Bitcoin headed for weekly drop amid exchange crackdown

Bitcoin headed for weekly drop amid exchange crackdown
Bitcoin was trading little changed on Friday, but headed for a weekly decline. (Shutterstock)
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Updated 07 April 2022

Bitcoin headed for weekly drop amid exchange crackdown

Bitcoin headed for weekly drop amid exchange crackdown
  • Bitcoin trading 5 percent lower in the week
  • Italy joins global crackdown on crypto platform Binance

LONDON: Bitcoin was set for a weekly decline as regulators continued a global crackdown on cryptocurrency exchange Binance and Federal Reserve Chair Jerome Powell speculated that central bank digital currencies may make cryptocurrencies less useful.

Bitcoin was trading little changed at $31,783 at 1:14 p.m. GMT on Friday, after experiencing its biggest slide in 10 days on Thursday. The world’s most traded cryptocurrency was 5 percent lower in the week.

Binance is not authorized to carry out activities in Italy, the country’s market watchdog said on Thursday, joining a string of global regulatory moves against the cryptocurrency exchange.

It is unclear whether the regulator had requested that local Internet companies block Binance’s website, or whether it has referred the case to magistrates. A Binance spokesperson said its website did not operate out of Italy and that the Consob notice had no direct impact on its services. He declined to comment on the letter.

Scrutiny of the cryptocurrency sector is growing across the world, with regulators worried over consumer protection and the use of digital coins for money laundering and other criminal activities.

Britain’s financial watchdog last month barred Binance — one of the world’s biggest exchanges — from carrying out regulated activities in the UK. Watchdogs in Thailand, Japan, Germany and the United States have also targeted the platform.

Binance was last month the world’s biggest exchange by spot trading volumes, data from CryptoCompare showed, with trading volumes in June at $668 billion — a near 10-fold jump from July 2020.

It offers a wide range of services to users across the globe, from crypto spot to derivatives trading. However, on Friday, it said it had stopped selling stock tokens — digital versions of equities — as Hong Kong's regulator moved against trade in the tokens.

Fed vs. stabelcoins

Fed Chair Powell on Wednesday said one of the stronger arguments for the US central bank to set up a digital currency is that it could undercut the need for private alternatives such as cryptocurrencies and stablecoins.

Asked during a congressional hearing if having a digital currency issued by the Fed would be a more viable alternative than having multiple cryptocurrencies or stablecoins emerge in the payments system, Powell said he agreed. A stablecoin is a cryptocurrency that attempts to peg its value to a conventional currency such as the US dollar.

“I think that may be the case and I think that’s one of the arguments that are offered in favor of digital currency,” Powell said during a hearing before the US House of Representatives Financial Services Committee. “That, in particular, you wouldn’t need stablecoins, you wouldn’t need cryptocurrencies if you had a digital US currency — I think that’s one of the stronger arguments in its favor.”

Fed officials will be broadly examining the digital payments universe in a discussion paper that could be released in early September, Powell said. He described it as a key step that accelerates the Fed’s efforts to determine if it should issue a central bank digital currency, or CBDC.

Digital euro

Elsewhere on Wednesday, the European Central Bank formally launched a pilot project to create a “digital euro”.

“Our work aims to ensure that in the digital age citizens and firms continue to have access to the safest form of money, central bank money,” ECB president Christine Lagarde said in a statement.

The initial “investigation phase” is to last two years and will focus on the digital euro’s design and distribution options, before a final decision is taken on whether to proceed.

A digital euro would be an electronic version of euro coins and banknotes held in a digital wallet, potentially allowing eurozone citizens for the first time to have accounts directly with the ECB.

A key challenge will be to balance privacy demands with anti-money laundering regulations, with experts saying it’s unlikely a digital euro can offer the same kind of anonymity as cash.

To avoid taking business away from commercial banks, ECB executive board member Fabio Panetta told reporters the amount of e-euros individuals can hold in their digital wallets could be capped, for example at around 3,000 euros ($3,500).