Anxiety Surrounding New Potential Crypto Regulation Is Likely Overblown

April 21, 2021 03:10 PM
Dark Crypto

Dark Crypto


Bitcoin and Altcoin Prices by TradingView

Results in the Top 10 were mixed this morning with Binance Coin (BNB) outperforming and DOGE continuing to sell off. Spot volumes are about 80% of the 30-day average. 

Crypto Story of the Day

Fox Business has reported that the Biden administration is developing a regulatory approach for the crypto space. Broad anxiety over new rules is likely overblown and another unlikely major contributor to last weekend's volatility.

The reporting comes after rumors circulated on social media over the weekend about new potential crypto regulation. According to the network, sources have indicated the Biden administration is debating an approach to regulating the crypto space. 

At the same time, SEC Chairman Gary Gensler is awaiting direction from the Treasury Department for the overall policy towards the space before developing an SEC-specific approach. Deputy Secretary of the Treasury Wally Adayemo is acting as the “point man on crypto.” The report also cites lawyers familiar with the SEC’s work who have revealed rumors that Gensler is willing to approve a BTC ETF as a compromise with Republican Commissioners in regards to other non-crypto regulation. 

During Gensler’s confirmation hearing, the Commissioner suggested that further rule-making is required to define jurisdictions in regards to overseeing crypto. Gensler said “it's either a question for Congress for how Congress would want that to be overseen or it's possibly a question for the [CFTC].”

Last week, while speaking at a BTC conference, CFTC Commissioner Dawn Stump discussed the scope of the CFTC’s mandate to regulate crypto markets. Stump noted that while the regulator does oversee derivative markets, involvement in “cash commodity markets” is limited to guarding “against fraudulent or manipulative conduct that may impact the proper functioning of markets we regulate.” As Stump explained, the CFTC is “not in the business of regulating [BTC] transactions or the individuals or entities that buy, sell, transfer, or store [BTC].”

In a 2019 research piece, Timothy Massad, Chairman of the CFTC from 2011-2015, argued that Congress needs to pass legislation to give the SEC “authority to regulate the offering, distribution and trading of crypto-assets, including regulation of trading platforms, custodians (or wallets), brokers and advisors.”

We’ve previously maintained that the U.S. Government is pushing towards a pathway for crypto’s development that’s in line with its own interests (as opposed to the founding principles of Bitcoin). Implementation of enforcement actions against BitMEX, Ripple, and others while firms like Coinbase have found a path forward that’s in line with U.S. regulations further emboldens that thesis. 

Considering the sophisticated legal review process that Coinbase would’ve undergone before being given the green light to publicly list, it's hard to see U.S. regulators developing new rules that would dramatically backtrack crypto’s mainstreaming a week after the listing. 

In this context, should a new, broad framework for regulating crypto emerge from the Biden administration, it’ll likely reflect a continuation of the government’s current approach. Not only does the timing of these rumors not align with the late-Saturday, early-Sunday selloff, but any such fears also have little fundamental support.

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