcoin exchange-traded fund (ETF), financial difficulties within the Digital Currency Group (DCG), regulatory tightening, and a strengthening US dollar.
U.S. Federal Reserve Chairman Jerome Powell stated that restrictive monetary policy will continue until inflation slows, and the central bank is prepared to raise rates cautiously; the price of Bitcoin briefly dipped before recovering, while traditional markets saw modest gains.
U.S. economic growth, outpacing other countries, may pose global risks if the Federal Reserve is forced to raise interest rates higher than expected, potentially leading to financial tightening and ripple effects in emerging markets.
The proposed cryptocurrency tax regulations by President Joe Biden are causing concern among many in the cryptocurrency community, with critics arguing that these measures could stifle innovation and progress within the US, while other countries outperform in this realm.
The rejection of a new bill on cryptocurrency regulation by the Australian Senate reflects the country's cautious approach and leaves the industry without legal guidelines as crypto innovation continues.
The Financial Stability Board and International Monetary Fund are releasing a joint paper at the G20 Summit that outlines a roadmap for global coordination and policy frameworks for cryptocurrencies.
Global equity investors are concerned about central bank policies as U.S. data shows a rise in inflationary pressures, causing markets to worry about a potential end to the Goldilocks scenario and softer labor markets.
A policy paper prepared under India's G20 Presidency recommends licensing crypto service providers and implementing anti-money laundering standards in the sector, while cautioning against an outright ban on cryptocurrencies due to their borderless nature. The paper also addresses concerns about stablecoins and their potential impact on financial stability.
Bitcoin, Ethereum, and Dogecoin remained relatively stable as the global cryptocurrency market cap increased slightly, while the Financial Accounting Standards Board endorsed regulations for accounting fair values of companies' cryptocurrency holdings.
The United States Federal Reserve's financial woes and potential implications for cryptocurrency are discussed on the latest episode of "Macro Markets," highlighting challenges posed by inflation and the consequences of loose monetary policies during the pandemic.
The US Federal Reserve is still in the early research phase and far from making any decisions on a central bank digital currency, according to Federal Reserve Vice Chairman Michael Barr, who also emphasized the need for clear support from the executive branch and legislation from Congress before any moves are made. Barr expressed concerns about stablecoins and called for strong federal oversight to avoid risks to financial stability and the US payments system.
Despite Visa's announcement and warnings from Binance's CEO, major cryptocurrencies such as Bitcoin and Ethereum are struggling in a bearish trend while a top Federal Reserve official expresses deep concern over the $120 billion stablecoin market.
Quantitative easing (QE) is a monetary policy tool used by central banks to boost the economy by purchasing financial assets, such as government bonds, which increases the money supply and lowers interest rates; while its impact on cryptocurrencies is indirect, QE can lead to increased demand for cryptocurrencies as alternative stores of value due to devalued fiat currencies and greater liquidity in the market. However, the decentralized nature of cryptocurrencies makes direct application of QE challenging, with supply dynamics, forking and airdrops, stablecoins, and market dynamics having potential implications on the crypto industry. QE also has criticisms and limitations, including inequality escalation, market distortion, potential financial instability, and impairment of financial markets.
The G20, including U.S. president Joe Biden, has endorsed the Financial Stability Board's recommendations for regulating cryptocurrencies, which could have a significant impact on the prices of Bitcoin, Ethereum, BNB, XRP, and other major cryptocurrencies.
Bitcoin's vulnerability to contracting global liquidity is highlighted by Bloomberg Intelligence's crypto market analyst Jamie Coutts, who suggests that the cryptocurrency will only turn bullish when global liquidity levels expand, warning that it is unlikely to rise until liquidity reverses and anticipating that institutional investors will only show significant demand for digital assets once liquidity rises.
Bitcoin and other digital assets are at risk of a deeper market correction due to the contraction of stablecoin liquidity, according to crypto analyst Nicholas Merten.
