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In today’s edition of The Daily, we look at how the current bear market is facilitating consolidation in the global cryptocurrency industry. We also focus on recent calls by an intergovernmental organization to tighten up rules on virtual assets throughout the world, as well as a story about a small U.S. town that has banned cryptocurrency mining for a period of one year.
Market Consolidating in
Response to Low Prices
Bearish sentiment in the cryptocurrency market has driven an industry-wide increase in mergers and acquisitions, with such deals spiking by more than 200 percent year on year in 2018. According to figures compiled by JMP Securities for Pitchbook, 115 deals have already been announced throughout the world this year, with roughly 30 more expected by the end of December. That compares with just 47 mergers and acquisitions that were completed in all of 2017.
“You’re seeing a mispricing of assets,” Satya Bajpai, head of digital assets investment banking at JMP Securities, told CNBC. “Even for great businesses, the value of the token remains correlated to bitcoin, which can create an ideal opportunity for strategic acquirers.”
A growing number of established companies are using the downturn to buy startups. They are mainly pursuing such deals to gain access to human resources, as talent is in short supply, rather than to simply secure new products and technologies.
“As soon as a company becomes interesting, they get bought,” said Bajpai. “The deal size may still remain small, but the number of deals will increase because that’s the most viable and fastest way to grow in this environment.”
Global Group Calls for Strict Rules on Virtual Assets
The Financial Action Task Force, a Paris-based intergovernmental organization that aims to stamp out money laundering and terrorism financing, issued a clarification last week regarding recent recommendations it has made on how to regulate virtual assets. It said that all countries throughout the world need to take coordinated action to prevent the use of such assets to fund terrorism and criminal activities.
“All jurisdictions should urgently take legal and practical steps to prevent the misuse of virtual assets,” said the organization, which is known as Groupe d’action financière in France. “This includes assessing and understanding the risks associated with virtual assets in their jurisdictions, applying risk-based [anti-money laundering and counter-terrorism financing] regulations to virtual asset service providers and identifying effective systems to conduct risk-based monitoring or supervision of virtual asset service providers.”
The organization is expected to set its own rules on the mandatory oversight of cryptocurrency businesses by June. Countries that fail to comply may be added to a blacklist. Beyond exchanges, the organization also wants national governments throughout the world to start imposing more regulations on initial coin offerings and encrypted wallet providers.
Community to Take ‘Break’ From Mining
The city council of Ephrata, a municipality of about 8,000 people in the U.S. state of Washington, has voted to ban new cryptocurrency mining operations for the next 12 months. According to the Columbia Basin Herald, local residents have complained about the noise emanating from mining facilities in the area. In addition, the authorities want to determine how such businesses fit in with the area’s electricity infrastructure.
“The noise was like an ocean. And I tried to pretend it was the ocean, but that gets old, 24/7, 24/7, 24/7,” complained Ephrata resident Donna Huesties, whose home overlooks one of the city’s mining outfits.
Kathleen Allstot, a member of the city council, said that the temporary ban would give the local authorities the chance to assess the implications of allowing mining businesses to operate in the community. In particular, she said that the one-year “break” will give Grant County Public Utility District — the main regional electricity supplier and operator of the Priest Rapids Dam and Wanapum Dam hydroelectric projects — a chance to determine how to provide power to mining businesses.
Only one council member, Matt Moore, voted against the decision. He said that he dissented over concerns about the potential economic impact of the ban.
“Economics will be the deciding factor,” Moore told the newspaper. “If this is an economical business, and this is one of the ideal places to situate it, I don’t want to surrender any economic opportunity, big or small.”
What do you think about today’s news tidbits? Share your thoughts in the comments section below.
Images courtesy of Shutterstock.
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Regulations Round-Up: SEC “Underwhelmed” by Exchanges’ Reporting, Quebec Halts New Mining Operations AgainJune 12, 2018 | dailybusinessnews
In recent regulatory news, Brett Redfearn, the director of the United States Securities and Exchange Commission (SEC)’s Division of Trading and Markets, has described the self-reporting efforts of cryptocurrency exchanges as “underwhelm[ing],” Hydro-Quebec has again suspended new applications from mining companies seeking to operate in the province, and the SEC has published a new page on its website encouraging consumers to “Get hip to the three ‘Rs’ of ICOs: Risks, Rewards, and Responsibilities.”
SEC Director “Underwhelmed” by Self-Reporting Among Crypto Exchanges
Brett Redfearn, the director of the SEC’s division of trading and markets, stated that the regulator is “underwhelmed” by the efforts made by cryptocurrency exchanges to conform to the agency’s registration and self-reporting requirements during an interview with CNBC at the Global Exchange and Brokerage Conference last week.
“We’re underwhelmed by the enthusiasm for coming within the regulatory structure right now,” Mr. Redfearn stated. “There are [so many] exchanges that are trading ICOs that I would think that we would see more registrations.”
Mr. Redfearn also declined to comment on whether ETH or XRP comprise securities, however, stated that the SEC will issue statements regarding “at least one of those products forthcoming in the future.”
Hydro-Quebec Again Suspends Applications for Mining Projects
Canadian state-owned utility provider and the fourth largest hydropower producer in the world, Hydro-Quebec, has again halted new applications from prospective cryptocurrency mining operations.
The halting of new applications was spurred by a request from the provincial government that Hydro-Quebec restrict the total power allotted to cryptocurrency miners to no more than 500 megawatts – a small fraction of the 17,000 megawatts thus far requested by mining companies seeking to operate in Quebec.
Pierre Moreau, Quebec’s Minister of Energy and Natural Resources, reportedly stated that he asked Hydro-Quebec to suspend the approval of new virtual currency mining operations until regulators determine appropriate guidelines for the province’s mining industry. Mr. Moreau added that the province will seek to develop guidelines enabling it to select “the best among the companies” seeking to establish mining operations in Quebec. Eric Filion, Hydro-Quebec’s Distribution President, indicated that the new regulatory apparatus will seek to bolster Quebec’s economy whilst ensuring cheap power is available to residents.
“Get Hip to the Three ‘Rs’ of ICOs: Risks, Rewards, and Responsibilities”
The SEC has published a page on its website which, according to its meta-description, seeks to help investors and market “Get hip to the three ‘Rs’ of ICOs.”
The page emphasized that ICOs may comprise “securities offerings,” that ICOs “may need to be registered”, and emphasizes that whilst tokens “can be called a variety of names, […] merely calling a token a ‘utility’ token or structuring it to provide some utility does not prevent the token from being a security.”
The page also implores prospective investors to conduct independent research and due diligence, and warns the promotion of unregistered securities may result in legal consequences.
What are your thoughts on the current regulatory climate surrounding cryptocurrencies? Share your thoughts in the comments section below!
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