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Tom Rodgers
Tom Rodgers Head of Research
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ETC Group Crypto Minutes Week #18

In what was likely the strongest month in history for pro-crypto legislation, Bitcoin becomes legal tender in a second country, multiple countries advance digital asset taxation and adoption laws, which the crypto collateral thesis grows ever stronger as Goldman Sachs carries out its first ever Bitcoin-backed cash loan.

Two down: Central African Republic adopts Bitcoin as legal tender

Sometimes it can feel like there's nothing happening in the world of digital assets. Markets are stagnant, and a little choppy. Then another crypto adoption domino falls, setting the stage for the next major macro move.

The Central African Republic (CAR) has become the second sovereign nation after El Salvador to adopt Bitcoin as legal tender. On 22 April 2022 President Faustin-Archange Touadéra signed legislation making the world's first cryptocurrency legal tender alongside the CFA franc.

Legislators had earlier voted unanimously to move ahead with the law.

Touadéra's chief of staff Obed Namiso called the decision “ a decisive step toward opening up new opportunities for our country ,” Reuters reported .

Despite significant natural resource wealth in uranium, gold and diamonds, in GDP terms CAR remains one of the world's poorest countries. The landlocked 5 million population country produces around $2bn in gross domestic product each year, making it the 180th largest globally.

The text of the bill , translated from French, notes:

The purpose of this law is to govern all transactions related to cryptocurrencies in the Central African Republic, without restriction, with unlimited purview in all transactions and for any purpose, carried out by individuals or institutions, whether public or private. Bitcoin will legitimately be considered as a reserve currency.

It is particularly interesting to note that, just as with El Salvador, CAR's law guarantees that citizens will be able to convert bitcoin into CFA Francs and back again, with the country setting up a fund held in trust to carry out those exchanges.

The state shall provide alternatives enabling the user to carry out transactions in cryptocurrency and to have automatic and instantaneous convertibility of cryptocurrencies into the currency used in the Central African Republic,

the law says.

The International Monetary Fund has to date shown little appetite to support Bitcoin's use as reserve currency and indeed has actively campaigned against El Salvador's use of a Bitcoin-backed bond to support the country's growth.

As an institution it has moved excruciatingly slowly in the face of the biggest infrastructural money revolution of the past 100 years.

But with publicly-traded companies like KPMG putting Bitcoin on their balance sheets, and investment banks like Goldman Sachs now using Bitcoin as collateral for cash loans, those decisions meant to stunt the growth of digital assets at all costs have now been taken out of the IMF's hands.

Writing on Twitter, the CAR President said:

We are delighted to be among the pioneers of the most innovative tech in the world, the one that creates added value for all: blockchain.

Bitcoin will now be legal tender alongside the French-backed CFA franc, the country's main currency. The CFA franc is also the currency of five other independent states in the region: Chad, Republic of the Congo, Gabon, Equatorial Guinea and Cameroon.

El Salvador's move to make Bitcoin legal tender in September 2021 carved out a new era for Bitcoin and put crypto front and centre of the debate over dollar dominance and state-backed currency in general.

We know that innovation happens at the fringes first, before gaining an unstoppable momentum. On 7 April, a special economic free trade zone in the central American country Honduras called Próspera ZEDE also made Bitcoin legal tender . Próspera ZEDE is located on the island of Roatan in the western Caribbean.

And while the CAR's decision is unlikely to have a seismic impact on markets in 2022, the move does represent something much larger than itself. It shows that those once verboten conversations between secretaries of state, central bankers and crypto advocates in the halls of power are being taken much more seriously, and likely at a rapidly advancing speed.

Bitcoin as collateral: Coinbase revealed behind Goldman world-first loan

Wall Street's embrace of cryptoassets has been sluggish at best. So hearing that Goldman Sachs had crossed the Rubicon to offer a client a cash loan using Bitcoin as collateral? This is very big news. Bitcoin remains the perfect collateral, as explained in ETC Group's Q1 2022 State of Bitcoin report, available online here .

