U.S. Crypto Upheaval Leads to Surprising Boon for Lucky Regions

The U.S. crypto space is in chaos. In recent years, the world has witnessed a rough journey for cryptocurrencies, with their popularity surging to unprecedented heights. However, once a hotbed of crypto innovation, the United States now grapples with a clear regulatory framework. It has become hostile that necessitates a crypto exodus in the country. As the U.S. SEC hostility becomes too much to bear, which other jurisdictions are poised to attract entrepreneurs, builders, and innovators in the FinTech and crypto space?

While causing concerns within the country, this crypto fiasco has inadvertently paved the way for other regions to emerge as potential beneficiaries of the evolving crypto landscape. In this article, we will explore the regions poised to experience Crypto Bliss in the wake of the U.S. crypto fiasco.

Europe's proactive regulations, Asia's crypto-friendly environment, and the global nature of decentralized finance collectively shape a new era of innovation and adoption. As the crypto landscape continues to evolve, these regions will likely play a pivotal role in shaping the future of cryptocurrencies and blockchain technology, opening doors to a world of new possibilities.

Implications of Strict U.S. Crypto Regulations

The implications of U.S. crypto regulations are far-reaching and complex. On the one hand, regulation can provide clarity and legitimacy to an industry plagued by Fear, Uncertainty, and Doubt (FUD). On the other hand, regulation can stifle innovation and limit access to new technologies.

One of the most significant implications of U.S. crypto regulations is that they have created a patchwork of laws that vary widely from state to state. This makes it difficult for companies dealing in cryptocurrency to operate across state lines. For example, New York has implemented BitLicense, which requires companies dealing in cryptocurrency to obtain a license from the state.

Alabama requires a license for selling or issuing payment instruments, stored value, or receiving money or monetary value for transmission. Arizona, Arkansas, and Connecticut have no specific cryptocurrency laws but have issued guidance on the subject. California and Colorado have a licensing requirement for businesses that engage in virtual currency activities. 

The lack of uniformity in regulations hampers the growth and development of the crypto industry, as companies must navigate a maze of compliance requirements and legal frameworks. This adds complexity and costs to their operations and creates uncertainty for investors and consumers.

Moreover, U.S. crypto regulations directly impact the global crypto market. The United States is one of the largest cryptocurrency markets, and any regulatory changes or restrictions can have ripple effects worldwide. For instance, when the U.S. Securities and Exchange Commission (SEC) took a stringent stance on initial coin offerings (ICOs) and classified specific tokens as securities, it sent shockwaves through the industry and influenced regulatory decisions in other countries.

Another implication of U.S. crypto regulations is their effect on investor protection. While regulations aim to safeguard investors from scams and fraudulent activities, they can also restrict access to certain investment opportunities. For example, the SEC has imposed strict accreditation requirements for investing in certain crypto assets, which can exclude retail investors from participating in potentially lucrative ventures.

Furthermore, U.S. crypto regulations impact financial institutions and traditional banking systems. As cryptocurrencies gain mainstream acceptance, banks and financial institutions are increasingly exploring ways to integrate crypto-related services into their offerings. However, the regulatory landscape can be a significant barrier for traditional institutions looking to enter crypto. Complex compliance requirements, potential legal liabilities, and the risk of non-compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations pose challenges for banks, inhibiting their ability to embrace cryptocurrencies fully.

The U.S. crypto regulations' impact on the broader economy should not be overlooked. The crypto industry has the potential to drive economic growth, create jobs, and foster technological innovation. However, overly burdensome regulations can hinder these positive outcomes. By balancing regulation and fostering innovation, policymakers can create an environment that encourages responsible growth and positions the U.S. as a global leader in the crypto space. Still, unfortunately, the reverse is the case.

Uncertainty in the Crypto Space

It is quite notable that even before the emergence of Operation Chokepoint 2.0.pdf, the Securities and Exchange Commission (SEC) had not approved any Bitcoin Exchange-Traded Funds (ETFs). This lack of approval is significant, considering ETFs are key players in market liquidity.

Instead of approving such ETFs, regulators have chosen to drain liquidity. Crypto-friendly banks like Silvergate and Signature were the first to face repercussions. However, the circumstances surrounding their fall were viewed with suspicion, leading lawyers from Cooper & Kirk to suggest that it reflected regulatory overreach targeting the crypto industry.

Throughout 2023, the SEC has been taking aggressive action. The regulatory watchdog has filed complaints against Bittrex, Kraken, Gemini, and Paxos. Binance.US and Coinbase have also been targeted in a culmination of these actions. 

By charging Coinbase as an unregistered securities exchange, the SEC has opened up a wave of legal uncertainty. It is worth noting that the SEC had previously approved Coinbase's underlying business model, a prerequisite for the company to go public under the ticker COIN in April 2021. However, as Coinbase expanded its range of crypto offerings, the SEC now views some of them as "crypto asset securities."

Simultaneously, the SEC needed to provide clear guidance when previously requested, which appears to be a deliberate strategy to establish rules through enforcement in the absence of proper legislation. While Coinbase is taking the SEC to court to seek clarification on securities, the damage has already been done.

In response to the legal uncertainty, Robinhood has announced that it will delist major cryptocurrencies like Cardano (ADA), Solana (SOL), and Polygon (MATIC) on June 27, with the possibility of more delistings based on the SEC's interpretation. Binance.US has halted all USD deposits, and Crypto.com is closing its institutional exchange.

As a result of this legal uncertainty, there has been a significant outflow of liquidity, leading to a $55 billion shrinkage in the total cryptocurrency market cap. Given the increasing fear, uncertainty, and doubt (FUD) in the U.S. crypto space, it raises the question of which crypto-friendly regions will most benefit from this situation.

European Union (EU)

Despite officially entering a recession, the Eurozone is the first major region to establish a comprehensive legal framework for digital assets. Eurostat data reveals that the Eurozone accounts for approximately 14% of global trade, putting it alongside China and the U.S. as the top three players in the market.

The E.U.'s Market in Crypto-Asset (MiCA) regulations are set to come into effect between June and December 2024. This regulatory clarity has prompted Ripple CEO Brad Garlinghouse to identify Europe as a "significant beneficiary of the confusion that has existed in the U.S." in a recent CNBC interview.

Similarly, Paul Grewal, Coinbase's chief legal officer, views the U.S. crackdown on cryptocurrencies as an "incredible opportunity" for Ireland and Europe, as stated in an interview with the Irish Independent. Years in the making, MiCA embodies a balanced and proactive approach to crypto regulation. It encourages innovation while considering financial stability and consumer protection. Here are some key highlights of the MiCA regulations:

• Digital assets are categorized across a spectrum, including e-money tokens (EMT), asset-referenced tokens (ART), crypto-assets, and utility tokens.

• Requirements vary based on market capitalization. For instance, smaller-cap and utility tokens are exempt from providing a whitepaper covering liability, technology, and marketing.

• However, suppose an ART (stablecoin) or EMT exceeds certain thresholds, such as a €5 billion market cap, 10 million holders, or 2.5 million daily transactions with a volume exceeding €500 million. In that case, they are deemed "significant" gatekeepers and fall under the Digital Markets Act (DMA) regulation.

• All crypto companies are licensed as crypto-asset service providers (CASPs), with custodians and exchanges requiring a minimum liquidity threshold of €125,000 and trading platforms needing €150,000.

• CASPs must report user transactions to maintain licenses with the European Securities and Markets Authority (ESMA). This reporting includes transfers between CASPs and self-custodial wallets if the transactions exceed €1,000. CASPs must also record the senders and recipients for hosted wallets, following the "Travel Rule."

While the increased tracking may not be ideal, it represents a significant step towards legitimizing the crypto industry. In contrast, the U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler recently made blanket statements referring to crypto investors as "hucksters, fraudsters, scam artists."

It is also worth noting that Switzerland maintains its position as an innovation sandbox while interacting with the Eurozone. This is why many prominent crypto foundations, such as Tezos and Ethereum, are in Switzerland.

Within the E.U. itself, numerous crypto companies have gained global recognition. Notable examples include the Netherlands-based options trading platform Deribit, Finland's LocalBitcoins, Lithuania's DappRadar, and Ledger, a hardware wallet provider headquartered in France.

Switzerland

Switzerland, famous for its breathtaking landscapes and precision timepieces, is quickly establishing itself as a worldwide center for cryptocurrency businesses. What sets Switzerland apart is its regulatory environment, which plays a crucial role in fueling the growth of crypto enterprises. 

The Swiss Financial Market Supervisory Authority (FINMA) has taken proactive steps to establish clear guidelines for crypto companies, offering them the legal certainty they need to operate. A prime example of this progressive mindset is the "Crypto Valley" in Zug, where numerous blockchain and cryptocurrency startups have found a home.

In 2020, Switzerland solidified its reputation as a crypto-friendly nation by passing the Blockchain Act. This legislation provides a comprehensive legal framework for distributed ledger technology (DLT) and blockchain, ensuring businesses clearly understand their legal obligations and rights.

Another key factor contributing to the success of crypto businesses in Switzerland is the country's robust financial infrastructure. With some of the world's largest banks and financial institutions, Switzerland offers crypto enterprises access to a sophisticated and mature financial ecosystem. This infrastructure, combined with Switzerland's stable economy, makes it an ideal location for businesses operating in the volatile realm of cryptocurrencies.

Switzerland's dedication to innovation and education is also vital in driving the growth of crypto businesses. Swiss universities rank among the world's leaders in blockchain research, consistently producing talented individuals for the rapidly expanding industry. Prominent institutions such as the Swiss Federal Institute of Technology in Zurich (ETH Zurich) and the University of Zurich offer courses specifically focused on blockchain and cryptocurrency, equipping students with the necessary skills to propel the industry forward.

The future appears bright for crypto businesses in Switzerland. The country's forward-thinking regulatory environment, robust financial infrastructure, and commitment to innovation will continue to foster growth in the sector. Furthermore, the Swiss government's openness to new technologies and willingness to engage in dialogue with crypto businesses indicate that Switzerland will maintain its status as a global hub for cryptocurrency innovation.

