The EU has agreed on a new regulation of cryptocurrencies. Lending platforms Vauld, Voyager, and BlockFi are in financial difficulties. Rumors of problems at USDC and KuCoin are also spreading on social media. We’ll give you guidance on how regular investor should store their cryptocurrencies. Cardano’s important Vasil hard fork is approaching.
The EU decides on new crypto regulation
Last week, the EU wrapped up major legislative changes on crypto regulation. These changes will impact every crypto investor in the EU in the coming years. Decisions were taken on two different stages: the MiCa and the TFR.
MiCa stands for Markets in Crypto-Assets. It is a broader notion that includes topics such as stablecoins, DeFi, Proof of Work (environmental impact), and regulations for industry operators (e.g. exchanges).
Patrick Hansen, who follows crypto regulation closely, has made a good summary in this Twitter thread:
1/ Yesterday, after 2-3 years of consultation, discussion, amendments & negotiation, EU institutions reached an agreement on MiCA.
MiCA is probably the most important piece of crypto regulation to date.
Here is a brief overview of some key decisions 👇 https://t.co/4CtzMkZhb0
— Patrick Hansen (@paddi_hansen) July 1, 2022
Crypto providers will be supervised by authorities in each country but coordinated by ESMA, the European Securities and Markets Authority. It also has the power to intervene, for example, in cryptocurrencies listed on exchanges. Exchanges will be responsible for hacks and customers’ funds will have to be separated from the company’s own funds.
The biggest changes concern stablecoins. Every stablecoin provider will have to register in the EU. In addition, the EU oversees the reserves of stablecoins, which need to be fully backed. At this stage, the DeFi and NFT sectors are excluded from MiCa. The PoW ban is also off the table.
The TFR package sets out the articles regarding money laundering (AML). They set out the steps that will be required in the future, for example for the transfer of cryptos to and from exchanges. Patrick Hansen’s second Twitter thread goes through the TFR clauses.
1/ The EU has reached a deal on the TFR (AML rules).
Yesterday evening, policymakers agreed on the first of the two key EU crypto regulations being currently finalized.
It's not looking great, but could have ended up even worse. A quick overview👇 https://t.co/kM3PW2FAWD
— Patrick Hansen (@paddi_hansen) June 30, 2022
As expected, transactions out of the exchanges will be monitored. If the recipient is another provider, the transfer will be subject to an AML check, no matter how small the amount. For transfers to own wallets, verification will only be required for transactions above €1000.
It is currently unclear how the verification will be carried out in practice. For example, is a screenshot of the wallet sufficient or just the person’s own notice of the wallet owner?
The guidelines decided last week raise some questions. But, as a whole, it seems that the worst-case scenarios did not materialize. Regulation will tighten, but at least the EU is not trying to kill the entire crypto industry. It is likely that similar AML clauses will be pushed through in all Western countries – also outside the EU.
The decisions taken next will be written to a law, followed by an 18-month transition period. It is likely that exchanges will start implementing these regulations as early as 2023.
Vauld and Voyager
Last week, we reported on the collapse of lending platform Celsius and hedge fund 3AC. In recent days, there have been more reports of problems in the industry.
The Singaporean lending service Vauld feezed withdrawals yesterday. The company’s situation had started to get worse earlier, leading Vauld to lay off 30% of its workforce in June. A huge number of investors are again at the mercy of lawyers.
This unlucky person had transferred his bitcoins to his Vauld account minutes before the announcement.
I literally just transferred from blockfi to Vauld like minutes ago before the announcement. Could I have my btc back. Seriously.
— Unemployed Banana (@unemployedbana2) July 4, 2022
According to a recent news report, the lending service Nexo would be interested in acquiring Vauld.
The US-based Voyager stopped withdrawals on the first day of July. The company made headlines a couple of weeks ago when it announced that it had granted a loan of around USD 650 million to hedge fund 3AC. As we reported a week ago, 3AC is bankrupt and this has caused problems for a number of players in the industry. In Voyager’s case, the consequences seem to be fatal.
Voyager already limited the size of withdrawals earlier. Now the company has closed its doors completely.
An update to customers: https://t.co/myyrQ6gZi7
— Voyager (@investvoyager) July 1, 2022
Voyager is no small player, as the company is listed on the US stock exchange. Its share price has plummeted by a staggering 87% in the last month. It seems that the loan to 3AC will drive Voyager into bankruptcy.
BlockFi made a deal with FTX
Celsius, BlockFi, and Nexo have been the market leaders so far in the lending sector. Of these, only Nexo is currently reported to be operating without any problems. BlockFi was also close to collapse but found a savior in Sam Bankman-Fried and the FTX exchange.
BlockFi founder Zac Prince commented on the deal in this Twitter thread.
— Zac Prince (@BlockFiZac) July 1, 2022
Unlike many other services, BlockFi has never stopped withdrawals. BlockFi will therefore continue to operate as normal and, at least according to current information, customers’ coins are not at risk.
