Bitcoin, crypto investors will be watching these 5 questions facing the Biden administration

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, -0.45% has risen a staggering 548% during the past twelve months, while Ethereum ETHUSD, +0.03% , 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, +1.32% . 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

A bitcoin winter ahead? Crypto expert predicts just that, but after digital asset hits $300,000 at end of 2021

Bitcoin prices could reach $300,000 soon — but then sink into a dark period, if history is any gauge, according to one expert.

Bobby Lee, co-founder and former CEO of crypto exchange BTCC, told CNBC Asia in a Monday interview that bitcoin BTCUSD, -0.45% tends to operate in four-year bull cycles, with big jumps in 2013, 2017 and this year’s most recent surge representing the latest uptrend for the world’s most prominent crypto.

However, if the pattern holds true, a fallow period for the asset created in 2009 is also likely to follow that could last two or three years, “if history plays itself out again,” Lee told CNBC, adding that he isn’t certain “history will repeat itself” but notes that that the nascent ascent since its inception has thus far followed a predictable pattern.

“I don’t know if history will repeat itself but what we do know is that bitcoin bull market cycles come every four years and this is a big one,” Lee said.

Lee predicted that bitcoin could hit $100,000 by the end of the summer and possible touch $300,000 by the end of 2021.

After a possible 10x surge by bitcoin at the end of the year, it is likely to come crashing back down to Earth, if it adheres to moves in its past two other bull phases.

To be sure, bitcoin’s bullish trading patterns over the past decade don’t offer up a statistically robust sample size, but it may be something that upbeat investors cling to, at least, until values crater.

“Bull-market cycles come and go and after a bull-market peak, inevitably it can go down by quite a bit and that’s when the bubble bursts,” Lee said.

Bitcoin is up 96% so far in 2021, compared with a nearly 7% year-to-date gain for the Dow Jones Industrial Average DJIA, +0.32% , a 5% rise for the S&P 500 index SPX, +0.70% , a 4% gain for the Nasdaq Composite Index COMP, +1.23% and an over 8% decline for gold GC00, +0.04% , FactSet data show.

“In the crypto industry, we call it bitcoin winter and it can last for two to three years. So after it peaks out…people should be aware that it could fall as much as 80% to 90% of its value from the all-time peak,” he explained.

At last check, bitcoin was trading at $56,728, off less than 1% on Monday and not far from its recent all-time high at $61,556.59, according to CoinDesk.

