Despite moving into a traditionally quiet time of year, the world of cryptocurrencies is still undergoing key changes in terms of market dynamics and regulation. I reflect on three key developments below that emerged this week:
- EU Regulator Raises the Stakes on Crypto Regulation
- Ether exchanges bitcoin in the options markets
- Aave stablecoin is a natural progression
ESMA Accelerates Pace of Crypto Regulatory Preparations
The European Securities and Markets Authorities (ESMA) have issued requests to companies to provide trading data on crypto asset transactions, including spot trades and derivative products. This is not unexpected in the context of recently agreed legislation at EU level, but it is certainly evidence that the regulator is now starting to flex its muscles.
This is not, in principle, a bad thing. The DeFi and crypto space in general has been under considerable pressure in recent months due to market declines. As a result, some less stable projects fail, it will come under more scrutiny to the industry and this should be welcomed.
Of course, there are limits to the balance of power with regulatory oversight, but overall it’s a good thing for businesses, consumers and investors looking to take advantage of opportunities in the space. We are at a really important inflection point where the addition of regulatory oversight will provide key confidence and assurance that DeFi has an exciting long-term future.
Ether ‘changes’ bitcoin options: is a complete change just around the corner?
Talk of The Merge taking place has sparked a lot of speculation about whether ether, the native token of the Ethereum network, is capable of overtaking bitcoin in terms of market capitalization and token price.
According to reports in various outlets, ether has, in fact, invested bitcoin in certain options trading markets for the first time. But while both tokens do in fact represent the cryptographic numbers one and two respectively, they both exist as quite different things, which makes comparison difficult.
Ether, meanwhile, is being watched very closely as The Merge approaches. The move from proof-of-work to proof-of-stake protocols, at this scale, could be nothing short of a jolt. Ethereum as a network and platform is highly influential, so the ripple effect on DeFi and crypto in general should not be underestimated.
That said, with the DeFi space growing and developing every day, Ethereum is now just one of many options for users, investors, and businesses. As the industry works to come out of the current tough climate stronger than ever, we will see some real winners emerge and the competition will remain strong.
Aave stablecoin is a natural progression
Aave DAO has approved the launch of a stable coin, called GHO, for the protocol. It is a positive democratic development and a natural progression for the platform.
The stablecoin market is a growing space, both in terms of market capitalization and influence in the crypto and DeFi space. Stablecoins provide key on-ramps for users, so it’s no surprise to see the space grow exponentially. Interoperability between DeFi and TradFi is also of growing importance, and stablecoins are the best solution for this.
As DeFi develops further this will only grow. In the long term, we see the two spaces become so intertwined that the point at which TradFi ends and DeFi begins will be quite difficult to establish. The fulcrum of this will be stablecoins.
The Aave stablecoin will be backed by a basket of crypto assets, which is important especially in the current environment that has seen some stablecoin algorithmic failures. Ultimately, projects like Aave are only as strong as their technology, so building a stablecoin that is robust and sustainable is key here.