Daily Archives: October 3, 2021

Coinbase Meeting With US Lawmakers to Discuss Crypto Regulatory Proposal

Coinbase Meeting With US Lawmakers to Discuss Crypto Regulatory Proposal

The Nasdaq-listed crypto exchange Coinbase has been meeting with members of Congress to discuss the cryptocurrency regulation it plans to propose, according to CEO Brian Armstrong. In addition, the company has met with more than 30 crypto firms, four major law firms, and three trade groups about its crypto proposal.

Coinbase Meeting Congress Members and Crypto Firms on Regulatory Framework for Crypto

Coinbase is on a mission to influence crypto regulation in the U.S. CEO Brian Armstrong tweeted Thursday:

We’ve now met with 30+ crypto firms, 25+ members of congress and/or staff, 4 major law firms, and 3 trade groups about our regulatory proposal for crypto. Our policy team is doing great work and we’re trying to be part of the solution.

Armstrong first revealed that his company was preparing a draft regulatory framework to submit to lawmakers in an interview at Techcrunch Disrupt 2021 on Sept. 22. He said that he expected to begin distributing the crypto regulatory proposal this month.

The CEO revealed that he had been asked multiple times for a crypto regulatory framework proposal as regulators often seek industry feedback when creating new rules.

He shared during the interview: “When I go to DC, I’ve met with a number of people in government, and they typically will ask us ‘Well, do you have a draft, do you have a proposal of something we could try to shop around about how this could be regulated federally?’”

Armstrong noted that Coinbase is currently licensed as a money transmitter and lender in 50 states. He added that Coinbase operates under the purview of the Financial Crimes Enforcement Network (FinCEN), the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Internal Revenue Service (IRS), the Treasury, and the Office of Foreign Assets Control (OFAC).

The Coinbase boss indicated that he prefers a federal framework instead of having to deal with independent state-by-state rules and agencies. He was quoted as saying:

We have a proposal that we actually want to put out there that could help maybe create at least one idea about how to move forward. But this is going to require input from a lot of people.

Coinbase recently ran into trouble with the SEC over its lending product which the Commission considers to be a security. The SEC threatened to sue the company if it went ahead with the Lend product without registering, prompting Coinbase to abandon its plan to launch the product.

SEC Chairman Gary Gensler recently explained that crypto platforms that accepted funds from investors and offered returns “should consider the securities laws carefully and talk to the agency about getting registered.”

What do you think about Coinbase meeting with U.S. lawmakers to discuss a regulatory framework for cryptocurrency? Let us know in the comments section below.

Laos to Study Digital Currency With Help From Japanese Fintech, Report Reveals

Laos to Study Digital Currency With Help From Japanese Fintech, Report Reveals

The central bank of Laos intends to explore issuing its own digital currency, according to a media report that provided details on the plan. A study on the matter will commence soon and will be conducted with the support of a fintech startup based in Japan.

Central Bank of Laos Joins Race to Develop Digital Fiat

The Bank of the Lao People’s Democratic Republic is going to launch the study focused on the development of a central bank digital currency (CBDC) as early as this month, Nikkei Asia unveiled on Sunday. The monetary authority has employed the Japanese fintech firm Soramitsu which was involved in a similar project in neighboring Cambodia.

The report of the collaboration comes out after Laos recently signed a memorandum of understanding with the Japan International Cooperation Agency. Soramitsu, a company specializing in blockchain finance, took part in the establishment of the Bakong digital payment system in Cambodia designed to reduce the country’s dependence on the U.S. dollar.

The Bakong payment application has been downloaded by 200,000 users since it was presented to the public. The app can be used to pay for goods and services at 2,000 stores in Cambodia while Soramitsu and other fintech entities are working to further expand the coverage of the digital payment platform across the nation.

The Laos study, assisted by the Japanese startup, will assess the role of commercial banks and other financial intermediaries as well as the country’s needs in terms of financial inclusiveness. If authorities in Vientiane eventually decide to issue a state-controlled digital currency, Soramitsu is going to play a role in its actual development, too.

A digital version of the Laotian kip would improve the government’s ability to gather data needed to “take the pulse of the economy” and better track the amount of money in circulation, Nikkei noted. The move comes as the regional powerhouse, China, advances with its digital yuan project and some neighbors want to prevent excessive yuan inflows into their economies by launching their sovereign digital currencies. Laos, a landlocked country in Southeast Asia, borders the People’s Republic which is its second-largest trading partner after Thailand, according to the World Bank.

