ESMA’s crypto preparations, Ether ‘flip’ Bitcoin; Aave’s stablecoin

Despite moving into a traditionally quiet time of year, the crypto world is still undergoing important changes in terms of market dynamics as well as regulation. I reflect on three key developments below that emerged this week:

• The EU regulator is stepping up efforts for crypto regulation
• Ether reverses bitcoin in options markets
• Aave stablecoin is a natural progression

ESMA is increasing the pace of crypto-regulatory preparations

The European Securities and Markets Authorities (ESMA) have issued requests to companies to provide trading data on crypto-asset transactions, including spot trades and derivative products. This is not unexpected in the context of recently adopted legislation at EU level, but is certainly evidence that the regulator is now starting to flex its muscles.

In principle, this is not a bad thing. The DeFi and crypto space has been under significant pressure in recent months due to market declines. As some less stable projects fail as a result, more scrutiny will be placed on the sector and this should be welcomed.

Of course, there are limits to the balance of power of regulatory oversight, but by and large it’s a good thing for businesses, consumers and investors looking to take advantage of the opportunities in the space. We are at a really important turning point where the addition of regulatory oversight is going to provide key security and certainty for DeFi to have an exciting long-term future.

Ether ‘turns’ bitcoin alternatives – is a full turnaround around the corner?

The Talk of The Merge taking place has set many speculations on whether ether – the original token of the Ethereum network – is capable of toppling bitcoin in terms of market capitalization and token price.

According to reports in various media, ether has actually reversed bitcoin in certain options markets for the first time ever. However, although both tokens in reality represent crypto numbers one and two respectively, both exist as quite different things, making comparison not easy.

Ether, on the other hand, is being watched extremely closely as The Merge approaches. The move from proof-of-work to proof-of-stake protocols, at this scale, could be nothing short of earth-shaking. Ethereum as a network and platform is very influential, so the ripple effect in DeFi and crypto more broadly should not be underestimated.

That said, with the DeFi space growing and evolving every day, Ethereum is now just one of many options for users, investors, and businesses. As the sector works to emerge from the current tough climate stronger than ever, we will see some real winners emerge and competition will remain robust.

Aave stablecoin is a natural progression

Aave DAO has approved the launch of a stablecoin, called GHO, for the protocol. It is a positive democratic development and a natural progression for the platform.

The stablecoin market is a growing area, both in terms of market capitalization and influence on cryptoassets and the DeFi arena. Stablecoins provide important onramps for users, so it’s no surprise to see the space grow exponentially. Interoperability between DeFi and TradFi is also of increasing importance, with stablecoins being the best solution for this.

As DeFi continues to evolve, this is only going to grow. In the long term, we see the two areas becoming so intertwined that the point where TradFi ends and DeFi begins will be quite difficult to determine. The pivot point for this will be stablecoins.

Aave’s stablecoin will be backed by a basket of cryptoassets, which is important especially in the current environment that has seen some algorithmic stablecoin failures. Ultimately, projects like Aave are only as strong as their technology, so building a stable coin that is robust and sustainable is the key here.