In the midst of winter, I found there was, within me, an invincible summer.”
Albert Camus’s remarks highlight the tenacity of the human spirit, but they also perfectly sum up the past two weeks in crypto policy. There are signs of life in the ecosystem of digital assets, from Bitcoin ETF filings and Ripple’s court victory to legislative advancement in the House and Senate. Indeed, there is growing indication that the crypto winter has begun to thaw, at least in terms of regulation.
The digital asset market has survived several crypto winters since its beginnings. precisely four of them. Crypto winter is the term used to characterize the market cycle’s crash that comes after the boom. Premature Bitcoin demises, Low Trade Volume, and Flatlining Public Interest in the Space Characterize These Depression Periods.
The severe regulatory snowstorm that started with the collapse of the cryptocurrency exchange FTX, however, is what makes this winter different from others.
Gary Gensler, the chairman of the Securities and Exchange Commission, used his audacious “regulation-by-enforcement” strategy to try to control cryptocurrency by declaring in February that all digital assets, aside from bitcoin, were securities and should be regulated by the SEC. According to Brian Armstrong, CEO of Coinbase, the SEC later ordered Coinbase to delist all tokens except from bitcoin (261 tokens in total).
Armstrong, however, declined to follow the directive because, as he claimed in an interview, doing so would have “put the US crypto industry to death. His pushback merely gave the SEC more room to operate. Following up on its accusation, the SEC filed litigation against Coinbase and Binance for allegedly trading unregistered securities.
While June in the actual world was characterized by clear sky and in blooming flowers, it was a gloomy month for cryptocurrency. The challenges to the sector were bordering on existential between the lawsuits filed by the SEC and a vocal anti-crypto group in Congress.
But since then, it seems like Old Man Winter’s hold on cryptocurrency regulation is loosening. The future of the sector is noticeably brighter now than it was a few weeks ago.
So what took place?
There are three indications that a bipartisan spring may be on the horizon for cryptocurrency regulation:
1. The Return Of ‘Smart Money’
The two biggest asset managers in the world are Vanguard and BlackRock. They collectively oversee more than $17 trillion in global wealth. And they both just made large wagers on the future of cryptocurrencies.
When word spread that BlackRock had submitted an application for a spot Bitcoin ETF to the SEC, the mood changed. The institutions are coming narrative drove the bull run in the previous crypto cycle. The institutes are now present. It is less important whether the SEC ultimately authorizes the ETF. Why? because just the filing itself shows that Wall Street has accepted cryptocurrencies as an asset class.
A few weeks later, Vanguard announced that it had acquired millions of shares in the two biggest bitcoin mining firms in the US, Riot Blockchain and Marathon Digital, in response to BlackRock’s action. Vanguard currently owns 10% of Riot alone, indicating that the company anticipates the onset of a new crypto bull wave soon.
The hope that the asset class would survive its existential crisis was given to market participants despite the fact that this development did not change the policy necessity. But the Ripple case ruling by Judge Analisa Torres, which was made public a few days later, actually changed the direction of policy.
2. Ripple Effects From XRP Decision
Crypto markets were shaken by the SEC’s assertion that all digital assets other than bitcoin are securities. However, in a ruling that changed the course of the business, Judge Torres openly refuted Gensler’s assertion.
The SEC filed a lawsuit against Ripple in 2020 on the grounds that it had issued an unregistered security by selling its own cryptocurrency, XRP. However, Torres criticized the SEC in her judgement, stating that XRP is not, by itself, a “contract, transaction, or scheme” that satisfies the Howey requirements of an investment contract because it is a digital token.
In other words, XRP is not a security.
Almost all digital assets will be significantly impacted by the decision. Why? Since other tokens singled out by the SEC for allegedly being unregistered securities could also be vindicated if the verdict is upheld, in addition to XRP. These include SOL, ADA, NEAR, MATIC, and others.
3. A Resurgence Of Bipartisanship In Congress
A bipartisan Senate team changed the course of events just as it seemed that opinions on cryptocurrency were beginning to diverge along party lines, with Republicans supporting it and Democrats opposing it. The Responsible Financial Innovation Act was reintroduced in July by Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY), making it the most comprehensive cryptocurrency legislation to be presented to the U.S. Senate to date.
The bipartisan enthusiasm carried over to legislative initiatives in the House of Representatives, where a dozen Democrats joined their Republican counterparts on the House Financial Services Committee to develop a thorough regulatory framework for crypto assets. A few Democrats also voted to approve legislation governing payment stablecoins, demonstrating that neither bipartisanship nor crypto are extinct.
When considered separately, these three developments represent important wins for the cryptocurrency sector. Together, they indicate that the regulatory blizzard might be easing.