Laos to Study Digital Currency With Help From Japanese Fintech, Report Reveals

While the Chinese CBDC is mostly tested domestically at this stage, Beijing is likely to promote it as a tool for international transactions, sooner or later. China is already working with Thailand, and UAE on a project led by the Bank for International Settlements (BIS) Innovation Hub. Its special administrative region of Hong Kong announced in June it wants to connect its domestic payments system with the e-CNY infrastructure to trial the digital currency in cross-border scenarios.

Besides the People’s Bank of China, dozens of central banks around the world are currently working to develop and launch CBDCs. These include the U.S. Federal Reserve, Bank of Russia, and the European Central Bank. In Asia, Bhutan and U.S.-based blockchain firm Ripple announced last month their partnership on a pilot digital currency project. The tiny Himalayan kingdom, which also borders China, plans to experiment with the digital version of the national fiat currency, the ngultrum, on Ripple’s private ledger.

Do you expect more Asian countries to start exploring options to issue national digital currencies? Tell us in the comments section below.

Salvadoran President Nayib Bukele Says Citizens Paying for Gas With the Chivo Wallet Will Get a Discount

Salvadoran President Nayib Bukele Says Citizens Paying for Gas With the Chivo Wallet Will Get a Discount

The Salvadoran president, Nayib Bukele revealed on Friday that Chivo wallet users will be able to get a discount on petroleum fill-ups at the largest gas stations in the country. Chivo wallet users paying for fuel will save $0.20 per gallon using the government’s crypto wallet.

Salvadoran President Nayib Bukele’s Government Subisidizes Country’s Gasoline Market

Following the Salvadoran president, Nayib Bukele revealing the volcano-powered bitcoin mining facility last week, this Friday, Bukele told his Twitter followers about two positive implementations the government has enacted. To start, Bukele explained that he signed a decree that authorizes a fund to stabilize the price of gas in El Salvador. He noted that gas prices were expected to increase but his decree has stopped the increase.

In fact, gas prices will see a “slight reduction,” Bukele stressed. “The Government will absorb the increases that are taking place in the international market for one year,” the Salvadoran president disclosed. “If there are reductions, they will be transferred directly to the price of LPG cylinders (of all existing brands in our country) to consumers,” Bukele added.

The president also said that households that already receive a gas subsidy will continue to get the help and since gas prices will not increase, they will see reductions instead. “This will not only alleviate the pockets of households but also that of small businesses, helping to strengthen our economy, and the most vulnerable sectors will also feel the benefit of the economic growth that our country is having,” Bukele said.

Chivo Wallet Users to Save $0.20 per Gallon

Following those statements, Bukele then detailed that Chivo bitcoin wallet users will be able to get a gas discount per gallon when they fill up.

Salvadoran President Nayib Bukele Says Citizens Paying for Gas With the Chivo Wallet Will Get a Discount

The guidelines for this new discount are not super clear, but Bukele said that a number of the largest gas station companies in the country will drop the price of gas per gallon by $0.20 if a customer uses the Chivo wallet application to pay. He also shared a few advertisements that showed a few of the participating gas stations. Bukele said:

The state company Chivo negotiated with the largest gas station companies in our country, so starting tomorrow, these gas stations will sell each gallon of fuel $0.20 cheaper, with the Chivo wallet.

What do you think about Salvadoran residents getting $0.20 off per gallon when they pay for gas fill-ups using the Chivo wallet app? Let us know what you think about this subject in the comments section below.

US Lawmakers Urge Fed Chair Jerome Powell to Support Crypto Innovation

US Lawmakers Ask Fed Chair Jerome Powell to Support Crypto Innovation

Several U.S. lawmakers have called on Federal Reserve Chairman Jerome Powell to support cryptocurrency innovation. “The Federal Reserve must work to support domestic innovation … Our government should never be in the business of thwarting innovation.”

Members of Congress Urge Fed Chair Powell to Support Crypto Innovation

Several U.S. Congress members have sent a letter to Fed Chair Jerome Powell asking him several questions regarding the Fed’s effort on cryptocurrency regulation. The bipartisan letter is signed by Reps. Tom Emmer, Darren Soto, Frank Lucas, Ted Budd, Ro Khanna, Glenn “GT” Thompson, and Eric Swalwell.

