Following a turbulent 2022, crypto markets still have a long way to go on their road to recovery. The macroeconomic outlook this year – clouded with fears of recession and slower growth – hasn’t helped, nor has the regulatory uncertainty in the United States.
Despite the progressive steps taken in other countries – for example, the European Union’s Markets in Crypto-Assets (MiCA) regulation and Singapore’s stablecoin policies – the US Securities and Exchange Commission’s ‘war on crypto’ has cast a grey cloud over crypto markets.
Altcoin prices plunged following lawsuits filed by the US Securities and Exchange Commission (SEC) – against Binance and Coinbase – which labelled a number of them as unregistered securities.
Bitcoin has been held below US$30,000 as well, with investors waiting on the SEC to make a decision regarding the approval of spot exchange-traded funds (ETFs).
According to Matrixport’s head of research, Markus Thielen, approval of these ETFs could bring in significant capital and trigger a Bitcoin rally. A number of companies – including BlackRock and ARK – have applied for these ETFs, but to no success so far.
The state of crypto in the US
In an interview with Vulcan Post in July, Coinbase’s Country Director for Singapore, Hassan Ahmed said, “The rest of the world is moving forward, with or without the US.” To a similar view, the heads of Ripple and BitGo have little faith in the SEC and its vision for crypto.
At Token2049 Singapore – the largest ever crypto conference – Ripple CEO Brad Garlinghouse agrees with BitGo CEO Mike Belshe on the regulatory roadblocks in the US. “The only country I’d encourage people not to start a [crypto] company in right now is the US,” he reiterates.
Ripple, despite its partial victory against the SEC – wherein the court ruled that the company-issued XRP crypto tokens didn’t constitute a security offering – still has ways to go before it clears its legal troubles in the US. As it stands, the SEC seeks to fight back and appeal this ruling.
Garlinghouse remains optimistic, but doesn’t downplay the challenge ahead. “We’re seeing a momentum shift – a lot of judges [used to believe] that the SEC was always right.”
Although the sentiment is now changing, as seen with the Ripple ruling, the SEC still “has an unlimited budget”.
“You’re literally fighting the man,” Garlinghouse adds. Belshe touches on the crux of the issue, highlighting the political influence on crypto in the US. While other crypto-friendly countries have focused on solving issues – such as consumer protection and transparency – crypto regulations are being used as a tool to further political ambitions in the US.
Jurisdictions such as Singapore, Dubai, and the UK have been defining the areas within which crypto companies can operate. On the other hand, the US is in a state of ambiguity and as Garlinghouse states: “The confusion gives the SEC power. They’re using their unlimited legal budgets and just filing more lawsuits.”
Where is crypto headed from here?
Although the crypto markets have been influenced heavily by sentiment in the US, Garlinghouse believes that the industry is still poised for growth. “Ripple has been growing outside the US,” he says. In Singapore alone, the company has doubled its headcount in the past year.
“Sometimes, you have to zoom out a bit further,” Garlinghouse adds. Current Bitcoin prices might be a third of their all-time-high, but they’re still up almost 300 per cent over the past five years.
He further states that the interest in crypto remains strong, highlighting the sold-out audience of 10,000 at Token2049 Singapore as evidence.
OKX President Hong Fang speaks highly about the increasing clarity being offered in jurisdictions including Singapore, Hong Kong, and the European Union. “All of them are very focused on consumer protection, corporate governance, [asset custody]. I think they’re heading in the right direction.”
While crypto remains an unseemly affair in the US, companies have plenty of alternatives where they can set up shop and continue to build. The markets may be slow to react to these developments, but the view among the panel members is that the bounceback will come eventually.
All three panel members agree that the approval of Bitcoin spot ETFs is inevitable. Belshe believes that the currently appointed SEC will continue to fight it but adds that “it absolutely will happen”. With the US elections slated for 2024, there’s a possibility that the SEC will be headed by a different set of commissioners next year.
“Once this ETF is available, a lot of money will [flow into crypto],” Fang says. “We’ll probably see Bitcoin grow as an asset class.”
The future of crypto regulations
With a broad range of innovations and emerging use-cases, there’s a lot for regulators to think about when it comes to crypto. That said, there are a set of fundamentals which should ideally be addressed first.
“The highest priority when it comes to crypto regulation is the basics – making sure that assets are safe and can’t be rug-pulled,” Belshe says.
Garlinghouse mentions that industry players have a responsibility to agree on such matters for the space to move forward.
“[Aspects like] AML and KYC are going to matter. If we try to circumvent these things, that just gives fuel to the fire for the politicians who like to make noise and don’t really understand what’s going on in crypto.”
Featured Image Credit: Ishan Singh / Token2049 Singapore 2023
