US Regulatory Evolution and Global Competition
Global Clarity and Domestic Advocacy Shape the Future of Cryptocurrency Innovation
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Topics Covered
Global Regulatory Clarity vs. US Regulatory Challenges
Political Influence and Advocacy Efforts
Demographic and Generational Opinions on Crypto
Quick Notes🏃♂️
Cryptocurrencies and Web3 technologies currently have greater utility outside the US, where nations like Hong Kong and Dubai are creating crypto-friendly policies. In contrast, the US faces regulatory challenges, with the SEC taking a hard stance, evidenced by lawsuits against major crypto projects like Coinbase and Ripple. Despite this, there have been some regulatory wins, such as the approval of Spot Bitcoin ETFs.
Organizations like "Stand With Crypto" are advocating for clearer policies and political support for the crypto industry. The recent approval of the Ethereum spot ETF suggests a potential shift in the regulatory landscape.
As the global regulatory environment becomes clearer, the US risks falling behind if it doesn't adapt. Retaining crypto innovators is crucial to prevent the US from lagging in this industry, similar to the semiconductor space. The involvement of large institutions and the support of younger generations and minorities highlight the growing importance of crypto in the US economy and elections.
Full Analysis📝
US Crypto Regulation Has Historically Been Harsh
Cryptocurrencies and Web3 technologies currently have greater utility and potential outside of the US.
Thus, it is no wonder that other nations and geographical areas have battled to be a hub for builders. As we visited in a prior article, aspiring crypto hubs like Hong Kong and Dubai are creating policies that are friendly to crypto founders.
In the US, the tune has been DIFFERENT.
US regulation has been all but clear in the crypto space, but the Securities and Exchange Commission vehemently disagrees.
SEC chair, Gary Gensler, is viewed as the Lex Luther or Joker of the crypto space for many US crypto founders.
The SEC has sued major crypto projects with American founders Coinbase, Uniswap, and Ripple.
The Wells Notice that Coinbase received is particularly odd as the company is listed on the Nasdaq.
However, despite the opposition to Chairman Gensler and the hostile regulatory environment, the industry has seen some wins regulatory-wise. One major win was Grayscale winning a lawsuit against the SEC, which spurred the approvals of Spot Bitcoin ETFs. This paved the way for BlackRock and ARK founder, Cathie Wood to launch ETF products.
With election season underway, crypto has been a polarizing topic for the country’s elected officials.
The outcome of the elections could significantly influence the future regulatory landscape for cryptocurrencies in the US, potentially altering the current adversarial stance of the SEC.
US Faces Challenges Amid Global Regulatory Clarity
As mentioned above, the regulatory landscape for crypto is not friendly in the US.
The European Union, United Arab Emirates, and United Kingdom are all nations that have regulatory clarity. These nations didn’t get the clarity today but have had it for many months at the time of writing this piece.
Interestingly, the cryptocurrency industry is the first technological innovation that isn’t led by Silicon Valley. While COVID probably had a hand in that, founders in America who want to innovate in crypto fear regulatory consequences.
This is why Coinbase, a public company, and other American crypto companies have created an organization called “Stand With Crypto” to engage political figures to rectify the difficulty that builders and users of the crypto industry face.
The organization focuses on education about US politicians' views on the crypto sector. Additionally, the organization endorses candidates that are pro-crypto and mobilizes crypto supporters to vote for those pro-crypto candidates.
Stand with Crypto has a ton of notable supporters including Consensys, Gemini, Light Spark, Haun Ventures, and others who have supported the organization. MoonPay, another supporter, recently donated a million dollars to the cause.
These political issues have rapidly ascended into the realm of importance in the minds of Congress. This month, a couple of major bills like FIT21 and SAB121 have both passed in Congress. SAB121 was passed by both the House and Senate but the legislation may be vetoed by the president.
While that was uttered by the current President in recent days, many people feel as if the SEC has routinely overstepped its boundaries and the courts have agreed (i.e. Ripple and Grayscale lawsuits). After Donald Trump self-proclaimed himself as the pro-crypto candidate and these bills were passed, President Biden would be flirting with angering a segment of voters for a reason that is a threat to the safety of the American people.
The latest development on the regulatory front is the approval of the Ethereum spot ETF. This action from the SEC comes months after the success of the spot Bitcoin ETF. It also may be an effort for the current administration to appear more crypto-friendly as the industry has been more politicized. The spot Ethereum ETF is more challenging to finalize as there needs to be greater clarity on staking.
Ultimately, in the span of a little over a week, the current crypto regulatory landscape is primed for a near-term overhaul.
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Crypto Regulation Needs Urgent Reform to Retain Innovation and Talent
While regulation is steadily improving, it will be interesting to see how it compares with the rules of more established crypto regulations in other nations. The current regulations have put the US government on defense for incentivizing crypto innovation.
Being on defense will cause other nations to create offers that are more friendly for crypto innovation. If the US can’t keep up, it will be challenging to retain crypto innovators which will put the US in a predicament.
Not retaining the talent or keeping up with global regulatory oversight puts the US at risk of falling behind in this industry, similar to the semiconductor space. After turning a blind eye to that industry, the leaders of 92% of advanced production are located in Taiwan and South Korea. The US market share of the crypto space will be low if the country doesn't make it friendlier to build businesses in the space.
However, large institutions like BlackRock entering the fray in the US crypto ecosystem may have an amplified voice in helping to form crypto policy that impacts the economy. If these institutions are full believers of the industry, they will also deploy tons of capital into the industry which will provide many jobs to US citizens.
According to Stand With Crypto, 52 million Americans own crypto. The majority of those owners are Gen-Z and Millennials. Stand With Crypto also stated that many crypto owners identify as racial minorities. There are many people who fall in these demographic categories who don’t feel that they are getting a fair bite at the apple to accomplish the American dream. Thus, the appetite for risk assets has increased. It only makes sense as Millennials are the first generation to earn less than their parents.
There is an abundance of TED talks from the likes of that share the difficulty of being a millennial or Gen-Z in today’s environment. With watching parents or entering the workforce during the great recession, graduating during the COVID-19 pandemic, millennials and Gen-Z have seen very tough economic times. There are also concerns about whether or not they will be able to own a home with many having to pay off student loans. With that in mind, crypto presents an opportunity for millennials and Gen-Z to acquire the American dream.
Ultimately, the Baby Boomer generation prepared to transfer wealth to younger generations. These younger generations have a propensity to appreciate crypto as it is the most accessible wealth generation investment relative to the standard options, such as real estate. Thus, it will be a factor in how they vote in elections this year and beyond.