Some American politicians are actively criticizing the crypto industry, others are no less passionately supporting Bitcoin. Experts, in turn, call the upcoming presidential elections in the United States one of the main factors affecting the cryptocurrency market in 2024. Ahead of the vote, Americans are increasingly willing to invest in cryptocurrencies, while the industry is having a way of change.
Recent developments in US crypto regulation
FIT21
On May 23, it became known that the House of Representatives of the US Congress approved the FIT21 Act. Further, the vote will take place in the Senate, and then the law will be sent for signature to the president.
FIT21 is a Financial Innovation and Technology for the 21st Century Act that defines the powers of the Commodity Futures Trading Commission (CFTC) and the US Securities and Exchange Commission (SEC) in the cryptocurrency industry.
There are some provisions:
- The CFTC will regulate a digital asset as a commodity if it is decentralized properly way.
- The SEC will regulate the token like a security if it is not decentralized.
- Decentralization is considered a situation in which no person has control over the blockchain and does not hold more than 20% of the token issue or voting rights.
The bill largely hands control of cryptocurrencies to the CFTC, which the industry sees as a softer regulator, over the securities regulator.
The main provisions of the FIT21 will allow trading cryptocurrency on exchanges, even if it was "originally sold as part of an investment contract."
Interestingly, the head of the SEC, Gary Gensler, was against this law, but could not convince his voting colleagues. This is not surprising, since most of it will be "managed" by the CFTC, not the SEC.
The document received 279 votes in favor with 136 against. The bill introduced by the Republicans was supported by 71 Democratic representatives, including ex-speaker Nancy Pelosi. At the same time, the Biden administration was also against its current edition and is ready to finalize it.
Financial Services Committee Chairman Patrick McHenry noted that the Securities and Exchange Commission (SEC) and the CFTC are currently fighting for control of the cryptocurrency market.
“The SEC and the CFTC are currently in a food fight for control over this asset class. They have created an impossible situation where the same firms are subject to competing and contradictory enforcement actions by the two different agencies”.
“FIT21 fixes this by creating a regulatory framework that will provide clear rules of the road and strong guardrails for the Americans engaging with the digital asset ecosystem”.
Ethereum-ETF
On May 23, the US Securities and Exchange Commission (SEC) approved 19b-4 filings from Ethereum-based spot exchange-traded fund issuers.
Approved companies include VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK Invest/21Shares, Invesco/Galaxy, and Bitwise.
However, the regulator did not give permission for Hashdex, whose deadline for the application expired on May 30.
Bidding will start after the SEC signs registration statements on Form S-1. After that, ETH can be treated as a commodity, not a security.
Facing the approval, the ETH rate jumped to $3900, but by the time of writing, it fell to $3760.
Most important regulatory actions for crypto markets
According to a study by Grayscale, cryptocurrencies are growing in relevance due to "macro dynamics and their own maturity." In a survey of 1,768 Americans, 41% of respondents said they follow events in the crypto industry, and 47% plan to include cryptocurrencies in their investment portfolio. These data, in turn, indicate an increase in public interest in crypto investing.
The survey also showed that American voters are concerned about the lack of regulation around digital assets. 77% of American voters who took part in the survey believe that presidential candidates should understand cryptocurrency and 53% of respondents are ready to vote for a candidate savvy in cryptocurrencies.
It is also worth noting that a large share of voters comes from the generation of millennials and setters, who are more predisposed to new technologies and argue about the need to transform the financial system.
Nearly four in five digital asset holders in California are more likely to support a candidate advocating for the crypto industry as a job creator and source of U.S. geopolitical power.
Thus, the topic of cryptocurrencies becomes one of the decisive criteria for choosing a particular candidate. Therefore, now we can observe the active activity of the US administration in solving the regulation of the crypto market: as soon as the Lower House of the US Congress adopted the FIT21, the SEC immediately responded with the approval of application 19b-4 from issuers of spot exchange-traded funds based on Ethereum.
The crypto market reaction
Co-founder and CEO of the largest American crypto company Coinbase Brian Armstrong called the vote on the FIT21 in the House of Representatives "historic."
“Historic vote today on the FIT21 bill in the House of Representatives, that will finally start to create some clear rules to regulate crypto (if it becomes law)”.