However, BlockFi was running into serious financial difficulties. The company has been losing money for a long time and failed to make a profit even in the bull market of 2021. It has also drastically reduced its workforce during the spring of 2021.
BlockFi also announced that it had granted a loan of as much as $1 billion to the aforementioned 3AC. The loan was at least over-insured, but BlockFi suffered losses of 80 million when it was liquidated. The deal with FTX will inject hundreds of millions into the company’s bank account and calm the situation.
The BlockFi lending service has become known to the general public in particular through influencer Anthony “Pomp” Pompliano. He has publicly been one of BlockFi’s biggest supporters. Morgan Greek, founded by Pompliano, was also a major investor in BlockFi’s first funding rounds.
KuCoin and USDC rumors on social media
The situation in the crypto industry is very nervous at the moment. Many players in the industry have publicly announced financial problems. On top of this, there is a lot of buzz behind the scenes. Nobody knows how much trouble crypto exchanges, for example, are in at the moment.
Usually, problems arise when customers start to withdraw their money. Until then, there could be a billion-dollar hole in the company’s balance sheet without anyone knowing.
It seems that the current situation is also being used to spread rumors. It is often impossible for an average investor to distinguish FUD from valid warnings. The rumor spreaders know this too. Anonymous sources are often used. The aim is to create panic and cause a bank run and/or reputational damage.
In recent weeks, the stablecoin USDC and the KuCoin exchange have been the subject of rumors. Popular Swedish Youtuber CEO Larsson went through the USDC case in a video yesterday.
It is also worth remembering that the competitor Tether (USDT) has been actively campaigned against on social media for five years. Its reserves are still being debated every day.
KuCoin is one of the largest exchanges on the market. Last week, several Twitter accounts started spreading rumors that KuCoin would soon put a stop to withdrawals. The campaign caused such a panic that KuCoin had to empty 80 million USDT tokens from its cold wallet.
CEO Johnny Lyu has firmly denied all rumors of problems at KuCoin. There is also nothing to suggest that the exchange is in any significant trouble.
Not your keys, not your coins
In this and last week’s news overviews, there have been reports of problems with many crypto services. What should an average investor think about all this? Is there a reason for panic? Here are our views on the situation.
It is worth understanding that there are always rumors about all major projects. For example, Bitcoin maximalists believe that Ethereum is a scam. Ethereum maximalists think Cardano is a scam. Gold bugs think Bitcoin is a scam. The list could go on and on. The point is this; for every investment and every project, there will always be critics.
The bigger the player, the more vocal the opponents. Everyone has to do their own research and draw their own conclusions about where to invest and what services to use.
As for the exchanges, the phrase “not your keys, not your coins” is more relevant than ever. If you store your cryptos on an exchange or lending service, they are under the control of that operator. In the past, the fear was mainly hacking or other technical problems. Now many people are wondering about financial difficulties.
Investors should prepare for potential problems in advance. Fire insurance cannot be bought either when the house is already on fire. One good way is to spread your holdings over several exchanges or wallets. If you are not familiar with the different wallet options, read this comprehensive beginner’s guide.
There is no risk-free storage. Personal wallets also have their own weaknesses, which are primarily related to the wallet owner’s own diligence. Each investor must consider the options that best suit him or her.
The ongoing bear market will claim even more victims. In a recent interview with Forbes, FTX founder Sam Bankman-Fried warned that some players in the industry are secretly in trouble.
We urge every investor to now carefully consider their cryptocurrency holdings. Should holdings be diversified? Is now the right time to get a Ledger Nano?
If the idea of having your own wallet seems daunting, Nordic marketplaces (especially Finnish) can be seen as the most reliable players in the industry. They are run by professional teams, and Coinmotion and Northcrypto are closely regulated by the Finnish Financial Supervisory Authority.
Cardano’s Vasil hard fork is approaching
Cardano was one of the most popular investments last year. The project, which had been in the game for a long time, received its long-awaited smart contracts in September 2021. The Alonzo hard fork was eagerly awaited but the end result was disappointing – at least for investors.
Cardano’s ADA token price plummeted after Alonzo. This happened even before the rest of the market started a broader downturn. While smart contracts and apps can be built, the technical limitations of the Cardano platform have slowed down the development of the ecosystem.
This problem will be addressed in the upcoming Vasil hard fork. Coin Bureau briefly discussed the topic in the video below.
IOHK, the development team, announced yesterday that the Vasil update has been successfully completed in Cardano’s TestNet. If no problems are detected, the Vasil hard fork will also be implemented in the MainNet in a month’s time.
Cardano’s native token ADA has been traditionally mooning ahead of hard forks. This time, however, the situation is different. The cryptos are so deep in the bear market that positive news will not have much impact. The ADA token has not performed significantly better than any other similar cryptocurrency over the previous 30 days.
According to IOHK, Vasil is the most important upgrade to Cardano since the summer 2020 Shelley hard fork. That update brought staking to Cardano. So, Vasil is an important step, and it could trigger Cardano’s DeFi ecosystem to a new bloom. Time will tell.
You can read about the details of the Vasil hard fork on the IOHK website.