Have You Seen These ESG Regulations? 😱

What if I told you that there were laws being proposed that would limit food production on account of ESG mandates? Laws that would severely restrict a company’s ability to choose suppliers and buyers without first studying their ESG credentials.

Well, those laws appear to be around the corner with the EU’s ‘Corporate Sustainability Reporting Directive’, which went into effect in January.

These laws will lay the groundwork for how companies of a certain size can do business in the EU - be they EU-based companies or international companies with EU partners.

While most of the politicians in Brussels think that these regulations will help to increase quality of life, the exact opposite is likely to occur. Not only will they crush competitiveness, but they could throw the EU into another energy and cost of living crisis.

In my video today, I break down these regulations and what they could mean for not only those living in the EU, but for everyone around the world. That’s because, if the EU is busy rolling out these regulations, you can be pretty sure there are politicians elsewhere who can’t wait to follow suit with some of their own.

You can watch that video here.

📊 My Personal Portfolio 📊

USDC 38.69% | ETH 27.79% | BTC 27.72% | ATOM 4.19% | DOT 1.58%

📈 Guy’s Forward Guidance 📈

We’re starting to see some interesting trends emerge in the crypto market. For starters, it looks like cryptocurrency has decoupled slightly from stocks. Unfortunately, this decoupling is happening to the downside - crypto is crashing, while stocks are pumping. The only thing that would cause this kind of decoupling is a crypto-specific factor. In this case it seems to be concerns about Silvergate, a crypto-friendly bank which could soon be on its last legs. Silvergate provided banking services to some of the largest companies in crypto, almost all of whom have cut ties with the bank over the last few days.

This is a bigger deal than you think, because US regulators and anti-crypto politicians have been looking for every excuse they can find to separate crypto from the banking system. If Silvergate goes under, then we could see Operation Chokepoint 2.0 intensify.

Another crypto-specific factor that’s been causing concern among crypto holders is the ongoing stablecoin crackdown. Today marks exactly one month since the SEC issued a Wells Notice to Paxos, announcing that it intends to sue the stablecoin issuer because of BUSD. Given that the Wells Notice effectively gave Paxos a 30-day warning, we could see the SEC officially sue Paxos as soon as this week. There are fears that the SEC’s reasoning could be applied to other stablecoins. It seems that BUSD whales have been rushing to redeem before the actual announcement; 400m was redeemed on a single day late last week.

When it comes to macro factors, there only seems to be one worth looking out for this week, and that’s the payroll statistics for February, which will be published on Friday (10th March). Some of you might recall that the payroll statistics for January suggested that the US added more than double the amount of jobs than investors were expecting. In theory this is a good thing, but in practice it’s not. That’s because it gives the Fed more room to raise interest rates. If the February payroll statistics come in above expectations (currently 200k), expect to see lots of volatility in the stock market and in the crypto market (likely to the downside).

Funnily enough, there’s another potential crypto-specific factor that will come into play on the same day, and that’s the beginning of the release of BTC to Mt. Gox creditors. For reference, creditors could collectively receive as much as 142,000 BTC (worth roughly 3.3 billion USD) between 10th March and 30th September. Fortunately, many of these claims have been sold already, and it’s extremely unlikely that most will sell this BTC after seeing it appreciate so much over the last decade. Unfortunately, the same can’t be said for the crypto belonging to bankrupt crypto companies like Celsius, which is finally starting to be sold. Watch out.

💵 Diversification Is An Illusion (Or Will Be Soon) 💵

Diversification is the first rule of investing. An easy example of diversification is the 60/40 portfolio - 60% in equities (like stocks), and 40% in bonds (like government debt). The reasoning behind this allocation is that when the markets are doing well, you will gain more (the 60% side), and when the markets are doing badly, you won’t lose as much (the 40% side). This 60/40 rule fell apart in 2022. Stocks crashed, and bonds fell by historic amounts too.

I believe this ties into a much bigger trend which began long before 2022.

In 1987, the DOW Jones fell by 23% on what has since become known as ‘Black Monday’. Following the flash crash, US regulators introduced something called a ‘circuit breaker’. When the stock market becomes too volatile, stock exchanges have to pause trading so investors can calm down. In theory, circuit breakers are used in big pumps and big crashes. In practice, they’ve only been used in big crashes. In other words, a pause on selling.

Fast forward to early 2021. Retail investors get word that hedge funds are aggressively shorting certain stocks, namely Gamestop. They decide to orchestrate a short squeeze - forcing these hedge funds to buy back the stocks they are shorting. Easy money. Obviously, the hedge funds don’t like this very much - institutions aren’t supposed to lose money. And so, Robinhood temporarily introduces restrictions on these stocks - you can only sell.

Now, let’s imagine 2025. By this point most governments around the world have introduced central bank digital currencies (CBDCs). Almost every single asset trades against a CBDC of some kind. Suppose something really bad happens that causes so much volatility that the trading of all these assets has to be indefinitely halted. Thanks to CBDCs, this is easy to do, and many central bankers have been talking about how these powers could be used.