Rep. Emmer described:

Empowering individual Americans to become everyday investors should be our highest priority – decentralized digital assets provide that opportunity. The Federal Reserve must work to support domestic innovation … Our government should never be in the business of thwarting innovation.

The congressman explained that his letter “highlights concern with Powell’s statement that the biggest supporting argument for a Fed-issued digital currency is that it could eliminate the need for private sector innovation.”

The letter points out that cryptocurrencies are subject to “overlapping regulation from multiple regulators,” including the Fed, the Financial Crimes Enforcement Network (FinCEN), the Securities Exchange Commission (SEC), and the Commodities Futures Trading Commission (CFTC).

Noting that crypto adoption has been “hobbled by a lack of regulator clarity,” Powell was asked what steps the Fed is taking “to coordinate with other federal regulators on the development of policy guidance for digital assets such as cryptocurrencies, and other critical related policy issues such as custody and accounting, to ensure the United States remains a leader in financial innovation.”

In addition, the Fed chair was asked what steps the Fed is taking “on its own or in coordination with regional Federal Reserve Banks to provide regulatory clarity to banks that wish to offer cryptocurrency or other digital asset custody to their customers.”

Chairman Powell was further questioned when the Fed plans to release the discussion paper on the design of a U.S. central bank digital currency (CBDC) and whether he believes a CBDC would make cryptocurrencies and their applications — “from decentralized identity to decentralized file storage” — obsolete.

The lawmakers’ letter to Powell concludes with a request:

We appreciate your prompt response, no later than October 15, 2021, to the questions detailed in this letter.

Powell testified before the House Financial Services Committee in July, stating that “you wouldn’t need stablecoins, you wouldn’t need cryptocurrencies if you had a digital U.S. currency.” He recently admitted that he misspoke and the word cryptocurrencies should be omitted from the statement. He told Rep. Budd last week that he has no intention to ban or limit the use of cryptocurrencies.

What do you think about U.S. lawmakers urging Fed Chair Powell to support crypto innovation? Let us know in the comments section below.

Joe Biden: US Bringing 30 Countries Together to Stop ‘Illicit Use of Cryptocurrency’

Joe Biden: US Bringing 30 Countries Together to Stop 'Illicit Use of Cryptocurrency'

President Joe Biden says that the U.S. will bring together 30 countries to stop “the illicit use of cryptocurrency.” The United States is “partnering closely with nations around the world” to respond to the cybersecurity threats, Biden further said.

US Will Bring 30 Countries Together to Combat Illicit Use of Crypto, Says Biden

The White House released a statement by President Joe Biden Friday on the government’s cybersecurity efforts as October is Cybersecurity Awareness Month.

President Biden explained that the U.S. is “partnering closely with nations around the world” to respond to the cybersecurity threats, “including our NATO allies and G7 partners.” He added that this month:

The United States will bring together 30 countries to accelerate our cooperation in combating cybercrime, improving law enforcement collaboration, stemming the illicit use of cryptocurrency, and engaging on these issues diplomatically.

“The Federal government needs the partnership of every American and every American company in these efforts. We must lock our digital doors — by encrypting our data and using multifactor authentication, for example—and we must build technology securely by design, enabling consumers to understand the risks in the technologies they buy,” Biden continued.

The U.S. president opined: “I am committed to strengthening our cybersecurity by hardening our critical infrastructure against cyberattacks, disrupting ransomware networks, working to establish and promote clear rules of the road for all nations in cyberspace, and making clear we will hold accountable those that threaten our security.”

The Biden administration has been increasing efforts to fight ransomware. In September, the U.S. Department of the Treasury announced “a set of actions focused on disrupting criminal networks and virtual currency exchanges responsible for laundering ransoms” as part of the whole-of-government effort to counter ransomware.

The Bank for International Settlements (BIS) said in June that in many cases, cryptocurrencies “are used to facilitate money laundering, ransomware attacks, and other financial crimes.”

What do you think about President Joe Biden’s efforts to stop “the illicit use of cryptocurrency”? Let us know in the comments section below.

The Founder of Wallstreetbets Jaime Rogozinski Discusses Defi, NFTs, and Crypto Regulation

The Founder of Wallstreetbets Jaime Rogozinski Discusses Defi, NFTs, and Crypto Regulation

In 2021, the subreddit forum r/wallstreetbets, also known as Wallstreetbets (WSB) became an extremely popular forum after the members played a major role in the Gamestop short squeeze escapade. In recent times, the founder of WSB, Jaime Rogozinski has been behind a new decentralized finance project called the Wallstreetbets Dapp (wsbdapp.com). Rogozinski spoke with Bitcoin.com News this past week and he discussed the Wallstreetbets Dapp and how traditional and crypto finance are spilling over into each other.

