March 15 – Bitcoin loves to flirt with the mainstream. But now that the President of the United States says he wants to get serious, the cryptocurrency may cool off.
When Joe Biden ordered officials last Wednesday to prepare reports on the role of cryptocurrencies in future finances, Bitcoin jumped 9% and Ethereum jumped 8% as many cryptocurrency fans cheered the potential milestone in mainstream acceptance.
“The real importance of this is that the President of the United States is talking about crypto,” said Jack MacDonald, CEO of Standard Custody, a digital asset custody solutions firm for institutional investors.
Register now and get FREE unlimited access to Reuters.com
register
However, cryptocurrencies are complex.
While Bitcoin danced above $42,500 after the news, it has since retracted those gains and is now back to $38,000. Similarly, Ether dropped to $2,500.
It seems like a muted market reaction to the White House’s first official announcement about crypto — though who can truly understand bitcoin, still licking its wounds from China’s rejection and nagging worry that it is losing its identity.
Regulation can be a double-edged sword.
Some industry observers are seeing bullish signs for bitcoin, stating that the president’s announcement could herald the introduction of U.S. crypto laws that would attract much more institutional money from pension funds and insurance companies.
“Biden’s order could spell the end of the wild west of cryptocurrencies as we know it,” said Edmund Kulakowski, senior financial crime consultant at London-based software company Fenergo.
However, this may not be such good news for those crypto players who thrive in the wild.
“Hedge funds that are quantitatively driven, using arbitrage and quantitative strategies, tend to excel in more volatile and unstructured markets,” said Ganesh Iyer, director of marketing and strategy at New York-based tech company IPC.
“Only time will tell how and when this market matures. Until then, hedge funds have the option to use ultra-low latency networks to make the most of the volatile, liquid crypto markets.”
WHO IS THE SHERIFF?
There is also little confidence in America’s regulatory intentions, as Biden gave federal agencies six months to make recommendations on how best to proceed.
First, it is not clear who will be the sheriff of the cryptocurrency and, for that matter, whether the cryptocurrency should be treated as a security or as a commodity.
Both the Securities and Exchange Commission (SEC), which oversees listed shares and therefore tokens that are considered securities, and the Commodity Futures Trading Commission (CFTC), which oversees the commodity and derivatives markets, are among those who should contribute. into reports.
“The specifics associated with the SEC, CFTC and other financial regulators are small,” said Gerald David, president of Arca Labs, the innovation arm of Los Angeles-based digital asset management company Arca.
Shane Rogers, a former investment banker and CEO of PDX Coin, a crypto-to-fiat payments app and utility coin, said he is waiting to see how regulation changes, especially in terms of defining the role of the SEC.
He added that until it becomes more visible, “the government can forget about innovation in the crypto space in the US, because I, for example, will not hire people or spend large sums of money on research and development in this country.”
CRYPTOHELP OF AMERICA
What seems certain, no matter how it turns out, is that US actions will have a major impact on the global crypto industry.
America, the epicenter of traditional finance, is fast becoming the same for cryptocurrencies; According to PwC, 43% of the world’s cryptocurrency hedge fund managers are currently based there, while the United States is now also the center of bitcoin mining following China’s crackdown on that part of the industry last year.
McDonald of Standard Custody called Biden’s order “a symbolic document.”
“He didn’t come out and say it was a scam or bad actors doing bad things,” he added. “On the contrary, there is a recognition that digital assets have a place in the future, that this industry requires a thoughtful approach to regulation.”
Register now and get FREE unlimited access to Reuters.com
register
Reporting by Lisa Mattakal and Medha Singh in Bangalore Additional reporting by Elizabeth Howcroft in London Written by Alun John in Hong Kong Editing by Vidya Ranganathan and Praveen Char
Our Standards: Trust Principles.
The opinions expressed are those of the author. They do not reflect the views of Reuters News, which, in accordance with the Principles of Trust, strives for honesty, independence and freedom from bias.