Crypto regulations explained – GOOD or BAD News? | Crypto Regulations 2022-Personal Finance-Crypto

Hey guys, it’s Ryan. Finding a path to financial freedom for the self-employed.

Hey guys it’s ryan finding a path to financial freedom for the self-employed look if you’ve been paying any kind of attention over the last couple of years it’s clear to just about everyone that the us government and many governments around the world are struggling to figure out how to get a handle on the crypto markets increased regulation seems to be the attack

Du jour with some going so far as to ban the use of cryptocurrency outright of course that hasn’t stopped the crypto train and in all likelihood it won’t but there is certainly a discussion to be had regarding how countries around the world should deal with crypto and the role it will play in all our futures let’s chat about it rubble and crypto land may well

Be a bruin y’all crypto companies are under attack by the sec a perfect example in the last couple days is the decision against block fi regarding their interest accounts in which they were ordered to pay 100 million dollars in fines with 50 million going to the sec directly and another 50 million to 32 individual states for giving out interest and operating as

A non-registered investment company now it shouldn’t come as a surprise to anyone that the sec and these major crypto companies have a significant difference of opinion when it comes to regulation however for the sec’s part it seems that their intention is to bring cryptocurrency under their purview by labeling them as securities as an investor in blockfi i and

Millions of other customers have received notice as recently as today about major changes about to happen to interest-bearing accounts but the sec has no intention of stopping with blockfy you may remember that back in september that coinbase was poised to launch a new lending product and abruptly pulled the plug as a result of a threat from the sec but that’s not

All they’re targeting all the biggies gemini celsius and voyager to name a few but even if you aren’t a customer of any of those platforms it’s important to understand what’s happening because it’s going to affect the entire industry to blockfy existing blockfy interest account or bia clients will maintain their accounts and continue to receive interest as they

Always have on that money however should us-based clients add further assets to their accounts they will not pay interest on those funds that’s right this ruling only affects united states citizens existing and prospective block by clients outside of the u.s are unaffected by these changes and continue to have full access to the platform including opening new

Interest accounts and adding assets to existing one furthermore if you are creating a new account it won’t be eligible to earn interest until block five’s registration statement or what appears to be the replacement product for the bia block fi yield is declared effective by the sec at that time bias of u.s clients will be exchanged for block fight yield accounts

And clients will be able to resume making incremental deposits into their accounts i should mention though according to block by’s disclosure statement they haven’t yet filed for registration with the sec for blockfy yield or anything else for that matter so when or if it will be filed or more importantly approved is not certain now in their defense they did

Recently publish an article stating their intent to file but like so many things in the crypto sphere there are no guarantees another significant change to be aware of is this your blockfi account consists of two wallets presently a trading wallet and an interest bearing wallet in the past you could easily move assets from your bia into your trading wallet for

Buying selling or moving assets around then you could move those funds back into your interest bearing accounts for longer term storage under the new ruling however this will no longer be possible so sure you will be able to pull funds from your bia and move them into your blockfy trading wallet in-app but any money taken out of the bia cannot be put back to sum

Up the assets contained in your bia are grandfathered in and are allowed to continue earning interest as in the past but any change to that account such as withdrawing assets will make them no longer eligible to bear interest the reason the sec is getting involved now is simple they’d like to wet their beak did block fight do something wrong to spur the ire

Of the sec no not really they and other companies like them are essentially victims of their own popularity companies like blockfi are often able to pay extraordinary annual percentage rates or apys on stable coins relative to the rates commonly paid by banks or other institutions in some cases north of 10 per year which is at or above what you could expect to

Pull out of the stock market annually so as long as there is a crypto there is going to be a demand for liquidity and stable coins this allows these companies to lend to their clients which supposedly consist of institutions and large companies your invested funds at high interest rates now we don’t actually know who they’re lending to we just have to trust that

They’re doing the right thing because at least up to this point they weren’t being regulated by the scc the other thing to keep in mind back to my comments about be quedding is that crypto is competing with the banks which typically pay out about 0.06 apy on a savings account with high yield savings accounts peaking around 0.65 percent so it’s obvious to me why