Dubai

Dubai's government has been actively working to create a welcoming environment for crypto businesses. They understand the importance of regulation and have proposed a comprehensive framework through the Dubai Financial Services Authority (DFSA). They aim to balance addressing concerns like money laundering and terrorist financing while encouraging innovation and healthy competition in the crypto industry.

The Dubai International Financial Centre (DIFC) has also taken steps to foster a crypto-friendly atmosphere. They introduced the Innovation Testing License initiative, allowing fintech firms to test their ideas in a controlled environment before launching them to the public. This approach promotes a safer and more secure environment for businesses and consumers.

Dubai's commitment to technological advancement and its Smart Dubai initiative further enhance its appeal to crypto businesses. They have recognized blockchain technology's potential and implemented it in various sectors, such as real estate, healthcare, and transportation. This integration of blockchain applications demonstrates their dedication to creating an innovative and progressive city.

Furthermore, Dubai's solid internet infrastructure, widespread mobile usage, and extensive data centers provide a strong foundation for crypto businesses to flourish. These resources are essential for the seamless operation of crypto-related activities and ensure businesses can operate efficiently and effectively.

Dubai's strategic location as a bridge between the East and the West adds to its allure as a global crypto hub. It has attracted significant crypto industry players, including renowned exchanges like Binance and blockchain startups like ConsenSys. These companies contribute to the local economy and foster Dubai's vibrant and dynamic crypto ecosystem.

Looking ahead, the future of crypto businesses in Dubai appears promising. The government's commitment to embracing blockchain technology, a favorable regulatory environment, and advanced infrastructure establish a strong foundation for sustained growth in the crypto sector. Moreover, Dubai's status as a global financial hub and its strategic location continue to attract international crypto businesses. As more companies establish their presence in Dubai, the city is on track to becoming a renowned global crypto destination.

Hong Kong

A semi-autonomous region of China has come back into the world of cryptocurrencies. Despite mainland China's ban on cryptocurrencies to ensure the smooth implementation of the digital yuan, Hong Kong has been given the green light for retail crypto trading since June 1.

However, certain restrictions exist for Virtual Asset Service Providers (VASPs) in Hong Kong. They are required to block retail traders from mainland China, and the tokens they list must possess high liquidity, be included in two major indices, and have at least one year of trading history. VASPs must also adhere to various regulations, including segregating customer assets, setting exposure limits, following cybersecurity standards, and avoiding conflicts of interest.

The decentralized finance (DeFi) sector can also flourish in Hong Kong under the Securities and Futures Ordinance, specifically the Type 7 license, with their tokens classified as either futures or securities. As a result of the new regulatory framework, several exchanges, such as CoinEx, Huobi, OKX, Gate.io, and BitMEX, have hurried to obtain VASP licenses in Hong Kong.

Interestingly, Z.A. Bank, a subsidiary of the Chinese state-owned company Greenland and the most prominent digital bank in Hong Kong, has also participated in Hong Kong's e-HKD Pilot Programme initiative. This demonstrates China's full endorsement of Hong Kong's adoption of digital assets for the foreseeable future.

Moreover, Hong Kong's tax regulations on businesses are quite favorable. While individual taxpayers are exempted from the capital gains tax, companies are subject to a single-tier tax system where corporations are taxed at 16.5% on assessable profits.

Singapore

Singapore, a highly developed city-state, has emerged as a major cryptocurrency hub in the Asia-Pacific region. One of the key reasons for this is the absence of capital gains tax, which means that individuals trading or selling cryptocurrencies are not burdened with tax liabilities.

The Monetary Authority of Singapore (MAS) classifies cryptocurrencies as "intangible property" and allows their use as a medium of exchange for goods and services. This is facilitated by homegrown payment provider Alchemy Pay, making crypto transactions relatively easy in the country.

However, it's important to note that businesses in Singapore are subject to a flat corporate tax rate of 17%. Nonetheless, Singapore offers a three-year tax exemption for start-up firms, providing them with a favorable environment to establish themselves and build credit, especially when traditional funding opportunities are limited.

Singapore has attracted major cryptocurrency players thanks to its financial stability and favorable regulations. For example, OKCoin, Coinbase, Binance, and Crypto.com have all set up offices in Singapore. Crypto.com has obtained a Major Payment Institution (MPI) license from the MAS, freeing it from certain thresholds related to its Digital Payment Token (DPT) services. This strategic move safeguards the exchange's operations amidst the SEC's tough stance on similar platforms.

In addition to its crypto-friendly environment, Singapore has been proactive in integrating artificial intelligence (A.I.) and machine learning technologies. The Ministry of Education has already developed AI-powered student learning systems, demonstrating the country's commitment to leveraging game-changing technologies.

As A.I. continues to advance and intertwine with the crypto industry, Singapore is well-positioned to become a hotspot for innovative crypto projects. Singapore's favorable tax regime, supportive regulations, and embrace of transformative technologies like A.I. make it an attractive destination for the cryptocurrency industry, drawing major players and paving the way for future developments.

As the U.S. crypto fiasco unfolds, these favorable regions offer promising prospects for the crypto industry. These regions provide supportive regulatory frameworks, fair tax policies, and a commitment to embracing emerging technologies. By capitalizing on these opportunities, crypto enthusiasts, entrepreneurs, innovators, and businesses can find their version of Crypto Bliss in these forward-thinking destinations.

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto Regulations: The WEF “Want In” Recommending A Global Approach For The Crypto Industry 

The World Economic Forum (WEF) is notorious for having a far-reaching and perplexing influence over companies and institutions in many countries worldwide. This influence extends to the crypto industry and crypto regulations. The WEF published a crypto regulation white paper in May 2023, which is significant, so we’ll take a look at what they have to say and how it could influence the crypto legislation being proposed worldwide. We’ll also examine how it could affect the crypto market if implemented.

Image source: Weforum.com

The WEF white paper summarized in this article is titled “Pathways to the Regulation of Crypto-Assets: A Global Approach.” The white paper begins with a brief preface by a member of WEF’s Center for the Fourth Industrial Revolution. For context, WEF founder and chairman Klaus Schwab conjured up the Fourth Industrial Revolution. This concept involves replacing all of us so-called serfs with AI and Automation. Another component of the Fourth Industrial Revolution is controlling the population with technology. 

In the preface, the question is asked of how governments can control a borderless, open-source, and decentralized technology. Naturally, the only solution is a globally coordinated approach to regulation. The author of the preface reveals that the WEF has been engaging in “multi-stakeholder consultations” to understand how to roll out global crypto regulations. 

For reference, a stakeholder is a term the WEF uses to describe powerful individuals and institutions, not ordinary people like us. In this case, the author of the preface specifies that the white paper was put together with “significant contributions from members of the Digital Currency Governance Consortium.” (DCGC)

For those unfamiliar, the DCGC was formed in January 2020, including multiple crypto companies. The complete list of DCGC members is private. Still, research on the WEF reveals that Ripple, also the Ethereum company, Consensus, and USDC issuer Circle are all part of the DCGC, as are dozens of prolific personalities in the crypto industry. 

The DCGC has published five reports so far, and the WEF website notes that it is currently in phase two of its master plan, which involves assessing the economic effects of crypto, stablecoins, and central bank digital currencies. (CBDCs) 

The Key Takeaways

The next section of the white paper provides a summary of the key takeaways. Here, the authors argue that global crypto regulations are not only desirable but “necessary.” They seem to suggest this is because of the increasing connections between crypto and traditional finance. The authors explain that many things are standing in the way of global crypto regulations, including: 

• A lack of universally accepted definitions for different types of cryptos, 
• A lack of coordination between Regulatory Agencies 
• Regulatory Arbitrage, meaning some countries are too pro-crypto. 

The authors highlight that many unaccountable and unelected international organizations have been working on global crypto regulations. This includes the Financial Stability Board (FSB) and the Financial Action Task Force. (FATF) The authors admit that the WEF has been in contact with these organizations but insist that academia, civil society, and crypto users will also have a say in global crypto regulations. Of course, the authors don't put a timeline on when we will have a say in this matter; but we have yet to have a say in anything. 

Why Are Global Crypto Regulations Required?

The first part of the report is about why global crypto regulations are required. The authors start by explaining what crypto assets are and include stablecoins under the definition of a crypto asset. Note that these reports seldom refer to cryptos as currencies; they believe cryptos are not currencies. That said, the authors do acknowledge that cryptos have some financial use cases. They say that this is why regulatory scrutiny around crypto has increased. 

As you might have guessed, they refer to the crash of Terra last May and the crash of FTX last November as examples of why regulatory scrutiny is justified. The authors then explain that different jurisdictions have since introduced different crypto regulations. They claim that this increases the risk to the global financial system and benefits bad actors in the crypto industry. 

They also highlight the inconsistency in crypto definitions. The authors then suggest that smart contracts could be one way of ensuring regulatory compliance. This is not surprising considering that the WEF is a massive fan of programmability in payments. Again, the WEF and its affiliates ultimately want to control what people do, and programmable payments are one way to do just that.
 
When it comes to regulating cryptocurrencies, the authors say the first step is identifying where the crypto activity is taking place, if possible. The second step is to determine who is engaging in the crypto activity, and the authors say that privacy coins, personal wallets, and DeFi protocols make this problematic. This is a worry because it implies that personal wallets will be a target of global crypto regulations. 

Although, in fairness, the authors of this white paper don't seem to be that opposed to personal wallets. That's because they know that if you buy your crypto through an exchange with KYC, it's easy to identify which wallet belongs to who with the help of blockchain analytics companies like Chainalysis.  According to the authors, the third step to regulating crypto is determining who is responsible for any crypto activity. They admit this is sometimes difficult, mainly when dealing with decentralized protocols. They note that this will become easier if DAOs become regulated entities.

Crypto And Traditional Finance Connections

In the next section, the authors dig deeper into the connections between crypto and traditional finance. They start by saying that the crypto market’s correlation to BTC's price is a sign of maturity. Now this is arguably incorrect; a decoupling between different crypto categories would be a sign of maturity. What the authors do get right, however, is that institutional interest in crypto has been on the rise. 

