US Lawmakers Unite Against SEC as Crypto Regulations Tighten Globally

20 May 2024

This May, the Fed noticed that it would not decrease rates soon, and the BTC price fell below $57,000 at the beginning of May. Despite that, it's unexpectedly becoming a good time for the crypto market. The Bitcoin ETF has had record inflows since March, hedge funds report record numbers of crypto investments, and American legislators have passed anti-SEC resolutions.

Other crypto regulation updates outside of the US include a new crypto bill in Turkey, a mining ban in Venezuela, regulatory uncertainty in the EU, and consultations between crypto regulators in India.

Do US lawmakers unite against the SEC?

The US Senate has passed a resolution against the SEC to cancel rule 129, which obligates banks to declare their crypto balances to the commission. Senators voted 60 - 38; both Republicans and Democrats supported this resolution. However, Biden has already claimed that he is going to veto it.

Anyway, this is the first such case where the US Congress and Senate have agreed with each other on crypto regulation. The resolution was supported by both Republicans and Democrats, including majority leader Chuck Schumer. Lawmakers gently hint to the SEC and its chairman, Gary Gensler, that the commission doesn't have to abuse its authority over cryptocurrencies and banks.

Growing numbers of investments in Bitcoin ETF

In the middle of May, some big institutional investors made waves by announcing their shares in Bitcoin. Hedge fund Millennium invested about $2 billion, while Morgan Stanley invested $270 million. The State of Wisconsin Investment Board also revealed it has about $164 million in Grayscale and Blackrock Bitcoin ETF. Meanwhile, with the US CPI index for April coming in 0.1% lower than expected, Bitcoin's price surged to $67,000. Last week, according to Farside Investors, we saw $948.3 million in inflows into US spot Bitcoin ETFs.

Last but not least, Pantera Capital invested in cryptocurrency TON a large sum—which is unknown but probably exceeds Pantera's investment in Solana ($250 mln). Chicago Mercantile Exchange (CME Group) has also recorded increased institutional demand for bitcoin and plans to launch spot bitcoin trading directly.

Regulatory uncertainty in the European Union

Meanwhile, Europe is gearing up for the full implementation of the MiCA crypto regulation framework. Overall, this isn't the best news for the industry—there's a lot of uncertainty about how cryptocurrency companies will continue to operate in Europe. This affects not just medium-sized VASPs, but also the big players in the market.

In April it became known from Tether CEO Paolo Ordoino that the company does not plan to obtain a license for USDT in the EU. Last week Kraken exchange announced that it will delist USDT for its European clients. Tether will presumably develop euro-denominated stablecoins in the EU. However, it is unknown how this will happen—so far, the capitalization of euro-denominated stablecoins has stayed relatively small.

At the same time, European countries continue the implementation of their classic VASP crypto regulation frameworks, which obligate any crypto entities operating in the country to get a license/registration. For instance, French financial regulator Autorité des marchés financiers (AMF) has informed the public that Bybit has illegally operated in the country since 2022 because it didn't get a license from the regulator. Bybit is included in the AMF blacklist as a company, which isn't compliant with existing regulations in the country.

Turkey will pass new crypto bill

Last week, the ruling party introduced a crypto bill into Turkish parliament. The new legislation regulates licensing procedures for crypto entities, compliance, and AML. Local financial regulator Capital Markets Board (CMB) will be the main institution in this process.

India updating crypto regulations

Although pending new elections, the National Government has so far resisted its legislative initiatives to regulate cryptocurrencies—regulators are doing it instead.  Local financial regulator - SEBI has published its recommendations dedicated to crypto regulation in the country. It recommends dividing crypto activities by regulators: SEBI to regulate ICOs and securities, Central Bank - stablecoins, FIU - VASP registrations.

FIU started VASP registration in the country late last year, and 28 companies were registered. Last week, the first two foreign exchanges, Binance and Kucoin, were also approved to operate in the country.

Venezuela imposes a mining ban

Despite the existing economic and political issues in Venezuela, cryptocurrencies are legal in the country. Also, it has regulations for mining. Unfortunately, last week, the local Ministry of Electric Power claimed that it would disconnect existing mining farms from the grid. The government explained this initiative by citing the high load on the country's electricity networks. In addition, the decision may be related to the country's anti-corruption campaign—the government had previously confiscated 2,000 devices in the city of Maracay and 11,000 mining devices in Carabobo state. It still needs to be determined whether the ban on mining in Venezuela will be temporary or permanent.

Such initiatives to ban or restrict mining due to high load on power grids are not uncommon. For example, in 2021, mining was banned in Iran for four months. The Central Asian countries of Kazakhstan, Uzbekistan and Kyrgyzstan also imposed certain restrictions on the activities of mining operators.

VanEck ETH ETF application

Finally, I would like to remind you about the important event of the coming week—on May 23, the SEC is expected to rule on VanEck's Ethereum ETFs. Bloomberg's analyst Erik Balchunas commented last week that the SEC probably won't approve any spot Ethereum ETF. He suggests that according to the commission's current position, it evaluates Ethereum as a security. Indeed, the probability of rejection is quite high, but let's see what the regulator decides.

If you are interested in getting more crypto regulation insights, you can watch the global crypto regulation rating here and get updates on my Telegram channel.