Bitcoin, crypto investors will be watching these 5 questions facing the Biden administration
The stock market’s recovery from last year’s COVID-driven crash is a testament to the unprecedented level of federal stimulus pumped into the economy over the past twelve months, but few asset classes have benefitted from a rebound in financial markets more than cryptocurrencies.
Bitcoin BTCUSD, -5.43% has risen a staggering 548% during the past twelve months, while Ethereum ETHUSD, -5.91% , the second most valuable cryptocurrency, has gained roughly 690% during that time, according to FactSet, compared to a 71% rise for the S&P 500. But the fate of this rally could depend greatly on President Joe Biden and his administration’s regulatory stance to the burgeoning crypto economy, experts tell MarketWatch. Here are the five biggest regulatory questions the Biden administration will face in the coming months and years that will greatly impact cyrpto investors:
Who will be the Comptroller of the Currency?
The agency in charge of chartering and supervising national banks is typically one of the more obscure federal financial regulators. But OCC has caught the attention of the crypto community through its championing of integration between the crypto economy and the legacy financial system under the brief leadership of former Acting Comptroller of the Currency Brian Brooks, said Jackson Mueller, director of policy and government relations at the crypto consultancy Securrency.
Read more: Fed’s Powell says bitcoin is more of a substitute for gold than the dollar
During his eight months as acting comptroller, Brooks issued issued several guidance letters affirming the ability of nationally chartered banks to serve as custodians of crypto assets and use a type of cryptocurrency called a stablecoin to make payments, among other issues. “The big issue is what happens to the guidance issued by Brooks and his team when someone else comes in,” Mueller told MarketWatch. “Do they go in a completely opposite direction and rescind that guidance?”
Stablecoins are a type of cryptocurrency that pegs its value to some other asset. The most popular is Tether, pegged to the U.S. dollar. The crypto community is fond of these instruments because they facilitate transactions between highly volatile digital currencies — some analysts argue that Bitcoin’s rally has been enabled by aggressive issuance of new Tether tokens.
Unlike currencies like Bitcoin and Ether, however, stablecoins are often not decentralized, but run by single companies and backed by assets held by traditional banks. Brooks’ guidance serves to give federally chartered banks the go-ahead to be a custodian for stablecoins and to use them for their own payments.
The crypto community was excited at reports that Biden would name Michael Barr, who served at the Treasury Department during the Obama administration, as comptroller. Barr had ties to several fintech companies and he served on an advisory board at Ripple, issuer of the eponymous cryptocurrency XRPUSD, +7.49% . But Barr is reportedly no longer in contention for the job after progressives in the administration protested.
Law professor Mehrsa Baradaran, an expert on the racial wealth gap, has emerged as the odds-on favorite to win the role, and crypto investors are less enthused about this pick, given the skepticism she has shown toward cryptocurrencies in the past.
“While I share many of the cryptocurrency industry’s concerns with respect to failures of the banking industry, I do not believe cryptocurrency is the best solution to the problems of financial inclusion and equity in banking,” Baradaran told the Senate Banking Committee in 2019, arguing instead that Congress should task the Federal Reserve with setting up a digital payments infrastructure available to all Americans.
Read more: Why the coming recession could force the Federal Reserve to swap greenbacks for digital dollars
Are cryptocurrencies a threat to financial stability?
The OCC will not be the only financial regulator concerned with the use of stablecoins, given the growing number of observers who claim that these instruments have enabled the growth of a new “shadow” banking system that threatens the stability of the U.S. financial system.
Democratic Rep. Rashida Tlaib of Michigan recently proposed a bill that would require issuers of stablecoins to obtain a banking charter and obtain Federal Deposit Insurance Corporation insurance or keep reserves at the Federal Reserve “to ensure that all stablecoins can be readily converted into United States dollars, on demand.”
Rohan Grey, president of the Modern Money Network, who helped craft the bill, has likened stablecoins to money market mutual funds, which came under great stress during the 2008 financial crisis.