Image source: Finoa

They cited a series of statistics from pro-crypto sources, which should be taken with a grain of salt. Genuine institutional interest and investment will come once crypto regulations are introduced everywhere. The authors also note that retail interest in crypto is on the rise and imply that this could cause problems for financial stability. This could explain why some countries, such as Canada, closely aligned with the WEF, have started introducing restrictions on retail investors in crypto. 

Besides contagion risks, the authors correctly underscore concentration risks as another concern. The crypto market relies on a handful of stablecoins, a handful of exchanges, and even a handful of cryptos. Oddly enough, the authors claim that Layer 2s on Ethereum lower this concentration risk. This is odd because many Layer 2s still rely on Ethereum for their security, which logically increases concentration risk, never mind that many of these Layer 2s are highly centralized and backed by the same investors. 

Challenges To Global Regulation 

The second part of the white paper is about the challenges to global crypto regulation. The authors start by reiterating that the absence of universally accepted crypto definitions is the biggest problem. They propose a potential taxonomy but admit that there are exceptions to every crypto definition. They then explain that this is a problem because it makes consensus about specific crypto regulations impossible. It increases the cost of crypto compliance worldwide, making it difficult to protect consumers. 

Image source: Weforum.com

According to the authors, regulatory arbitrage is the second challenge to global crypto regulation. They take issue with the fact that crypto developers can relocate wherever they want. It’s becoming all too clear that the WEF would like nothing more than to control the movement of people. 

On a related note, did you know that the WEF is also trying to turn almost every major city into a Smart City? More about that in an upcoming article. Meanwhile, Smart technology is already causing issues for consumers. 

The authors admit it might still be too soon to push for global crypto regulations. Most governments are still trying to wrap their heads around the technology. Some jurisdictions are further along than others, such as the EU, which recently passed its MiCA crypto regulations. 

The authors then reveal that these early crypto regulations, including MiCA, will come into force starting early next year. This is significant because this could make institutional investors comfortable allocating to crypto again. It means the crypto market could rally starting early next year. And this, coincidentally, corresponds with the next Bitcoin halving. 

The authors also take issue with so-called crypto hubs. They seem to imply that the crypto hub is code for ‘less crypto regulation’ and appear to blame them for causing regulatory arbitrage. If the WEF starts pulling the strings, this could be awkward for places like the UAE, Dubai, Hong Kong, and Singapore. 

Geopolitics

This ties into another vital angle the authors raised regarding crypto regulations – Geopolitics. International relations are deteriorating, making it difficult for certain countries to comply with global crypto regulation recommendations. It's safe to say that this trend will continue. 

The above relates to the third challenge to global crypto regulation: "Fragmented monitoring supervision and enforcement.” The authors reiterate that a lack of international cooperation is one of the core causes of this fragmentation, coupled with the rapid evolution of crypto-related technologies. 

The authors then provide the FATF's infamous travel rule as a case study. The travel rule requires all transactions above a certain threshold to be tracked and KYC’d. The authors complain about the fact that compliance with the FATF's travel rule has been slow when it comes to crypto. 

While we’re on that topic, you should know that the FATF has reportedly been pressuring countries to restrict or even permanently ban crypto to get off its grey list. Any country on this so-called naughty list is refused bailouts from the IMF, so a clean report from the FATF may be a political priority. If there is any truth to this, crypto hubs could face financial sanctions if they don't comply with the FATF’s crypto recommendations; perish the thought. 

Approaches To Regulating Crypto Globally

The third part of the white paper is about the possible approaches to regulating crypto on a global scale. The authors provide a de facto list of regulations the WEF wants to see. 

• Crypto-specific 
• Stablecoin-specific
• Know Your Customer (KYC) /Anti Money Laundering (AML) 
• Consumer protection, including restricting retail access to crypto 
• Strict regulations around crypto marketing 
• Regulation of DeFi and DAOs 

The authors then detail the five primary approaches to crypto regulation. 

1: The first is Principles-based regulation. This involves regulating around a series of broad principles rather than specific rules. The benefits of this approach are innovation and flexibility. The drawback is regulatory uncertainty. 

2: The second approach is Risk-based crypto regulation and involves applying the same risk/same regulation principle, meaning that crypto should abide by existing financial regulations. The benefit of this approach is regulatory certainty, and the drawback is difficulty in assessing risks. 

Notably, the WEF is a massive fan of this same risk/same regulation approach. It's why you see it in many existing regulatory recommendations for crypto. If that wasn't concerning enough, in this section, the WEF advocates for eliminating cash and going digital to ensure that KYC/AML is followed. 

3: The authors call Agile regulation the third approach to crypto regulation. This effectively allows regulations to evolve in response to new innovations. The benefit of this approach is that it is flexible. The drawback is that it requires much coordination and collaboration with the crypto industry. 

4: The fourth approach to crypto regulation is Self- and co-regulation. It involves allowing the crypto industry to set standards. The benefit of this approach is that it builds trust. The downside is that it can lead to capture; For instance, one company determines all the standards. 

5: The fifth approach to crypto regulation is one we’re all familiar with: Regulation by enforcement. It involves taking crypto companies and projects to court and using the precedent as de facto regulations. The benefit is accountability, and the drawback is zero innovation.

Interestingly, the authors asked their so-called stakeholders which regulatory approaches are best. The results can be seen in the image below. As one would expect, Risk-based regulation is the most popular, especially considering that the WEF is a fan of this particular approach. 

Image source: Weforum.com

The authors confirm that the other unaccountable and unelected organizations, such as the FSB and FATF, have been adhering to the WEF’s Risk-based approach to crypto regulation. It's preposterous to consider just how much influence the WEF has, and this is just the public stuff. 

WEF’s Recommendations for Global crypto regulations.

The fourth part of the report contains the WEF’s recommendations for Global crypto regulations. The authors explain that these recommendations are meant for international organizations, governments, and “industry stakeholders” who are presumably part of the WEF. 

In other words, these recommendations are what most crypto regulations will look like, regardless of what we, the people, say or do. The authors again claim that the average person will get the chance to give their input someday, but we’ll just have to wait and see if that happens. 

The first set of recommendations is specifically for international organizations. These are to;

• Create definitions for different types of cryptos and crypto activities 
• Set standards for how these cryptos and activities should be regulated
• Share data about registered entities with all organizations. 

It brings into question whether ‘registered entities’ include the average crypto user. As it’s the WEF, the answer is probably, yes. After all, the endgame of these international elites is to create a global government with a global digital ID and a global centrally controlled digital currency. 

The second set of recommendations is specifically for governments. These are to; 

• Coordinate regulations between jurisdictions.
• Create regulatory certainty for the crypto industry.
• *Use technology for regulation by design. 

*The latter means regulation at the blockchain level via Smart contracts. Remember, the WEF loves programmability. 

The third set of recommendations is specifically for the crypto industry. They are; 

• To set standards 
• To share best practices
• Ensure “Responsible Innovation.” 

This seems to be code for adhering to ESG criteria, given that the term refers to environmental, social, and economic risks. 

If you've been following articles about ESG, you'll know it's an investment ideology to ensure the UN's sustainable development goals or SDGs are met. Every country is supposed to meet the UN's SDGs by 2030. My research suggests that all the dystopian stuff being pushed has its roots in the United Nation's SDGs, be it CBDCs, digital IDs, smart cities, or online censorship. 

If you've been following articles about ESG, you'll know it's an investment ideology to ensure the UN's sustainable development goals or SDGs are met. Every country is supposed to meet the UN's SDGs by 2030. My research suggests that all the dystopian stuff being pushed has its roots in the United Nation's SDGs, be it CBDCs, digital IDs, smart cities, or online censorship. 

Image credit: Markethive.com

What Affect Will It Have On The Crypto Market? 

So the big question is, how could the WEF’s global crypto regulation recommendations affect the crypto market if implemented? The short answer is that it would result in the crypto industry being absorbed into the existing financial system, which is precisely what the WEF wants. 

The practical effect of Risk-based regulation is that crypto is forced to comply with existing financial regulations. As the authors tacitly admit, these risks posed by crypto aren't always clear. Many argue that the risks are significantly different and justify different regulations. The WEF’s recommendations would make crypto worse than the existing financial system. That's because they would require information about all registered entities to be; 

1. Shared with international organizations 
2. Require regulations to be enforced via Smart contracts
3. Require all cryptos to be ESG compliant 

These three unsuitable recommendations have one thing in common: Governance, more succinctly, control. This article about ESG and Bitcoin explains that the environmental aspect isn't the problem; it's the governance. Bitcoin can't be controlled because it has no traditional governance structure. In case you missed it, this is the core issue the WEF and its allies are trying to address. How do we control something that is designed not to be controlled? 

It's possible, if not likely, that the endgame of the environmental-focused attacks on Bitcoin is to track all Bitcoin miners and nodes. It’s something that the WEF’s global crypto regulations would prescribe because Bitcoin miners and nodes would presumably need to be registered. 

Their information would therefore have to be shared with all international organizations. At that point, it would become possible to control Bitcoin in theory. In practice, the WEF’s global crypto regulations will never come to pass, which the authors have also tacitly admitted. 

In addition to the geopolitical tensions, it's practically impossible to introduce the same crypto regulations in every single country simultaneously. This means that there's going to be some regulatory arbitrage, whether it's intentional or not. This regulatory arbitrage will exist for years, and in some countries, it will persist for decades. 

So long as there's a country out there that the WEF can't influence, it won't be able to entirely corrupt crypto. Also, because crypto innovation is essentially exponential, there's a high likelihood that it will evolve to the point that the WEF and its allies can’t control it. This is the most important takeaway – Crypto is too fast for the WEF. 

Klaus & Co will never be able to keep up, and crypto will eventually win the race. Right now, though, there are many hurdles facing the crypto industry, and the WEF’s white paper suggests that it played a role in putting those hurdles in place. The WEF's fingerprints are there, whether it's the FSB or the FATF. It’s also common knowledge that there are WEF allies in the crypto industry. 

