Before delving into key insights from March and April, here’s a quick look at the performance of the crypto market. Staying true to its reputation, the crypto market has been highly volatile in response to world events and key announcements. Whilst March saw substantial gains in the crypto market, these were wiped away in April as the market cap dipped below two trillion dollars.
The crypto world never stays still; ground-breaking developments unfold in tandem with ground-breaking announcements. Regulation has been a hot topic, and events during March and April of this year signal that greater financial regulation may be coming. The news cycle has been full of talk amongst local and national governments of strengthening regulatory frameworks for crypto.
Let’s jump into the key takeaways from March and April in the crypto world.
UK Announces Plans to Mint Its Own NFT
Britain’s Chancellor of the Exchequer, Rishi Sunak, made a ground-breaking announcement on April 4: The U.K. government is seeking to mint an Non-Fungible Token (NFT) by the summer. NFTs are effectively certificates of ownership for a digital asset stored using blockchain technology. This move aims to show the UK’s willingness to embrace the crypto world and demonstrates economic openness. The Chancellor was very explicit in his vision: “It’s my ambition to make the UK a global hub for cryptoasset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate, and scale up in this country.”
Minting an NFT is just part of the UK government’s broader strategy. They are also seeking to bring in regulation for cryptocurrencies, starting with stablecoins. These cryptos are pegged to fiat currencies and thus tend to be less volatile – a good starting point for rolling out regulation. Once fully regulated, stablecoins will be recognized as a safe form of payment in UK. The UK government foresees considerable growth in crypto wealth, suggesting that cryptos will play a larger role in financial systems in the future.
As one of the world’s leading economies, the UK embracing crypto could trigger a seachange in how governments worldwide handle the crypto market. El Salvador has already made cryptocurrencies legal tender, and many other countries are already looking at formally incorporating crypto. With talk of greater regulation rife, this latest development may represent another step towards crypto integration into national and world economies.
Russia-Ukraine War Highlights Crypto’s Alignment With Stockmarket
Traditionally, cryptocurrencies were thought to be immune to the influence of market forces, instead driven by investor sentiment. However, Russia’s invasion of Ukraine has represented another blow to this conventional wisdom. The simultaneous downturn in the stock market and cryptocurrencies during the ongoing Russia-Ukraine war provides another solid indicator that the performance of both markets is intertwined.
The crypto market represents a formidable force in the financial world, with the market cap hovering around the $2 trillion mark during March and April, a fourfold increase since 2017. Therefore, the risk of market spillover may well push governments to introduce more regulation for cryptocurrencies in the near future or even see the introduction of global regulatory frameworks. The economic shock of sudden downturns in both major indexes and cryptocurrencies may prove too risky for governments and international bodies to just sit on the sidelines. Well-targeted regulation could reduce speculation, taming volatility and making cryptocurrencies more attractive to long-term investors.
Twitter to Offer Crypto Payment Option for Creators
Twitter has signed to become the first company to use Stripe’s cryptocurrencies payment system, Connect. Karan Sharma of Stripe declared: “Today, we’re introducing crypto payouts for Connect. With crypto payouts, a select group of creators on Twitter—our first partner—will be able to use cryptocurrency-based rails to receive their earnings from Twitter.” Twitter now joins a growing club of major companies adopting forms of crypto payment, laying out the digital infrastructure for normalizing crypto transactions.
Crypto payments are a tempting option; they tend to be faster and have lower transaction fees, particularly for cross-border payments. Nevertheless, the growth of cryptocurrency payment systems will lead to stronger calls for regulation as consumers demand transparency and governments seek to safeguard against illegal activity. Regulation will build a more unified system that can work seamlessly around the world.
To find out more about all-things crypto regulation, please check out our insightful blog.