So, how diversified are you if all your assets trade against a dystopian, government-controlled currency that can be frozen at any time? The answer is: you aren’t. Your wealth is meaningless if it can be confiscated at any time. This is why even the worst shitcoin is more valuable than the most valuable stock. No matter what happens, I will always be able to trade it on a DEX or transfer it whenever I want and to whoever I want.

And that, my friends, is the true meaning of financial freedom. Never, ever forget it.

🤔 Why the ‘Security’ Designation is Feared 🤔

Gary Gensler, the Chair of the U.S. Securities and Exchange Commission (SEC), recently doubled down on his stance that every crypto asset besides Bitcoin is a security.

This caused consternation in the crypto space. But an important piece of the conversation that is often missing in these discussions is:

‘What in Satoshi’s name does it actually mean for the stakeholders involved when a crypto asset is labelled as a security?’

Well, folks, it boils down to three things: compliance, cost and limitations. Allow me to explain.

The three stakeholders most impacted by the ‘security’ label are the token issuer (the entity creating and selling the tokens), the crypto exchange where the tokens are listed, and the investor (the purchaser of the tokens).

For the token issuer, the security status entails a complex list of regulations and guidelines that need to be followed when selling the tokens to the public. While regulations vary based on the jurisdiction involved, some of the typical restrictions that can be observed across jurisdictions include placing a limit on the amount of capital that can be raised and who it can be raised from.

In the case of an unregistered security, along with a ceiling on the capital to be raised, the token issuer is also limited to selling the tokens to accredited investors, or a defined number of non-accredited investors. In the US, token issuers conduct the sale of unregistered securities under the exemptions provided either in Regulation A or D, both of which come with their own set of limitations and conditions.

While registered securities can be sold to the public without restriction, the token issuer is typically required to prepare and submit several documents and disclosures to the regulatory body. These documents and compliance requirements may include a prospectus, pitch deck, KYC, token subscription agreement, marketing restrictions, and an anti-money laundering compliance manual.

For a token issuer, the costs arising from the compliance requirements make the process of launching a security token tedious and expensive. Any token issuer found violating these regulations is usually fined heavily.

As for our next stakeholder, crypto exchanges, most of them currently hold some form of money transmitter or money services licence to facilitate the trade of digital assets on their platforms.

For these exchanges to list a security token, they would need to secure a broker-dealer licence or similar capital markets licence in their respective jurisdiction. These licences are expensive and come with rigorous compliance requirements and regulatory oversight. Crypto exchanges that do not hold the required capital markets licence are forced to delist the particular token after it is deemed a security by the regulator.

Finally, since securities laws are primarily intended to ‘protect investors’, this involves placing limits on who is allowed to invest in securities. As explained earlier, this involves classifying individuals as either accredited or non-accredited investors. This means that tokens classified as ‘securities’ are typically out of reach for most investors. While this seemingly ensures investor protection, it goes against one of the core tenets of crypto: indiscriminate and decentralised access to financial markets.

This clearly shows that a securities designation for a coin or token will have profound implications for the project or ecosystem associated with that cryptocurrency.

As to whether these regulations are fair, well, that is an entirely different debate.

🔥 Deal of The Week 🔥

One of the biggest lessons that we have learned over the past year is the importance of self custody. And, when it comes to self custody, there is no more secure way to stash those sats than with a hardware wallet.

But, which is best? Fortunately for you, the scientists in the Coin Bureau lab have tried out numerous hardware wallets and we do have a few favourites.

1. Trezor: Store 1000+ cryptos in a beginner friendly way. This is the most widely used hardware wallet in Coin Bureau HQ!

👉 Get a Trezor

2. Ledger: Stores 1000+ cryptos, offers mobile support, and the option to earn rewards through staking!

👉 Get a Ledger

3. NGRAVE: The “coldest” hardware wallet out there! NGRAVE is 100% offline and gives you advanced security against hackers. This is one for the most security-minded.

👉 Get a NGRAVE

Some of you might already have hardware wallets. But, have you protected your seed words from spillages, fire or other natural disasters? If not, then you might want to upgrade that potential point of failure with a metal Coin Bureau seed wallet.

🔮 Video Pipeline 🔮

  • The FSB’s Upcoming DeFi Regulations: Time to panic?
  • Smart Cities: Dystopia Coming To a Town Near You!
  • Crypto Hedge Fund Report - What You Need To Know!
  • Twitter Files Summary: All you need to know!
  • Silvergate Collapse: What’s the fallout?
  • Global CBDC Update: Startling revelations!

🏆 What's New At CoinBureau.com This Week? 🏆OKX vs PrimeXBT Review 2023: Crypto Exchanges Compared!

That’s all for now! As always, we’d like to thank you for supporting our work in crypto education. It means the world to us!

Guy your crypto guyDisclosure: Authors may own cryptoassets named in this newsletter. These are unqualified opinions, and a Coin Bureau newsletter, is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor.

Guy Turner

Guy is one of the founding members and face of the Coin Bureau. Like many of us, he is just an average joe who became “crypto curious” back in 2013. After recognising the potential of blockchain technology, Guy set off on a mission to create crypto educational content, working with others to start the Coin Bureau website and released our first video on YouTube in 2019. You can learn more about him in his Who is Guy? blogpost.

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