Here Comes Crypto Regulation!

The likelihood of increased U.S. regulation weighed on cryptocurrency prices for much of last year. In August, Gary Gensler, the chairman of the Securities and Exchange Commission, sent chills through the industry when he likened crypto to “the Wild West," saying that the asset class “is rife with fraud, scams, and abuse in certain applications.”

Now, the sheriff is finally coming to town, and the crypto market has brought out a welcome party.

Bitcoin and other cryptocurrencies started to rally last night after CoinDesk reported on a Treasury Department statement that was released early, apparently by mistake, indicating that a long-awaited executive order from President Biden on crypto regulation would “support financial innovation.”   

Bitcoin, Ether, and other coins surged. Bitcoin traded nearly 9% higher, at $33,64.81 this afternoon, while Ether was up nearly 6%, at $2,708.44.

The executive order came out today, and in it the president directs government agencies to study the opportunities and the risks surrounding the use of such digital assets. “We must take strong steps to reduce the risks that digital assets could pose to consumers, investors, and business protections; financial stability and financial system integrity; combating and preventing crime and illicit finance; national security; the ability to exercise human rights; financial inclusion and equity; and climate change and pollution,” Biden said in the order.

The executive order was viewed by many in the industry as a positive, even if it was vague on what shape regulation could take. Taking crypto seriously as an important and innovative asset class is being seen as a crucial first step toward laying down guidelines and bringing clarity.

“Industry lobbyists have considered the order to be the first legitimate acknowledgment from Western governments,” noted Fundstrat Global Advisors.

Cameron Winklevoss, who founded cryptocurrency exchange Gemini Trust with his twin brother Tyler, said on Twitter: “I applaud this constructive approach to thoughtful crypto regulation and look forward to working together with the various stakeholders to ensure that the U.S. remains a leader in crypto.

Houman Shadab, a professor at New York Law School, tweeted: “For everyone building in web3 and wondering what to make of President Biden's executive order, the simple answer is: keep building.”

Still, as Jack Denton noted on Barrons.com, the reaction by crypto investors may have been overdone.

“I believe the crypto-nistas have read the first part of the U.S. Treasury statement, now screenshotted across the net, and hit the buy button without bothering to read the second part,” said Jeffrey Halley, an analyst at broker Oanda. “Tread carefully with this rally.”

Read the rest of Jack’s article here.