In the world of cryptocurrency today, the European Union is set to enhance its regulation of digital asset firms. With apprehension over a potential US government shutdown, crypto funds have experienced significant inflows. An executive from Multicoin Capital mentioned that the Genius Act might finally challenge traditional banks.
EU seeks to streamline crypto regulation under ESMA to reduce fragmented oversight
The European Union’s market regulator is gearing up to broaden its jurisdiction to include cryptocurrency exchanges and other operators, a decision officials argue would align regulatory practices with the recently enacted Markets in Crypto-Assets (MiCA) framework.
Verena Ross, chair of the European Securities and Markets Authority (ESMA), confirmed in a discussion with the Financial Times that the European Commission is formulating plans to transition supervision of various financial sectors, including crypto, from national authorities to ESMA.
Ross stated that this reform would contribute to building “a more integrated and globally competitive” financial landscape in the EU. The proposal aims to tackle “continued fragmentation in markets” and work towards a unified capital market across Europe, she elaborated.
Currently, under the MiCA framework, licenses for crypto-asset service providers are granted by national authorities rather than a centralized EU entity.
So far, smaller member states have spearheaded this rollout. Lithuania issued its first license to discount broker Robinhood Europe earlier this year, while Malta has authorized significant exchanges like OKX and Crypto.com. In Luxembourg, Bitstamp and Coinbase have also obtained MiCA licenses.
Ross contended that delegating oversight to individual nations has resulted in inefficiencies, as each authority must develop its own expertise and regulatory systems. ESMA has also expressed concerns regarding inconsistent licensing standards, highlighted by a July review that critiqued aspects of Malta’s authorization process.
Crypto funds set records with $5.95 billion in inflows amid concerns over shutdown
Last week, cryptocurrency investment products achieved their highest inflows ever, driven by anxieties surrounding the US government’s shutdown that sparked a rally in the spot crypto markets.
Global crypto exchange-traded products (ETPs) reported $5.95 billion in inflows for the week ending Friday—the largest amount recorded—according to a report from CoinShares issued on Monday.
“We believe this was due to a delayed response to the FOMC [Federal Open Market Committee] interest rate cut, compounded by the very weak employment data […], and concerns regarding US government stability in light of the shutdown,” said CoinShares’ head of research, James Butterfill.
The unprecedented inflows emerged alongside an overall bullish sentiment in crypto markets, culminating in Bitcoin (BTC) reaching a new all-time high exceeding $125,000 on Saturday.
With inflows reaching $5.95 billion, crypto ETPs eclipsed the prior record of $4.4 billion set in mid-July by 35%.
In contrast to the previous record inflows, which were fairly evenly divided between Bitcoin and Ether (ETH), the latest surge was predominantly in BTC, with Bitcoin funds drawing in an astounding $3.6 billion.
“Even with prices nearing historical highs this week, investors opted not to purchase short-term investment products,” Butterfill noted from CoinShares.
Ether ETPs witnessed inflows totaling $1.48 billion, bringing year-to-date inflows to a new record of $13.7 billion, close to triple that of the previous year, Butterfill reported.
Solana (SOL) ETP inflows claimed third place with $706.5 million, while XRP (XRP) garnered $219.4 million, both achieving new highs, per CoinShares.
GENIUS Act may signal the end of traditional banking practices: Multicoin
The stablecoin-centric GENIUS Act, enacted in July, is expected to spark a movement of funds from traditional banks into higher-yielding stablecoins, according to the co-founder of Multicoin Capital.
“The GENIUS Bill marks the beginning of the end for banks’ capacity to exploit their retail depositors with minimal interest,” tweeted Multicoin Capital’s co-founder and managing partner, Tushar Jain, on Saturday.
“Following the Genius Bill, I anticipate that major tech companies with extensive reach (Meta, Google, Apple, etc.) will start vying with banks for retail deposits,” Jain continued, asserting that they would provide more attractive stablecoin yields along with enhanced user experiences for instant settlements and 24/7 payments compared to traditional banking entities.
He highlighted that banking institutions attempted to “preserve their profits” in mid-August by urging regulators to shut down a so-called loophole that may allow stablecoin issuers to offer interest or yields on stablecoins via their affiliates.