Wallstreetbets Collides With Decentralized Finance

Just recently, Bitcoin.com News chatted with Jaime Rogozinski, the founder of the infamous Wallstreetbets forum. These days, Rogozinski is very focused on defi and the WSB founder is now behind a new defi project called the Wallstreetbets Dapp (wsbdapp.com). Rogozinski discussed the project with Bitcoin.com News in great detail, in order to give our readers some perspective of the decentralized app, exchange-traded portfolios (ETPs), non-fungible token (NFT) assets, and his thoughts about defi regulation.

Bitcoin.com News (BCN): Can you tell our readers about the Wallsteetbets Dapp and how you got involved with the idea?

Jaime Rogozinski (JR): I was invited to join on after the idea was solidly developed by the founding team to basically create this decentralized financial (defi) ecosystem. When they invited me to come on board, I decided to put my twist on trying to combine crypto with regular equities. To bring in a lot of the people that are just exclusively trading equities and realizing the huge number of tools that are available via defi and blockchain technology.

The decentralized app (wsbdapp.com), what it does is create a trading ecosystem on a blockchain with defi. We have several components that are now available and we’re constantly looking to improve the product offerings. We have socially built exchange-traded portfolios (ETPs), as community members leverage the dapp by purchasing the tokens and they can vote on which ETPs they want to create. What kind of weighting they want to put on the ETP or how they want to rebalance it.

These ETPs can have a combination of regular equities, not only the U.S. stock exchange but really any stock exchange, as well as crypto-assets like bitcoin (BTC). So the ETPs get minted and are available for anyone to purchase, not just people using the dapp either as the tokens are publicly available.

Another product we offer is single stocks, these are tokenized synthetic assets. So you can get stocks like Apple, Microsoft, or whatever type of stock you want. Individual stocks that trade 24/7 and they are available all over the world. We’re also unleashing tokenized stocks that are not synthetics. Someone goes out and purchases the underlying share, passes the dividend rights, voting rights, and all that stuff to the user. That one will be trading 20 hours a day and seven days a week.

We’ve launched a couple of ETPs and we launched one this week that’s not really meant to be like an investment or like an index fund, it’s meant to be a hedge against macro-level events like inflation.

BCN: Why do you think there’s a big influx of retail investors getting into the traditional stock market today and many flocking to crypto markets too?

JR: The trends have been there for a long time. They have already been pointing out with hard facts the exponential growth of retail participants getting into the stock market and into crypto. I think there were a couple of catalysts that accelerated that pre-existing trend. We were going to get here anyway but we got here a lot faster thanks to coronavirus.

They put everyone in quarantine and turned off all entertainment, sports or whatever, and people look for something else to do. So whether they turn to it for entertainment or to make money, they turned to the stock market which is one of the few things that was available.

The second catalyst, like what we saw with Gamestop earlier this year, put the spotlight on Wallstreetbets giving people the impression that Wallstreetbets is where retail people, without really any professional training or anything, can get involved with the stock market.

I think that was a very inviting moment where it lifted the veil of sophistication and it showed, in a digestible entertaining manner, what it is like to participate in the stock market.

BCN: Some people say the stock market is in a bubble. How do you feel about that description?

JR: I don’t know that we’re in a bubble, the economy is a cycle and it goes up, and then it goes down. We’ve been in an uptrend for like 10-15 years, so I guess at some point stocks are going to go back down. I wouldn’t say that it’s a bubble because you gave a lot of participants that are flowing in and they are flowing in with various amounts of money. I think the market share just increased at this point.

People have been screaming forever that the Fed has been printing money and that’s why the stocks go up. Maybe that’s the case, but they’re still printing money and the stocks continue to go up. It’s gonna happen until it stops happening.

The same thing goes on in the crypto world I think. It goes in cycles, we’ve had a few bullish years and then we had some bearish years, and now kind of on a bull run. When exactly the cycle switches I don’t really know. It’s impossible to predict, we know that it will happen, and when it happens, it will recover again.

WSB Founder: ‘It’s Inevitable That Traditional Finance and Crypto Finance Are Merging’

BCN: Recently, the WSBdapp team released NFTs. Can you tell our readers about the WSB NFTs?

