As Cryptos Step Down, US Senate Moves Forward With Possible Legislation

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  • Cryptocurrencies are in a downtrend.
  • Comprehensive regulation receives bipartisan support in the United States.
  • Lobbying for cryptos is growing.
  • The affordable market is booming.
  • Opposition may occur for an important reason.

The motivation to regulate cryptocurrencies seemed to have waned as their prices devalued from record highs in November 2021, when the value of the crypto market hit over $3 trillion. Since then, the crypto market capitalization has fallen, hitting $1.2 trillion on Friday, but after Bitcoin briefly lost $18,000 over the weekend before bouncing back to the $18,000 level, $20,000 at press time, crypto valuations had already declined further.

The lower value of this market reduces systemic risk to the United States and the global financial system, but the current setback may provide the perfect opportunity to establish rules and regulations that can promote growth and secure future operations. of the crypto market. And that coincides with statements by an official from the SEC, the United States Securities and Exchange Commission, that the body should deal with the emerging asset class in order to encourage innovation and protect consumers and market players.

This month, the United States Senate, which tends to move at a snail’s pace, unveiled a sweeping legislative proposal for crypto and other digital assets.

Cryptocurrencies continue their bearish trend

Rising interest rates have weighed on stocks and bonds, and cryptocurrencies are not immune to selling off in broader markets. Over the weekend, oeo reached its latest lows, extending the downtrend started in November 2021.

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The chart shows the decline below $20,120, a level not seen since December 2020.

ethereum weekly

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Ethereum fell below $1015 per token on June 15, the lowest price since June 2021. Trends remain bearish, with consolidation at lower levels giving way to lower lows.

Comprehensive regulation gets bipartisan support in the US

Senators Kirsten Gillibrand, Democrat of New York, and Cynthia Lummis, Republican of Wyoming, have joined forces to craft the most comprehensive legislative proposal to regulate cryptocurrencies and other digital assets.

The so-called Responsible Financial Innovation Act sets the legal parameters for digital assets and virtual currencies, requiring the US Internal Revenue Service to adopt a guideline for merchant acceptance of digital assets and charitable donations, as well as to distinguish between digital assets that are commodities and those that are securities, a gray area within the asset class.

The bill follows the molds of the executive order issued by US President Joe Biden, asking the Federal Reserve (Fed, US central bank) to study the creation of a digital version of the country’s currency. The executive order also directed federal agencies, including the Treasury Department, to study the impact of cryptocurrencies on financial stability and national security.

Treasury Secretary Janet Yellen said the following:

“We have a strong interest in ensuring that innovation does not lead to fragmentation of cross-border payment architectures.”

The Treasury Secretary warned that government regulation must control the proliferation of cryptocurrencies and deal with fraudulent or illicit transactions.

The crypto lobby is growing

As cryptocurrency values ​​plummet and the US Senate considers lawmakers Gillibrand and Lummis’ bill, the Washington crypto lobby has turned into a lucrative business. The number of cryptocurrency lobbyists reached 320 in 2021, up from 115 in 2019.

Spending on crypto-focused representation rose from $2.2 million to $9 million during the period, with the majority of funds coming from Coinbase (NASDAQ:) and blockchain associations. Crypto lobbyists include a number of former senior officials from each party championing the asset class as Washington begins to establish a regulatory framework.

The affordable market is booming

The accessible cryptocurrency market has grown, while the asset class has grown by leaps and bounds, with greater investor interest in adding crypto to their portfolios. In May 2022, JP Morgan Chase replaced the real estate market with cryptocurrencies as their preferred alternative assets,” claiming they were undervalued.

The most recent declines have made Bitcoin, Ethereum and several other cryptocurrencies, which now number nearly 20,000, even more undervalued, according to analysts at JP Morgan.

More and more financial managers are exposing themselves to cryptos in their portfolios, and hedge funds are already actively involved in this segment. Although crypto prices have retreated, the overall market has grown and is gaining more and more popularity.

Opposition may occur for an important reason

While custody, security, and regulation remain significant risk factors for cryptocurrencies, the biggest hurdle may be government control of the money supply.

The expansion and contraction of the money supply to influence economic trends and support political agendas is a powerful tool. The growth of the crypto market would limit the government’s ability to manipulate the money supply as it dilutes the position of other global fiat currencies.

While Washington officials, regulators, and the government have not expressly attacked cryptos for challenging fiat currencies, the fact remains that the rise of cryptocurrencies will represent the demise of national currencies. Even though governments can step in and manipulate cryptos, they can be harder to control than fiat currency markets. Moreover, the ideological philosophy of cryptocurrencies is libertarian in that it advocates the devolution of the power of the money supply to individuals. Therefore, only this ideological position will increase government opposition.

The Senate’s latest move to define and validate cryptocurrencies may come up against a wall of opposition in the weeks and months to come.

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