Even so, many in the crypto industry who are on the right side of history, and we at Markethive, genuinely believe that the incentives of crypto are more robust than the WEF’s cronyism. Imagine helping to create a powerful crypto or protocol that allows the average person to preserve their purchasing power, grow their wealth, and maintain their financial freedom. In that case, you are rewarded in every possible way.  

As purchasing power, wealth, and financial freedom continue to erode, the incentive to create robust protocols with crypto will only increase. Eventually, the incentives will become so strong that the WEF’s hurdles will become irrelevant. The people will want freedom, and they will achieve it through crypto. 

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

References: World Economic Forum, Coinbureau

The Great Disconnect: Exploring the Global De-banking of Crypto Businesses.

Cryptocurrencies emerged as a disruptive force, challenging the traditional financial system and centralized control. With their potential to revolutionize cross-border transactions, enhance financial inclusion, and provide secure and transparent transactions, cryptocurrencies gained momentum among investors, businesses, and individuals seeking alternative financial solutions. However, traditional financial institutions have not met this radical shift towards decentralized finance with open arms.

In recent years, a concerning trend known as de-banking has emerged, where banks and other financial institutions systematically sever ties with crypto-related businesses. This process entails closing accounts, denying services, and declining partnerships with companies involved in cryptocurrency-related activities. While financial institutions cite concerns over regulatory compliance, money laundering risks, and reputational damage, critics argue that de-banking stifles innovation and hampers the growth of the burgeoning crypto industry.

This article aims to provide a comprehensive analysis of the global de-banking phenomenon, shedding light on its underlying causes, consequences, and potential implications for the future of cryptocurrencies. By examining real-world examples from various countries and industries, we will delve into the factors contributing to this widespread debanking trend. Additionally, we will explore crypto-related businesses' legal and regulatory challenges, often prompting financial institutions to distance themselves from this sector.

Furthermore, this article will explore the immediate and long-term consequences of de-banking on the affected businesses and the broader cryptocurrency ecosystem. We will delve into the difficulties crypto entrepreneurs encounter in accessing banking services, obtaining loans, and establishing partnerships, as well as the potential implications for financial stability and the overall adoption of cryptocurrencies. 

Image credit: Markethive.com

De-banking Phenomenon

De-banking refers to the systematic severance of ties between financial institutions and businesses whose operations are perceived not to be in line with legal and governmental regulations. This process involves banks closing accounts, denying services, and declining partnerships with companies engaged in such activities. While financial institutions often cite concerns over regulatory compliance, money laundering risks, and reputational damage as reasons for de-banking, critics argue that this approach stifles innovation and hampers the growth of the burgeoning crypto industry.

To truly understand the de-banking trend, we must explore the underlying causes. One of the primary factors is the regulatory landscape surrounding cryptocurrencies. Governments and regulatory bodies worldwide have struggled to keep up with the rapid development of this new technology. The lack of clear and comprehensive regulations has created an uncertain environment for financial institutions, leading them to adopt a cautious approach.

The anonymity and pseudo-anonymity offered by some cryptocurrencies have raised concerns about potential money laundering and illicit activities. While the blockchain technology behind cryptocurrencies provides transparency, it can also be exploited by individuals seeking to conceal their identities and engage in unlawful practices. Although wary of potential legal and reputational risks, many financial institutions have chosen to distance themselves from the crypto industry.

The debanking phenomenon is not limited to a specific country or region; it is a global trend affecting businesses operating in the cryptocurrency space worldwide. For example, many crypto-related startups have struggled to establish banking relationships in the United States. Banks often view these businesses as high-risk due to regulatory uncertainties and the perceived association with illicit activities.

As a result, companies have faced difficulties accessing basic banking services, such as opening business accounts and obtaining loans. Europe has also witnessed a similar debanking trend. Several major European banks have halted services to crypto-related businesses or imposed severe restrictions, hindering their ability to operate smoothly. The situation in Asia is no different, with countries like Iraq imposing a de facto ban on cryptocurrencies and financial institutions wary of engaging with crypto-related entities.

Traditional lenders are reluctant to extend credit to companies operating in the cryptocurrency space due to perceived risks and uncertainties. Access to capital is needed to improve the growth and expansion of these businesses, limiting their potential for innovation and development. These entrepreneurs face significant challenges in accessing banking services, which are vital for day-to-day operations. Without a bank account, businesses struggle to receive and manage funds, pay employees, and transact with suppliers. This creates a substantial operational burden, forcing companies to rely on alternative and often less efficient solutions.

The impact of de-banking extends beyond individual businesses to the broader adoption of cryptocurrencies. The inability to establish partnerships with financial institutions inhibits the integration of cryptocurrencies into the mainstream financial system. It hinders the ability of consumers to use cryptocurrencies for everyday transactions, limiting their utility and slowing down the overall adoption process.

However, it is crucial to consider the perspectives of all stakeholders involved in the de-banking debate. Financial institutions are tasked with ensuring regulatory compliance and managing risks associated with the cryptocurrency industry. With increasing regulatory scrutiny, banks face immense pressure to prevent money laundering, fraud, and other illicit activities. By distancing themselves from crypto-related businesses, they aim to protect their reputation and avoid potential legal repercussions.

Regulators, however, grapple with the challenge of striking a balance between fostering innovation and safeguarding financial stability. Developing clear and effective regulatory frameworks for cryptocurrencies is a complex task that requires careful consideration of the unique characteristics of this digital asset class.

Crypto enthusiasts advocate for a more collaborative approach, where financial institutions work with the crypto industry to address concerns and find mutually beneficial solutions. This includes implementing robust know-your-customer (KYC) and anti-money laundering (AML) measures and enhancing transparency and cooperation between regulators and industry participants.

Moreover, de-banking crypto-related businesses can have significant implications for financial inclusion. Cryptocurrencies have the potential to provide financial services to individuals and companies that are underserved by the traditional financial system. For example, in many developing countries, traditional banking services are limited, and many individuals and businesses rely on mobile money services to manage their finances. 

Cryptocurrencies have the potential to provide an alternative to these services, offering faster, cheaper, and more secure transactions. However, the de-banking of crypto-related businesses can limit the ability of these individuals and companies to access these services, further limiting their financial inclusion.

The Impact of De-banking on the Crypto Industry

Lack of access to traditional banking services can create significant operational challenges for crypto-related businesses. Moreover, the lack of access to conventional banking services can also limit the ability of crypto-related businesses to establish partnerships with other companies and organizations. This can limit the potential for collaboration and innovation in the industry, further limiting the growth potential of cryptocurrencies.

The potential implications of these challenges for financial stability and the overall adoption of cryptocurrencies are significant. Without access to traditional banking services, crypto-related businesses may be forced to rely on alternative banking relationships or operate entirely outside the conventional financial system.

This can create significant risks for financial stability, as these businesses may be more vulnerable to fraud, money laundering, and other forms of financial crime. Without the ability to easily convert cryptocurrencies into fiat currency, many consumers and companies may hesitate to adopt these assets as a form of payment or investment.

There are several reasons why some banks and financial institutions decide to de-bank crypto businesses. Some of them are:

•  Regulatory uncertainty: Cryptocurrencies' legal status and regulation vary across jurisdictions and are often unclear or inconsistent. This challenges banks and financial institutions to comply with anti-money laundering (AML), counter-terrorism financing (CTF), and other rules and regulations. Some banks and financial institutions may prefer to avoid dealing with crypto businesses altogether rather than risk facing fines, sanctions, or legal actions.

•  Compliance risks: Even if the regulation of cryptocurrencies is clear and consistent, banks and financial institutions still face compliance risks when dealing with crypto businesses. For example, they may have difficulty verifying their crypto customers' identity and source of funds or have to deal with complex and costly reporting requirements. Some banks and financial institutions may also be concerned about the reputation risk of being associated with crypto businesses involved in illicit activities or scams.

•  Volatility: Cryptocurrencies are known for their high price volatility, which can pose risks for banks and financial institutions that provide services to crypto businesses. For example, if a bank offers a loan to a crypto company that uses cryptocurrencies as collateral, the value of the collateral may fluctuate significantly and affect the repayment ability of the borrower. Similarly, suppose a bank provides a payment service to a crypto business that accepts cryptocurrencies as payment. In that case, the value of the payment may change drastically between the time of the transaction and settlement.

•  Competition: Cryptocurrencies are also seen as a potential threat to the traditional financial system, as they offer alternative ways of storing and transferring value that may challenge the dominance and profitability of banks and financial institutions. Some banks and financial institutions may view crypto businesses as competitors rather than customers or partners and seek to limit their growth or market share by debanking them.

Operation Chokepoint

Operation Chokepoint, introduced in 2013 by the United States Department of Justice (DOJ) under the Obama administration, primarily focused on combating fraud in high-risk industries by pressuring financial institutions to sever ties with specific businesses. The operation targeted sectors such as payday lending, firearms, ammunition sales, online gambling, and debt collection. The strategy involved pressure on banks and payment processors to cut off services to these industries, effectively choking off their access to the financial system.

The primary concern driving Operation Chokepoint 1.0 was to curtail fraudulent activities in industries that posed higher risks. The DOJ expressed concerns that some businesses in these sectors were engaged in deceptive practices, leading to consumer harm and financial losses. By leveraging its authority and coordinating with other regulatory agencies, the DOJ sought to disrupt the economic infrastructure supporting these industries and minimize their ability to carry out activities.

Screenshot: Twitter

The connection between Operation Chokepoint 1.0 and Operation Chokepoint 2.0 lies in extending the original concept to the crypto industry. Operation Chokepoint 2.0 indicates the application of similar tactics employed in the initial operation to the crypto industry. Just as Operation Chokepoint 1.0 sought to target high-risk sectors by pressuring financial institutions, Operation Chokepoint 2.0 involves exerting pressure on banks, payment processors, and other financial service providers to sever ties with cryptocurrency-related businesses. 

