Although there is a constant circuit of negligence on the global consensus of Bitcoin’s regulatory framework, the digital currency continues to hold the potential to positively impact the free market.
Europe has taken giant steps forward towards progressive regulation. The European Union will install new legislation entitled MiCA (“Markets in Crypto-Assets”), which aims to implement a universal set of guidelines that allegedly “protects investors and incentivize innovation.”
The regulation provides legal security for those who custody bitcoin not covered by existing EU legislation. Proper regulation will also encourage the utilization and innovation of digital assets. However, without an international consensus of Bitcoin regulation, it will be challenging for the legislation in Europe to have a meaningful impact.
Mairead McGuinness, a member of the European Commission, has said that “there’s no point in Europe being on its own, because this is a global development, and we can’t put barriers on it. If we fail to do that global approach, we’re going to find that there’s more and more problems.” McGuinness concluded that, “The technology is borderless.”
There is also an attempt at proper regulation in the United States. President Biden has issued an executive order titled “Executive Order on Ensuring Responsible Development of Digital Assets,” which aims to address the risks associated with digital assets and their technologies while also maximizing their potential benefits.
Democrats have traditionally had a mixed or even skeptical sentiment towards digital assets. Senator Elizabeth Warren, a Democrat, has been highly skeptical about Bitcoin and has raised concerns about money laundering and energy usage within the Bitcoin sector.
However, Democrat Eric Adams, Mayor of New York City, has taken his salary in bitcoin. He is an open advocate for Bitcoin, and has also spoken out against the strict regulatory framework in the state, calling the BitLicense mandate “a high barrier.”
In contrast, the Republican party has been much more supportive of new legislation on cryptocurrencies. Republican officials like Allen West and Roger Williams have both publicly supported the Bitcoin industry.
Additionally, Republican Senators like Ted Cruz and Cynthia Lummis have been instrumental in creating positive sentiment for the space. There has recently been a growing consensus among Democrats and Republicans, so much so that Bitcoin regulation is now considered a bipartisan issue.
Ultimately, whether Democrats or Republicans win the House and Senate is a non-issue for Bitcoin, as there is a growing sentiment from Democrats and Republicans to establish legislation in favor of digital assets. Evidence of this is the Grayscale investment survey which determined that 88% of Democrats and 77% of Republicans want clear regulation for digital monies.
S.E.C. Chairman Gary Gensler has said several times that bitcoin is unique since it doesn’t pass the Howie test (the legal test that determines whether an investable asset is a security). Bitcoin is decentralized, the issuance of new bitcoin is automated, and there is no “common enterprise” behind its creation.
Therefore, bitcoin is the only crypto that is considered a commodity, like wheat, oil, or gold.
At the state level in the United States, there is a volume of opinions on how to regulate the crypto sector. States with the most bitcoin mining hashrate include Texas, Georgia, and New York.
Georgia and Texas are viewed as the two states that encourage Bitcoin mining the most. New York policy on mining cryptocurrency is unfavorable. Some Bitcoin businesses believe New York Governor Kathy Hochul’s order to impose a two-year ban on new fossil fuel-powered cryptocurrency mining projects could serve as a deterrent to Bitcoin businesses from operating in New York.
Sam Bankman-Fried, former CEO of FTX, donated over $70 million to election campaigns in less than 2 years, which makes him one of the nation’s top political donors over that time period. He also gave at least $40 million to politicians and political action committees ahead of the 2022 midterm elections. Ultimately though, Sam Bankman Fried failed in his fraudulent attempt to influence the regulation of the Bitcoin market.
Prominent personalities within the Bitcoin sector have accepted the fact that crypto regulation is coming soon. Binance CEO Chengpeng Zao, who is known as CZ, mentioned that stablecoins have come under close attention from regulators, and that regulating the Bitcoin sector would provide clarity for those who utilize services related to stablecoins.“Regulation will bring much needed certainty to issuers, users and service providers, as well as accelerating adoption.”
And ever since the FTX collapse, Binance has come under growing regulatory scrutiny in multiple nations around the globe, including the United States, United Kingdom, Japan, Germany, and Canada. The removal of FTT from Binance’s balance sheet shows that CZ is making a valiant effort to self-regulate. This is a clear indication to government officials that Binance is a platform that intends on managing client assets responsibly.
Former FTX CEO Sam Bankman-Fried also held a 90% stake in the ownership of Alameda. Reports have surfaced that the bank loaned out over 10 billion dollars, which was the money of clients who trusted the bank to custody their funds.
Despite the fraudulent actions of Sam Bankman-Fried, there is a clear use-case for Bitcoin to fix global banking policy, as it allows for anyone in the world to exchange value at any moment with relatively little to no transaction fees. Unfortunately, certain governments seem unwilling to adopt Bitcoin as part of their financial policies.
Financial authorities are more than likely worried about losing control over monetary policy, or they simply do not understand the advantages of Bitcoin. Due to this resistance, banks within anti-bitcoin borders can’t embrace the unique characteristics of digital money. Despite the lag in global consensus on the regulatory framework of Bitcoin, it still has the potential to impact the free market in a positive way, especially within countries that decide to regulate digital assets in a positive manner.
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