Crypto Giggle
Some experts predict that the crypto industry will see major policy changes in 2025. Proof that crypto’s regulatory climate is improving is the approval of Bitcoin and Ethereum ETFs and support for the Financial Innovation and Technology Act. Coinbase announced it had resumed XRP trades in New York following a hiatus of nine months. CBDCs still face some opposition, however, since the House has passed the CBDC Anti-Surveillance State Act, which limits Federal Reserve power. Federal Reserve data also revealed a decrease in U.S. cryptocurrency ownership. This contrasts the positive industry trends.
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Crypto policy: A positive shift
Experts in the crypto industry are predicting a more favourable 2025. Nathan Dean, senior Bloomberg policy analyst believes that 2025 could be a crucial year in crypto policy. This is especially true when considering the recent approval of Bitcoin and Ethereum Exchange-Traded Funds (ETFs), and increased support for Financial Innovation and Technology Act (FIT).
Dean believes that despite the United States Securities and Exchange Commission’s (SEC) ability to regulate firms who wish to classify tokens as commodities rather than securities, the regulatory environment appears to be improving.
Bloomberg analyst Eric Balchunas concurs with that statement and specifically refers to the fact a group of bipartisan House members urged SEC chair Gary Gensler, to approve spot Ether-based ETFs. Balchunas noted the increasing involvement of ETFs, particularly during election years, in mainstream politics.
The United States is not the only country that has seen regulatory improvements. Financial Conduct Authority of the United Kingdom approved recently the first Bitcoin ETPs (exchange-traded product) on London Stock Exchange for professional investors.
Hong Kong Securities and Futures Commission may also allow spot Ether ETFs issuers the option to stake custodied ETH. This could earn them yields as high as 3.6% annually for validating transactions on blockchains.
The combination of ETF approvals and more supportive legislation as well as evolving regulatory frameworks around the world suggest a more favorable climate for the crypto sector in the coming years.
ETH ETF Approvals Redefine Token Regulations
Recent ETH ETF approvals are a huge step in the right direction for determining whether or not certain cryptos can be labelled as securities.
The SEC’s approval of the spot ETH-ETFs is viewed as an acknowledgement that Ether does not qualify as a financial instrument. Analysts believe this may also apply to other tokens.
In a conversation with Ryan Sean Adams, a Bloomberg ETF Analyst James Seyffart said that the SEC has effectively stated they won’t pursue Ether in the securities arena by approving the commodity-based trusts shares. Justin Browder, a digital asset lawyer, said that if Ether’s ETFs are approved by the SEC as a securities product, then the debate about ETH will be finally settled.
Adam Cochran is a venture capitalist at Cinneamhain Ventures. He believes this can also be applied to tokens of other projects. Seyffart, and other experts, warn, however, that the SEC may still be targeting those who stake Ether. While ETH is not a security by definition, staked ETH might be.
Joe Carlasare, a digital asset lawyer who agrees that this is true, has pointed out the SEC could pursue action against individuals and staking service providers even after the ETF’s launch. The SEC has recently taken actions such as serving a Wells Notice on Ethereum infrastructure company Consensys.
Scott Johnsson, a finance lawyer, believes the SEC approved Ether ETFs without explicitly confirming Ether as a non-security. Instead, the SEC sidestepped this issue.
Coinbase brings XRP trading back to New York
Ripple’s and XRP’s policy has also seen some improvements. Paul Grewal announced on May 23 that Coinbase customers from New York could trade XRP again after a 9-month break.
Re-listing XRP follows a 2020 lawsuit filed by the SEC against Ripple labs, accusing the company of unregistered security sales. Many centralized exchanges delisted XRP in response. These included Coinbase Bittrex and Binance.US. After Judge Analisa Torres ruled that secondary sales were not securities, these exchanges relisted XRP.
Despite the ruling by the U.S. court and subsequent relistings of XRP, it continued to be regulated in certain jurisdictions such as Japan and New York. The New York Department of Financial Services removed Ripple Labs in September 2023 from their “Greenlist,” and Coinbase then suspended XRP trades for New Yorkers.
Positive news coming from Coinbase has led to a small increase in XRP’s Today’s Viral level= SaddleBrown, from $0.51 up to $0.53. As of the time this article was published, the token for remittances traded at $0.5267. Since its high in March, XRP’s Today’s viral level= green has been steadily declining.
Crypto ownership is declining, according to a survey
The average crypto-holder, on the other hand might not have the same optimism about the future of crypto. According to the Federal Reserve’s most recent annual household survey, in 2023 there will be around 18,000,000 adults living in the United States who own or use crypto.
Fed’s Survey of Household Economics and Decisionmaking, published May 21st, indicated that 7 % of adults surveyed used cryptocurrency in the twelve months prior to October 2023. The decline was from 10% in the year 2022 to 12% in the year 2021. In 2022 only 1% adults used crypto to make payments and money transfers. This is down from the previous year.
These figures, it is interesting to note, are quite different from Coinbase’s claim of 52 million Americans who own cryptocurrency. Coinbase, however, has not commented on the methodology used to arrive at these figures.
Nearly 30% of those who use crypto to make transactions said that they do so because their recipient prefers crypto. Fewer people, however, did it because there is a lack in trust for banks.
According to the survey, people who earn $100,000 annually or more are more likely than others to use cryptocurrency. The largest crypto user group was made up of millennials aged between 30 and 44. Generation Z, adults aged 18-29, came in second.
Men were also three times as likely to use cryptocurrency than women. Black and Hispanic adult users were most likely to use crypto in financial transactions. Asian adults used it primarily for investment. White adults are the least likely users of crypto.
11 488 U.S. residents aged between 18 and 24 were included in the survey.
House Passes Anti-Surveillance CBDC Act
CBDCs still get the cold shoulder despite the advances made in crypto-policy. On May 23, the United States House of Representatives passed The CBDC Anti-Surveillance State Act. This bill amends Federal Reserve Act of 1913 in order to prohibit Federal Reserve Banks from directly offering products to the public and using central bank digital currencies (CBDCs) to conduct monetary policy.
Republicans raised concerns about government overreach and a CBDC. Democrats, meanwhile, focused their attention on the competitiveness of the US dollar in international markets. French Hill, the chair of Financial Services Committee Subcommittee, is concerned with government overreach. Representative Mike Flood warns against giving political opponents control of a CBDC.
Warren Davidson compared the New York Fed Project Hamilton with China’s digital yuan surveillance tool and demanded legislative control. Alexander Mooney, the author of a CBDC-research restriction amendment, spoke out against CBDCs being readily available.
Tom Emmer introduced the bill in 2023 and it was approved by 216 votes to 192.
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