U.S. regulators are increasing their oversight of crypto-related activities. The U.S. Securities and Exchange Commission has shut down Kraken’s crypto exchange stake program and issued a Wells Notice to warn Paxos that it could face enforcement action. Also proposed a rule that could make it more difficult for asset managers to invest client funds in digital assets.
According to CoinDesk data, bitcoin still has a strong rally. It traded above $25,000 briefly on Thursday and is now up over 14%. Other major cryptocurrency prices also rose, with Ether trading at $1,740 Thursday, its highest level since September.
This installment features a discussion with industry professionals explaining the reasons behind the rally.
What is the reason crypto has surged in value?
David Tawil, president of ProChain Capital, stated “I don’t see any fundamental reason why crypto asset prices have been so strong over the past two-days.” Tawil suggested that it could be the crypto ecosystem’s way to tell the SEC “do whatever you want, we’ll continue doing what we’re already doing.”
However, recent U.S. regulatory actions could have been more effective, especially after the November collapse of crypto exchange FTX, which resulted in billions in customer losses. Weisberger said that it would have been disastrous if the SEC had asked Coinbase to remove all of these coins, stating that they were secure.
Weisberger stated that although the SEC has targeted specific companies, it has not issued a ban on crypto services. Weisberger stated, “I think people realize now that even the SEC knows they can’t overstep because of fear of backlash. They can’t go too far.”
James Butterfill, Head of Research at CoinShares said that investors are most concerned about the SEC’s actions, while fears over a ban from the government have declined.
Butterfill said in an email that “the regulation rather than ban narrative” is a positive outcome because it will legitimize the crypto industry.
Technically, bitcoin’s midweek rally pushed some traders into short positions. The resulting momentum carried the cryptocurrency above $24,000 resistance, according to Jan Sammut (Vice President of Marketing at Origin Protocol).
Notably, bitcoin performed better than most cryptos in the latest rally, Weisberger noted. Weisberger stated, “We believe that the SEC recognizes that bitcoin is not specifically under their jurisdiction, however, proof of stake coins such as Ethereum as well as staking and lending products are.”
Gary Gensler, SEC Chair, has stated Bitcoin is the only cryptocurrency that he’s willing to publicly label as a commodity.
Despite the fact that the stock market is often traded together, Bitcoin’s recent strength was in contrast to the stock market’s weakness. The Dow Jones Industrial Average DJIA closed at 0.08% on Thursday. The tech-heavy Nasdaq Comp, -1.17% fell 1.8%.
Proposed rule by the SEC
According to a report from The Wall Street Journal, the SEC voted 4-1 Wednesday to approve a proposal to expand the assets investment advisers must hold using qualified custodians.
According to Christopher Avellaneda (partner at law firm Schulte Roth & Zabel), the rule could make crypto assets more difficult for some firms and could limit the number of companies registered.
Avellaneda stated that proposals for SEC rules are generally open for comment for 60 days following publication.
Paxos stops minting USD
Paxos announced Monday that it will stop minting the BUSD, a crypto-dollar-pegged cryptocurrency issued by Paxos and branded by Binance, the largest digital-asset exchange, after a New York State Department of Financial Services order that it cease.
The stablecoin issuer stated that it received a Wells notification from the SEC on February 3. According to the notice, the SEC was considering recommending that Paxos be charged with registering BUSD as a security.
Kraken stops stakes in the U.S.
The SEC has charged Kraken, a crypto exchange, with failing to register its stake programme as a security. According to a Thursday statement, Kraken agreed to pay $30 million to resolve the charges.
Staking allows users to get rewards for using their tokens to verify transactions. This feature is available in proof-of-stake blockchains such as Ethereum EUSD, 0.98% and Solana SOUSD, 0.35% , Solana HOLUSD, 0.35 and Cardano AADAUSD, 1.55%.
Author
Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
