We are on the threshold of a major shift in the financial, political and social power from baby boomers to millennials, which, combined with digitization and changes in monetary policy, will continue to drive regulatory changes that support the adoption of crypto assets.
Regulation is often cited as a key factor hindering the introduction of this under-owned asset. A recent survey conducted by Campden Wealth cited a lack of regulation as the second biggest obstacle to investing in cryptocurrencies at family offices. This is understandable given the regulatory landscape in the United States since the collapse of the FTX crypto exchange.
Gary Gensler’s Securities and Exchange Commission (SEC) striked the crypto industry with an iron fist and carried out enforcement actions against Coinbase, Kraken and many other credible companies. In addition, Martin Grünberg of the Federal Deposit Insurance Corporation (FDIC) made life difficult for the crypto industry by arming the banking sector. For crypto companies like ours, getting the basic banking services we need to function has been a challenge.
The good news is that conditions have improved significantly in the last year and the door has been opened for demographic change to accelerate the adoption of crypto assets.
Removing regulatory barriers
The conditions began to change in June 2023 with a constructive verdict in the court matter against Ripple (XRP), which provided much-needed clarity on the application of securities law to cryptocurrencies. It also showed that the courts could take over the SEC and hold the institution accountable for its decisions.
In August 2023, the US DC Circuit Court of Appeals described the SEC as “arbitrary and capricious” after its decision to reject Grayscale’s Bitcoin ETF. This decision led to the approval of 11 Bitcoin ETFs in January 2024 and laid the foundation for the approval of the Ethereum ETF in May 2024. ETFs have proven to be important not only for flows, but also for institutional credibility and have created broad support. Some of the world’s largest wealth managers with deep-rooted relationships in Washington have developed Bitcoin products and are marketing the value proposition to their clients.
Cross-party support
The approval of Bitcoin ETFs was monumental, but uncertainty about crypto regulation persisted in Washington. The DOJ’s regulatory actions against Tornado Cash and Samurai Wallet in 2024 indicated continued regulatory resistance. However, the events of May have emphatically confirmed that the pendulum is turning in a more positive direction.
In May 2024, the House of Representatives passed a resolution, H.J. Res.109, which struck down SEC Staff Accounting Bulletin (SAB) 121. SAB 121 introduced unworkable measures against depositaries of digital assets, threatening their viability. Subsequently, President Biden vetoed the actions of Congress. But the biggest news is the bipartisan support for the bill in Congress, including from key Democrats like Nancy Pelosi.
In addition, the FDIC chairman Grünberg will resign, which could put an end to Operation Choke Point. Although Grünberg’s decision is related to his allegations of misconduct, it certainly contributes to a much more positive regulatory landscape than a few months ago.
