Cryptocurrencies have rebounded with a total market value of $2.2 trillion in late September, despite tough restrictions imposed by countries like China and India, according to a report by DBS Group Research.
This is a ten-fold increase since the beginning of last year. The launch of several digital asset exchanges, rollout of innovative wallets, changes in mining technology and wide issuance of stablecoins have kept the momentum strong for crypto, the report said.
Countries like India and China are keeping a close eye on crypto assets, as the scale and scope of this asset class are large enough to have systemic implications, it said.
Multiple reasons for the ban have been cited by the governments, such as security and governance, consumer protection, surveillance gap and monetary policy efficacy.
China’s central bank, in the last week of September, declared all transactions involving Bitcoin and other virtual currencies illegal, stepping up a campaign to block use of unofficial digital money. This was the second time the government announced a ban on crypto.
In March, it was reported that India would propose a law banning cryptocurrencies, fining anyone trading in the country, or even holding such digital assets. This, again, is not the first time when India is declaring its inhibition towards adopting crypto.
The resilience of crypto assets after the ban suggests that the market impact of China’s opposition to crypto could be declining. Year-to-date, Ether is outperforming Bitcoin by 400% in price return terms.
The ban has also led miners to migrate their businesses to crypto-friendly locations, which can offer cheap, reliable, and greener sources of electricity, the report said.
Kazakhstan, the US, and Russia are some of the preferred locations.
According to experts, China’s ban was likely because the government wants to remove competition for its digital yuan. Adding to this, India’s Reserve Bank of India has also said that it was eyeing a phased implementation of its central bank digital currency (CBDC).
CBDC adoption will help drive future usefulness, acceptance by merchants and improve cross-border payments, according to banking regulators.
However, there is still a lot of time for countries to roll out their CBDCs. To maintain stability, CBDCs would need to have a careful design and implementation, the report said.
Source: Economic Times