“We were looking at history of shadow banking and the examples in which entities… would claim they’d invented an instrument that walked and talked like money, that could be used like money, could be considered roughly as safe and stable as money in most circumstances,” Grey told The Block in December. “But then at moments of crises those claims turned out to be hollow, they became a massive source of systemic risk and inevitably they’d be bailed out in the name of protecting consumers. The effect of that was to privatize gains to socialize losses.”
This issue of financial stability means that other regulators, including the Federal Reserve and the Treasury Department, may look to regulate stablecoins in the years to come.
How will the government curb crypto money laundering?
The most immediate regulatory issue that crypto investors will have to face is an impending decision by the Financial Crimes Enforcement Network — a Treasury Department unit tasked with fighting money laundering and other financial crimes — on new requirements for banks and other intermediaries to maintain records and verify customer identities for certain crypto transactions.
Jerry Brito of the think tank Coin Center says that in the waning days of the Trump administration, Treasury attempted to fast track new rules that were “ill considered.” New requirements would have enabled the government to learn the owners of private crypto wallets and therefore their entire transaction history, even if that person had done nothing suspicious.
“Since the Biden administration has come in, they’ve been more deferential to FinCen, who I don’t think ever really wanted this as much as [former Treasury Secretary] Steve Mnuchin did,” he said, adding that law enforcement was wary the rules would encourage criminals to refrain from transacting with U.S.-based exchanges that are known to cooperate with criminal investigations. “The Biden administration will take a more rational approach going forward,” said Brito, who is Coin Center’s executive director.
What will happen with 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 of which is a lawsuit filed in December against Ripple by the SEC.
In its complaint, 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 said publicly that they don’t believe Bitcoin or Ethereum are securities that must be registered, the lawsuit indicates that the SEC views Ripple differently.
“I’ve been surprised that the suit wasn’t filed a long time ago because Ripple is very different from Bitcoin or Ethereum,” Angela Walch, law professor and cryptocurrency expert at St. Mary’s School of Law, told MarketWatch. “It’s not truly a decentralized currency because you’ve had a single company essentially running it.”
If the SEC is victorious in its suit, that will go a long way in helping define what types of digital assets will be viewed as currencies and which will be viewed as securities, Walch added.
Will the SEC approve bitcoin ETFs?
Crypto enthusiasts cheered Gensler’s nomination to lead the SEC, given his history of teaching blockchain and digital currencies at MIT’s Sloan School of Management. Coin Center’s Brito argued that his accession to the role of chairman will be good news for the many financial services firms attempting to sell Bitcoin exchange-traded funds.
Several major financial services firms have submitted applications to offer bitcoin ETFs, incluind Wisdom Tree, Morgan Stanley MS, -1.23% and VanEck. Theoretically, investors might prefer bitcoin ETFs because purchasing actual bitcoin can be a hassle, as investors have to set up digital wallets or move money on to a crypto exchange. These ETFs, however, could be bought and sold much like traditional stocks.
“Gary Gensler is somebody who likes orderly markets,” Brito said. “What a better way of allowing investors to participate in this asset class in an orderly way than having a well-regulated ETF.”
Now read: A bitcoin winter ahead? Crypto expert predicts just that, but after digital asset hits $300,000 at end of 2021
The Crypto Daily – Movers and Shakers – March 22nd, 2021
A mixed start to the day saw Bitcoin rise to an early morning intraday high $58,584.0 before hitting reverse.
Falling short of the first major resistance level at $59,453, Bitcoin slide to a late morning intraday low $55,357.0.
The reversal saw Bitcoin fall through the first major support level at $57,253 and the second major resistance level at $56,426.
Steering clear of sub-$55,000 support levels, Bitcoin revisited $58,000 levels before a fall back to sub-$58,000 levels.
The first major support level at $57,253 limited the downside late in the day.
The near-term bullish trend remained intact in spite of last week’s pullback. For the bears, Bitcoin would need to slide through the 62% FIB of $26,041 to form a near-term bearish trend.
The Rest of the Pack
Across the rest of the majors, it was a mixed day on Sunday.
Binance Coin rose 0.15% to buck the trend.
It was a bearish day for the rest of the majors, however.
Crypto.com Coin slid by 4.76% to lead the way down, with Litecoin falling by 2.31%.
