Wisly Wednesday Industry News — 30 June 2021

It’s been another whirlwind week in the world of crypto with some key developments making for interesting conversations. The Mexican central bank cautions lenders on crypto service offerings; Elon Musk throws his weight behind Dogecoin’s fee change proposal; Second-hand hydropower plants flood the Chinese market amidst exodus of crypto miners, and German authorities approve crypto custody license for Coinbase.

Mexico’s central bank, Banxico, has reiterated its stance that all Mexican financial institutions are prohibited from offering cryptocurrency-based services. This was confirmed in a joint statement from Banxico, the Finance Ministry, and Mexico’s banking regulator.

The statement comes hot off the heels of the news that Banco Azteca, owned by Mexican billionaire — Ricardo Salinas Pliego, is looking at accepting Bitcoin and other virtual tokens. With a net worth of over $15 billion, Pliego’s string of Banco Azteca banks in Mexico and other Central American countries wants to integrate cryptocurrencies in their service offering.

Mexico’s joint statement stated, “Virtual assets do not constitute legal tender in Mexico nor are they currencies under the current legal framework.” It further elaborated that any Mexican financial institution that violated these regulations and offered crypto-related services would be subject to sanctions. While the Mexican central bank has not banned cryptocurrencies entirely, it wants to maintain a healthy distance between digital assets and Mexico’s financial system.

CEO of Tesla, Elon Musk, has backed Dogecoin’s proposed fee policy change that was submitted over the weekend. This comes after Dogecoin developer, Ross Nicoll, tweeted that the Dogecoin fee change proposal is up. In response to the news, Musk replied to the tweet with, “Important to support.”

This fee change proposal was actually submitted by another Dogecoin developer, Patrick Lodder, who confirmed, “This document proposes a new fee structure and policy for Dogecoin Core to be gradually deployed to the network over multiple software releases.” He further explained his stance on Reddit by stating, “This proposal to all Dogecoin stakeholders suggests to reduce average fees 100x for standard transactions on the Dogecoin chain, split full control over all aspects of fees between miners and node operators, rely less on core development, and bring back a functional (small) free transaction space that incentivises keeping the network healthy.”

Musk has been instrumental in his efforts to improve Dogecoin and recently announced that he was working with Doge developers to improve the system transaction efficiency. He has encouraged those interested parties who want to contribute to Dogecoin’s development to submit their ideas on GitHub and the Dogecoin Reddit forum.

The online second-hand market in China has seen a surge in small hydropower plants for sale in the past few weeks as Chinese crypto miners head across the border to continue with their activities. This comes in light of the recent crackdown by the Chinese government on crypto-related mining and trading activities.

While the initial stages of the crackdown saw the second-hand marketplace flooded with crypto mining rigs, the latest restrictions on crypto activity in China have seen clean energy sources like hydropower plants being put up for sale. Many of the country’s crypto miners have headed to Kazakhstan and some North American regions where energy supply is subsidised and cheaply available.

The majority of the hydropower plants for sale are located in Sichuan province, a Chinese crypto mining hub for clean Bitcoin mining. Owners of these hydropower plants have decided to sell their stations after the demand for Bitcoin mining energy supply dwindled post crackdown. The most recent regulations imposed on crypto miners in China have significantly reduced Bitcoin’s network hash rate by almost 70%.

The German Federal Financial Supervisory Authority (BaFin) has boosted Coinbase in Germany by issuing a crypto custody business license to them. In an announcement earlier this week, BaFin stated that Coinbase in Germany was issued with the very first license of its kind for a crypto exchange related to the custody of digital assets within its borders. Moreover, it confirmed that plans were in place to create an interdisciplinary, cross-divisional and cross-departmental team that would oversee any issues regarding crypto custody.

This exciting development has been in the pipeline since 2019 when legislation was passed that required companies who wanted to operate crypto custody businesses to gain approval from BaFin first. Although the law was effective from 1 January 2020, a period of transition for crypto companies in Germany had to be followed.

Regarding this promising news, BaFin stated that businesses who offer the exchange of virtual currencies for legal tender and vice versa, or for other cryptocurrencies, are considered financial institutions that are subject to local laws and regulations. They have, however, warned investors that there is little to no protection against losses in the crypto market.

Any data, text or other content on this page is provided as general market information and not as investment advice. Past performance is not necessarily an indicator of future results.

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