Another day, and another murmur of the US seeking crypto crackdown rears its’ head.
The US government has been looking at imposing new guidelines and governance structures for the cryptocurrency market. Cryptocurrency has been growing rapidly in the past few years and there is a move towards integrating digital currencies into central banks by large economic players such as China and the Digital Yuan. Over 100 other countries are also exploring and trialing this possibility of having their own Central Brank issued cryptocurrency.
President Joe Biden has signed an executive order on Wednesday, and has requested his trusted advisors to provide detailed proposals on the subject matter within 180 days. The overall ambition of the executive order is to protect consumers, and deny access to criminals that may choose to use the alternative currency to bolster their criminal activities.
This was an initial fear of governments around the world during the earlier days of cryptocurrency, when platforms such as Silk Road were running amok with the sale of illegal items and payments being accepted in Bitcoin. We have moved a long way from that in the crypto ecosystem but the underlying fears prevail.
Anti-money laundering features highly on the priority list and with the current situation in Ukraine and the sanctioning of many Russians it is becoming more important to have visibility and oversight. Politicians from the US and elsewhere are become increasingly concerned that cryptocurrency could be used to try to evade financial sanctions, despite the fact that many accounts have recently been frozen suspected of being linked to senior Russian individuals.
Is regulation the US seeking a crypto crackdown? Surely not
Whilst many in the crypto industry have not been firmly against regulation of some sort, they are seeking some clarity on the type of regulation that congress and the US government may seek to implement. Uncertainty regarding regulation presents significant uncertainty regarding the underlying market itself, and in turn for pricing.
The balancing act between consumer protection, enforcement of sanctions, and the ability to allow innovation in what is still a developing ecosystem is one that is hard to get right.
It seems that the uncertainty surrounding regulation, enforcement, and the future state of cryptocurrency is bleeding into the underlying price, with the value of Bitcoin having surged more than 8% on Wednesdays’ trading, before reversing more than 6% on Thursday.
Volatility anyone? … I think you will see at least a little more to come in the weeks ahead!