After the European Central Bank (ECB) and Christine Lagarde, the Banque de France comparing the bitcoin phenomenon to “tulipomania”, it is the turn of the American Federal Reserve (Fed) to warn against cryptocurrencies. And to rely on the striking crash of this month of April to justify his warning: “These events demonstrate the need for clear regulatory safeguards,” warned Lael Brainard, the new vice president of the US central bank.
While cryptocurrencies are gaining more and more notoriety, with various categories of investors, including institutional funds, crypto-assets have suffered an unprecedented crash following an algorithmic movement on a stablecoin. The market for these decentralized assets, on which the ECB has identified 16,000 cryptos, lost more than half of its value, dropping from a valuation of $3 trillion to $1.4 trillion – in just six months.
Since bitcoins still fails to climb the slope and pass a plateau, around 29,000 dollars on Friday, a drop of more than 25% in one month according to the Bitstamp site. Since the record at 66,000 dollars, the fall is 57%.
Consequences in El Salvador
This unprecedented decline, while bitcoin has never fallen back to its starting value, has consequences for some states which have – or will – legalize bitcoin as an official currency. In El Salvador, merchants are still required by law to accept bitcoin as payment currency, but now cryptocurrency is burning their fingers and most are rushing to exchange it for less risky dollars.
Cryptocurrency tumble comes badly: Negotiations with the IMF for a $1.3 billion loan bog down for El Salvador, whose public debt is around 90% of GDP. There, only 23% of the population has a bank account.
But President Bukele has announced that he is taking advantage of the fall in bitcoin to buy 500 of them, which have increased the country’s cryptocurrency reserves, now at 2,301 bitcoins, each currently worth around $30,000.
The central authorities, who had warned of these risks, are therefore not stingy with criticism: “the measures we take now, whether on the regulatory framework or on a digital dollar, will have to be robust for the future evolution of the system. financial”, added Lael Brainard.
Regulation is getting tougher… even in Portugal
The trend towards regulation is happening everywhere. Portugal intends to fill the legal loophole that prevents the taxation of virtual assets and has made it particularly attractive for cryptocurrency investors, the Portuguese finance minister said on Thursday.
“The government intends to legislate on this matter, we are not going to maintain this vacuum”, declared Fernando Medina during a meeting with the foreign press in Lisbon.
The government wishes to present “as quickly as possible” a new legal framework which ensures that the balance between fiscal “fairness” and the country’s international “competitiveness” is maintained, added the minister.
Portugal is currently one of the few countries in Europe where cryptocurrency transactions are not “taxable” because they are not issued as currencies or financial assets, according to an opinion issued by the tax administration in 2016 and still in force.
Prioritize the digital currencies of States
At the same time, Washington is considering the creation of a digital dollar. President Joe Biden asked the Treasury Department in March – equivalent to the Ministry of Economy and Finance – to submit a report to him within six months on “the future of the currency”.
The Fed, which has been thinking about it for several years and published a report in January, the first stage of a public consultation, is for its part responsible for studying the stages that should be put in place.
“No decision has been made as to whether a US central bank digital currency (CBDC) will be part of that future,” Lael Brainard clarified. And to conclude: “it is important that the United States play a leading role in the development of standards governing international digital financial transactions involving (digital currencies of central banks)”.