More ETH burned than produced; Union Investment wants to add crypto assets to funds; Bitcoin becomes means of payment in El Salvador; new crypto regulation from the BMF and BMJV and the SEC is apparently planning a legal dispute with Coinbase.
Another exciting week in the crypto space is drawing to a close. The most important events around Bitcoin and Co. in a compact overview.
Since “London”: More ETH burned than produced
Last Friday, Ethereum’s inflation rate turned negative for the first time. Or to put it another way: On that day, more ether was burned than new coins were added in the form of block rewards. This imbalance is reducing the supply volume that is advancing and could therefore prove to be a major price catalyst in the coming months.
The EIP-1559 implemented with the upgrade introduced a basic fee for Ether transactions, which is calculated based on the block utilization. If the crypto network is busy, the gas fees increase. The same applies in the opposite direction, with low utilization the costs are reduced. At the same time, the maximum block utilization was doubled to 25 million gas units. This is to ensure that the fees settle at an affordable level even at peak times.
However, it is very important that the fees are not transferred to miners as they were before, but have been burned since the hard fork. This slows down the flow of ether: the inflation rate flattens out. If the block utilization increases due to an increased volume of transactions, more basic fees fall victim to the combustion mechanism, which can exceed the miner’s additional remuneration of currently 2 ethers per block.
Union Investment wants to add crypto assets to funds
Like the business magazine Bloomberg reports, Union Investment, one of the largest local asset managers based in Frankfurt am Main, plans to include Bitcoin in funds. Accordingly, the crypto experimentation phase with Bitcoin certificates has ended, it is said.
“We are considering adding bitcoins in small amounts of no more than 1 percent to 2 percent to a handful of other funds for private investors,” Daniel Bathe, portfolio manager at the fund company, told Bloomberg. As a fund service provider for the cooperative banks in Germany (Volksbanken Raiffeisenbanken) Union Investment manages almost 430 billion euros (as of end of June). So far, he has not wanted to reveal any more details about the date, but the fourth quarter of the current year is possible.
With the plans, the traditional financial world is taking another step towards digital assets and allowing a wider crowd to jump on the crypto bandwagon.
El Salvador gives the go-ahead for Bitcoin – crypto market collapses
El Salvador was the first country in the world to officially make Bitcoin legal tender. The corresponding draft law, which Parliament passed on June 9th, came into force on September 7th. The content of the legal text includes the obligation to accept Bitcoin payments. If the technical conditions prevent BTC custody, the government offers “instant conversion into US dollars”.
In order for as many traders as possible to include Bitcoin in their day-to-day business in the medium term, the government of the Central American country is also committed to providing active support. For example, Parliament has agreed to set up a $ 150 million trust fund to provide money for Bitcoin-related infrastructure projects. The so-called “Chivo” crypto wallet is also intended to spark the historic decision. All El Salvador residents who choose to download will receive $ 30 in BTC as starting credit.
Many expected a pump of the cryptocurrency from this, but the opposite was the case. On September 7, the price of the crypto reserve currency collapsed by almost 19 percent for no apparent reason. It is likely that larger orders from so-called Bitcoin whales pushed the price below the 50,000 mark, which triggered further orders as a chain reaction.
New regulation allows investment funds to issue crypto fund shares
It was not until the beginning of June that the federal government set an example for the digital transformation of the financial system with the “Law on the Introduction of Electronic Securities” (eWpG). From then on it was possible to deposit certificates of bonds and share certificates without paper. Now the grand coalition is extending the scope of application to so-called crypto fund shares for the last days of government. This emerges from a first draft regulation by the Ministry of Finance and Justice. The paper is currently still available for examination by the federal states and associations.
Should the regulation come into force in this way, providers of investment funds could in future also issue electronic unit certificates by entering them in a crypto securities register as crypto fund units. The registrar must correspond to the depositary of the investment fund.
SEC targets Coinbase
In addition to the legal dispute with Ripple, the US Securities and Exchange Commission is now also targeting Coinbase. Again it turns to the old question: When is the offer of cryptocurrencies a securities business? And to what extent is the SEC responsible for this and when is a ban or adjustment requirement justified?
The lending program of the crypto exchange serves as the basis for the pending legal dispute. Customers do not invest in the program itself, but in the stablecoin USDC via the Coinbase platform. Coinbase then lends the USDC to verified borrowers, allowing customers to earn up to four percent effective return. According to the crypto trading platform, these rates are completely independent of Coinbase’s other business.
Although the SEC and Coinbase have been in an exchange about this product for six months, it has so far neither been on the market nor has it disappeared from the Coinbase website. According to the recently published blog entry by Chief Legal Officer Paul Grewal, this is mainly due to the SEC’s unwillingness to communicate. In his contribution, he clearly criticizes the fact that the SEC had shown a nice gesture with “talk to us, come in”, but that there is currently no sign of it.
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