Weekly Digest: Europe’s Historic New Crypto Law

Welcome to your Sunday digest…my breakdown of the things we’re thinking about and talking about in the Global Intelligence world. 

First up this week, the European Union’s historic crypto law. 

Representatives from European parliament and EU member states recently reached a deal on the Markets in Crypto Assets (MiCA) law. It is expected to come into force at the end of next year. 

Under the new law, crypto asset issuers and service providers will have to adhere to capital and consumer protection rules. The law also allows crypto companies based in one EU member state to serve clients across the EU. 

The deal is historic…marking the first comprehensive framework for crypto regulation in the world. (The U.S. and Britain are working on similar rules, but have yet to approve them.) 

Overall, the crypto world has reacted positively to MiCA. 

While the EU has yet to release the full text of the law, regulators and crypto advocacy groups know the broad stokes, and many are pleased…primarily that there are going to be clear rules for everyone to follow. 

As I’ve been saying for years now, crypto at present is a bit like the Wild West. It has long needed regulation so that businesses and consumers know where they stand. 

Once countries put those rules in place, innovative crypto startups will have the certainty they need to grow and evolve, and attract big money from institutional investors.  

That’s why this law is historic. And now that the EU has acted on crypto, it will put pressure on other major economies, including the U.S., to do so as well. 

This may be a tough moment for crypto prices, but these developments show that crypto as an asset class is here to stay. 

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Sticking with regulation, Airbnb faces an uncertain future. 

2022 has been a tough year so far for the short-term tourism rentals platform. 

While bookings on Airbnb reached an all-time high in the first quarter amid the “revenge tourism” trend, the company’s stock price was down more than 45% at time of writing. That’s more than double the roughly 20% drop-off in the S&P 500 since the start of this year. 

Despite its solid results, Airbnb has been dragged down by the wider sell-off in tech stocks. Now, it faces an even more troubling development…a rapidly changing housing market and the pressure this is putting on policymakers. 

With rental prices pushing record highs in many markets in the U.S. and around the world, governments are coming under huge pressure to act. Airbnb and its competitors in the short-term tourism rentals business are easy targets.  

For instance, the U.K. government has highlighted the negative impact of short-term tourism rentals on housing supply and home prices, and it is conducting a review into the industry. It is thought that this review could lead to taxes on short-term rentals or even limits to short-term rental capacity in select areas.  

It’s not hard to envision other countries conducting similar reviews in the months and years ahead. 

If countries do introduce new taxes or caps on short-term tourism rentals, this could push a lot of Airbnb’s hosts to give up the platform and put their properties on the long-term rentals market…especially as long-term rental rates are so high right now. 

It seems the tide many be turning against Airbnb. 

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Finally this week, we end with an update on the slow-moving collapse of China’s private sector property giants. 

For several months, I’ve been sharing stories on how many of biggest China’s property developers overextended themselves…borrowing massive sums and expanding too far, too fast. 

Now, they’re facing big bills that they can’t cover. 

The latest to default on its debts is Shanghai-based Shimao Group. It failed to pay interest and principal on a $1 billion bond due last week. 

Shimao is a massive player in the country’s property sector. It develops large-scale residential projects and hotels across China, and owns Shanghai Shimao International Plaza, one of the tallest skyscrapers in Shanghai. 

This default follows those at Evergrande, Fantasia, and Kaisa. 

Now, China’s government is preparing to step in to “rescue” these developers. 

However, this isn’t a typical Western-style restructuring/refinancing arrangement like those that occurred in the aftermath of the Great Recession. 

Instead, this “refinancing” amounts to a massive power grab by the Chinese government and state-owned enterprises, as they try to wrestle back control of China’s property market from the private sector.  

You can get all the details on this power grab in the upcoming monthly issue of the Global Intelligence Letter, which will be dropping in your inbox next week. 

That brings us to the end of this week’s digest. Many thanks for being a subscriber. And if you have any feedback or questions, reach out through the contact form on the Global Intelligence website. 

Enjoy the rest of your Sunday.