JR: With the NFTs, coming from a real traditional finance background, wanting to get into the NFTs for me was an exercise of like let’s give these things utility. Let’s make these things kinda like membership tokens. Where people purchase these tokens and get access to all sorts of benefits within our ecosystem. Like increased percentages on yield, or providing liquidity, access to special rooms, access to additional airdrops that were gonna be thrown out there with additional NFTs.

That’s my personal vision, but the team that I am working with has their perspective on the NFTs, and they say well that’s great we’ll put all that stuff there but we like the pictures, the profiles, and people really like the artwork behind it. So we’re also making sure that it has that artwork component to it. People can buy right now and basically it’s like a raffle, a maneuver to lower the gas fees to get the Diamond Hands NFT. Once people have that they will get an airdrop of additional ones that we’ve mapped out.

BCN: Were you familiar with blockchain and crypto-assets like bitcoin before WSB’s massive growth?

JR: When bitcoin first started I was aware of it and later I mined some coins and played around with it. It was really cumbersome to get involved so I became more of an observer of bitcoin and hoped that it would be adopted and become mainstream. Sure enough, it did, and the price started going up. Then at that point, it’s like a regular asset with the supply and demand and the price that gets spit out as a function of that.

I stopped paying attention to crypto for a few years. I saw that new coins would come out and read a little bit about them and said ok cool, this is a different protocol. They figured out ways around certain inefficiencies and I hadn’t realized just how powerful the world of defi had become.

Even still when I tell people I’m doing things with defi, a non crypto person’s initial reaction is are you bullish bitcoin. These defi protocols are so much more than just coins. My imagination runs wild with possibilities. It’s also inevitable that traditional finance and crypto finance are merging. We’re already seeing them spill over into each other.

BCN: In recent times, regulators have had their sights set on decentralized finance. Do you think U.S. regulators will come down on defi?

JR: I don’t know. I wouldn’t use the words come down. Right now it feels that way and antagonistic. I’m hoping the regulators learn about defi and because it legitimizes it. Right now it’s really difficult without a framework to work with. Any person that’s getting involved with this is taking a chance that it might go away or might change.

I do believe the regulators have the best interest at heart. As far as we are concerned with Wallstreetbets, we are super-positioned for regulation. Everything we do, we’re going above and beyond with audits and legal opinions, and we’re trying to anticipate what these rules might look like.

What do you think about the Wallstreetbets Dapp and our discussion with the WSB founder Jaime Rogozinski? Let us know what you think about this subject in the comments section below.

Kyrgyzstan Raises Electricity Rates for Cryptocurrency Miners

Kyrgyzstan Raises Electricity Rates for Cryptocurrency Miners

The government of Kyrgyzstan has recently revised its electricity tariffs for various groups of consumers. Authorities in Bishkek have raised the rates at which crypto mining businesses buy power citing the energy-intensive nature of the coin minting process.

Crypto Miners in Kyrgyzstan to Pay More for Electricity

Companies operating crypto mining facilities in Kyrgyzstan will have to pay a higher price for the electrical energy they need to mint digital currencies. The increase follows a government decision to update electricity rates across the board in order to “ensure the stable and reliable functioning of the energy sector.”

Kyrgyzstan Raises Electricity Rates for Cryptocurrency Miners

According to an official announcement, the changes are part of the country’s Medium-Term Tariff Policy for Electricity (2021–2025), approved by the Cabinet of Ministers. “Mining entities (cryptocurrency)” is one of the 14 groups of end users affected by the revision. The base tariff for consumers in that category is calculated with a multiplying factor of 2.0, the published documents detail.

Crypto miners will pay a 2.52 Kyrgyzstani som (less than $0.03) for each kilowatt-hour of electricity they use. The new rate is the result of an increase of 12.5%, government numbers show. For the remaining four years of the period covered by the new tariff policy, prices will be adjusted each year to reflect the average level of annual inflation.

Authorities in Kyrgyzstan have listed crypto mining farms alongside enterprises in the gold mining industry and producers of alcoholic beverages as consumers that require significant power supplies. The revised tariffs for these users take into account the additional operating costs of the country’s thermal power plants as well as the costs of distribution, the government explained.

The region of Central Asia, where the Republic of Kyrgyzstan is situated, has become a hotspot for cryptocurrency mining, attracting miners with its low electricity rates. The government in Bishkek has been taking steps to regulate the growing industry.

