Biden’s Infrastructural Law brings some changes into crypto
Week in short:
Some disturbances came to crypto last week as Biden has announced stricter regulation for crypto, and long-feared Mt. Gox’s asset sell-out seems to be coming soon. But it’s not all that bad, and the market still appears to be on the upward trend in the mid-term.
This weeks’ digest:
- Stricter regulations are coming to crypto
President Biden has recently introduced the $1.2 tln infrastructure spending package, which has some impact on the crypto market as well. From this point, cryptocurrency exchanges (similar to traditional exchanges) will record all customer transactions and disclose the data to the IRS. Besides that, businesses will be required to report customer identities for all crypto transactions greater than $10k (similar rules apply to cash transactions for anti-money laundering purposes).
So what? The regulation itself does not change a lot as currently, people are still required to pay taxes from their crypto gains. However, the oversight increases, which will obviously bring more tax money to the government. On the one hand, it makes the industry more regulated and less attractive to investors. On the other hand, it also makes it more mature and civilized, which is a good thing if you think about the chaos which periodically happens currently (fraud, market manipulation. etc.). The bottom line is that it’s a well-expected natural step in market maturity.
*Link [read, 3 min]
- Mt. Gox’s rehabilitation plan is confirmed
In case you’ve missed this epic story — Mt. Gox was the major crypto exchange in the early days of crypto until it was hacked in 2011 with a loss of 850k BTC ($460 mln at that now and around $51 bln now). The exchange subsequently collapsed and filed for bankruptcy. You can read this long and exciting story here, but what is important for now is that part of the “stolen” bitcoins was recovered, and they may reunite with their owners now as the Tokyo District Court has approved the rehabilitation plan based on the votes representing 83% of total voting rights. It is unclear what amount will be paid and in what form, but it is said that around 150k BTC is available for the payment.
So what? An implication for the market is that we may expect the massive sell-out of these 150k as soon as they are distributed to the claimants, which might lead to a considerable price drop. However, for this sell-out to happen, it should occur simultaneously, while the funds may be distributed over some time. What is more, not all claimants might want to sell 100% of their assets immediately. Together with the fact that this amount represents less than 1% of the current total circulating BTC supply, it does not constitute an unbearable risk for the market.
*Link [read, 1 min]
- Marathon Digital issued bonds to fund its mining business
One of the world’s largest mining companies has issued $650 mln of convertible debt to acquire the new mining equipment and Bitcoin. It’s an excellent example of a crypto company scaling using traditional financial market resources.
So what? The US continues to strengthen its leadership in mining, and it’s also interesting to see the market reaction to this issuance. If it happens to be a success, we might expect many more companies trying to raise public money to fund their crypto operations, which will lead to more capital inflow into the market.
*Link [read, <1 min]
- The new soft fork for the Bitcoin network
90% consensus from miners and mining pools has led to the first major network upgrade since 2017. The main goal of the Taproot update is to improve Bitcoin smart contract flexibility and privacy by implementing the concept of Merkelized Abstract Syntax Trees (MASTs). In simple terms, it will make even the most complex smart contracts indistinguishable from regular transactions. Still, the technical details are much better described in this article [read, 8 min] if you’re interested.
So what? Speaking about its importance for the market, I would note that such a massive update shows that the network (and community) is still ready to cooperate in developing itself. Even though there are many new, more flexible, and efficient blockchain technologies, Bitcoin tries to keep up and move forward, and we can expect even more positive technological changes in the future. Here are some possible examples.
*Link [read, 3 min]