Bitcoin’s value has continued to decline for the second day in a row, dropping below $28,000 at one point. The head of research at Canadian crypto asset manager 3iQ, Mark Connors, linked the decline to U.S. regulatory woes, stating that “market liquidity remains heavily tilted to Asia”. Meanwhile, European legislators have built a promising regulatory foundation for digital assets with MICA and a separate crypto-related rule. This has created a comprehensive set of rules for crypto companies, allowing them to know what they can and cannot do and where their responsibilities lie if they want to operate in the 27-nation strong trading bloc.
According to Connors, the Kabuki theatre that unfolded in Washington this week suggests Asia and other jurisdictions will continue to gain market share from the U.S. This is evident in Coinbase’s decision to get licensed in Bermuda to launch an exchange as early as next week, indicating that U.S. digital asset companies are now voting with their feet. The decline continued a two-day slump that started early Wednesday amid a hot U.K. inflation report and massive sell-off on Binance. BTC is down about 10% from last week’s high near $31,000 with investors more fretful than upbeat about crypto assets’ path forward.
Connors noted that “market liquidity remains heavily tilted to Asia, so he was “not surprised to see bitcoin’s downswing start as markets in that part of the world closed. “Remember, last May and June dislocations occurred in a similar window,” he wrote. Ether was recently changing hands at about $1,936, off a few fractions of a point and well off its recent, Shanghai upgrade highs above $2,100. Other major cryptos were largely in the red, mostly darker shades.
Despite encouraging first-quarter earnings from a number of major banks, investors remain warily watchful, given the decline of a number of important economic indicators that may foreshadow recession. Recent jobs data has indicated a fall-off in the torrid employment market, and on Thursday, the National Association of Realtors monthly report showed home prices registering their biggest decline since 2012 and mortgage rates rising. Gold hovered comfortably over $2,000, suggesting that investor appetites for assets that hold their value in good times and bad remained strong.
The European Parliament has voted in the landmark Markets in Crypto-Assets (MiCA) regulatory framework and a separate crypto-related rule known as the Transfer of Funds regulation. These rules were described as a “world first” by the European Commission’s Mairead McGuinness and also an “end of the Wild West era for crypto assets,” according to Green Party lawmaker Ernest Urtasun. The laws, which will be enforced at the state-level, still need to be officially approved by the supra-governmental body called the EU Council, are just about cleared to take effect next year.
MiCA represents a crucial step forward for the crypto industry. It’s the first major attempt to provide a comprehensive set of rules for crypto companies so they know in advance what they can and cannot do and where their responsibilities lie if they want to operate in the 27-nation strong trading bloc. The European Union hopes it sets the global standard (and, in some sense, is worried about MiCA’s effectiveness in the EU if similar rules are not adopted everywhere). MiCA requires crypto firms – like wallet providers and exchanges – to be licensed by the EU, and comply with money laundering and terrorism finance safeguards if they want to serve EU-based customers.
Some have balked at the reporting standards, which will undoubtedly weaken privacy for crypto users in the name of customer safety and national security. However, MiCA is considered a promising regulatory foundation for digital assets, while the U.S. regulatory efforts remain disjointed and counterproductive. CoinDesk columnist Daniel Kuhn writes that the U.S. needs to learn from Europe’s efforts and create a regulatory framework that will benefit the crypto industry in the long run.
In conclusion, Bitcoin’s decline is due to U.S. regulatory woes, which have been weighing heavily on the cryptocurrency. Meanwhile, Europe has taken a significant step forward in creating a regulatory foundation for digital assets with the introduction of MiCA and a separate crypto-related rule. This has created a comprehensive set of rules for crypto companies, allowing them to know what they can and cannot do and where their responsibilities lie if they want to operate in the 27-nation strong trading bloc. The U.S. needs to follow Europe’s lead and create a regulatory framework that will benefit the crypto industry in the long run.