In August 2020, the Ministry of Economics put forward a bill to introduce taxation for mining activities. The draft law proposes a 15% tax on the cost of electricity consumed to mint digital currencies. The legislation requires mining companies to apply for registration in order to operate legally in the country.

Do you think Kyrgyzstan will maintain its electricity rates low enough to continue to attract cryptocurrency miners? Tell us in the comments section below.

Axie Infinity Co-Founder Says Blockchain Game Plans to Launch a Decentralized Exchange

Axie Infinity Co-Founder Says Blockchain Game Plans to Launch a Decentralized Exchange

Sky Mavis, the team that created the Ethereum-powered non-fungible token (NFT) game Axie Infinity, revealed the project plans to launch a decentralized exchange (dex), according to the company’s co-founder Jeff Zirlin during a podcast with Frank Chaparro. Moreover, Axie Infinity recently captured over $2 billion in NFT sales, making it the second-largest project in terms of NFT sales, just below the marketplace Opensea.

Axie Infinity Plans to Launch a Dex Platform

The Axie Infinity economy has swelled exponentially during the last few months, as the Ethereum-powered game has seen $2.27 billion in all-time sales among 687,495 traders. While the project offers an in-game experience with NFTs, Axie Infinity also has two native token assets. The token asset axie infinity (AXS) has increased 55.4% in value during the last month. Meanwhile, year-to-date, Axie Infinity’s other native token smooth love potion (SLP) is up 98.7% against the U.S. dollar.

Jeff Zirlin appeared on the podcast The Scoop in episode 61 with host Frank Chaparro and he revealed that Sky Mavis was creating a decentralized exchange (dex) platform.

“The broad idea behind Axie is to introduce the world to a kind of scary and fun, exciting new technology, blockchain through something that’s relatable and nostalgic,” Zirlin explained. “So Axie’s are similar to Pokemon or Tamagotchi, these things we grew up with, you can battle them, collect them, you can breed them. Also even play games with them to earn cryptocurrencies with real value.”

‘Web3 Is Turning Communities Into Economies’

When speaking about building the dex, Zirlin mentioned that the project would benefit from its large and established user base. When he was asked if the dex platform would facilitate concepts like liquidity pools, Zirlin said he would neither confirm nor deny whether this feature will be available.

The Axie Infinity dex will allow the trading of tokens like AXS and SLP among the project’s user base. Meanwhile, stats show dex platforms like Uniswap, Pancakeswap, Sushiswap, Curve, and more are seeing billions of dollars worth of crypto swaps regularly.

Zirlin further stressed during the podcast that the idea was to make it so users don’t have to leverage a cross-chain bridge to acquire or swap tokens. The Axie Infinity co-founder sees a lot of potential with “hyper-social” game concepts melding with blockchain and NFTs in the future, but not every game.

“Web3 is turning communities into economies, and what are the games that would do really well with these digitally native economies? I think games that are very social, or hyper-social — Not every game, like a single-player game might not need a blockchain game or NFT game. More like community-driven really social games.”

What do you think about Sky Mavis adding a dex to the online crypto game Axie Infinity? Let us know what you think about this subject in the comments section below.

Crypto Miners Blamed for Power Supply Deficit in Kazakhstan, Government Mulls Restrictions

Crypto Miners Blamed for Power Supply Deficit in Kazakhstan, Government Mulls Restrictions

Kazakhstan is facing electricity shortages and cryptocurrency mining has been singled out as the main culprit. Amid an ongoing crackdown in China, the Central Asian nation has become a magnet for crypto miners who are taking advantage of its low electricity rates.

Republic of Kazakhstan Sees 7% Increase in Electricity Demand Due to Crypto Miners

Kazakhstan plans to boost its power generating capacities in the coming years but right now the country is experiencing electricity shortages. In 2021, consumption has surged by 7% in comparison with last year, a government official revealed at a press conference.

The spike in demand is largely due to a growing number of data centers devoted to cryptocurrency mining, Energy Minister Magzum Mirzagaliev told local media this week, referring to numbers released by the grid operator, KEGOC. Stressing that “this is a very big increase,” he stated:

We need to make a number of decisions. First, we must be able to ensure that system operators have the right to limit or reduce the consumption primarily of mining data centers at a time when there may be a shortage of electricity.

