The past week could turn out to be one of history's most important weeks in the field of US fiscal policy. Via two votes in the US Congress, supporters of crypto have won decisive cross-party victories. On Thursday evening, the SEC is also expected to approve spot-based ETFs based on Ethereum, the world's second-largest blockchain.
The past week could turn out to be one of history's most important weeks in the field of US fiscal policy. Via two votes in the US Congress, supporters of crypto have won decisive cross-party victories. On Thursday evening, the SEC is also expected to approve spot-based ETFs based on Ethereum, the world's second-largest blockchain.
While regulators in Europe, Asia, the Middle East and Latin America have tried to regulate, and thus legitimize, cryptocurrencies in various ways, the United States has chosen a very different line. In the United States, the SEC (U.S. Securities and Exchange Commission) and SEC boss Gary Gensler have almost waged a war against the crypto industry. His argument has all along been based on investor protection, while his critics believe that he has run the errand primarily of traditional banking and finance.
Gensler has legally built his rulings on a 90-year-old securities legislation from 1933 and 1934, and on the referred “The Howley Test”, where by considering several criteria one can decide whether an asset is to define as an “investment contract” between two parties or not. This, in turn, will determine whether the asset is to be considered a security under the law, and thus subject to registration with the SEC. This view has been taken further by Gensler and the SEC in the form of numerous rulings, lawsuits, and litigation with crypto exchanges and other crypto industry players. The industry has argued that this is a highly random and subjective way of driving regulation, based on an outdated legal framework that was implemented many decades before both the current internet and digital assets saw the light of day. Until now, Gensler has had the silent support of both the White House and Democrats in Congress.
Leading up to the 2024 election year, the crypto industry has bet hard on turning the political mood around in Washington. In the past week, for example, hundreds of lobbyists have been in Washington, and through Coinbase's “Stand with Crypto” campaign, hundreds of thousands of voters have signed a petition. Very many crypto supporters, both Republicans and Democrats, have also reached out to “their” representative in Congress to voice their views.
Surveys have also shown that over 50 million Americans have already invested in cryptocurrencies, and that the crypto investments and positive crypto attitudes are strongly positive in the under 40 age groups, groups that are also investors of the future, following the baby boomers who as of today dominate the investor communities. News of entrepreneurs, startups and other crypto communities moving to more crypto-positive countries, such as in Asia and the Middle East, has also helped paint a picture of the United States as an innovation-hostile country, stinging at odds with what has brought today's tech giants to what they are today.
However, all these facts and arguments have been there for a long time. There have also constantly been prominent representatives among Democrats who have been positive about crypto, even though they have represented a minority. So what exactly happened this week? The ball has probably started to roll when the threat that “single-issue voters” who are strong supporters of crypto, both principled and emotional, could turn their backs on the Democrats and their presidential candidate Joe Biden.
Some strong crypto supporters, such as VC investor Anthony Scaramucci, have argued particularly strongly that the threat of an autocratic regime under Donald Trump is even greater. But after Donald Trump emerged as a crypto-positive president, the pressure on Democrats has increased further. Last week, billionaire Mark Cuban, considered a liberal figure, among others, came out and warned that Gary Gensler and the SEC's crypto policies could come to a halt cause Joe Biden would lose the US presidential election. In parallel, it became increasingly clear that the crypto industry in the United States had finally managed to organize itself to become very influential, also in relation to local elections.
The crypto industry's first goal was not necessarily to get Democrats to become massively positive about crypto, but to get them to become more neutral and halt with their crypto-hostile support for Garry Gensler. This week, it seems that exactly that goal has been reached.
Last Thursday, May 16, the U.S. Senate passed, with a 60 to 38 vote, including 12 Democrats and Majority Leader Chuck Schumer, with override the SEC's decision on refusing traditional banks to manage cryptocurrencies. As of yet, the House of Representatives, with the support of 20 Democrats, had passed the same. Before the vote, Biden signaled that he would come to veto the decision, but that is now far less likely.
In parallel with the processes in the US Congress, the market has been anxiously awaiting whether the SEC would come to approve Ethereum spot-based ETFs, similar to Bitcoin, which was approved by the SEC on January 10 this year. Expectations have long been skeptical, but in the run-up to May 23, when the SEC has its first deadline to rule on an application, the psychology of the market has totally changed. Two Bloomberg analysts, Eric Balchunas and James Seyffart, now consider that the odds for/against an ETF approval to be 75/25, versus 25/75 the week before.
In parallel, the crypto markets also went, powered by an Ethereum rally, sharply upward.
On Wednesday night, the House of Representatives voted, by 279 to 136 votes, to give its support to an initiative to legislate digital assets, called “Financial Innovation and Technology” act. A whopping 71 Democrats, including influential Nancy Pelosi, voted in favor. This, despite the fact that on Wednesday morning Gary Gensler once again went out with strong criticism. Later in the day, however, it became clear that the White House, although negative to the proposal, was not going to apply its veto option.
On Thursday evening, Norwegian time, we will learn whether the SEC will approve Ethereum spot-based ETFs. In the event that yes, we may get a similar development as from January 2024, where the market is wondering if this is a “buy the news” or “sell the news” event. And even if there is a postponement, Bloomberg analysts are likely to stand by their prediction that approval will come later in 2024.
So how about Biden's threat to veto Senate Resolution 16. May? This, too, may now appear less likely.
What about Gary Gensler? Can he survive as SEC chief after a third of Democrats in the House of Representatives have chosen not to heed his warnings?
Crypto and digital assets are also unlikely to become a neutral topic in the US election campaign. But our initial comment, that the past week could turn out to be one of the most important weeks in US fiscal policy in history, stands by layers.