Coinbase has been revealed as the entity on the other side of Goldman's first Bitcoin-backed loan, Bloomberg reported on 3 May.

The investment bank made the landmark announcement a week ago that it had lent cash to a then-unnamed client cash using Bitcoin as collateral.

As Arca's Jeff Dorman notes :

Everything about this is interesting - from the lender (Goldman) to the collateral (BTC) to the client [Coinbase]. These types of bilateral agreements are rarely done in a vacuum; it is far more likely that Goldman is seeing a lot of demand for this type of transaction and is just testing the waters before making a bigger splash.

Dorman couldn't be more right. Everything about this is interesting.

Not least because the financial world has a collateral problem. In good times, even junk-standard collateral looks fine, because economic growth and stable conditions mean it performs just fine. But when the tide goes out, everyone can see who has been swimming naked. That economic tide is way out, and traditional collateral is starting to look very shaky indeed.

Goldman Sachs carried out its first OTC crypto trade on 21 March 2022 facilitated by merchant bank Galaxy Digital. The non-deliverable bitcoin option (a bitcoin derivative) pays the borrower in cash. So Bitcoin-backed loans are starting to gain international recognition at precisely the time when the world's financial systems are facing a serious lack of quality collateral for credit. US Treasuries, once considered prime collateral for loans, have lost their lustre with persistently high inflation and rampant central bank QE.

Coinbase's work with Goldman is a first step in the recognition of crypto as collateral which deepens the bridge between the fiat and crypto economies ,” said Brett Tejpaul, head of Coinbase International in an email to Bloomberg. The future demand for this type of transaction, as Dorman suggests above, is likely to come from other high-profile cryptoexchanges, the only publicly-listed company in the sector being Coinbase.

2021 was the first year when cryptoexchange revenues surpassed equities exchanges, according to research compiled by capital markets firm Opimas and detailed in ETC Group's Q1 2022 State of Bitcoin report. In fact, last year revenues from exchanges like Coinbase were 60% higher than the trading and clearing revenues generated by all the traditional exchanges in the world.


Legacy names such as the venerable 220-year-old New York Stock Exchange, the relative upstart Nasdaq, which launched in 1971, and CME Group, which began trading silver futures in 1933 and gold futures in 1974 were “ left in the dust ” by cryptoexchanges Coinbase, Binance and FTX, the data shows.

It demonstrates the willingness of institutions to utilise new tools with old techniques, Dorman concluded. We will likely see many more Bitcoin-backed loans in future: this is just the beginning. And so while markets falter, the institutional infrastructure placing Bitcoin front and centre as potential global collateral continues apace.

Uzbekistan legalises solar powered mining, charges zero income tax

Uzbekistan has legalised solar-powered Bitcoin mining and exempted all domestic and foreign companies from paying any income tax on crypto operations. The Central Asian nation announced the move on 4 May 2022 with a presidential decree. President Shavkat Mirziyoyev said he wants miners to power their farms by setting up solar panels; Bitcoin miners who connect to the national power grid will pay double the standard energy draw price.

Uzbekistan is a mid-tier country in terms of GDP, sitting alongside Croatia and Panama in terms of economic output. It has vast mineral and material reserves, of oil, gas, gold and uranium; now the country wants to add Bitcoin to that mix.

The intensive process needed to create new Bitcoins is called mining. Computers process billions of calculations in vast data centres in order to process transactions on the network and be in with a chance of winning rewards of 6.25 Bitcoins per block. Around 190 new Bitcoins are created each day.

Central Asia in particular has become a global hotspot for Bitcoin mining due to its extremely low electricity prices and large areas of commercial land suitable for mining farms.


Its neighbour to the north, Kazakhstan, is the world's third-largest power in Bitcoin mining after the US and Russia. The Cambridge Bitcoin Energy Index, produced by the University of Cambridge Centre for Alternative Finance, shows that the global share of Bitcoin hashrate more than tripled in the US and Kazakhstan between 2020 and 2021 following the ban on cryptocurrencies in China.