People might choose to invest where they can get a 10x or better return on their money this is bad news for banks so enter their business partner at the sec but is it really so sinister or am i just being paranoid maybe it’s possible that the sec is simply trying to get involved because of concerns about the stability of these high interest rates you see high

Interest rates in crypto can exist because of high demand so should demand drop because of a crypto bear market or an extended crypto winter for example then prices too will fall to meet decreased demand fear in the markets associated with the drop will reduce the need for liquidity and stable coins and drive down interest rates at the same time conversely in a

Strong market with high demand there is greater interest in borrowing and a greater need for liquidity hence interest rates go up so maybe the sec’s concern is well founded but i think that most crypto advocates believe that there are mechanisms in place already to keep rates sustainable good old-fashioned supply and demand so i still find myself questioning their

Motives imagine a scenario where you wake up in the morning to the news that president biden has declared that crypto lending in all its forms should be treated like other types of securities further what if he declared we could no longer receive interest on our invested assets what effect would that have on the market at large well most analysts suppose it

Would result in a swift and significant drop in prices this would be devastating as it would likely trigger a cycle of mass liquidation or sell-offs which in turn would crash prices further causing additional liquidation this cycle would repeat over and over again and who knows where we’d be when the dust settles the worst part is what if that isn’t the worst

Part what if suddenly stable coins weren’t so stable and they were no longer worth the dollar they’re presently tied to check this out so many people jumped into crypto for the express purpose of investing their money in a way that could make them a significant return but what if suddenly biden had one of his secret service guys pull a rug out from under them

Making it illegal to be paid interest on their money what do you think would happen well everyone would head for the hills of course and they’d take their shiny little stable coins with them this would create a run on the bank as investors try to convert their coins back into fiat that followed by a full-scale disaster where as a result of massive sell-offs and

Nobody buying liquidity is lost and the price of stable coins could plunge south of a dollar now we have mechanisms in place to defend against that sort of thing and ensure liquidity one example you may have noticed depending on the platforms you use is that whenever you move cash or assets there are often grace or waiting periods of sometimes 24 hours or more

The reason for this is in part identity protection but also to keep people from cashing everything out too quickly crushing liquidity another method of safeguarding liquidity is through the use of over collateralization essentially when institutions lend out money they over collateralize the amount of money they’ve lent you effectively making the loan less risky

Ensuring that should you default the lender will be made whole at least that’s how it’s supposed to work in a regulated environment but remember crypto isn’t regulated so we simply have to trust these organizations to do the right thing when lending out our money and in the assurances they make in terms of the safety of our assets to emphasize this point a big

Part of the sec’s case against blockfy was that they overrepresented the amount by which they over capitalized their loan and it asserts that because of that misrepresentation and also a mission about the level of risk in its loan portfolio blockfy investor account clients did not have complete and accurate information with which to evaluate risks this is a serious

Violation of trust and in this particular area i happen to agree with the sec’s take i am certain that blockfi isn’t the only company to exaggerate or fluff up the risks involved with investing with them but this is the kind of thing that involvement by the sec specifically and greater regulation in general might stave off making crypto investing ultimately safer

For consumers in full disclosure i like blockfy and i have one of those grandfathered bia accounts myself so the purpose of this video isn’t to drag those guys but given that their case is almost certainly the first in a long stream of other cases with other companies i thought it made sense to discuss where things went wrong in hopes of fixing them for the future

So back to biden’s executive order and what he’s going to do with it well i don’t really know but i imagine we’ll continue to see volatility in the markets until he makes a decision and almost certainly afterwards but for me personally fear of regulation isn’t a catalyst for me to dump everything and abandon ship i see some form of regulation as further legitimizing

Crypto and as a part of the process of making it more sustainable and a bigger part of our future financial lives thanks a bunch for watching squish the like button if you haven’t already also click to subscribe and hit the bell to be notified every time i drop a new show if you find this content or anything on this channel valuable share it spread the good word

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Crypto regulations explained – GOOD or BAD News? | Crypto Regulations 2022-Personal Finance-Crypto By Ryan Roghaar