Bitcoin Cash SV (-1.12%), Cardano’s ADA (-1.21%), Chainlink (-1.34%), and Ethereum (-1.22%), and Ripple’s XRP (-1.73%) weren’t far behind.
Polkadot (-0.12%) saw relatively modest loss on the day, however.
For the week, it was also a mixed bag.
Crypto.com Coin and Ripple’s XRP jumped by 17.41% and by 17.77% respectively to lead the way, with Cardano’s ADA rallying by 12.58%.
Binance Coin (+0.52%), Bitcoin Cash SV (+2.81%), Chainlink (+2.36%), and Polkadot (+3.60%) also ended the week in the green.
Ethereum (-3.49%), and Litecoin (-8.64%) bucked the trend, however, to join Bitcoin in the red.
In the week, the crypto total market fell to a Tuesday low $1,593bn before rising to a Saturday high $1,840bn. At the time of writing, the total market cap stood at $1,739bn.
Bitcoin’s dominance rose to a Monday high 63.03% before falling to a Saturday low 60.83%. At the time of writing, Bitcoin’s dominance stood at 61.40%.
New to Crypto Trading? How to Find the Best Exchange for You
Few assets over the past year have been more popular cryptocurrencies. With leading cryptos like Bitcoin, Ethereum, and others constantly making headlines, the asset class has seen record inflows.
While crypto’s popularity is hotter than ever, the question over which crypto exchange investors should settle on is far less of a consensus. Crypto exchanges, like other types of exchanges have their own nuisances, advantages, and issues.
To best understand which crypto exchange is best, is to recognize what the top priorities are for a given trader.
Understanding Crypto Exchanges
While seen as complex, investing in crypto is not much different from either stocks, forex, or other instruments. The industry is riddled with horror stories of scams, cyberattacks, and stolen wallets, however.
Despite these issues, crypto trading has never been safer than today, with several innovations made over the past decade.
Generally speaking, there are a few core features to look for when choosing the right cryptocurrency exchange for you. These include the following:
Security, anonymity, and support
Transaction fees
UI and ease of use
Volume and liquidity
Geographical location and restrictions
Once reserved as a niche form of investment, crypto trading is now firmly established as a mainstream investment class, adopted by banks, companies, and organizations globally.
As a first step, security is always paramount. This is integral for any crypto trading, as investors want their money to be safe and secure. Whether a trader is intent on purchasing crypto and holding long term, or is a day trader, the same mechanisms and safety protocols hold sway.
Additionally, not all crypto exchanges are equal when it comes to funding your account. Presently, most modern forms of payment are accepted, including PayPal or other service providers, credit cards, and wire transfers.
However, each exchange has different sorts of limits, fees, and other fine print that should be consulted before funding an account. This is perhaps the most diverse element of all exchanges, with these attributes ranging extensively from exchange to exchange.
Many exchanges now rely on an easy-to-navigate framework that makes it more seamless for newer investors. Traders should always familiarize themselves with any terminal before actually funding their accounts.
Demand More from Your Crypto Exchange
Depending on which crypto you wish to trade will obviously dictate what exchange you settle on. The best exchanges offer access to the most liquid cryptos and biggest name such as Bitcoin, Ethereum, and others.
Many other popular cryptos are now widely traded as well, such as Dogecoin, Cardano, and Stellar Lumens, among others. Seeing whether an exchange supports a desired crypto ahead of time will save a lot of headache and hassle.
For traders in certain jurisdictions, there are also specific rules or regulations that dictate what and how much an individual can trade. Always stay up to date with these laws as it could impact taxes.
Most exchanges now screen new traders for their nationality, which is designed to help prevent the inadvertent illegal use of using an exchange. See what is the best UK crypto exchange for traders.
Do Your Homework
Like any other form of investment, it is always advised to do your part and perform some basic research before choosing a cryptocurrency exchange.
This can be accomplished by simply looking into the exchange’s past history, or whether it has been subject to any past malicious attacks or phishing scams.
All popular exchanges have engaged forums or communities that have the same questions as others. Always avoid signing up for exchanges that have a known history of financial and security breaches, or those that have disabled withdrawals for long periods of time.