Decentralised finance happens to be one of the few high tech areas where the EU is doing quite well. Last week the Council adopted its position on proposed crypto market regulations for Defi products. They are very industry-friendly.

The proposed regulations are the most important to date for the European crypto industry because they establish rules for issuers, or the developers and companies behind tokens, as well as crypto-asset services providers, or exchanges and custodians.

Happily for the EU industry, the new regulations do not apply to non-fungible tokens, NFTS. Nor do they apply to utility tokens, meaning any crypto asset that provides access to a good or service provided by the issuer. Crypto-assets that are offered for free, airdrops, are also exempt. Crypto assets automatically created as a reward for maintaining the blockchain on which they operate are also unregulated.

It’s a different story for stablecoins. The EU remains attached to the idea of launching its own central bank digital currency. Whether pegged to a fiat currency or basket of currency or assets, any form of stablecoin will be under strict regulation including a ban on earning interest, and a requirement for all issuers to be granted permission by the relevant national authority.

Fully decentralised exchanges are not subject to these rules, most likely because, as we’ve been arguing, it would be impossible to enforce them.

In another pleasant surprise for the industry, self-custody software and hardware wallets do not fall under the new regulations either. Earlier announcements that the EU planned to ban anonymous wallets appear to have been premature: there seems to be a growing recognition in the EU of what is and is not possible in Defi and crypto…read more.

• Bitcoin’s price could surge to $550,000 as institutional investors ramp up allocations to the space, according to Cathie Wood.
• Wood told CNBC on Thursday that institutions are seeking exposure to uncorrelated assets and crypto fits the bill.
• “The move by institutions into bitcoin could add $500,000 to bitcoin’s price if they moved into the tune of roughly 5% over time,” Wood said.

The price of bitcoin could surge to more than $500,000 as institutional investors begin to allocate to the relatively new cryptocurrency space, Ark Invest’s Cathie Wood told CNBC in an interview on Thursday.

Wood explained that institutions are always in search of investments that are uncorrelated to traditional asset classes like stocks and bonds, and crypto fits that bill.

“I think institutions are moving in [to crypto] right now,” Wood said, adding that they currently prefer the two largest cryptocurrencies, bitcoin and ether. As a whole, according to Wood, institutions barely have any exposure to the space.

“The reason institutions are moving in is to some extent this is a new asset class with correlations very different compared to other asset classes,” Wood explained. A study conducted by Ark Invest found that the asset with the closest correlation to bitcoin is real estate.

That runs counter to the commonly held belief that cryptocurrencies are risk assets that move in tandem with broader moves in the stock market. For example, amid the Omicron-induced stock market sell-off last week, bitcoin entered a bear market, falling more than 20% from its recent high.

“Institutional managers have to look at new asset classes that are evolving, that have low correlations, that’s the key to diversification, and it’s the holy grail in terms of asset allocation,” Wood said…read more.

On Wednesday, the Banque de France (BdF), the BIS Innovation Hub (BISIH) and the Swiss National Bank (SNB) announced the success of a pilot run of a wholesale central bank digital currency (wCBDC), titled Project Jura. The project, which aimed to investigate cross‑border settlement with euro and Swiss franc wCBDCs, was launched on a third‑party distributed ledger technology platform.

The experimental technology explored in Project Jura consisted of a decentralized peer‑to‑peer network of computer nodes (Corda) to validate transactions while simultaneously ensuring that all legal, regulatory and business rules of governing nations are satisfied. Then, there was the tokenization of the aforementioned fiat currencies and the Negotiable European Commercial Paper, a short-term maturity (one year or less) debt instrument denominated in euros. Finally, Project Jura looked into infrastructure networks that enable real‑time gross settlement of transactions, bond digitization and a digital assets registry.

Although the trial was successful, it does not guarantee the issuance of a wCBDC by Swiss, French or European Union authorities. The report concluded that “wCBDCs could be incorporated into novel settlement arrangements that could change the structure and functioning of capital markets, money markets and foreign exchange markets,” saying that:

“Broadening the use of central bank money through wider access or increased cross‑border settlement could catalyse these changes, as could deeper integration of currencies with other digital assets and securities.”…read more.