Accointing Weekly: September 23

Our weekly crypto newsletter is here! Learn more about the possible wider institutional adoption of ETH after the merge, the digital euro’s status, and what all the newly published reports by US authorities mean for crypto!

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Ethereum May Attract Institutional Investors Post-Merge​

You’ve probably been hearing a lot of buzz about the Ethereum Merge, which happened on September 15, 2022. Simply put, that’s when Ethereum’s blockchain switched to a proof-of-stake (PoS) consensus mechanism. While the switch didn’t do much (well, anything) to solve Ethereum’s scalability problem or high transaction fees, it did make all transactions on Ethereum about 99.95% more eco-friendly.

Such a drastic reduction in electricity consumption could undoubtedly be enough to convince a wide range of institutional investors to go ahead and purchase Ether (ETH) for the first time. A recent report from Bank of America highlights the possibility that such renewed investment interest in Ethereum may lead to greater institutional adoption of its smart contract functionalities. This, in turn, could prove to be a game-changer for traditional finance and a big boost for the mass adoption of decentralized finance (DeFi) worldwide.

Who’s Taking the Lead in the Quest for a Digital Euro?

The European Central Bank (ECB) announced last week plans to push further with the Eurozone’s central bank digital currency (CBDC). The digital euro could be issued as early as 2026, ECB officials stated in the press. The European regulator has selected five companies to each develop a user interface prototype focused on one specific use case of the digital fiat currency: Amazon for e-commerce payments, CaixaBank for P2P online payments, Worldline for P2P offline payments, Nexi for point-of-sale payments initiated by the payee, and the European Payments Initiative (EPI) for point-of-sale payments initiated by the payer.

The front-end prototypes that will be developed by the end of the first quarter of 2023 will only serve for research purposes and won’t be used later on during the two-year-long research phase of the retail CBDC project. However, the ECB still hasn’t officially decided to launch the digital euro!

US Regulations: What Do All the Recently Published Government Reports Mean for the Future of Crypto?

The White House recently discussed the Comprehensive Framework for Responsible Development of Digital Assets. Meanwhile, the US Treasury Department released three reports about crypto – Action Plan to Address Illicit Financing Risks of Digital Assets, Crypto-Assets: Implications for Consumers, and The Future of Money and Payments. These reports and frameworks have directly resulted from President Biden’s March 9 Executive Order on Ensuring Responsible Development of Digital Assets. So what exactly does this mean for the future of crypto in the USA?

While each report focused on different aspects of digital assets, the main topic continues to be regulation to protect consumers and investors while taking advantage of the opportunities from these assets as a nation. The key takeaway is that regulators are not trying to kill crypto but rather put in place oversight and regulations to protect investors from events such as the Terra LUNA collapse or the many scams in the industry. Another key goal is to maintain financial stability and avoid a crash in a crypto project to have a catastrophic impact on the broader economy. The focus is also on the US remaining competitive and a leader in the industry while continuing to research and consider a US CBDC and better payment systems. Finally, mending gaps that pose a national security risk, such as illicit financing and money laundering, remains a top priority.

There tends to be a lot of FUDD surrounding government regulation. Yet, the industry will not see the mainstream adoption we all hope for without it. There may be concerns about the underlying interests, execution, or degree of regulation. Still, we must admit that better guidance and regulation are much needed for everyone in the crypto industry.

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