The victims of Operation Choke Point 1.0 are thus all too familiar with what the participants in the crypto economy are now experiencing. The campaign begins with a series of vague policy pronouncements and ominous warnings issued as informal guidance to the banks. Then there is a flurry of decisions by banks to terminate their banking relationships with the targeted industry, of accounts closed either without any explanation or with the decision being attributed to “compliance requirements,” to “your business being outside of our risk tolerances,” or to “risks associated with your business.” All these are gimmicks to destroy the crypto industry.

Examples of De-banking in the Crypto Industry

It has been a common practice for banks to distance themselves from companies they perceive as high-risk for many years. However, the de-banking of crypto-related businesses has become increasingly prevalent in recent years as the industry has grown and regulators have struggled to keep up with the pace of innovation.

Binance US is halting US dollar deposits and withdrawals from its platform as of June 13, 2023. This comes after the US Securities and Exchange Commission (SEC) filed a lawsuit against Binance and its CEO, Changpeng Zhao, for allegedly violating securities laws and operating an unregistered exchange. The SEC also asked a federal court to freeze Binance US assets.

The de-banking of Binance US could be a concern for the crypto community because it could affect the liquidity and accessibility of the crypto market in the U.S. Binance US is one of the largest crypto exchanges in the country, with over 2 million users and more than $1 billion in daily trading volume. 

If Binance US users cannot deposit or withdraw fiat currency, they may have to resort to other platforms or methods that could be more costly, risky, or inconvenient. Moreover, the SEC's crackdown on Binance could signal a more aggressive and hostile stance towards the crypto industry, which could discourage innovation, investment, and adoption of digital assets.

On May 18th, 2023, Binance Australia announced that it had suspended Australian dollar (AUD) PayID deposits "with immediate effect" due to a decision made by its third-party payment service provider. It also said that bank transfer withdrawals would also be impacted. According to Binance Australia's statement, its payment processor's partner bank Cuscal had decided to end AUD deposit services for Binance Australia without providing any specific reason. 

In July 2022, FTX, another major crypto exchange, lost its banking partner Signature Bank after the SEC filed a lawsuit against the company for allegedly operating as an unregistered securities exchange. FTX had to suspend its U.S. operations and refund its customers. Signature Bank said it ended its relationship with FTX due to “regulatory concerns” and “reputational risk.”

One of the most high-profile examples of de-banking in the crypto industry is the case of Bitfinex. In 2017, Wells Fargo, one of Bitfinex's banking partners, announced that it would no longer process wire transfers for the exchange. This move left Bitfinex unable to process withdrawals for its users, leading to a significant drop in trading volume and a loss of trust among its user base.

Another example of de-banking in the crypto industry is the case of Coinbase. In 2017, the US-based exchange was forced to suspend trading in Hawaii after failing to secure a banking relationship in the state. This move left Coinbase unable to serve its Hawaiian customers, highlighting the challenges crypto-related businesses face in obtaining banking relationships. 

These debanking cases illustrate some of the challenges and uncertainties that crypto businesses face in the U.S. and Europe, significantly as regulators increase their scrutiny and enforcement actions against the industry. In contrast, regulators and policymakers postulate that debanking is necessary to protect consumers and investors from fraud and risk, but is that their true intention for doing that? If the government had full control over Bitcoin and other altcoins, which gives them enormous control over your financial freedom, would they have aggressively fought against the industry? Think about that.

The Future of De-banking in the Crypto Industry

The future of de-banking in the crypto industry is a topic of much debate and speculation. While it is likely that the de-banking of crypto-related businesses will continue in the coming years, there are also signs that the industry is beginning to adapt to these challenges.

One of how the industry is adapting is by exploring alternative banking relationships. Some of these businesses are beginning to work with smaller banks or payment processors that are more willing to work with them. These alternative banking relationships can help these businesses access the traditional financial system while mitigating cryptocurrency risks.

Some countries are beginning to develop more supportive regulatory frameworks for cryptocurrencies. For example, in the United States, the Securities and Exchange Commission (SEC) has started to provide more guidance on the regulatory status of cryptocurrencies, which has helped to clarify the legal landscape for crypto-related businesses.

Similarly, the European Union has developed a comprehensive regulatory framework for cryptocurrencies, known as the Fifth Anti-Money Laundering Directive (5AMLD). This framework requires crypto-related businesses to register with national authorities and comply with anti-money laundering and counter-terrorism financing regulations.

These more supportive regulatory frameworks can mitigate the perceived risks associated with cryptocurrencies, making it easier for banks and other financial institutions to work with crypto-related businesses. These frameworks can build trust in the crypto ecosystem, making it more attractive to mainstream investors and companies.

As the industry continues to evolve, regulators, banks, and crypto businesses must work together to build a more inclusive and supportive financial ecosystem that embraces the potential of digital assets while mitigating the associated risks. By working together, these stakeholders can help to build a more resilient and sustainable financial system that benefits businesses, individuals, and the global economy.

What are the Indicators of the Next Crypto Bull Market? Are they at odds?

Recognizing if a crypto bull market is returning depends on which indicators we look at ultimately. Some indicators suggest that a bullish crypto market is just around the corner, while others suggest that the bear market will soon reoccur. This article examines these conflicting indicators, sheds light on what they signify in simple terms, and elucidates where the crypto market could be headed.

Price Action

First up is price action, as it’s everyone’s favorite indicator. Many crypto experts define a crypto bull market as a long period of positive price action. In other words, multiple months of higher highs and higher lows for the most significant cryptos. As the graph below indicates, BTC has had four consecutive months of positive price action, which began in January. BTC is, therefore, in a new bull market, according to Coinbureau’s basic definition. 

Screenshot: Coinmarketcap.com

However, there are a few caveats: First, this multi-month rally has yet to happen for most major altcoins apart from ETH.  Almost every major altcoin has been moving sideways over the last four months. In an actual crypto bull market, you see breadth in the positive price action meaning that most altcoins ride on BTCs’ coattails. 

The absence of this effect is evidence of a bear market rally, not a bull market. ETH's price action can provide additional proof of this being a bear market rally. ETH didn't have the same double top as BTC during the previous bull market. ETH’s price action looked more like what you'd see in a standard market cycle and could be due to institutional investment. 

Comparing ETH’s price action to the famous Wall Street cheat sheet suggests we're just past the anger stage. That said, ETH could easily be in the disbelief phase that comes before the beginning of a new bull market. 

Image credit: Newtraderu.com

This ties into the second caveat, and that's trading volume. Data from Coinmarketcap suggests that trading volume for BTC has continued to decline as prices have risen. This effect is even more pronounced for ETH. This divergence of increasing prices and falling volume is further evidence of a bear market rally and also suggests that a reversal could be imminent. 

However, this decline in trading volume could be due to institutional investors investing in crypto via centralized proxies like futures contracts that are settled in cash due to concerns around crypto regulation. It would explain why ETH's trading volume is so low relative to BTC. 

Screenshot: Coinmarketcap.com

Also, ETH has been looking extremely weak against BTC and has been in a long-term downtrend against BTC since around July of last year. The same trend can be seen in most major altcoins. Again for this to be an actual crypto bull market, there must be breadth and broad participation, at least among most major altcoins. 

To be fair, we could soon start to see more money rotate out of BTC into ETH and most major altcoins. If this happens, it will be additional evidence of a new bull market. For the time being, though, Bitcoin dominance continues to increase. For context, Bitcoin dominance measures how much of BTC’s total market cap comes from crypto. Bitcoin dominance is currently at around 46% and has been in a long-term uptrend since last September, showing no signs of slowing. 

Regulations 

If BTC doesn’t rotate into ETH and the most significant altcoins, it could be due to another factor previously mentioned: Crypto regulations. Like it or not, crypto regulations are required for institutions to invest their trillions into the crypto market. The largest institutional investors are based in the United States. US institutional investors were likely the most significant contributors to the previous crypto bull market. Unfortunately, the regulatory situation in the US has deteriorated significantly over the last few months.

In addition to the threats against specific crypto projects and companies by the SEC, the Fed and other banking regulators have been actively working to de-bank the crypto industry. Their primary targets have been 24/7 payment systems analogous to the Fed's upcoming Fed Now payment system. 

Stablecoin issuers are at the top of the Fed's hit list. It’s problematic because the crypto industry relies heavily on stablecoins to function. If anything were to happen to a stablecoin issuer in the United States, it could severely damage the crypto market and be a disaster for the entire DeFi niche. 

However, not all stablecoin issuers are based in the United States, and most crypto trading happens against offshore stablecoins, namely, Tether’s USDT. This means the crypto market would be mostly fine if a US-based stablecoin were taken down. A crackdown on a US stablecoin issuer may also not materialize. More importantly, other countries with many institutional investors are introducing sensible crypto regulations. 

This article about the countries that will drive the next crypto bull market discusses that the list includes the UAE, Saudi Arabia, Hong Kong, Singapore, and France. These jurisdictions will introduce these sensible crypto regulations very soon. France has technically done so already. The Markets in Crypto Assets (MiCa) regulation was passed by European politicians less than a month ago. Money is already flowing into EU crypto startups as a result.

Moreover, it looks like Hong Kong is next. Officials there recently announced that crypto licensing requirements would be revealed by the end of the month, with retail access to crypto coming on June 1st. Lots of money from the Chinese Mainland may enter the crypto market via Hong Kong. It's also likely that lots of crypto companies will relocate to the region. That's because Hong Kong requires banks to open accounts for crypto clients.

This is significant because crypto companies in crypto-friendly jurisdictions, like the UAE, are still reportedly struggling to open bank accounts. The caveat is that crypto investment from Hong Kong will reportedly be limited to the largest cryptocurrencies by market cap, and crypto niches like DeFi could be completely off-limits. Even so, there are many ways of accessing altcoins once you've acquired a crypto like BTC or ETH. 

Notwithstanding, the passing of favorable crypto regulations in these countries will likely be enough to increase the conviction in crypto’s recent price action and confirm that it's the beginning of a new bull market. However, this assumes that macro conditions encourage crypto investing in these regions. 

