- The Chairman of the US Federal Reserve said that Facebook should not be allowed to launch Libra until regulatory concerns have been addressed.
- Bitcoin dropped $2,000 in less than 24 hours, causing more than $25 billion to bleed from the crypto market.
- The governor of Iran’s central bank announced that Iran plans to authorize crypto mining.
- As the US Federal Reserve considers cutting interest rates, one thought leader speculates that a crypto boom could have an even bigger effect on inflation.
This week, Jerome Powell, Chairman of the US Federal Reserve, stated in a hearing that Facebook should not be allowed to launch Libra until regulatory concerns have been addressed. He emphasized that the company has not adequately addressed money laundering, data protection, or consumer privacy. Powell added that Libra raised “many serious concerns”around financial stability and consumer protection. Some of these concerns, he added, stem from the sheer volume of Facebook’s userbase.
Facebook’s blockchain lead and head of Calibra, David Marcus, responded to questions by the Senate Banking Committee on Tuesday. In general, regulators felt that these answers were insufficient. Marcus will testify again in front of this committee on July 16, at which point lawmakers hope to hear more a concrete strategy from Facebook.
“I just think it cannot go forward without there being broad satisfaction with the way the company has addressed money laundering… Data protection, consumer privacy, all of those things will need to be addressed very thoroughly and carefully in a deliberate process that will not be a sprint to implementation” — Jerome Powell, chairman of the Federal Reserve
“Facebook failed to provide answers about Libra. I want real answers during next week’s hearing and I’m calling on our financial watchdogs to scrutinize Libra closely to ensure users are protected.” — Senator Sherrod Brown
This week, Bitcoin dropped $2,000 in less than 24 hours. BTC price was rejected at 13,000 and quickly fell below $12,000, reaching a low of $11,164. Some commentators believe that the US Federal Reserve Chairman Jerome Powell’s criticisms of Facebook’s Libra triggered the sell-off. In total, the crypto market cap lost over $25 billion in value within a couple of hours. Altcoins followed suit, and some speculate that the panic could continue for some time longer.
Bitcoin hasn’t been able to reclaim the important resistance point between [$14,000] and its all-time high. Worse yet, on the way back up to make another reattempt at breaking above $14,000, Bitcoin was stopped short just above $13,000, sending it down well over $1,000 to a current price of below $11,800.
Altcoins have shown some signs of bouncing here, but may still have further to fall. In the past once altcoins bottomed, they vastly underperformed Bitcoin, so buying the blood in the streets here may be wise. Of course, the panic could ensue a lot longer than expected which would make buying here extremely dangerous, so exercise extreme caution if considering setting an order for any altcoins here.
This week the governor of the Central Bank of Iran (CBI) declared that Iranian authorities plan to authorize cryptocurrency mining. CBI governor Abdol Hemmati implied that this decision is linked to an executive law, and follows a long debate on the legality of crypto in Iran. The law will require crypto miners to use electricity as priced for export, rather than the internal subsidized energy grid. Hemmati also stated that miners in Iran should contribute to that country’s economy, rather than filtering bitcoin beyond its borders. Buying and selling crypto is still illegal in Iran due to its stringent anti-money laundering rules.
The planned law will require crypto mining in Iran to abide by the price of electricity for export, rather than allowing miners to use the heavily subsidized internal energy grid. According to the report, Iran exports power to neighboring countries at prices from 40–100% higher than it provides internally.
The new announcement followed reports that Iranian authorities planned to cut off power to crypto mining due to abnormal surge of electricity consumption, which was allegedly due to increased rates of crypto mining in the country. Accordingly, Iranian government subsequently confiscated about 1,000 units of Bitcoin mining hardware units from two mining operations.
The United States Federal Reserve is once again considering whether interest rates should be cut to support the broader economy. The White House is urging them to cut interest rates, which would also inevitably result in inflation. Tyler Gallagher, CEO of Regal Assets, thinks that interest rates are not the only thing economists should be watching. In his view, cryptocurrency is likely to have an even greater impact on the economy in light of Facebook’s Libra launch.
This year alone, BTC has seen a 200% rise — and that boom will likely continue as more corporations join the fray. Any “boom,” in which new wealth is injected into the economy results in inflation, and a crypto boom is on the horizon. However, after this initial boom, Gallagher believes that cryptocurrency could stabilize the economy because there is a finite amount to be mined.
The increase in cryptocurrency of all kinds, including the recent launch of Facebook’s Libra and a 200% rise in Bitcoin this year alone, supports the weight of cryptocurrency’s role in the global economy, especially as it affects inflation… More corporate giants will follow Facebook with their own exclusive coin offerings; in 10 to 20 years, a company without its own token may be analogous to a company without a website today.
Ultimately, the consequences of inflation won’t be nearly as devastating as the alternative — deflation. Inflation, at least, gives us a leg to stand on to stay in the game long enough to devise a better strategy. Much like one person can acquire a credit card and continue to live despite mounting debt, the global economy can utilize inflation as a way to extend the time frame we have to figure out a better solution.
That’s the roundup for July 13th. Check-in next week for the latest news of cryptocurrency innovation and regulation around the world!
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