Kazakhstan Riots Disrupt Crypto Market, Show Vulnerability As Global Currency

The event exposes the vulnerability of cryptocurrencies to non-market forces, with government actions and regulation emerging as major obstacles for an industry seeking to challenge the US dollar and other fiat currencies for dominance of international currencies. Sources close to the situation say the sell-off was sparked by the central government’s decision to shut down the internet, removing nearly 88,000 regional miners from connectivity and reducing the total global hash rate, the amount of energy used to mine bitcoin, by nearly 11% overnight.

“I think we’ll see more of that around cryptocurrencies in the same way we’ve seen it happen with social media,” the source added. “When there are protests, some governments choose to shut down social media and we will likely see the same with crypto.”

“It is clear that state control of internet access is a matter of concern, especially when states have the unilateral ability to be able to shut down the internet for political purposes,” the crypto expert told Newsweek on condition of anonymity.

Speaking on the same point, Alan Dorgiev, head of the National Association of Blockchain Industry and Data Centers in Kazakhstan, told Newsweek, “In the medium term, the biggest obstacle for this industry is regulation, countries that want to use cryptocurrency and local governments prevent it.” “.

Bitcoin was initially created as a digital alternative to fiat currencies, allowing users to circumvent the power of banks and governments. But as cryptocurrency gains popularity and becomes increasingly involved in finance and commerce, it may no longer be able to escape regulation, he said.

TripleA, a Singapore-based crypto company that according to its website “companies to increase their revenue by reaching growing digital currency users,” estimates that more than 300 million people currently use or own crypto assets. India leads the way with more than 100 million users, followed by Nigeria and the United States.

Most of this adoption has come in the past two years, as the total market capitalization of cryptocurrencies has increased over 900%, from nearly $200 billion in 2019 to more than $2 trillion today.

At the same time, massive price volatility, a sudden rise in cryptocurrency-related fraud and hacking, and the opportunity for tax evasion have alarmed central governments and regulators around the world, prompting them to take action.

The growing popularity of cryptocurrencies such as Bitcoin, Ethereum or stablecoins, as well as decentralized finance (DeFi) and non-fungible tokens (NFTs), have attracted the interest of institutional and individual investors.

Government responses and regulations for this emerging industry have ranged from a total ban on mining operations to the adoption of cryptocurrency as legal tender.

US Federal Reserve Chairman Jerome Powell and Security and Exchange Commission Chairman Gary Gensler have both expressed concerns about the lack of standard cryptocurrency regulations.

Powell told reporters in December that he views cryptocurrencies as a “truly speculative asset.” But despite some initially hesitation, a formal regulatory framework is currently being discussed by Congress and the Federal Reserve.

“Smart legislation is on the way in the coming months,” said Senator Cynthia Loomis of Wyoming, a bitcoin holder and crypto champion in Congress.

Some are optimistic about the effects of regulation on markets, such as Bieng Chua, partner of financial regulation at global law firm Linklaters, who told Forkast that “increased regulation may encourage growth in this industry, as investors feel comfortable with regulatory oversight once the rules are in place to clear the way for digital assets.” .

On the other hand, Colin Harper, head of content and research in Luxor, told Newsweek that he would prefer the industry to remain largely unregulated, although he acknowledged that some level of regulation is inevitable.

He argues that if cryptocurrency is improperly regulated, it risks losing its main value proposition.

“I can see the value of the government’s desire to have some structures in place,” he said. “But if I’m a government, the only thing I’d like to think about is how to tax it and prevent illegal transactions.”

Citing political instability, market crashes, and rapidly rising inflation around the world, Dorjiyev from Kazakhstan said that with fiat currencies declining in countries like Turkey or Nigeria, the decentralized nature of cryptocurrencies will allow individual users to protect themselves financially.

“If you include cryptocurrency in the financial regulations we have for legacy assets, it somehow loses its purpose,” he said.

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