Interest Rates 

Interest rates are the primary macro factor moving the crypto market, specifically the interest rate decisions coming from the Federal Reserve. The fact that the Fed is near the end of its rate hiking cycle has contributed to the recent rally. Another contributor has been the expectation that the Fed will soon be forced to pivot, i.e., start lowering interest rates. Investors believe the Fed will do this in response to a crisis; an example could be the stress in the commercial real estate sector.

The irony to this expectation is that if the Fed is forced to pivot in response to a crisis, chances are the situation will also crash the markets. Case in point, sudden rate cuts have historically corresponded to stock market crashes, not rallies. A rate cut may have the same effect on the crypto market. However, in the absence of a crisis, only falling inflation will convince the Fed to pivot. As it happens, headline inflation has fallen fast over the last few months. The question is whether inflation will fall to the Fed’s 2% target, and the answer here is unclear. 

Image source: In2013dollars.com

Core inflation figures of all kinds suggest that services-related inflation isn't coming down nearly as quickly. If core inflation gets stuck at 4%, the Fed will likely keep interest rates slightly above that level. The longer the Fed keeps interest rates high, the higher the likelihood that markets will crash, that something in the financial system will break – or both. Risk assets like cryptocurrencies could be hit the hardest because they rely on lower interest rates for positive price action. 

Image source: Advisor Perspectives

For those who are wondering why this is, the answer is liquidity. Liquidity is the amount of money circulating in the market and the economy. As interest rates rise, liquidity gets drained out of the financial system as people rush to pay off more expensive debts and have difficulty accessing loans. As it happens, the supply of money in the US economy, as measured by M2, has been shrinking faster over the last few months than in decades.

This situation should have caused risk assets like crypto to crash, but they pumped instead. The simple explanation is that there is more to the world than the United States. Although the money supply has decreased in the US, countries like China and Japan have continued to stimulate, and this money has been slowly but surely finding its way into US assets. The caveat is that this stimulus may not continue for much longer, at least in China, where economic growth is returning. 

Another reason why risk assets have rallied is because of the Fed and the treasury. The Fed recently expanded its balance sheet in response to the banking crisis. Meanwhile, the treasury has been spending money from its de facto checking account due to the debt ceiling, which is increasing liquidity. However, the Fed's balance sheet recently started decreasing again, and the debt ceiling will soon be raised, allowing the treasury to reissue bonds. Both factors could further drain liquidity, further prolonging a crypto bear market. 

Geopolitics

As stated earlier, there is more to the world than the United States. Much of the world has been trying to escape the US dollar. This could positively affect the crypto market during the next bull cycle. Some countries, such as Iran, reportedly use crypto for trade, and others, such as Russia, may follow suit. This could change crypto's categorization from a risk asset to something analogous to a commodity, like gold, at least in these regions. 

Steady crypto demand from these regions could create a price floor for significant cryptos like BTC and ETH, the same way central banks created an apparent price floor for gold, and they accumulated record levels of gold last year. This was predominantly due to the sanctions against Russia, which caused many central banks to think twice about keeping large reserves in US dollar assets. 

In retrospect, sanctions could be the catalyst that killed the dollar. While these central banks haven't begun accumulating crypto yet, the Bank for International Settlements announced last December that central banks will be allowed to hold up to 2% of their balance sheets in crypto starting in 2025. By then, the crypto bull market should be in full swing, and if it's not, that will likely be the catalyst that kicks it off. Some central banks may have begun secretly accumulating crypto already. 

Additionally, trust in the financial system is deteriorating at a rapid rate, and the crypto market will continue to grow as trust in the traditional financial system continues to decline. This is evidenced by how much the crypto market pumped in response to the banking crisis. If the banking crisis continues in some form, you can expect to see more of the same positive price action for most cryptocurrencies.

Even if the banking crisis doesn't continue, central bank digital currencies (CBDCs) are coming, and they could have the same effect on the crypto market. The reason is that CBDCs will allow governments and central banks to control how you spend and save. As with the banking crisis, the average person will quickly realize that government money is not a safe place to store their wealth and will seek alternative stores of value.

The average person will likely allocate a small percentage of their portfolio to assets outside the financial system, including crypto. This percentage will become more extensive as these alternatives become easier to use. It's already happening worldwide; individuals and institutions are turning to crypto because their currencies are collapsing, their banking systems are struggling, or because CBDCs are being rolled out. This combined buying could set a price floor for many cryptocurrencies; this price floor will likely rise as the appeal of traditional currencies continues to decline. 

As such, we could be at the beginning of a crypto super cycle, or at least a crypto market cycle unlike any other. The caveat to this is that the incumbents will not go quietly. This potential supercycle will likely be accompanied by unprecedented price volatility as entities in the existing financial system try to crush or control crypto. Some would say this has already started, and the recent price action is proof.

The Crypto Market Cycle

As you may be aware, crypto tends to follow a four-year cycle and is believed to be because of the Bitcoin halving, which occurs roughly every four years. The last Bitcoin halving happened in May 2020, and what followed was an almost two-year-long crypto bull market. However, many argue that the crypto bull market began before the previous halving. BTC had already been in a strong uptrend for months, hitting $14k in May 2019. That early 2019 rally looks eerily similar to the one we're seeing now, four months of green; all be it with much more volume. 

This begs the question of whether history will repeat itself, specifically whether BTC will experience a flash crash that retests its bear market lows of around $15K. In theory, this is unlikely because the previous flash crash, when we saw BTC sink to about $3K, was caused by the beginning of the pandemic in March 2020. 

In practice, however, this is still possible, and that's because there are so many similar catalysts to choose from. 

• A 2008-style financial crisis caused by commercial real estate, 
• a war between China and the US over Taiwan, 
• civil wars due to inflation and political polarization, 
• or that global cyber attack predicted by the World Economic Forum. 

Even if history repeats, a retest of the crypto bear market lows will likely be short-lived. The fact remains that we're in the same time frame when the previous crypto bull market arguably began – one year before the next Bitcoin halving, which is scheduled for April 2024. However, this analysis only applies to BTC. 

As shown in the graph below, the historical price action of most major altcoins flatlined between May 2018 and the Bitcoin Halving in May 2020. You'll also see that most of them only hit their bottoms during the pandemic flash crash. This means that even if the crypto bull market has begun, you still have at least a year to accumulate your favorite altcoins, and you may still manage to catch the bottom of some of them. 

Screenshot: Coinmarket.com

The caveat is that some of these altcoins will never recover, especially if interest rates stay higher for longer. However, the effects of high-interest rates on the crypto market are not evident because the crypto market has never experienced a period of sustained high rates. Some argue that most cryptocurrencies, possibly even prominent altcoins like ETH, will not fare well under such conditions.

For established Proof of Stake cryptos, like ETH, the yield on staking rewards needs to be higher than the yields on traditional financial investments to capture the interest of institutions. In some cases, the rewards must be much higher to compensate for the additional risk of investing in crypto, e.g., Crypto vs. Bonds. 

For most other altcoins, there needs to be lots of speculation to receive heavy inflows, and these levels of speculation and inflows require lower interest rates. Some say the most speculative cryptos are all the Ethereum competitors, as they stand to capture the most value if they succeed. 

Image credit: Markethive.com

Speculation

As shared by Delphi Digital, “Crypto has primarily been a speculator’s market, and that’s still true today. But speculation isn’t inherently evil. The term “speculation” tends to carry a negative connotation. But, like most things, it sits on a spectrum. Hype and excitement drive interest, which attracts capital and gives entrepreneurs the resources to build innovative products leveraging new technologies.” 

Without speculation, capital wouldn’t flow to such risky ventures, and society would still be stuck in the stone age or the throes of tyranny due to escalating adverse events of today. Arguably, speculation is more than beneficial; it’s imperative at this stage. The crypto industry has gone through multiple hype cycles, each fueled by speculation on the back of emerging innovation triggers. Each hype cycle brought more attention, users, and capital to the crypto ecosystem and built upon the advances made by those previously.

This article explains why experts say a bear market is a good thing. There’s much truth in the mantra “bear markets are where you build” – many of today’s prominent protocols and applications were built in the depths of prior downturns. In the early stages of any emergent technology, much attention must be focused on the technical aspects of what’s being built.

The building is on one side of the equation; demand is on the other. It’s what’s needed to maximize the value of all the sweat equity that goes into bear market building. Demand leads to more usage, leading to faster feedback cycles, and better products, leading to more demand and use.

The visionaries and entrepreneurs see the need for innovation as the increasing pressure from the centralized totalitarian regime orchestrated by globalists tightens. To shift the balance of power, decentralization with an alternative financial system to the one currently failing us is a solution. 

A primary example of this is Markethive – The Ecosystem for Entrepreneurs. It is a community-funded pioneer in the blockchain and cryptocurrency space's social media, marketing, and broadcasting sector. 

Markethive is consistently delivering new integrations and updates to its platform in preparation for its launch into the crypto industry, and the timing couldn’t be better. It’s an entirely different animal and one of the most promising projects in the entire social media and marketing niche, with varied use cases and real-world applications that have the potential to change the media landscape. 

This next-generation platform perfectly exemplifies how this technology can benefit more people beyond just leveraged speculation. Markethive provides valuable utility for its community that understands the potential of applications in this new world.

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Citibank Report Says Asset Tokenization a “Killer Use Case” for Blockchain and CBDCs. What About Crypto?

Citibank's latest global perspectives and solutions report claims that tokenizing financial and real-world assets could be the "killer use-case" and a multi-trillion dollar opportunity. The report focuses on Asset Tokenization as the “killer use case” that blockchain needs to drive a breakthrough, with trillions of dollars worth of securities tokenized by the decade's end, forecasting up to $4 trillion. 

Citi is an investment bank on the list of the “Too Big To Fail” banks. Its 165-page research report is titled ‘Money, Tokens, and Games. Blockchains Next Billion Users and Trillions in Value’ and contains bold projections for Blockchain, NFTs, and Central Bank Digital Currencies. 

