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On February 13, a mysterious QR code bounced like a ball in the game of Pong, scanning smartphone users on nearly 37 million television screens in the U.S. and around the world tuned to watch the Super Bowl. I urged you to follow the link. The ad, paid for by cryptocurrency exchange Coinbase, is one of several crypto-related spots that are supposedly the premier advertising event of the calendar year.
But less than four months after distributing $14 million (€13.16 million) to prime time slots, Coinbase (the totem of broader sector legalization after its initial public offering in April 2021) announced plans to cut global by 18%. A workforce facing a global meltdown in cryptocurrency prices. Like many of the industry’s biggest names, the company, which has its European headquarters in Dublin, said in the following month he cut more than 1,000 jobs, many of them in Ireland.
This meltdown will reduce the market cap of the entire crypto industry by an estimated $2 trillion from its May 2021 peak.
Cryptocurrency market Red Sea ultimately overwhelmed some high-profile victims as disgruntled investors moved to withdraw their funds and cut losses.
The downfall of Bankman-Fried and FTX, which were arrested in December on wire fraud charges over alleged diversion of billions of dollars worth of customer deposits, has catalyzed further declines in value. Bitcoin, the pioneering asset of the crypto world, has fallen more than 62% so far this year to $15,700, and as the outlines of the FTX scandal began to unfold, he fell to 20 from the beginning of November. % is down.
After two years of skyrocketing asset prices and a growing sense that the industry may be on the verge of joining the financial mainstream, this wasn’t supposed to be. In an account filed in September, Coinbase’s Irish division reported a more than 300% increase in after-tax profit in 2021 to €2.7 million, with revenue he at €64.5 million. Against the backdrop of the pandemic-related surge in cryptocurrency prices, other exchanges such as Binance are charging investors (mostly amateurs) a fee for every trade made through their platform, which will increase their profits. raised.
However, the sharp decline in asset prices this year has also seen a decline in cryptocurrency trading volumes that began in early summer 2021, wiping out some of the estimated 22,000 coins and tokens in the market. As a result, exchanges like Gemini are preparing for a much slimmer set of numbers in 2022 as investor interest wanes, a phenomenon known in the industry as “crypto winter.”
Inflation and the impact cryptocurrencies have recently attracted on the disposable income of retail investors, combined with a general flight from risky assets, is also a major underlying factor in the meltdown. But with his FTX collapsing towards the end of the year, this latest crypto winter has been particularly grim, if not existentially threatening. Bloomberg reported earlier this month that average daily trading volume halved between late October and early December.
“I think things are going well for a while, [the correction] Rachel McCausland, associate solicitor at law firm Taylor Wessing, which has advised cryptocurrency and other disruptive technology companies, said. “But I don’t think anyone expected all the other factors that led to the cuts we saw.”
As 2022 draws to a close and winter is in full swing, the assets and ecosystem that support the crypto sector are in tatters. But it’s not all bad news for the sector, at least on the regulatory side.
This year, Gemini and Coinbase registered with the Central Bank of Ireland as Virtual Asset Service Providers (Vasps), bringing the U.S.-listed cryptocurrency exchange under its supervision for the purpose of anti-money laundering and regulating criminal financing. . European regulators have long taken an independent approach to crypto-assets. If asset classes are dragged under formal oversight and treated similarly, the volatility seen in asset prices and trading volumes could hurt consumers and even spill over into the ‘traditional’ financial system. I’m afraid of something to other financial instruments.
Against this backdrop, central banks continued to warn cryptocurrency investors about the dangers of unregulated assets. Gov. Gabriel Makhlouf said in November that “money should only be put into cryptocurrencies if you are prepared to lose it all,” but the ramifications of this year’s cryptocurrency price crash have spilled over into the broader financial system. “remains limited”.
With the European Union’s vaunted Market for Crypto Assets (Mica) Regulation set to come into force in 2024, the question is whether financial authorities will effectively legitimize the analogy of law and order in the cryptocurrency’s Wild West era. how it is viewed as bringing without doing. A fringe asset class that has exhibited such volatility, impacted so many consumers and enthusiast investors, and has so many reputational tarnishes in 2022.
The government is also keen to foster the development of Ireland’s broader blockchain industry, as outlined in the revised Irish Financial Strategy in October. All of this makes it difficult to balance regulation and politics.
“It’s a difficult area to regulate,” says McCausland. “I think the difficulty lies in trying to achieve a balance between innovation, investor protection and market integrity. Mica has been in development for a long time, and this is a welcome development. , the difficulty with this industry is that it is developing and growing so rapidly that it is almost impossible to keep up with developments at the regulatory level. [Mica] It will come a long way. ”
But not everyone agrees, and recently many MEPs despised the proposed Mica government in the wake of the fall of FTX, wondering if it could prevent a similar catastrophe in Europe. I’m wondering please. The EU Council and Parliament are expected to ratify the package in the first quarter of 2023. Barring delays, a regulated entity would have 12 to 18 months to apply for passport approval by one of the EU member states. Service across the block. Given that many of the biggest and best-known exchanges have their European headquarters in Dublin, central bank officials are expecting a busy year ahead.
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