The United Kingdom central bank has followed the Federal Reserve in suddenly cutting interest rates — by the most since 2009. As various news outlets including the Financial times reported on March 11, the Bank of England (BoE) said the move was in direct response to economic pressures posed by the ongoing coronavirus outbreak.
“The reduction in Bank Rate will help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability, of finance.”
The move takes the BoE base rate to just 0.25%, a reduction of 0.5%. The Fed rate is now 1.25%, with more cuts forecast this year.
The pound immediately reacted, shedding 0.5% against the US dollar, to subsequently recoup some of the losses.
While Bitcoin (BTC) failed to react, supporters of the cryptocurrency maintain that stimulating spending and borrowing by lowering rates is just one practice laying the foundation for the long-term ruin of the fiat economy.
To avoid recessions, a key fear of Keynesian economists, governments aim to increase spending while applying incentives such as tax cuts for businesses.
Additional spending against a backdrop of less income can only happen via the use of measures such as increasing the money supply, further debasing fiat currencies.
Nonetheless, Bitcoin’s lackluster reaction to the coronavirus crisis caught many by surprise. Among them was John Bollinger, creator of the Bollinger Bands trading indicator, who on Tuesday said that recent losses were unexpected.
“Bitcoin fell victim to the COVID-19 panic. I truly did not see that coming, I thought it might act as a safe haven asset,” he said.
In another post, he added:
“Safe-haven-ness is a matter of perception, not fact. If an asset is thought to be a safe haven, it is. The matter is entirely psychological.”
BTC/USD traded at around $7,870 at press time, down 0.4% on the day after briefly rising above $8000.
On March 10, major South Korean cryptocurrency exchange Bithumb announced it has partnered with crypto forensics firm Chainanylsis following the passing of new Korean crypto regulations.
Bithumb will employ Chainalysis’s “Reactor” investigations tool to examine suspicious activity on its platform in a bid to comply with Korea’s recently amended Special Financial Transactions Information Act.
Certain provisions in the act will take 12 months to come into effect, with the new apparatus expected to be fully implemented after a further six months. As such, all South Korean crypto exchanges must operate with full compliance by September 2021.
Bithumb’s head of compliance, Sungmi Lee, predicts lawmakers to further strengthen the new legislative apparatus in the near future, stating, “We anticipate further updates following last week’s vote making it even more important for us to have support available in our local language.”
On March 5, South Korea’s National Assembly passed the revised bill, introducing a permit system for the nation’s virtual asset service providers (VASPs).
Korean exchanges must now report their operations to the country’s Financial Intelligence Unit, and are required to collect “real name-confirmed accounts” from banks. Reporting failures can be penalized with up to five years in prison or $42,000 worth of fines.
Exchanges must also have their systems certified by the Korean Internet Security Agency (KISA). Due to the time and expense involved in attaining KISA certification, only four VASPs have completed the process so far — Bithumb, Upbit, Coinwon and Korbit.
Chainalysis’ chief revenue officer, Jason Bonds, stated, “As cryptocurrency use in South Korea continues to grow, new regulations such as this will make blockchain analysis solutions like Chainalysis vital for compliance.”
South Korea is one of many nations to recently amend their domestic cryptocurrency regulations to meet the reporting and compliance standards recently laid out by the G7’s Financial Action Task Force (FATF).