The Federal Reserve's decision to maintain interest rates and raise its long-term forecast for the Federal Funds Rate surprised many market participants, causing a slight pullback in the stock and cryptocurrency markets while highlighting the need for investors to focus on the actual health and viability of companies and the utility of the crypto ecosystem. Additionally, the article speculates on the impact of the U.S. Securities and Exchange Commission's ruling on Bitcoin spot ETF applications and the potential for cryptocurrency to become a mainstream alternative investment.
Bitcoin could experience significant inflows from China in the coming months due to a weakening Chinese yuan and increasing capital flight, with Chinese investors turning to Bitcoin as a familiar investment in times of economic uncertainty, according to experts. The recent data shows that China's capital outflow reached its highest level since 2015 in August, potentially putting further pressure on the yuan. While Chinese capital controls may limit investment options, cryptocurrency, particularly Bitcoin, is seen as a viable alternative. However, analysts caution that the impact of Chinese capital flight on Bitcoin may not be as significant as it was in 2017 due to changes in regulations and crackdowns on certain practices.
The Federal Reserve's decision to hold interest rates at their highest in over 20 years is posing a "nightmare" scenario for bitcoin and crypto companies, potentially leading to price chaos and further decline in the bitcoin price.
A new report by the European Parliamentary Research Service argues that harmonization in regulation across major jurisdictions is necessary to address regulatory arbitrage and the decentralized nature of crypto assets, with recommendations including enhanced oversight from non-EU regulators to ensure stability and development in the global cryptocurrency market.
Cryptocurrency faces regulatory challenges that could shape its future, but despite these challenges, the industry holds promise with developments such as increased institutional adoption, central bank digital currencies (CBDCs), DeFi innovation, interoperability, and expected regulatory clarity.
Taiwan's Financial Supervisory Commission (FSC) has issued new rules and guidelines to protect cryptocurrency investors, including separating exchange treasury assets from customer assets and requiring foreign virtual asset service providers to obtain necessary approvals to operate in the country.
Bitcoin and other cryptocurrencies remain stable or slightly higher despite turbulence in the stock market, but this calm may not last.
A new report by the Federal Reserve Banks of Boston and New York concludes that stablecoins, such as Tether and USD Coin, have similar vulnerabilities as money market funds and could potentially inject instability into the broader financial system.
The World Federation of Exchanges suggests that crypto-asset trading platforms should embrace regulation to enhance their market appeal, while also proposing six principles for regulating such platforms.
Stablecoin issuer Circle argued in a court filing that tokens pegged to a sovereign currency, like the US dollar, are not securities, amid the Securities and Exchange Commission's (SEC) lawsuit against Binance, highlighting the potential implications for stablecoins as a whole.
Overall inflation has moderated recently in the United States and euro area, but core inflation remains sticky, creating a challenge for central banks trying to meet their inflation targets. Financial conditions have eased, complicating the fight against inflation by preventing a slowdown in aggregate demand. The combination of loose financial conditions and a monetary policy tightening cycle may have dulled the effectiveness of monetary policy. There are risks of a repricing of risk assets and potential vulnerabilities in the financial sector, emphasizing the need for central banks to remain determined in their fight against inflation.
The International Monetary Fund (IMF) has published a working paper proposing a crypto-risk assessment matrix (C-RAM) to identify potential risks and policy responses in the crypto sector, with examples including the risks associated with El Salvador's adoption of Bitcoin as legal tender.
Banks will be required to disclose their cryptocurrency holdings as part of new regulations to cut contagion and prevent banking collapses partially caused by the sudden popularity of crypto, according to the Basel Committee on Banking Supervision.
Bitcoin could face difficulties in the long term due to tightening liquidity in the current macroeconomic environment, according to crypto analyst Nicholas Merten. Merten believes that Bitcoin's price is heavily influenced by monetary policy and warns that if sentiment turns bearish, investors may start cashing out.