The past week could turn out to be one of history's most important weeks in the field of US fiscal policy. Via two votes in the US Congress, supporters of crypto have won decisive cross-party victories. On Thursday evening, the SEC is also expected to approve spot-based ETFs based on Ethereum, the world's second-largest blockchain.
The past week could turn out to be one of history's most important weeks in the field of US fiscal policy. Via two votes in the US Congress, supporters of crypto have won decisive cross-party victories. On Thursday evening, the SEC is also expected to approve spot-based ETFs based on Ethereum, the world's second-largest blockchain.
While regulators in Europe, Asia, the Middle East and Latin America have tried to regulate, and thus legitimize, cryptocurrencies in various ways, the United States has chosen a very different line. In the United States, the SEC (U.S. Securities and Exchange Commission) and SEC boss Gary Gensler have almost waged a war against the crypto industry. His argument has all along been based on investor protection, while his critics believe that he has run the errand primarily of traditional banking and finance.
Gensler has legally built his rulings on a 90-year-old securities legislation from 1933 and 1934, and on the referred “The Howley Test”, where by considering several criteria one can decide whether an asset is to define as an “investment contract” between two parties or not. This, in turn, will determine whether the asset is to be considered a security under the law, and thus subject to registration with the SEC. This view has been taken further by Gensler and the SEC in the form of numerous rulings, lawsuits, and litigation with crypto exchanges and other crypto industry players. The industry has argued that this is a highly random and subjective way of driving regulation, based on an outdated legal framework that was implemented many decades before both the current internet and digital assets saw the light of day. Until now, Gensler has had the silent support of both the White House and Democrats in Congress.
Leading up to the 2024 election year, the crypto industry has bet hard on turning the political mood around in Washington. In the past week, for example, hundreds of lobbyists have been in Washington, and through Coinbase's “Stand with Crypto” campaign, hundreds of thousands of voters have signed a petition. Very many crypto supporters, both Republicans and Democrats, have also reached out to “their” representative in Congress to voice their views.
Surveys have also shown that over 50 million Americans have already invested in cryptocurrencies, and that the crypto investments and positive crypto attitudes are strongly positive in the under 40 age groups, groups that are also investors of the future, following the baby boomers who as of today dominate the investor communities. News of entrepreneurs, startups and other crypto communities moving to more crypto-positive countries, such as in Asia and the Middle East, has also helped paint a picture of the United States as an innovation-hostile country, stinging at odds with what has brought today's tech giants to what they are today.
However, all these facts and arguments have been there for a long time. There have also constantly been prominent representatives among Democrats who have been positive about crypto, even though they have represented a minority. So what exactly happened this week? The ball has probably started to roll when the threat that “single-issue voters” who are strong supporters of crypto, both principled and emotional, could turn their backs on the Democrats and their presidential candidate Joe Biden.
Some strong crypto supporters, such as VC investor Anthony Scaramucci, have argued particularly strongly that the threat of an autocratic regime under Donald Trump is even greater. But after Donald Trump emerged as a crypto-positive president, the pressure on Democrats has increased further. Last week, billionaire Mark Cuban, considered a liberal figure, among others, came out and warned that Gary Gensler and the SEC's crypto policies could come to a halt cause Joe Biden would lose the US presidential election. In parallel, it became increasingly clear that the crypto industry in the United States had finally managed to organize itself to become very influential, also in relation to local elections.
The crypto industry's first goal was not necessarily to get Democrats to become massively positive about crypto, but to get them to become more neutral and halt with their crypto-hostile support for Garry Gensler. This week, it seems that exactly that goal has been reached.
Last Thursday, May 16, the U.S. Senate passed, with a 60 to 38 vote, including 12 Democrats and Majority Leader Chuck Schumer, with override the SEC's decision on refusing traditional banks to manage cryptocurrencies. As of yet, the House of Representatives, with the support of 20 Democrats, had passed the same. Before the vote, Biden signaled that he would come to veto the decision, but that is now far less likely.
In parallel with the processes in the US Congress, the market has been anxiously awaiting whether the SEC would come to approve Ethereum spot-based ETFs, similar to Bitcoin, which was approved by the SEC on January 10 this year. Expectations have long been skeptical, but in the run-up to May 23, when the SEC has its first deadline to rule on an application, the psychology of the market has totally changed. Two Bloomberg analysts, Eric Balchunas and James Seyffart, now consider that the odds for/against an ETF approval to be 75/25, versus 25/75 the week before.
In parallel, the crypto markets also went, powered by an Ethereum rally, sharply upward.
On Wednesday night, the House of Representatives voted, by 279 to 136 votes, to give its support to an initiative to legislate digital assets, called “Financial Innovation and Technology” act. A whopping 71 Democrats, including influential Nancy Pelosi, voted in favor. This, despite the fact that on Wednesday morning Gary Gensler once again went out with strong criticism. Later in the day, however, it became clear that the White House, although negative to the proposal, was not going to apply its veto option.
On Thursday evening, Norwegian time, we will learn whether the SEC will approve Ethereum spot-based ETFs. In the event that yes, we may get a similar development as from January 2024, where the market is wondering if this is a “buy the news” or “sell the news” event. And even if there is a postponement, Bloomberg analysts are likely to stand by their prediction that approval will come later in 2024.
So how about Biden's threat to veto Senate Resolution 16. May? This, too, may now appear less likely.
What about Gary Gensler? Can he survive as SEC chief after a third of Democrats in the House of Representatives have chosen not to heed his warnings?
Crypto and digital assets are also unlikely to become a neutral topic in the US election campaign. But our initial comment, that the past week could turn out to be one of the most important weeks in US fiscal policy in history, stands by layers.
