G20 Leaders Pledge to Regulate Cryptocurrencies, the Crypto Winter is Here, and the U.S Government May Soon be Able to Track Privacy Coins
A new notion, just like a sheriff, is in town and it compels us not to worry about Bitcoin’s price, but rather, the relevance of new crypto projects. The G20, a group of the world’s most powerful leaders recently pledged to work together to regulate cryptocurrencies. While everyone is trying to make sense of the crypto winter that might be as long as the one feared in HBO’s epic fantasy series, the Game of Thrones, the U.S. government is planning to track privacy coins such as Zcash and Monero.
The leaders of the G20 descended in Buenos Aires, the capital of Argentina to discuss the world’s most pressing issues and how to navigate around them. The leaders agreed on a number of common goals and signed a declaration document committing them to work towards sustainable development. The leaders passed a resolution to regulate cryptocurrencies in line with FATF standards.
In G20’s view, the regulation of cryptocurrencies would help fight financial crimes such as money laundering and terrorism finance. The bloc is also considering “other responses as needed.” This move can be considered to be natural since the G20 is committed to “an open and resilient financial system, grounded in agreed international standards,” because it is needed to ‘support sustainable growth.’
The bloc will leave no stone unturned as it “will continue to monitor and, if necessary, tackle emerging risks and vulnerabilities in the financial system; and, through continued regulatory and supervisory cooperation, address fragmentation.”
The bloc also pledged to work towards building an international tax system based on tax treaties and welcomes global cooperation “to advance pro-growth tax policies.” The leaders further want to address the impact of the digitization of the economy on the international tax system.
In October, the Financial Stability Board (FSB) published a report stating that digital assets are not a threat to global financial stability because the crypto market is still small. However, this may change in the future if the market grows.
While the G20 is planning to regulate cryptocurrencies, the U.S government may possibly move towards tracking privacy coins.
U.S government planning to track privacy coins
While the first-generation cryptocurrencies such as Bitcoin are pseudo-anonymous, they are not completely private. As a result, they have given birth to privacy-focused digital assets such as Zcash, Monero, Verge, etc.
The U.S. government through the Department of Homeland Security (DHS) is curious to know if it is possible to track transactions facilitated by privacy cryptocurrencies. The DHS published a pre-solicitation document that discusses the role of privacy digital assets in transactions. Although the document acknowledges that cryptocurrencies have commercial and governmental uses, the topic sways more towards finding a way to analyze privacy coins and dig deeper to see if they are being used to aid criminal activities.
The document handpicked Zcash and Monero as digital assets whose main features revolve around privacy and anonymity, making it difficult for authorities to track transactions.
Part of the document read, “while these features are desirable, there is similarly a compelling interest in tracing and understanding transactions and actions on the blockchain of an illegal nature,” and further stated that
“This proposal calls for solutions that enable law enforcement investigations to perform forensic analysis on blockchain transactions. This analysis can be approached in any number of ways and may consider different data situation use cases depending on whether additional data from off-chain sources are available.”
The document noted that Zcash and Monero are only two examples. More similar projects will be developed in the future and as such, the proposed solution needs to be general or be customizable to accommodate future projects.
The proposal is expected to undergo three stages before its completion on Dec. 19.
Crypto winter – the mess of our own making
It’s almost a year since the crypto market cap peaked at $830 billion but it has fallen so fast and hard that many have lost their faith in the market they once saw as a “Quick Get Rich” scam. As we speak, the entire crypto market is 80 percent down, Bitcoin has fallen by over 70 percent, and Ether has lost close to 90 percent of its peak price.
In the process, many have called Bitcoin the biggest bubble of all, paving way for critics such as Nouriel Roubini to call Bitcoin “the mother and father of all bubbles.” Speculators exited the market, some even calling it a zero-sum game. Regulators stepped in, further bringing the prices down.
All this brings us to one important question: was the relevance of Bitcoin and its ilk about its skyrocketing price or something more important and unappreciated at the time. It could be better if it was both.
What we know so far is that the crypto winter is here and may be around for some time. This has happened before. This time, developers need to go back to the drawing back and commit more to technical development rather than speculation.
It is time for the world to be educated about the benefits of this new technology and not just fed with the “to the moon” theory. New projects have an obligation to develop sound products that will have enough value to drive the prices of digital assets to the moon. However, one thing must remain clear – let’s not obsess over Bitcoin’s price but look for ways to solve the blockchain trilemma – scalability, decentralization, and security.
Of crypto winter, Bitcoin miners, and mayhem
The crypto winter is likely to cause ripple effects and the chaos may have already begun. The latest rout of Bitcoin prices may have claimed the heads of at least 100,000 individual miners, according to Autonomous Research LLP. Fundstrat Global Advisors LLC claims that about 1.4 million servers have been shut down since September.
Malachi Salcido, head of Wenatchee, Washington-based Salcido Enterprises, said that this phase and the coming one will “flush out” some players out of the market. Some miners only make a profit when the price of Bitcoin is sitting at $4,500 or more, something that it hasn’t done so since Nov. 19.
The current conditions are only conducive for a select few with better business models and low electricity costs. Due to the market conditions, the hash rate or mining power on the world’s leading cryptocurrency has dropped down 36 percent from it’s all-time peak in August. The mining difficulty has slightly dropped, allowing the remaining miners to stand a better chance of earning Bitcoins.
While this is good for the remaining players, it is bad for investors and parties with interests in the network. With fewer companies playing a big role in mining Bitcoins – the chances of a 51% attack on the network become increasingly possible.
The few miners can conspire to carry out a 51% attack, reverse transactions, and earn billions in other people’s money. This has already happened. Bitcoin Gold and ZenCash have been victims of the so-called 51% attack.
Poloniex offers institutional accounts
Poloniex cryptocurrency exchange has launched trading services for institutional investors. Poloniex was acquired by Circle Internet Financial Ltd., a payment company which launched its stablecoin backed by the USD on Sept. 26.
Circle is offering an over-the-counter (OTC) trading desk through Circle trade and is only open to participants with a minimum order of $250,000. The company promised to offer its institutional clients “higher withdrawal limits and professional customer support.”
Poloniex customers have something to smile about as there will be “no fees on BTC/USDC trades in the month of December.”