Like most governments, Tashkent has had a strained relationship with crypto since its popularity soared in the mid 2010s. Mirziyoyev legalised crypto trading in Uzbekistan in 2018 for domestic exchanges, allowing businesses to charge fees and organise transactions with residents and non-residents.

In December 2018, the National Agency for Project Management banned Uzbek residents from buying cryptocurrencies in what was a huge blow to the industry. Residents were still allowed to hold and sell digital assets they already own, but were forced to follow stringent anti-money laundering rules.

By contrast, non-residents were allowed to join the country's first regulated cryptoexchange Uznex, run by South Korea's Kobea Group and which launched in January 2020. Then in 2021 the NAPM bowed to public and commercial pressure to allow “ all types of crypto exchange trades involving crypto assets and tokens in exchange for national currency and foriegn currency ” and put forward rules to authorise crypto companies to operate freely in the country.

The more lenient income tax and Bitcoin mining rules announced this week speak to the drive by countries setting out their stalls almost weekly to attract cryptoasset businesses to their shores. In CryptoMinutes Week 16 we noted how the UK and US had each pledged to become a “ global cryptoasset hub ” in a bid to attract wealthy funds to set up in New York and London.

Brazil, Panama, Slovenia, Bahamas rush forward with pro-crypto laws

Panama's legislature has passed a new law legalising and regulating cryptoassets. As reported by Reuters on 29 April, the National Assembly approved a bill to regulate and commercialise the use of crypto in the South American nation. Citizens in Panama can now use cryptoassets as a means of payment for any civil or commercial operation. What is particularly interesting in this case is that lawmakers extended the terminology to include not just cryptoassets and currencies like Bitcoin, Ethereum, Litecoin or Bitcoin Cash; this also includes crypto derivatives and NFTs.

Gabriel Silva, who proposed the legislation, said:

We're seeing the emergency of many different types of [assets] like works of art. That's why we didn't want to limit ourselves only to cryptocurrencies.

In recent weeks the Bahamas has become the latest nation to allow its citizens to pay taxes in digital assets. In a white paper detailing the nation's crypto strategy through 2026, Prime Minister Philip Davis noted:

We have a vision to transform the Bahamas into the leading digital asset hub in the Caribbean.

Slovenia is making its own move to halve potential crypto taxes in a bid to shore up the nation's finances post-COVID: legislators there have put forward a flat-rate tax on crypto redemptions with an effective rate of under 5% when any digital assets are bought or sold. That halves the 10% crypto tax rate proposed in 2021.

If the legislation passes it will make Slovenia “ one of the few countries, if not the only country in the world with such a simple taxation, ” the press release accompanying the announcement said.

More regulatory certainty is always a net benefit to the crypto industry at large. Companies often have to contend with grey areas so vast and murky that it can be difficult even to set up bank accounts in various nations, while some have to contend with permanent threat of unfavourable legislation.

Blockchain and crypto companies and service providers (wallets, exchanges, cybersecurity companies, for example) can plan better and project their costs further into the future if they know how much they will have to spend on taxation.

So it has been heartening to see far more countries advancing their own legal structures to grow their burgeoning industries to support digital assets.

Earlier in April, Banco de Portugal, the country's central bank, granted its first crypto license to a bank. Bison Bank becomes the European nation's first bank to win a virtual asset service provider licence, as is the fourth such provider to win a license in Portugal after 2TM's CriptoLoja; exchange Mind the Coin; and Utrust, a fiat on-ramp and crypto custody provider.

Portugal has long led the bloc in terms of cryptocurrency friendliness. Investors living there face no capital gains tax nor personal income taxes on crypto, unless it represents an individual's sole income for trading purposes.

On 26 April, the Brazilian Senate approved a bill regulating crypto transactions. The bill folds cryptoassets into the same regulatory regime as other financial assets and adds reporting requirements for “ virtual service providers ”.

