Regulation practices have been responsible for the continued stagnation of BTC prices for quite some time now. It might thus come as a relief to learn that two major companies in the cryptocurrency space this week, have made moves which show regulation is smoothing out.
“We believe the regulatory picture is now improving — best evidenced by Coinbase and Circle ‘running towards’ regulation,” Fundstrat co-founder Tom Lee said in a note to clients 7th June. “We are basing this on the notion that Coinbase and Circle would only take these actions if such was the case.“
Coinbase, made a pleasant announcement saying that it would acquire securities dealer Keystone Capital Wednesday in a bid to become a fully SEC-regulated broker-dealer. Goldman Sachs-backed cryptocurrency platform Circle is pursuing a federal banking license and they have plans to register with the SEC as a brokerage and trading venue.
“We believe both companies would only make these moves if their perception of regulatory risks in crypto was improving,” Lee said, calling their announcements “implicit acknowledgement” that the regulatory tide is shifting.
SEC have released quite some regulatory crackdowns and announcements due to which the prices fell below $10,000 in March after the agency said it would require digital asset exchanges to register with the agency and have struggled to recover since.
Bitcoin has slumped more than 45% since January, according to CoinDesk. Demand for cryptocurrency has been restricted due to these crackdowns and they have prevented institutional investors from entering the market.
In a CNBC interview Wednesday, SEC Chairman Jay Clayton commented on the matter of how to classify what cryptocurrency is, and how it should be regulated. He said that while bitcoin is not a security, tokens from initial coin offerings are. The CFTC, on the other hand, regulates them as commodities.
As Bitcoin neared the $20,000 mark in December, one has to understand that the demand was more than the supply. Lee, the only major Wall Street strategist to issue formal price targets on bitcoin, pointed to a sharp increase in cryptocurrency supply in 2018 and lower demand after investors sold Bitcoin holdings to meet tax requirements.
“You do not want to give Jeff Bezos a seven-year head start.”
The SEC and other U.S. regulators are looking into new innovations and trying to protect investors from fraud. Robert Cohen, chief of the Cyber Unit in the Division of Enforcement at the SEC, said that while the agency is heavily focused on fraud, it is being cautious not to hurt innovation.
“We want to encourage innovation and new ways of raising capital,” Cohen said at the New York Blockchain and Digital Assets Summit on 7th June. “If there’s a new and exciting tech, people should have an opportunity to invest in it”.
“Every time there’s an exciting new technology, people are afraid of missing out when they see people becoming millionaires overnight, there’s a high risk of people falling victim to fraud,” Cohen said.