When Joe Biden ordered officials to prepare reports on the role of cryptocurrencies in future finances last Wednesday, bitcoin jumped 9% and ether 8% as many crypto fans hailed a milestone. potential in general acceptance.
“The real importance is that the President of the United States is talking about crypto,” said Jack McDonald, CEO of Standard Custody, a company that manages digital asset custody solutions for institutional investors.
Still, cryptocurrencies are complicated.
As bitcoin danced above $42,500 following the news, it has since given up on those gains and is now back to around $38,000. Likewise, Ether retreated to $2,500.
This appears to be a quiet market reaction to the White House’s first official statement on crypto – although who can really understand bitcoin, still licking its wounds from China’s rejection and harboring lingering concern it’s losing its identity.
Regulation can be a double-edged sword.
Some industry watchers see bullish signs for bitcoin, saying the presidential announcement could portend U.S. crypto regulations that will attract a lot more institutional money from pension funds and insurance companies.
“Biden’s executive order could signal the end of the wild west of crypto as we know it,” said Edmund Kulakowski, senior financial crime consultant at Fenergo, a London-based regulatory software firm.
Still, that might not be such good news for thriving crypto gamers in the wild.
“Quantification-focused hedge funds executing arbitrage and quantification strategies typically shine in more volatile, unstructured markets,” said Ganesh Iyer, chief marketing and strategy officer at New York-based technology firm IPC. .
“Only time will tell how and when this market will mature. Until then, hedge funds now have the flexibility to use ultra-low latency networks to make the most of volatile, light, and volatile crypto markets. liquids.”
WHO IS THE SHERIFF?
There is also little certainty about U.S. regulatory intentions, with Biden having given federal agencies six months to produce guidance on how best to proceed.
On the one hand, it is unclear who will be the sheriff of crypto, or for that matter whether crypto should be treated as security or as a commodity.
The Securities and Exchange Commission (SEC), which oversees listed stocks and therefore tokens considered securities, and the Commodity Futures Trading Commission (CFTC), which oversees the commodities and derivatives markets, are among those that are required to give their opinion. in the reports.
“The specifics related to the SEC, CFTC and other financial regulators are light,” said Jerald David, president of Arca Labs, the innovation arm of Los Angeles-based digital asset manager Arca.
Shane Rodgers, former investment banker and CEO of PDX Coin, a crypto-fiat payment app and utility coin, said he was waiting to see how regulation might evolve, especially in terms of defining the role of the SEC. .
Until there is more visibility, he added, “the government can forget about innovation in the crypto space in the United States because, for my part, I will not hire anyone and I will not spend large sums of money on R&D in this country”.
AMERICAN CRYPTO POWER
What seems certain, however it plays out, is that the US action will have a major impact on the global crypto industry.
America, the epicenter of traditional finance, is fast becoming the same for crypto; According to PwC, 43% of the world’s crypto hedge fund managers are now based there, while the US is now also the center of bitcoin mining following China’s crackdown on this part of the industry. last year.
Standard Custody’s McDonald described Biden’s order as a “symbolic document.”
“He didn’t come out and say it was fraud or that bad actors were doing bad things,” he added. “Quite the contrary, there is an acknowledgment that digital assets have a place in the future, that this industry requires a thoughtful approach to regulation.”