According to a late-April reportInto The Cryptoverse ' by Korean exchange Kucoin, 26% of the country's population have previously invested in cryptocurrencies with an increased 64% happy to continue investing. The research pegs Brazil as one of the fastest-growth markets for Bitcoin globally.

Latin American Bitcoin adoption gathered pace in the first quarter of 2022. Following Rio de Janiero's widely-reported municipal plans to move 1% of its treasury assets into Bitcoin in January this year, along with accepting Bitcoin for real estate tax payments by 2023, crypto advocates are looking ever wider.

According to the Central Bank of Brazil, the total amount of cryptoassets held by Brazilians is more than three times larger than the amount held in US stocks and shares: $50bn compared to $16bn.

Brazil - like most economic powerhouses worldwide - is struggling to keep inflation in check. Recent data via the government statistics authority IBRE pegs 2021 annual inflation at 10.06%, more than double its 2020 figure of 4.5% and the highest the country has seen in six years.

As a whole Brazil fits the crypto adoption model well: a large unbanked population (34 million at last count), soaring inflation and approximately 20% of the country living in poverty, according to World Bank statistics .

A comprehensive digital asset strategy is now working its way through the National Congress. House bill 4401/21 would do what their Americans neighbours to the north have so far summarily failed to do: creating a separate regulatory agency to oversee digital asset markets “ tasked with authorising and controlling the functioning of cryptocurrency service providers, including brokers and exchanges ”. As it stands in the US, both the SEC and the CFTC claim jurisdiction over cryptoasset markets and politicians have repeatedly ruled out organising a separate legislative body.


No cryptoasset has escaped the general market drift of the past two weeks and we are now equalling the recent lows of late January 2022. From there, the crypto market took a $500bn upswing, reaching $2.1 trillion in early April.


Bitcoin and Ethereum halved their losses from the last fortnight, down 6.1% and 7.2% respectively, compared with drops of 12.5% and 13.7% in the weeks before.

Altcoins suffered the most, with Avalanche dropping a further 23.2% to compound its 19.7% loss last fortnight.

Pulling out to a weekly view on the charts, we can see that despite the price weakness of the last two months, Bitcoin remains in a secular macro uptrend. Technical analysis suggests that only when BTC breaches either end of the macro range high at $69k, or at the lower bound of $28k will the next phase of the market cycle be confirmed.


While the technicals don't paint a particularly pretty picture - Bitcoin and crypto at large are still being largely priced as risk assets - the fundamentals are flashing signals that show quite the opposite.

Hard assets with growing adoption metrics are never so valuable as in times of trouble. Liquid hard assets especially so.

As revealed in ETC Group's Q1 2022 State of Bitcoin research paper:

The cost to use Bitcoin to send value around the world is at a two-year low


Bitcoin HODLing - where users buy and hold Bitcoin without spending is at an all time high


With choppy markets and the world waiting to see what happens next, we've seen a repeat of the classic rotation back into blue-chip cryptoassets. In the last two weeks, Bitcoin reclaimed 42% of the total market cap and Ethereum took back 19%.

When bullishness is in evidence across markets, traders tend to rotate out of the largest cryptoassets by market cap and into smaller, potentially faster-growth competitors. When times are more unclear, traders and investors perform avolte face flight to safety.

It is very early to be making predictions about how Bitcoin will perform in a highly inflationary environment. The world has not witnessed such a state of affairs in decades. But if anything was likely to push more investors, users and holders towards alternative, provably scarce assets, it would be a cost of living crisis in the West, soaring gas and oil prices, and stubbornly high inflation, making cash held in savings accounts ever more toxic by the day. Throw in the potential for a US recession and the picture could not be better set up for a strong 2022 for Bitcoin.

And when the world's eyes turn away from one sector in particular, historically that has been the time for savvy investors to gather up their capital, buy up undervalued assets and sit on their hands to wait for the next market upswing.

It is this state of affairs that is leading the market at present. Volatility and uncertainty remain near all time highs and with both the Bank of England and Federal Reserve hiking rates in a bid to control rampant inflation, everyone is watching for what comes next.

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