Crypto assets and blockchain ranked first in the European Securities and Markets Authority (ESMA) financial innovation ranking in 2021. This information was published in the agency’s latest report entitled Trends, Risks and Vulnerabilities.
In it, cryptocurrencies are viewed as a leading innovation in the world of finance and a threat to its stability, primarily due to the growing negative impact on the environment of Bitcoin mining.
Note that the topic of the negative impact of Bitcoin on the environment was raised by Elon Musk in May of this year. We are talking about mining the first cryptocurrency, which, due to the use of the Proof-of-Work algorithm, consumes a lot of electricity. And although the consumption of electricity by BTC miners is comparable to the energy consumption of a small country, they are still far from the general indicators of other areas by the type of construction.
Criticism of the cryptocurrency was the reason for a massive market crash on May 19 . At the same time, Bitcoin miners began to move from China, in some provinces of which the mining of cryptocurrency is now simply prohibited.
In response, the cryptocurrency community has set out to popularize the use of renewable energy, while Chinese miners have found a place to work in other countries. We checked the actual data: today the hashrate or total computing power of the entire BTC network is 135 exahashes per second. This is more than double the local low in July, when the figure fell to 69 exahashes.
Cryptocurrencies will rule the world
ESMA experts are confident that the general volatility of the cryptosphere, decentralized finance (DeFi) and central bank digital currencies (CBDC) make a huge contribution to the growth of risks in relation to so many investments. Here is a quote from analysts in which they share their vision of the situation.
Most cryptoassets have very high volatility [drastic changes in rates – editor’s note] and operate outside the regulation of the European Union, which poses a potential threat to the protection of investor rights.
Here, representatives of the regulator make it clear that in case of loss of funds on cryptocurrencies, the state will not be able to protect investors. However, for experienced users of digital assets, this is already understandable, since in a decentralized environment everyone is responsible for their funds and their safety.
According to Coindesk , the upcoming adoption of a new EU regulatory framework for the markets for cryptoassets (MiCA) is intended to address these risks. MiCA will be applied in the 27 EU member states and includes particularly tight restrictions on stablecoins, i.e. cryptocurrencies backed by national currencies. This also includes a requirement for stablecoin issuers to own at least 3 percent of coin reserves.
The experts continue.
The development of the stablecoin market is still under the scrutiny of global regulators, given the potential impact of the massive implementation of such projects on financial systems. This call for more transparency and legal certainty has only been reinforced as the largest stablecoin, Tether, first submitted a full audit of its reserves in May 2021.
Despite all the risks, ESMA is heralding the cryptosphere as a leading force in the transformation of the modern financial system. That is, even financial regulators admit that Bitcoin may well change the way we think about money and the economy as a whole.
Despite all its shortcomings, it is cryptocurrency that gives the world a vector of development in monetary relations, and it is simply shortsighted to ignore its growth now.
We believe that this position of the regulator perfectly reflects the scenario of the further development of the coin market. And while many centralized authorities understandably dislike cryptocurrencies, they will be forced to acknowledge their benefits and potential. Further, banks and entire countries that want to keep BTC due to the limited supply of this asset will join the niche. And after this, the popularization of coins will no longer be stopped.