The report noted that the crypto industry is “approaching an inflection point,” and conversations by a few key figures in the crypto industry were aggregated in the research paper. The list includes Algorand founder Silvio Micali, Aave founder Stanley Kulechov, Ava Labs president John Wu, Polygon Labs president Ryan Wyatt,  and even Zooko Wilcox, the founder of Zcash.

The report pdf is very long, so here’s a summary of a few noteworthy sections and some counter-arguments of why it may be a little askew in these areas. Could it be intentional, or  maybe it’s just wishful thinking on their part? And what does it mean for the crypto industry?

Image credit: Citi GPS pdf
 

Report’s Brief Introduction 

The report begins with a brief introduction from Kathleen Boyle, the managing editor at Citibank, who, presumably, put this report together. She commences by explaining that the potential of blockchain has been overlooked primarily because it's a back-end technology, not a front-end technology like ChatGPT. She says successful blockchain adoption will be achieved when “Blockchain has a billion-plus users who do not even realize they are using the technology.” 

However, she does not say this adoption will come from crypto; it will come from Central Bank Digital Currencies (CBDCs). She also implies that the trillion-dollar opportunity of asset tokenization will come from the blockchains that power these CBDCs, not cryptocurrency blockchains. 

This starkly contrasts what the crypto headlines say about the report. – As DeFi Edge points out there are already some prominent crypto protocols focusing on real-world asset tokenization. This underscores the importance of whenever you hear an institution, be it a mega bank or a government, talking about the benefits and potential of blockchain technology, 99% of the time, they are not talking about cryptocurrency. In almost every case, they talk about private and permissioned blockchains they will control. 

This is why it's a bit scary to see Kathleen explain that blockchain needs “decentralized digital identities, zero-knowledge proofs, oracles, and secure bridges to achieve mass adoption.” She's probably not talking about the same technology we use in crypto. She's talking about different technology. Kathleen also notes that “regulatory considerations are also necessary to allow adoption and scalability without ‘hindering innovation’.” 

Image credit: Citi GPS pdf

Kathleen and her crew estimate the mass adoption of blockchain, not crypto, is 6 to 8 years away. Some would argue that the mass adoption of crypto will come much sooner than that, and the value of the assets tokenized on cryptocurrency blockchains will exceed the $4 trillion the report is projecting. Moreover, the sentiment of crypto heavyweights et al. believes the adoption of CBDCs and asset tokenization on private blockchains will be much lower than the authors' pitch. 

That's because data from the Bank for International Settlements (BIS), the bank for central banks, shows that only 4% – 12% of people will voluntarily adopt CBDCs. The same goes for tokenized assets on private blockchains. If governments control these blockchains, then having all your assets tokenized means you won't truly own them; the government will own them. This is precisely what entities like the World Economic Forum are pushing for. This article explains how you can reject what the globalists are planning.

Central Bank Digital Currencies – CBDCs 

The first part of the report worth covering is about CBDCs. The report projects that between 2 and 4 billion people will voluntarily adopt CBDCs. This is inconsistent with the adoption projections from the BIS and actual CBDC adoption in countries like Nigeria, where adoption is a fraction of a percent. 

It begins by revealing that the obsession with CBDCs comes from the fact that they will allow governments and central banks to micromanage monetary and fiscal policy. In other words, they can control how much you can spend, how much you can save, what you can buy, and so on. Citi’s authors estimate that as much as 20% of all the currency in circulation will be converted into CBDCs by 2030. They also claimed that; 

“The successful launch and adoption of CBDCs would lead to more stablecoin projects becoming mainstream. This is because the stablecoin protocol is now able to hold reserves in CBDCs, which are more stable and liquid than money market instruments.” 

For context, stablecoins are currently backed primarily by US government debt. This is a double-edged sword because it allows the US government to subsidize its spending but also risks crashing the bond market in the event of a stablecoin run. It sounds like stablecoins will soon be backed by CBDCs instead. This is concerning because if CBDCs back stablecoins, it gives governments and central banks de facto control of all the stablecoins in circulation. 

This, in turn, would give governments and central banks control of cryptocurrencies, whose ecosystems rely on stablecoins, such as Ethereum. Ethereum creator Vitalik Buterin said that stablecoins like USDC would have the power to decide future blockchain forks. What’s needed is a genuinely decentralized stablecoin to be developed that will protect crypto projects, like Ethereum, from future stablecoin control. 

The authors list countries that are working on CBDCs and include notes about which technologies they're using. Australia and Norway appear to use Ethereum as part of their CBDC development. It's safe to assume they will use some private version. To their credit, the authors also list risks associated with a CBDC rollout. These include competition between central banks because of currency competition, a loss of privacy, a loss of bank deposits leading to financial instability, and limited adoption. Critics argue that the latter isn't a risk.

Image credit: Citi GPS pdf

Regarding the adoption aspect, the authors highlight the less than 0.05% adoption rate of Nigeria’s eNaira and the slow adoption of the Bahamas Sand Dollar, with FTX’s collapse and C-19 said to be contributing factors to the loss in momentum. This makes their projection of wide-scale CBDC adoption that much more implausible. They blame the absence of said adoption so far on a lack of financial literacy. Arguably, financial literacy is precisely why people aren't adopting CBDCs. 

As explained in this article, it’s important to note the difference between CBDCs and cryptocurrencies. Certain institutions are already trying to market CBDCs as having the same benefits as cryptos as cryptocurrency adoption continues to rise.

Citi’s report presents timelines for when some CBDCs will be deployed. It states a digital Euro will be up and running around 2026. The digital pound will be ready by 2030, but the digital dollar is yet to be determined, and it slams the few brave US politicians for trying to stop its development. 

Decentralized Social Media – DeSo

The second part of the report is about decentralized social media (DeSo). Unfortunately, this chapter is relatively short because DeSo is highly critical due to the overwhelming efforts of governments to censor the internet. This article explains that governments worldwide are in the process of passing online censorship laws. In the European Union, these online censorship laws have already passed and are set to go into force in June this year. 

Since trust in institutions has been declining for decades and slumped after all the pandemic restrictions, their need for this crackdown makes sense. Trust in institutions is crucial for the financial status quo to continue. The recent banking crisis exemplifies what happens when that trust is entirely lost. This is why the authors note that “Blockchain's ability to create a shared, immutable, digital record of transactions could also help users see where particular information originated in order to judge its credibility. This could help build trust.”

The catch is that trust only exists when the blockchain is trustless. The report also notes that with DeSo, “ownership of content and control over the distribution channels remains with users.” This is required to resist online censorship, and it's the same principle that underlies all crypto. You are only financially free when you own and control your assets. 

The report’s authors include a conversation with Aave founder Stanley Kulechov; the remainder of the section is an interview with him. This is primarily because Stanley and the Aave team are working on the Lens protocol, a decentralized social media protocol that will serve as the backend for future DeSo platforms. Stanley believes that games and social media might be how most people become aware of blockchain technology. 

They are unaware that a monolithic crypto project in the DeSo space has been in development and is now up and running for the most part. The founder and architect of Markethive, Thomas Prendergast, envisioned the dystopian system we are experiencing currently and is ahead of the curve with a decentralized platform incorporating a social, marketing and broadcasting network for entrepreneurs that services as a cottage industry. Markethive is an ECOcentric DNA system. 

The Markethive ecosystem culminates with its unique, comprehensive economic center housing the wallets and account facilitation for the user, with merchant accounts for eCommerce facilitation, and enables creators to monetize their content. Its cryptocurrency, Hivecoin, is the cornerstone of this decentralized economic sanctuary and is a portal to sovereignty and financial freedom with gamification thrown in. This is where people are learning about and experiencing crypto and blockchain technology. 

Decentralized Digital Identity – DID

Another section of the report is about decentralized identity. Citi starts with a spooky sentence: "Decentralized identity is a core technology component that will enable regulatorily compliant uses of blockchain while still preserving anonymous/pseudonymous access.” 

They seem to suggest that the purpose of decentralized digital ID is not to do things like interact with cryptocurrency protocols but to be the “identity layer for the entire internet.” Logically, this means whoever controls this identity layer will have unprecedented power. 

Moreover, the report specifies that decentralized digital ID “Does not imply a lack of centralized parties in identity issuance or verification, but that the mechanism of owning, sharing and verifying identity is done in a permissionless, decentralized manner.” 

This is a problem because if the issuance and verification of a decentralized digital ID are centralized, the issuer or verifier can revoke your ability to interact with online services. That's not decentralization, underscoring the need for crypto to find a way to issue and verify digital ID in a decentralized manner. 

Consider that a decentralized digital ID tied to a government-issued document is no different from a centralized stablecoin. Ponder a scenario where your government-issued ID is digitized like the CBDCs backing stablecoins. Additionally, governments worldwide are actively working on rolling out Digital IDs. Countries are at different stages, but skepticism and pushback have existed. 

Naturally, the authors say that the need for digital ID comes from the relentless data collection by big tech. They don't say that most of these big tech companies are aligned with governments and that these so-called decentralized digital IDs will likely just provide this data directly to said governments. 

The authors showcase the recently released Polygon ID as an example of a decentralized digital ID solution, and the infographic suggests that it's built exactly how the authors describe it. There's a centralized issuer and verifier – you only control what you reveal on-chain. 

Image credit: Citi GPS pdf

The report also provides an example of an actual decentralized digital ID: the Ethereum Name Service (ENS). ENS lets you buy a decentralized domain name ending in .eth for those unfamiliar. It has no central issuer or verifier; it's entirely decentralized and is run by a DAO. With that said, you could argue that DAOs aren't that decentralized due to their governance structures. 

The authors appear to argue that an actual decentralized digital ID isn't a solution because it's not tied to so-called verifiable credentials such as government-issued IDs. Instead, they shill their version of decentralized digital ID, which they also call “Self-sovereign identity. They then provide examples of self-sovereign identities and include digital IDs developed by Microsoft and the European Union. To add insult to injury, the authors omit centralized control as one of the risks associated with this technology but imply that crypto is a risk. 

