Regulatory Proposals and Their Effect on Cryptocurrency

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Bitcoin and other cryptocurrencies are ending a sluggish week on a positive note. The price of Bitcoin increased by 3.2 percent today, while the price of Ethereum increased by eight percent. BNB is up 3.8 percent, Cardano is up 2.8 percent, XRP is up 2.7 percent, and Solana is up 8.5 percent.

Meanwhile, SEC whistle-blowers are planning a “Trojan Horse” regulation to ambush crypto marketplaces.

Last Monday, the SEC released a 654-page proposal aimed at regulating “Treasury market platforms,” which appears to be unrelated. Pro-crypto Commissioner Hester Peirce, on the other hand, warns that it is a widespread crypto regulation. While the plan does not specifically name crypto, the new guidelines would allow authorities to look into crypto platforms and even decentralized finance technologies.

The proposal has very extensive language, which, along with the chair’s obvious interest in policing all things crypto, implies that it may be used to govern crypto marketplaces, Peirce wrote in an email, according to Bloomberg. The concept could reach other forms of trade mechanisms, including decentralized finance protocols, she added.

A Broader Perspective

The SEC is intending to extend Regulation SCI to ATSs that exchange government securities, amend the SEC rule establishing the description of an exchange, and expand Regulation ATS for alternative trading systems (ATSs) that exchange government equities, NMS shares, and other securities.

These changes, according to SEC Chair Gary Gensler, attempt to fill a regulatory loophole caused by trading platforms that aren’t regulated by the SEC as exchanges or brokerages. He also pointed out that the new rules would expand existing rules governing platforms that trade Treasury and other government assets.

This plan would require these marketplaces to register and be regulated, promoting resiliency and increased access to the Treasury market.

Peirce, on the other hand, believes that broadening the definition of an exchange might be used as a backdoor means to regulate cryptocurrency. She noted in an interview with Yahoo Finance that the broad definition being suggested for exchanges should encompass a lot of possible platforms that haven’t been assumed to be covered before, both in the traditional security sector and in the crypto space.

This is in line with the SEC chair’s call for more DeFi monitoring. Even though they are decentralized and without any central organization in authority, Gensler said in a Wall Street Journal piece last year that DeFi projects that reward members with rewards or digital tokens could reach an area that is vulnerable to SEC regulation.

Looking to the Future

Insiders in the blockchain business, trading platforms, and other parties would have a 30-day opportunity starting from January 26 to comment on the new SEC-suggested strategy.

Peirce believes that the public consultation for such a big regulatory proposal is abnormally short. That, together with Biden’s pending executive order, could represent regulators’ desire to tighten their influence on the rapidly expanding decentralized finance system.

The SEC plans to take another vote after the consultation process to determine a final judgment. The proposals might give the SEC new authorities to oversee crypto and decentralized finance platforms if they are passed.

Is Bitcoin Rallying?

On Friday, Bitcoin was on a tear, climbing to a two-week peak of over $40,000.

According to data, on Friday, the cryptocurrency BTC USD, was trading at roughly $40,245 with an almost 10% gain over the previous 24 hours. Bitcoin is currently roughly 42% behind its November all-time high of $68,991.

The cryptocurrency’s rise comes on the heels of better-than-expected jobs data, which some market players believe would bolster the Federal Reserve’s resolve to tighten monetary policy significantly this year.

According to figures revealed on Friday, the United States added 467,000 employees in January, and employment was significantly greater at the end of 2021 than previously believed. In January, analysts polled by Wall Street predicted 150,000 additional jobs.

The Bottom Line

Amidst all this change in the realm of cryptocurrency, it is crucial that we remember just how volatile cryptos are. With these rapid fluctuations in price and the potential for regulations to be imposed on the currencies, we should ask what the future holds for the decentralized finance space.

Regulations would completely alter the nature of the blockchain and most certainly have an effect on how the currencies trade.

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