Crypto

War is brewing in the cryptosphere

The first bank distances itself from cryptocurrencies, up to the refusal of transfers that would allow them to be bought. Will they follow his example?

Almost two months ago, in the article “Will Bitcoin Go Back to Zero,” I wrote:

“For me, who has remained a (irritated) observer, Bitcoin is an experiment sponsored by a monetary oligarchy that wants to test digital currencies on the one hand and blockchain technology on the other. This first power-hungry prototype showed its limits. It’s a Ford T compared to the Ferraris that have come along since then.

Crypto maniacs will argue, urbi et orbi, that it was a currency finally freed from states and banks, while the very concept of a “blockchain currency” is to remember all transactions of a monetary unit. Thus, its most advanced version allows you to allow or not allow transactions according to the criteria defined by the game master.

From the very beginning, I believed that when central banks launched their own digital currencies, MNBC, they would somehow clear the sandbox of libertarian cryptocurrencies. However, on November 15, the Federal Reserve Bank of New York launched an e-dollar pilot phase with 12 of the largest US banks. This version of the e-dollar is designed to speed up interbank transactions at a lower cost than SWIFT. It won’t be consumer currency yet. »

Since then, the price of bitcoin has generally stagnated…until Friday, January 20, when, to my surprise, it broke the resistance of the last three months to close the week with a beautiful green candle.

Maybe it’s his “swan song”? Indeed, the SWIFT payment system can soon be used in the war of banks against cryptocurrencies.

Limited transfers

Remember that in 2012, Iranian banks were stripped of the SWIFT interbank messaging system to cut Iran off from the rest of the world’s finances. This was seen by all as an act of monetary warfare.

Three days after the start of the Russian invasion of Ukraine, on February 27, 2022, Russian banks lost their SWIFT in turn. No prejudice, as Russia anticipated this Western sanction and created an interbank messaging system independent of SWIFT, open to the banks of its commercial partners.

Today, SWIFT is being used to attack cryptocurrencies by an American bank. Starting February 1, Signature Bank is banning SWIFT transfers between its bank accounts and cryptocurrency platforms below $100,000.

Since BTC is currently worth $23,000, this will affect all transactions below 4.5 BTC. Among the clients of this bank, only large speculators will still be able to play.

This mainly applies to the Binance cryptocurrency exchange and only dollar transfers, but the question arises whether these restrictions can be accepted more widely.

Indeed, of the 19 million BTC in circulation in June 2022, 3 million were concentrated in 1,000 very large individual accounts, while 5 million depended on only 10,000 large investors. Thus, there are almost 14 million bitcoins in the hands of small holders, who may no longer be able to resell their bitcoins for dollars.

If this happens, there is a good chance that they will try to liquidate their positions in an emergency and cause prices to fall. In the second stage, large players could buy bitcoins at reduced prices.

If bitcoin is the flagship token in the world of crypto, specialized site coinmarketcap currently lists 22,351 crypto assets, which together are valued at 941.3 billion euros. But their market shares and capitalization are very different: the vast majority of these tokens are worth less than a few million euros.

In any case, small holders who will not sell their cryptocurrencies if banks associated with the SWIFT system eventually accept these restrictions will have to find a platform outside of the scope of SWIFT to resell their tokens.

Possible alternative?

The Red Date Technology company announced on January 19, 2023 at the World Economic Forum in Davos about start of one more payment system — Universal Digital Payments Network (UDPN). The purpose of this new platform is to carry out settlements and transactions in various regulated digital currencies.

Red Date Technology is a Hong Kong-based company that develops China’s central bank (MNBC) digital currency, the e-yuan. Thus, it is a company with experience in the field of blockchain.

The interruption of transfers via SWIFT could give a boost to this Chinese company, which could find itself overnight in the center of cryptocurrency exchanges.

It may then be sufficient to exchange your bitcoins for yuan and repatriate them to your bank account, avoiding the dollar.

It should be noted that most of the bitcoins currently in circulation were mined in China (which, before mining was banned in the country, reached in some months from 60 to 70% of the computing power dedicated to this task in the world) . Thus, this is a market that the Chinese are mastering very well.

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