Smart Legal Contracts – SLC

The last part of the report is about so-called Smart Legal Contracts (SLC), also called Contracts 2.0. The authors start with a statistic, and that's that 60% – 80% of all business transactions involve a contract. They note that companies lose 9% of their profits and miss out on an additional 40% of profits from bad contracts. Nick Szabo is the creator of Smart Contracts; however, SLCs are not the same as his smart contracts. It’s the authors that deem them an official subset of Smart Contracts but with different characteristics. 

They clarify that smart legal contracts have no universally agreed-upon definition, but the main difference is they don't involve blockchains. Smart legal contracts are also legally enforceable in their countries of origin. By contrast, legal enforceability is rarely a consideration in smart contracts.

This begs the question of why smart legal contracts are required at all, and the authors reveal the answer. “Smart legal contracts are more dynamic to changing circumstances – to achieve legal compliance, they must include terms that allow them to be paused, modified, or rectified.” 

It sounds like the authors are insinuating that smart contracts cannot be legally compliant due to their immutability. If smart legal contracts don't exist on blockchains, can be adjusted on a whim, and occasionally require human execution, as noted by the authors, then it begs the question of what makes SLCs different from a standard digital contract. The authors don't have a clear answer here. 

To their credit, they concede that smart contracts are likely to be much more popular than smart legal contracts because they provide the following benefits. 

• They can exist indefinitely.
• They are transparent.
• They are tamper-proof.
• They are secure.
• They are built on a single source of truth. 

This section of the report is long and consists of the authors tripping over themselves to try and explain why smart legal contracts are the future despite being objectively inferior to smart contracts.

Image credit: Markethive.com

What Does This Mean For Crypto?

So here’s the big question – What does Citibank’s report mean for crypto? If anything, it reveals that institutional investors are looking at the crypto industry through a radically different lens from us retail investors. CBDCs, de facto digital IDs, and changeable smart contracts are not crypto. 

The few sections of the report about crypto were much shorter than those about dystopian technologies inspired by crypto. As mentioned, the chapter about decentralized social media was the shortest of all and could be interpreted as not a coincidence. 

Consider that the purpose of cryptocurrency is to replace megabanks like Citi, as well as most of the institutions that the other authors of this report work for. The first step to this replacement is the awareness of what crypto offers and why it's valuable. This information can be found on social media for now; however, with all the plans and legislations to continually broaden censorship of what authorities deem as mis/dis-information may see it disappear from the mainstream. 

In fact, leaked documents from the Department of Homeland Security stated that the US government was looking to censor information on social media, which fosters distrust in the financial system. Whoever still doubts that the government would resort to censoring financial information look no further than the recent banking crisis. In the subsequent hearings about the crisis, multiple US politicians pointed to social media as the cause of the bank runs that precipitated it. 

If you read this article about bank bail-ins, you'll know that US government officials discussed censoring discussions of bank runs on social media in their bank bail-in simulation late last year. It's more than likely that other governments would secretly consider the same behind closed doors. Now, I mention all of this because Citibank's report is part of what can only be described as an ongoing information war against cryptocurrency by the establishment. 

Another example is mainstream media articles about how Bitcoin mining is killing the planet, which is untrue. When it becomes clear to the establishment that they are losing this information war, they will resort to censorship to ensure that the trust in their increasingly unstable financial system remains. 

This crossroads is coming sooner than people think because everyone is waking up to CBDCs. People are also starting to wake up to the fact that not all cryptocurrencies are created equal, and the establishment is co-opting some crypto projects, companies, and technologies to usher in a dystopian new system. This system requires a digital ID; their fake decentralized digital IDs are the trojan horse. 

Always remember that blockchain does not equal crypto, and take every statement about crypto from megabanks and central banks with a massive grain of salt. The same goes for headlines about how mega and central banks embrace crypto. The likelihood is that they're doing the exact opposite. 

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Meme Coin Mania Meets Bitcoin: BRC-20 Offers New Challenges for Bitcoin Investors.

The world of cryptocurrency is no stranger to innovation and disruption. From the advent of Bitcoin in 2009 to the rise of Ethereum and the explosion of decentralized finance (DeFi), the crypto space has been at the forefront of technological advancement and financial experimentation. But in recent months, a new phenomenon has taken the crypto world by storm: meme coins.

These digital assets have little to no fundamental value but have gained massive popularity thanks to social media hype and viral marketing. Some of the most famous meme coins include Dogecoin, Shiba Inu, and SafeMoon. These coins have captured the imagination of millions of people worldwide, leading to a surge in demand and a corresponding increase in their market value.

But meme coins may not totally be a fad. They are also changing how we think about digital assets and blockchain technology. And with the introduction of the BRC-20 token standard, meme coins are now becoming part of the Bitcoin ecosystem, offering new opportunities for investors and enthusiasts alike. Investors are now experiencing a massive shift in the Bitcoin (BTC) ecosystem thanks to the new experimental token standard called "Bitcoin Request for Comment," or BRC-20, which has attracted much interest.

Over 4 million Ordinal inscriptions have been recorded on the Bitcoin blockchain as of the time of this writing. This new invention has the crypto community buzzing, with about 18,266 BRC-20 tokens created utilizing Ordinals and a soaring market capitalization reaching $409 million. Recently, non-ordinal BRC-20 transactions have been eclipsed by transactions involving the deployment, minting, and transfer of tokens. The proportion of BRC-20 transactions peaked on May 7 at 65%, demonstrating the protocol's expanding uptake.

Video source: Coindesk.com

Unlocking Bitcoin's Potential

For usage in smart contract applications, BRC-20 tokens are a cryptocurrency that operates on the Bitcoin network. BRC-20 transactions, in contrast to standard Bitcoin transactions, require the user to inscribe a new ordinal, lengthening the queue in the Bitcoin mempool. The size of BRC-20 tokens is around ten times smaller than picture inscriptions, although the mempool memory utilization is now lower than in March.

The average transaction price increased to $18.9, the highest level since May 2021, despite the decreased mempool utilization. This is brought on by the lengthy mempool wait, which makes users pay a higher gas charge for the miners to complete their transactions. The percentage of fees from Ordinals transactions has risen to 61%, with 99.5% coming from BRC-20. The fact that there has been a noticeable increase from the previous levels shows that BRC-20 is becoming increasingly popular within the Bitcoin community.

The percentage of transaction fees increased significantly from the 1-2% level seen since July 2021 to 31% on May 7. It's vital to remember that the costs are modest when expressed in BTC, even though this fee increase may worry some Bitcoin users. 

The Revolutionary Approach And Utility Of BRC-20

BRC-20 tokens have attracted much interest in the cryptocurrency sector, but their usability and DeFi capabilities still have the potential for improvement. BRC-20 tokens may see an upgrade in their DeFi capabilities due to the possibility of a layer 2 solution like Stacks to bridge BRC-20s, which may draw in additional users and investors. It will be interesting to see whether BRC-20 tokens can surpass their present restrictions and gain more excellent traction as a cryptocurrency.

Despite rising popularity and market capitalization, the utility of BRC-20 coins is still constrained by the absence of smart contract functionality. However, the possibility for a layer 2 solution might improve their DeFi capabilities, which could lead to a cryptocurrency that is more commonly used.

Image source: Twitter

Bitcoin Community Reacts

Since its introduction by a developer going by the fictitious name Domo in March, the BRC-20 token standard has generated a lot of discussion within the Bitcoin community. Using the Ordinals protocol, BRC-20 tokens make it simple for developers to manufacture fungible crypto assets. Individuals must encode JSON data containing crucial token information to produce a BRC-20 currency. Similar to an ERC-20 token contract on Ethereum, this information would provide essential information about the token, such as its name, symbol, and total quantity.

As of this writing, there are over 300,000 unconfirmed transactions in the Bitcoin mempool due to the spectacular issue of over 18,266 BRC20 tokens and the spike in Ordinal inscriptions exceeding 4 million. Ordspace has a complete list of these 10K+ BRC20 currencies and a US dollar value for each token. The BRC20 token economy has seen tokens soar with increases in the triple digits.

These tokens include PEPE, MEME, ORDI, $OG$, PUNK, SHIB, and DOMO, to name a few. A contentious discussion about whether fungible and non-fungible tokens (NFT) built on BTC merit confirmation alongside financial transactions has been rekindled by the storm of BRC-20s and Ordinal inscriptions.

Ethereum supporter Ryan Berckmans described the rivalry between BTC Core devs, miners, and ordinals as a "civil war." BRC-20 meme coins and ordinals are viewed as spam by several developers, including Dashjr. As a result of the rising demand for block space, transactions, and fees have surged, giving the impression that it is experiencing an "Ethereum moment", yet they are advantageous to Bitcoin miners who are making huge profits from this disaster. Divisions within the Bitcoin community are nothing new; they have existed in the past and will probably do so again as long as the crypto sector continues to exist.

Image by Markethive.com

Final Thoughts

The current situation makes it untenable for many who want to use Bitcoin for its intended purpose. When you look at the ideas behind meme coins, you will understand that they are purely pump and dump coins with no actual utility attached to them. However, some argue that utility may come on afterwards, such as in the many NFT projects that started off as a joke. 

The thing here is that most of these meme coins are launched by rogues who anonymously build a community through massive advertising campaigns that make people believe in the project. After a while, the project dies off, causing people to lose millions of dollars. The bitter truth about meme coins is that the people are the products or the actual jokes in these projects. Having these projects launched on the Bitcoin Blockchain creates many uncertainties and opportunities, as many would believe.

If you are a Bitcoin maximalist, there's a reasonable probability you're angry. Why? Several people waste block space and pollute the king of crypto with pointless projects. Unfortunately, since NFTs and DeFi on Bitcoin are such a big concern, you can't stop people from doing this.

Bitcoin takes out the corruption of humans because the humans that created it stepped away. Certainly, people will build corrupt and disruptive systems around it, as we see with the meme coins, but Bitcoin remains a simple, pure, and elegant currency. Bitcoin's lack of control by any institution or government empowers individuals with economic freedom and personal sovereignty. It's a game-changer. However, will the era of meme coin end anytime soon? Is Bitcoin the ideal place for this kind of project? Most likely not! We will have to wait and see how it all works out.