The past few months have been turbulent for the cryptocurrency industry.
On the one hand, there has been a slight rebound in digital currency prices, suggesting that the crypto winter — a long period of falling prices — which began last year, was about to end. This culminated with Bitcoin prices surging above $30,000 last month. These are levels not seen since June 2022. The prices of the most popular cryptocurrency have retreated in recent weeks but continue to trade around $27,000, according to data firm CoinGecko.
Overall, the cryptocurrency market is valued at around $1.2 trillion. It is certainly far from the $3 trillion reached in November 2021, in full crypto craze, but it is much higher than the $700 to $900 billion to which it had descended at times in 2022.
On the other hand, the crypto industry is the subject of an offensive by US regulators, alerted by the wave of successive bankruptcies of big crypto names since May 2022. The crypto sector has indeed experienced various crises in recent months. First, there was the liquidity crisis which erupted in May 2022 and lasted almost all summer. The big victims were sister tokens Luna and UST or TerraUSD, which crashed, platforms Celsius Network and Voyager Digital which filed for bankruptcy and crypto hedge fund Three Arrows Capital (3AC), which was forced into liquidation.
Big Attack from the SEC
A few months later, the industry was rocked by an earthquake in the form of the bankruptcy of cryptocurrency exchange FTX and Alameda, its sister company. Their founder, Sam Bankman-Fried, is accused of alleged fraud and his trial is scheduled for October. The BlockFI platform and other players were collateral victims of FTX’s collapse. This cascade of bankruptcies has served as justification for the Securities and Exchange Commission to tighten its supervision of the crypto industry to the point where certain players are considering moving elsewhere or shutting down certain services.
The powerful regulator has attacked crypto firms through lawsuits and enforcement actions. The list of crypto firms affected by this regulation and by legal action has grown this year. The Kraken cryptocurrency exchange had to close one of the most attractive US services for platforms — staking — in the context of a recent settlement with the SEC.
The other big point of tension between the SEC and the crypto industry concerns the regulator’s approach to coins.
The regulator has indicated that except for bitcoin, most cryptocurrencies and crypto-related products are securities, which would give the regulator a lot of power over the industry. The problem is that SEC Chairman Gary Gensler makes statements about cryptocurrencies in interviews or in hearings before lawmakers, but his agency has not yet provided a regulatory framework that clearly states that coins are securities.
A security is, according to the agency, “an investment of money, in a common enterprise, with a reasonable expectation of profit derived from the efforts of others.”
The other main issue is stablecoins, in other words, tokens which are pegged to other assets, like the dollar, in an effort to limit their volatility. Their value is not supposed to change, which makes them appealing to institutional investors who want to invest in cryptocurrencies but fear exposure to the high volatility of the market.
The Biden administration condemns stablecoins, deeming them a systemic threat.
Suffice to say that the next few months are important for the sector. The next administration will inherit all these problems. This is why the crypto sector is closely watching the developments of the 2024 presidential election. The industry has just received a major positive sign from a presidential hopeful, Florida Republican Gov. Ron DeSantis.
‘You Have Every Right to Do Bitcoin’: DeSantis
DeSantis is seen as the main threat to former President Donald Trump, who is running for the third time in a row. While he is currently far behind in the polls, the 44-year-old Republican governor is a rising star.
“You have every right to do Bitcoin,” DeSantis said during a Twitter Spaces — the platform’s audio live feature — on May 24. “The only reason these people in Washington don’t like it, it’s because they don’t control it. And they’re central planners, and they want to have control over society. And so Bitcoin represents a threat to them.”
He promised, if elected, to oppose any attempt by Congress to ban the largest cryptocurrency by market value.
“Could Congress enact a statute to ban things like Bitcoin under the Constitution? They may be able to do [that]. I would oppose that,” DeSantis pledged. “People should be able to do Bitcoin.”
“Congress has never addressed this in this fashion and for the bureaucracy to just do it on their own and make it so people can’t operate in that space, that’s what we mean when we say we’ve got to return the government to the people, elected representatives who are our voice to be able to make these decisions. And so, as President we’ll protect the ability to do things like Bitcoin.”
For him, cryptocurrencies are a matter of civil liberties. This is one of the reasons, he explained, why he signed a law banning the use of a central bank digital currencies (CBDC) in the State of Florida. He promised to let crypto actors make decisions that they deemed better for the industry.
“There’s risks involved with it, but let them do that. I just do not have an itch to have to control everything that people may be doing in this space and I think that the current regime clearly they have it out for Bitcoin and if it continues for another four years, you know, they’ll probably end up killing it.”
DeSantis’ remarks are welcome for an industry currently seeking guidance from regulators.
