19th May 2024 > > US regulation.

tl;dr

We might be on the cusp of a regulatory revolution for cryptos in the US, a development which will be very positive for price action.

Market Snap

Market Wrap

The U.S. Department of Justice has unsealed an indictment accusing two individuals of wire fraud and money laundering using the Ethereum blockchain, two crimes which are overwhelmingly committed in the TradFi space. The details are not important here. What is important is that the indictment states:

“Ethereum is a decentralized blockchain […] without the need for a trusted intermediary”.

“No central actor runs the Ethereum Network.”

The underperformance of ETH vs BTC may be about to reverse course.

Curious Cryptos’ Commentary – SAB 121

The more I think about this bill that has passed both houses in the US, the more I come to realise just how big a body blow it is to the SEC and to Gensler himself.

SAB 121 is a blatant example of regulatory overreach. It is a version of Operation Choke Point and Operation Choke Point 2.0. This idea that the government, or its agencies, clamps down on legal activity simply because it has a moral disapproval of that activity is scarily dystopian, worthy of Russia, China, Iran, or North Korea. It is not worthy of a liberal Western economy.

Though the House split along party political lines when voting to discard SAB 121, the Senate did not. Joe Biden stated before the Senate vote he would veto the bill – a blatant example of trying to bully into existence the result he wished for – but I am not convinced he can do so now. If he does, he risks tainting his party with an anti-crypto stance for evermore. That cannot be a wise decision, not least in an election year for which the outcome remains so precariously balanced.

There is of course an obvious way out of this dilemma he has put himself into – ensure that Gensler retracts SAB 121 before he has to accept or veto the new legislation, the deadline for which is Tuesday 28th May.

I suspect that this is now the most likely outcome. The reputational damage to Gensler will be irreparable, but he has sole responsibility for forcing such a state of affairs upon himself. He might even resign over this issue, freeing him up to start building his own personal crypto stash in advance of the inexorable rise of BTC to seven figures.

Curious Cryptos’ Commentary – FIT 21

On the 11th May, the CCC took a look at FIT 21, another piece of legislation that could be influential for the crypto markets, in a very positive sense:

https://www.curiouscryptos.com/post/11th-may-2024-form-13f-the-us

At the time, I was far from convinced that this bill would make it past both Houses. Following the stunning success of the proposal to rescind SAB 121, my assessment has changed.

I am led to believe that FIT 21 will be put to a vote in the House on Wednesday, which is likely to vote in favour. A rapid ascent to the Senate now also has a high probability of being passed. If Gensler backs down on SAB 121, Joe Biden will likely agree to FIT 21.

By the end of this month, or soon thereafter, there might be a dramatic change in the regulatory landscape for cryptos in the US. Now that would be one huge and beneficial development.