China bans; the US doesn’t: Crypto wins (October 2021)

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Foreword: METI Advisory wrote this report for SEBA Bank AG. Abstract: On 24 September 2021, China’s key monetary and financial agencies issued a blanket ban on all crypto transactions and mining. This confirmed and reinforced the May 2021 ban on financial institutions and payment companies providing cryptocurrency-related services that enable cryptocurrency transactions. Similar bans were issued in 2013 and 2017, and there was, more broadly, a relentless effort to suffocate the domestic cryptocurrencies market. The latest ban came days after the securities regulatory commission re-affirmed the work on introducing smart contracts and blockchain-based services to digitise the securities and futures market; it also followed a period of heavy work by the monetary authority that culminated in the release of the e-yuan in 2020. China has always supported the distributed ledger technologies-based applications. On 1 October 2021, the chair of the US Federal Reserve System clarified that the US does not intend to ban cryptocurrency. The chair of the securities and exchange commission (SEC) took the same stance on 5 October 2021. The statement followed several months of intense scrutiny and analyses of the cryptocurrency markets, and political procedural steps by the federal monetary and financial regulators. These steps were undertaken to address the cryptocurrency market’s weaknesses exposed by the correction that took place in May 2021, such as those related to market infrastructure, market conduct, and investor protection. On 1 September 2021, the SEC urged crypto exchanges to embrace the regulation in order to not lose public trust, and on 5 September 2021, it called for the crypto space to work in cooperation with regulators. Daily bitcoin price charts evidence that strong statements made by superpowers do move the market. Investors should consider such statements within a broader context and be mindful of the following. First, cryptofinance cannot be stopped unless the Internet is shut down or extensively controlled. Second, regulatory adoption and sustainable practices are necessary conditions for mass cryptofinance adoption. Then, recent global developments show that cryptofinance-unfriendly jurisdictions are increasingly a minority.