The recovery of the stock market after the COVID-driven crash of last year is proof of the unprecedented level of federal stimulus pumped into the economy over the past twelve months, but few asset classes have benefited more than cryptocurrencies from a recovery in the financial markets.
Bitcoin BTCUSD,
has increased by 548% in the last twelve months, while Ethereum ETHUSD,
the second most valuable cryptocurrency, according to FactSet, rose about 690% during that time, compared to a 71% increase for the S&P 500. But the fate of this rally may largely depend on President Joe Biden and his administrative stance on the S&P 500. government emerging crypto-economy, experts tell MarketWatch. Here are the five biggest regulatory issues facing the Biden administration in the coming months and years, which will greatly affect Cyrpto’s investors:
Who will be the Controller of the currency?
The agency responsible for renting and supervising national banks is usually one of the more obscure federal financial regulators. But OCC has attracted the attention of the crypto community through its integration between the crypto-economy and the legacy of the financial system under the brief guidance of former acting currency controller Brian Brooks, Jackson Jackson, director of policy and government relations at crypto securities consultation.
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During his eight months as acting administrator, Brooks issued several guidelines confirming the ability of nationally chartered banks to act as supervisors of cryptocurrencies and to use a type of cryptocurrency called a ‘stable currency’ to make payments, among other things. . “The big problem is what happens to the guidelines that Brooks and his team issued when someone else came in,” Mueller told MarketWatch. “Are they going in a completely opposite direction and revoking the lead?”
Stablecoins are a type of crypto-currency that links its value to another asset. The most popular is Tether, pegged to the US dollar. The crypto community likes these instruments because it facilitates transactions between very volatile digital currencies – some analysts argue that Bitcoin’s rally was made possible by aggressive issuance of new Tether tokens.
Unlike currencies such as Bitcoin and Ether, however, the stable currencies are often not decentralized but are managed by a few companies and backed by assets owned by traditional banks. Brooks’ guidance serves to give federal chartered banks the chance to be a custodian of stable coins and use them for their own payments.
The crypto community was excited about reports that Biden would name Michael Barr, who served in the Treasury Department during the Obama administration. Barr has had ties with several fintech companies and he was an advisory board to Ripple, the issuer of the eponymous cryptocurrency XRPUSD,
But Barr is reportedly no longer in the fight for the post after progressives in the administration protested.
Law professor Mehrsa Baradaran, an expert on the racial wealth gap, has emerged as the best favorite to win the role, and crypto investors are less excited about this choice, given the skepticism she has shown in the past towards cryptocurrencies .
“While I share many of the concerns of the cryptocurrency industry regarding failures in the banking industry, I do not believe that cryptocurrency is the best solution to the problems of financial inclusion and fairness in banking,” Baradaran told the 2019 Senate Banking Committee said and argued. instead of Congress instructing the Federal Reserve to set up a digital payment infrastructure available to all Americans.
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Are cryptocurrencies a threat to financial stability?
The OCC will not be the only financial regulator using stable coins, given the growing number of observers claiming that these instruments have enabled the growth of a new ‘shadow’ banking system that has stabilized the US financial system. threatened.
Democratic Representative Rashida Tlaib of Michigan recently introduced a bill requiring issuers of stablecoins to obtain a bank charter and obtain Federal Deposit Insurance Corporation insurance or to hold reserves with the Federal Reserve ‘to ensure that all steel coins can be easily converted into US dollars. , on demand.”
Rohan Gray, president of the Modern Money Network, which helped draft the bill, compared stable portfolios to mutual funds in the money market, which were under great strain during the 2008 financial crisis.
‘We looked at the history of shadow banking services and the examples in which entities … would claim to have invented a tool that walks and talks like money, that can be used like money, and in most cases about as safe and stable can be considered money. circumstances, ”Gray told The Block in December. ‘But in a moment of crisis, these allegations turned out to be hollow, they became a major source of systematic risk and would inevitably be saved to protect consumers. Its effect was to privatize profits to socialize losses. ”
This issue of financial stability means that other regulators, including the Federal Reserve and the Treasury Department, will look to regulate stable currencies in the coming years.
How will the government curb money laundering?
The most immediate regulatory issue facing crypto-investors is a decisive decision by the Financial Crimes Enforcement Network – a unit for the Treasury tasked with combating money laundering and other financial crimes – on new requirements for banks and other intermediaries to keep and verify records. customer identities for certain crypto transactions.
Jerry Brito of the brainstorm Coin Center says that in the heyday of the Trump administration, the Treasury was trying to find new rules that were ‘ill-considered’. New requirements would have enabled the government to teach the owners of private cryptocurrencies and thus their entire transaction history, even if the person did nothing suspicious.
‘Since the Biden government came in, they’ve been more valuable to FinCen, who I think never really wanted to be as [former Treasury Secretary] Steve Mnuchin did, ”he said, adding that law enforcers are careful that the rules will encourage criminals not to trade themselves with U.S. exchanges that are known to cooperate with criminal investigations. “The Biden government will take a more rational approach going forward,” said Brito, Coin Center’s executive director.
What will happen to the Ripple lawsuit?
Gary Gensler, who is expected to be confirmed as chairman of the Securities and Exchange Commission, will have many crypto-related issues to deal with – not least, is a lawsuit filed in December against Ripple by the SEC.
In its lawsuit, the SEC accused Ripple and its executives Brad Garlinghouse and Christian Larsen of selling more than $ 1 billion in digital currency without registering with the SEC. While SEC officials have publicly said they do not believe Bitcoin or Ethereum are securities to be registered, the lawsuit indicates that the SEC views Ripple differently.
“I was surprised that the case was not filed long ago because Ripple is very different from Bitcoin or Ethereum,” said Angela Walch, law professor and cryptocurrency expert at the St. Mary’s School of Law, told MarketWatch. “It’s not really a decentralized currency, because you had a single business that essentially runs it.”
If the SEC wins in its case, it will help a lot to define what types of digital assets are considered currencies and which will be considered securities, Walch added.
Will the SEC approve bitcoin ETFs?
Crypto enthusiasts welcomed Gensler’s nomination to lead the SEC, given its history of teaching blockchain and digital currencies at MIT’s Sloan School of Management. Coin Brit’s Brito has argued that joining the role of chairman will be good news for the numerous financial services companies trying to sell Bitcoin exchange-traded funds.
Several major financial services firms have applied to host bitcoin ETFs, including Wisdom Tree, Morgan Stanley MS,
and VanEck. Theoretically, investors prefer bitcoin ETFs because buying real bitcoin can be a problem, as investors have to set up digital wallets or move money to a crypto exchange. However, these ETFs could be bought and sold just like traditional stocks.
“Gary Gensler is someone who loves orderly markets,” Brito said. “What better way to allow investors to order this asset class than to have a well-regulated ETF.”
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