Coinbase also noted that the bill will be able to protect consumers and will promote innovation and job creation.
Ron Hammond, director of government relations for the Blockchain Association, in a commentary for The Block, also called the FIT21 "a massive turning point," which will change the opinion of the industry in Congress, and is also able to remove the barriers created by the SEC.
He also admitted that the White House "began to realize" the political consequences of maintaining the previous policy regarding cryptocurrencies.
Prominent industry lawyer Jake Czerwinski called it a signal to the incumbent from his House caucus that the "anti-crypto platform" is in a losing position this year.
Against the background of the election campaign in the United States, criticism of the current government for its position on cryptocurrencies is growing. Cardano co-founder Charles Hoskinson announced Biden's desire to "kill the industry."
ConsenSys CEO Joseph Lubin believes that the president-backed SEC, led by Gary Gensler, is deliberately discouraging innovation in the United States, threatening the future of the country's financial system.
Hayden Adams, founder of the largest DEX Uniswap, called the administration's actions an "all-out war" with the industry. The entrepreneur admitted that Biden could lose the election due to opposition to cryptocurrencies. A similar opinion was expressed by billionaire Mark Cuban.
Biden's rival, Donald Trump, promised the industry support if elected, and also began accepting campaign donations in digital assets.
The crypto community met the approval of spot Ethereum-ETFs very positively, but not without a bit of skepticism.
“BOOM!! APPROVED! There it is. The SEC just approved spot #Ethereum ETFs. What a turn of events. It's really happening”, twitted James Seyffart.
Representatives of the management company Bitwise called the approval of the spot ETH-ETF "a historic move that puts the spotlight on the second-largest crypto asset."
According to industry experts, the approval of Ethereum-based exchange-traded funds was the Commission's "implicit admission" that the asset was not a security.
“These are commodities-based trust shares, so the SEC, by approving these, is explicitly saying they’re not going to go after Ether as a security,” noted Bloomberg ETF analyst James Seyffart
Digital asset lawyer Justin Browder believes if Ether ETFs get S-1 approval then the “debate is over: ETH is not a security.”
However, some experts noted that the SEC could still continue to pursue industry participants hosting Ethereum.
Upcoming regulatory action predictions
The future of the FIT21 is still being determined since in the Senate he will face one of the largest cryptocurrency critics in the country, Senator Elizabeth Warren. The only positive news in this regard is that on May 16, the Senate passed a resolution repealing the SEC order that limited the conduct of cryptocurrency business by banks (Bulletin No. 121).
With no time limit in place, it could be months before the Senate takes up the bill. But even if this happens, it will have to go through the approval of the relevant committees of the US Congress. Because of this, new versions of the act may arise, so members of the House and Senate will gather to smooth over differences, and then the document will return to Congress for final approval.
In the final part of the procedure, President Biden will have to make a decision within 10 days — to sign the bill or to veto it. However, on May 22, the White House administration announced that it opposed the adoption of the law. However, they did not mention whether it would be vetoed.
Even if Biden vetoes the bill, the House and Senate can override it by passing it through both chambers with a majority of at least two-thirds of the vote.
Conclusion
In the run-up to the US presidential elections, we see how candidates speculate on the topic of cryptocurrencies in order to win more votes for their side. Of course, a large percentage of voters are already crypto asset holders or are about to become one. The issue of inflation fuels their interest. Therefore, their voices must be heard and their interests protected.
The adoption of these regulatory actions means a step towards strengthening the position of cryptocurrencies and blockchain technology in the US financial system, their adoption by a number of people, the emergence of new jobs, and will also be able to change the US position in the ranking of pro-cryptocurrency countries. If the FIT21 is adopted by the current president, this may have an impact on drawing many voters into his orbit and the support of crypto companies. If this does not happen, then the votes of crypto investors will go to Trump.
The SEC's approval of spot Etherium-ETFs has delighted ETH fans and investors in general. Some optimistic experts are ready to consider the SEC decision as a green light for other projects that will fit the concept of "product." However, not everyone unequivocally trusts the SEC and believes that the commission will not just let go of the crypto.
Thus, the topic of regulation of the crypto market has become a serious factor in the presidential election. The attention of the crypto community is fixed on the further actions of the administration. Probably 2024 will be a turning point for the crypto industry.
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