Bitcoin has seen a fresh rally following former US President Donald Trump’s speech in support of cryptocurrencies. This could rekindle concerns over European Union (EU) regulations on the controversial market.
The Republican candidate for the presidency of the United States, Donald Trumpgave a speech to cryptocurrency advocates at the Bitcoin conference 2024The former US president promised to turn his country into “the crypto capital of the planet and the bitcoin superpower of the world.”
Positioning himself as a contrast to the Biden administration and Democratic candidate Kamala Harris, Trump pledged to create a “strategic reserve” from bitcoin to the US government.
He wants to remove the president of the Securities and Exchange Commission
He also promised to remove Securities and Exchange Commission Chairman Gary Gensler if elected and “appoint an SEC Chairman who will build the future, not block it.”
Last week, Trump became the First presidential candidate to accept crypto donationsand raised 4 million dollars (3.69 million euros) in cryptocurrencies for his campaign.
While Trump’s endorsement of cryptocurrencies may appeal to voters who support digital tokens, the vigorous pro-crypto campaign could bring New regulatory risks for European policymakersThe monopolistic position of dollar-dominated digital tokens may also pose a threat to the world’s second-largest reserve fiat currency, the euro.
Resurgence of cryptocurrencies
Cryptocurrency markets experienced a resurgence this year, driven by the trajectory of central banks’ expansionary monetary policies. The fact that bitcoin was halved and the SEC’s approval of bitcoin spot ETFs (‘Exchange Traded Funds’) also caused a bullish momentum of these digital tokens.
Since Biden dropped out of the presidential race earlier this month, bitcoin has seen a new surge Due to the Growing speculation about a Trump victory in the November electionsThe largest cryptocurrency, bitcoin, is up more than 13% since last month up to over $68,700 (63,244 euros) on Monday, just 6% from its all-time high reached in March 2024.
Trump’s promises at the Bitcoin 2024 conference on Saturday could serve as a catalyst for further cryptocurrency boom if he becomes the next US president. This potential change may lead European politicians to re-evaluate the current regulatory regime.
The current EU regulatory regime
Over the past decade, cryptocurrencies and digital assets have experienced a significant growth in popularity and adoption. This rapid expansion has created the need for regulatory frameworks that guarantee market stability, investor protection and fraud prevention.
The rise of Initial Coin Offerings (ICOs), security tokens and stablecoins has highlighted both the potential for innovation and the associated risks within the financial system.
In September 2020, the European Comission presented the Digital Finance Packageaimed at ensuring the EU embraces digital finance while mitigating risks. The Markets in Crypto-Assets Regulation (MiCA) was introduced as part of this package to regulate cryptocurrencies and digital assets.
However the European Parliament and the Council have adopted MiCA in stages and it will not come into force until June 2023, with partial implementation starting in June and full implementation expected in December this year.
The war in Ukraine has affected cryptocurrencies
A significant risk that cryptocurrencies pose is their Possible use for money laundering and terrorist financing due to the decentralized nature of transactions.
Since Russia’s aggression against Ukraine, cryptocurrencies have been used not only to support Ukraine, but also to fund Russia’s military efforts.
Chainalysis’s sanctions officer noted that “the Russian entities have turned to cryptocurrencies under heavy pressure from international sanctions, using them for fundraising for private militia groups, ongoing ransomware attacks, and sanctions evasion attempts.”
ADVERTISINGA potential threat to the euro
Some EU regulators are concerned that the dominance of dollar-pegged stablecoins could pose a threat to the euro. Most stablecoins are pegged to the US dollar, which helps maintain their price stability over time.
Cryptocurrency traders often hold ‘stablecoins’ on exchanges as a means of trading between different cryptocurrencies. This reflects the Dollar dominance in commodity marketswhere assets such as gold, silver, copper and crude oil are also quoted in dollars.
However, to back these stablecoins, a crypto exchange or stablecoin company must hold a corresponding amount of US dollars in reserve. As demand for stablecoins increases, it tends to prop up the US dollar while weakening the euro.
A significant increase in the importance of bitcoin in the US could lead to increased issuance of ‘stablecoins’, which could exert a additional pressure on other currenciesincluding the euro.
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