Crypto update Crypto update Crypto update

Crypto Weekly: All about regulation

Mads Eberhardt 400x400
Mads Eberhardt

Cryptocurrency Analyst

Summary:  It is often said that regulation is the greatest threat to the cryptocurrency industry. Today, we managed to write a Crypto Weekly only containing topics related to regulation, if from different angles. We look at a Chinese crackdown on mining, Binance going head-to-head with regulators and Paraguay set to introduce positive Bitcoin legislation.


Bitcoin mining difficulty drops, making mining more profitable

The last couple of months have been rather chaotic in terms of Bitcoin mining. First, China started cracking down on Bitcoin mining. Before the crackdown, it was estimated that the country counted for between 65% to 75% of the total Bitcoin mining capacity, also known as hash rate. The crackdown from Chinese regulators allegedly forced more than 90% of the Chinese miners offline. Afterward, pictures of mining equipment being shipped abroad from China started circulating on the internet. However, the mining equipment was not up and running on new territory on July 3rd, where the Bitcoin algorithm adjusted its mining network difficulty based on the current hash rate. The network difficulty signals how difficult it is to mine Bitcoins. The lower hash rate resulted in a 28% drop in network difficulty, making it more profitable for existing miners to mine Bitcoins. Industry experts have calculated that it is roughly twice as profitable to mine Bitcoins now compared to before the Chinese crackdown. However, in all likelihood, it is only a matter of time before the profitability will fall again as more miners turn their equipment on to take advantage of the current higher profitability. Either the Chinese miners will be moving abroad or selling their equipment to existing miners abroad. According to Luxor Mining, buying used mining equipment is between 32% - 36% cheaper compared to a couple of months ago, which should stimulate interest in mining.

Binance goes head-to-head with regulators and traditional banks

The world’s largest cryptocurrency exchange measured on volume, Binance, is currently fighting some battles globally with respective regulators and traditional banks. Last week the exchange suspended euro bank transfers allegedly because of regulatory issues as U.K.’s Financial Conduct Authority (FCA) announced last month that Binance is not permitted to undertake regulated activities in the U.K.  The announcement made several British banks suspend bank transfers to the exchange, including Barclays and Santander’s U.K. bank division. On top of this, regulators in Canada, Japan, and Thailand have issued warnings to the exchange. Germany’s financial regulator BaFin has also warned Binance over its trading of tokenized stocks. It has always been tough to figure out the exact country Binance is operating from – and thereby, its regulatory framework. Binance has often declined to comment on this question, arguing that they are a decentralized organization. Even though decentralization is often associated positively with the industry, it may not be something you should try to sell to regulators while operating in a highly regulated industry as the largest company. Binance’s CEO Changpeng Zhao commented on the issues last week adding; “We hope to clarify and reiterate our commitment to partner with regulators, and that we are proactively hiring more talent, putting in place more systems and processes to protect our users”. Today, Zhao famously known for wearing t-shirts and hoodies, posted a picture of himself on Twitter wearing a suit with the text: “Do I look more regulated already?”. The sarcastic tweet is likely something that pleases the community – but perhaps not regulators.

Paraguay may join El Salvador

The Latin American country El Salvador made Bitcoin legal tender in June, equal with the US Dollar as legal tender in the country. It now looks like the decision impacted other countries in Latin America as Paraguay is about to introduce Bitcoin-focused legislation. Paraguayan Congressman Carlitos Rejala tweeted last week that the Bitcoin bill will be announced on July 14th, adding that it will be a great surprise for Paraguay and the world. According to his previous statements, the bill is set to make Paraguay a leading center for the cryptocurrency industry. Whether that includes making Bitcoin legal tender, we will have to wait to see.

12_07_2021_Crypto_Update_01
BTC vs. USD. Source: CoinMarketCap
12_07_2021_Crypto_Update_02
ETH vs. USD. Source: CoinMarketCap

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.