Licensed Crypto Exchange “UnitEx” Launches In Estonia

Bloomberg

(Bloomberg) – A standoff between commodities giants and shipping companies is prolonging the labor crisis at sea, with an estimated 200,000 seafarers still stuck on their vessels beyond the expiration of their contracts and past the requirements of globally accepted safety standards. In an effort to keep deliveries of food, fuel and other raw materials on schedule, some of the big commodities firms are avoiding hiring certain vessels or imposing conditions that may block relief for exhausted seafarers. The companies are trying to steer clear of crew changes, which have become far more expensive and time-consuming during the coronavirus outbreak. In an effort to keep shipments on schedule, some firms have asked their shipping partners to guarantee that no change will take place, according to emails and contracts reviewed by Bloomberg.Those requirements risk worsening a labor crisis already in its 12th month, according to ship owners, labor unions and the United Nations. More than a year into the pandemic, hundreds of thousands of mariners are long overdue for shore leave. Some have been working without pay or a firm plan for repatriation, and many have taken desperate measures: in one instance, a captain diverted his ship to the middle of the ocean and refused to return to course without a guarantee of relief.Prior to the pandemic, a ship owner could bring in new crew during routine port stops. That common practice has become a logistical nightmare with Covid border curbs. Some ports require lengthy quarantines for incoming and outgoing workers, others turn away vessels that have changed crews within 10 to 14 days over fears seafarers could spread the virus.In January, around 300 companies, including Vitol Group, the world’s biggest independent oil trader, and Australian mining behemoth Rio Tinto Group, signed a pledge to take action to resolve the crisis for seafarers. Called “the Neptune Declaration,” signatories recognized a “shared responsibility” and promised increased collaboration between ship operators and charterers to facilitate crew changes.As of now, though, some ship owners and labor advocates say little has changed, and not all of the biggest charterers signed on. “We chose not to sign because we believe that our current practices in respect of crew changes are fair and fully respect the need for regular crew changes,” said a spokesperson for Equinor ASA, a major oil, gas and energy company based in Stavanger, Norway. “We do not charter vessels for any voyage if a crew change will be required that cannot be accommodated in our delivery schedule.” Exxon Mobil Corp., the largest U.S. oil and gas producer, has also declined to sign. A spokesperson said the company is “considering next steps.” The pact is “a work in progress,” said Rajesh Unni, a captain and chief executive officer of Synergy Marine, which manages more than 375 ships including container vessels and commodity carriers. Shipping has always had competing interests, he said, but companies that sign the Neptune Declaration “at least commit that they will then follow the standard protocol, which should then give you a lot more comfort that now we’re all on the same page.”What you need to know: Tracking the Labor Crisis at SeaThe fight over who should pay for the higher costs of crew changes is most acute for commodities companies and their shipping partners, which carry out what are called spot charters. Crewed vessels available on demand for anywhere from a few days to several months, spot charters make up 85% to 90% of dry bulk and tanker shipments in the commodities industry, according to industry group BIMCO.Some companies have stipulated no crew changes or asked for verbal guarantees before hiring a charter, according to emails and contracts reviewed by Bloomberg. Charterers have also used questionnaires to learn whether ships are planning crew swaps, according to ship owners. In one instance, a ship owner told Bloomberg, in order to secure a charter with Rio Tinto, he had to extend workers’ contracts, paid additional salary and promised to relieve them when the voyage was complete. He also had to confirm that no crew change was planned for the duration. “Rio Tinto does not use ‘no crew change’ clauses in chartering contracts,” the company said in a statement. “Rio Tinto aims to support the shipping industry and the human rights of the seafarers on which it depends. This requires collaboration between ship owners, who employ the seafarers, charterers and regional port authorities around transparency of information and flexibility on schedule.”The problem, labor advocates and seafarers say, is that the workers don’t have a choice either way. Ship captains often hold the passports of their crew – a convenience for port stops, they say – and ports are tightly controlled borders. Even if a worker wanted to walk away from his vessel, he wouldn’t get very far without a passport, a visa or a plane ticket home.The International Transport Workers' Federation, or ITF, which represents seafarers, is calling on the industry to do more to alleviate the crisis.There are still charterers rejecting charters unless they are given assurances that crew changes don't take place,'' said Stephen Cotton, ITF general secretary. It might not be as blatant as putting it in writing, but it’s still going on. As long as seafarers' lives remain secondary to companies' profits, this crisis will continue to unfold." Read more: What Happens When Tycoons Abandon Their Own Giant Cargo ShipsThe industry says it is the responsibility of ship owners to arrange crew changes and to ensure the safety and well-being of the seafarers on their vessels. BIMCO has encouraged charterers to share the costs of crew changes and developed contract language that requires companies that hire vessels for a fixed period of time – called a time charter – to do just that. Owners of ships available for spot charter, the group said, should change crews when the ship isn’t out for hire.Labor and industry groups want companies to be more flexible and allow tankers and dry bulk vessels to divert or delay deliveries to help alleviate the crisis in stranded mariners. Shareholders, too: A group of 85 investors that manage more than $2 trillion of assets, including Fidelity International, said in January that frequent charterers should be flexible about enabling crew changes and should consider providing financial support for mariners who need to be repatriated.“Charterers at this point do need to share costs and assume the delays they might face,” said Laura Carballo, head of maritime law and policy at World Maritime University in Malmo, Sweden. “That’s their biggest argument: it’s about the delays. Sorry, we’re all facing delays right now. The world is only running because seafarers are doing their job.”Wichita, Kansas-based Koch Industries, which has interests spanning petroleum and agriculture, has instructed ship owners not to conduct crew changes while under charter, according to a person with direct knowledge of the terms and who asked not to be identified because the conversations were private. The requests were delivered verbally, not in writing.In response to questions about the stipulation, the company responded in a statement: “Koch works closely with vessel owners to ensure the safety and wellbeing of crew members. This is an issue we are watching closely and looking for ways to resolve.”Rotterdam-based Vitol has required ship owners not to make crew changes on some spot charters, according to people familiar with the company’s contract terms who asked not to be identified because they weren’t authorized to speak publicly. Vitol says that it has “sought to manage our shipping business in line with the standards outlined in the Neptune declaration.”“Wherever commercially and operationally possible we facilitate crew changes,” company spokesperson Andrea Schlaepfer said in a statement. “As a vessel owner and manager Vitol appreciates the challenges of the current situation but believes that with good management owners can maintain high standards of seafarer welfare.”The Neptune Declaration also calls on world leaders to change their port and border policies to ease the burdens on seafarers, following a September statement from consumer companies including Unilever Plc and Procter & Gamble Co. to do the same. Last month, the IMO recognized 55 countries that agreed to consider seafarers “essential workers” and encouraged nations that hadn’t yet to do so. That designation has no official definition, and the countries weren’t specific about what if any change it would bring to the port procedures.On Friday, the shipping industry raised concerns that, while the number of seafarers stranded has dropped since its peak, the improvements could be short-lived as governments and port authorities respond to the threat of new Covid-19 variants with stricter restrictions. Seafarers, many of whom are from developing countries, may also miss out on the ongoing vaccination drives, risking further delays and supply chain disruption.“The crisis is still ongoing,” said Guy Platten, secretary general of the International Chamber of Shipping, which represents more than 80% of the world’s merchant fleet. “Governments will not be able to vaccinate their citizens without the shipping industry or, most importantly, our seafarers.”(Updates with recent statements from the shipping industry on the threat of new Covid-19 variants to efforts to relieve seafarers. )For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.