Mirzagaliev’s statement was quoted by Kazakhstan Today which remarked in its report that the activities of crypto miners now do not have a significant positive impact on the socio-economic indicators. Mining consumes the cheap electricity generated in Kazakhstan, competing with the growing needs of the rest of the economy and the population. The minted cryptocurrency is usually sold elsewhere and profits are accumulated abroad.

Nevertheless, the head of the Ministry of Energy insisted that Kazakhstan needs to develop its crypto mining sector and expressed confidence that the industry will evolve. Mirzagaliev pointed out there are “very good opportunities” for that, highlighting the country’s potential to expand the use of renewable energy.

In light of the current deficit, however, the department has prepared a number of proposals on how to deal with power shortages caused by miners. These include measures to limit the electricity consumption of existing mining data centers and suspend the connecting of new crypto farms to the grid.

Crypto Miners Blamed for Power Supply Deficit in Kazakhstan, Government Mulls Restrictions

At the same time, the government in Nur-Sultan will focus on increasing electricity production. Minister Mirzagaliev revealed that the country intends to build power plants with a combined 3,000-megawatt capacity in the next five years. While these electric stations will operate on natural gas, Kazakhstan will also launch new facilities relying on renewable energy sources. Their share in the country’s energy mix is expected to reach 6% by 2025 and at least 15% in 2030.

A study released by the University of Cambridge this year showed that the country has seen its share in the global extraction of bitcoin increase six times in less than two years. Kazakhstan now ranks third in the world by crypto mining volume. In July, the government decided to introduce a surcharge for the electricity used by miners, but that hasn’t stopped the influx of mining companies.

Do you expect Kazakhstan to successfully deal with its power supply deficit and continue to attract cryptocurrency miners? Tell us in the comments section below.

IMF Warns Crypto Boom Poses New Financial Stability Challenges, Urges Regulators to Step Up

IMF Warns Crypto Boom Poses New Financial Stability Challenges, Urges Regulators to Step Up

The International Monetary Fund (IMF) warns that the rising popularity of cryptocurrencies poses new challenges to financial stability. “Cryptoization can reduce the ability of central banks to effectively implement monetary policy. It could also create financial stability risks.”

IMF Sees New Challenges to Financial Stability From Crypto

The International Monetary Fund (IMF) warned about the risks posed by the cryptocurrency boom in a blog post published Friday. The post, titled “Crypto boom poses new challenges to financial stability,” is authored by three financial experts from the IMF’s Monetary and Capital Markets Department: Dimitris Drakopoulos, Fabio Natalucci, and Evan Papageorgiou.

Noting that “The total market value of all the crypto assets surpassed $2 trillion as of September 2021 — a 10-fold increase since early 2020,” they said that many entities in the ecosystem “lack strong operational, governance, and risk practices.” These include exchanges, wallets, miners, and stablecoin issuers.

The authors proceeded to discuss “Consumer protection risks,” stating that they “remain substantial given limited or inadequate disclosure and oversight.”

They warned: “Looking ahead, widespread and rapid adoption can pose significant challenges by reinforcing dollarization forces in the economy — or in this case cryptoization — where residents start using crypto assets instead of the local currency.” The IMF experts further described:

Cryptoization can reduce the ability of central banks to effectively implement monetary policy. It could also create financial stability risks.

Moreover, they stated: “Threats to fiscal policy could also intensify, given the potential for crypto assets to facilitate tax evasion. And seigniorage (the profits accruing from the right to issue currency) may also decline. Increased demand for crypto assets could also facilitate capital outflows that impact the foreign exchange market.”

The authors also suggested policy action. “As crypto assets take hold, regulators need to step up,” they wrote.

“As a first step, regulators and supervisors need to be able to monitor rapid developments in the crypto ecosystem and the risks they create by swiftly tackling data gaps,” they detailed. “The global nature of crypto assets means that policymakers should enhance cross-border coordination to minimize the risks of regulatory arbitrage and ensure effective supervision and enforcement.”

The IMF experts suggested: “National regulators should also prioritize the implementation of existing global standards. Globally, policymakers should prioritize making cross-border payments faster, cheaper, more transparent and inclusive through the G20 Cross Border Payments Roadmap.” They concluded:

Time is of the essence, and action needs to be decisive, swift and well-coordinated globally to allow the benefits to flow but, at the same time, also address the vulnerabilities.

What do you think about the IMF’s warning and suggestions? Let us know in the comments section below.