In today’s crypto for advisors, André Dragosch from Bitwise Europe provides an update on the global crypto regulatory landscape and suggests we may be entering a golden age for crypto.
Then, Beth Haddock from Warburton Advisers answers questions about the impact of regulatory clarity on the crypto market in Ask an Expert.
You’re reading Crypto for Advisors, CoinDesk’s weekly newsletter that unpacks digital assets for financial advisors. Subscribe here to get it every Thursday.
Global Landscape Update – Entering the Golden Era of Bitcoin and Crypto Assets
Much has changed over the past six months. Donald Trump took office in the U.S. on January 20, which was already two months ago. Regardless, this relatively short period has witnessed a series of positive regulatory changes in the U.S., including:
- Executive Order on digital financial technology
- Establishment of a Strategic Bitcoin Reserve and national digital asset stockpile
- Formation of the SEC’s Crypto Task Force
- Advancement of the GENIUS Act
- Shift in the SEC’s enforcement strategy
The Executive Order to create a Strategic Bitcoin Reserve has already positioned the U.S. as the largest sovereign holder of bitcoins globally, with further acquisitions anticipated.
Across the Atlantic, the EU’s “Markets in Crypto Assets” (MiCA) regulation is set to take effect at the end of 2024, aiming to enhance regulatory clarity in Europe while harmonizing crypto regulation across the continent.
Currently, MiCA appears to be three to five years ahead of the U.S. in terms of clarity and implementation. If comprehensive crypto regulation is enacted in the U.S. within a few years, it could start bridging this gap. For now, however, MiCA provides significant legal certainty for crypto assets in Europe, promoting institutional adoption across the region.
Additionally, the European Central Bank (ECB) has announced the launch of the digital euro CBDC in October of this year, ahead of schedule. This digital currency is rumored to leverage public blockchains like Ethereum, potentially enhancing Ethereum’s on-chain activity considerably.
As a result, it appears that bitcoin and other crypto assets are approaching mainstream acceptance.
However, despite these advancements, the policies of the Trump administration have introduced uncertainty into financial markets. U.S. economic policy uncertainty is reportedly at its highest since the COVID-19 recession, driven by rising trade tensions and significant job cuts.
Concerns over a potential U.S. recession are resurfacing. Data from the crypto-based betting platform Polymarket indicates a 41% probability of a recession by 2025. Concurrently, the Federal Reserve of Atlanta forecasts a quarter-over-quarter GDP contraction of -1.8% for Q1 2025.
Job cuts in the U.S. have surged to their highest levels since the Covid recession in February.
While these factors weigh heavily on risky assets globally, including bitcoin and crypto assets, they also foster a more favorable environment due to a weakening dollar and increasing expectations for Fed rate cuts.
The global money supply, already near all-time highs, is on the rise, which is beneficial for scarce crypto assets like bitcoin, typically thriving during weak dollar environments with increasing money supply growth.
There is also a growing likelihood that crypto assets could decouple from traditional financial markets, influenced by factors such as the delayed impact of the bitcoin halving and a continuing supply deficit on exchanges. Increasing institutional inflows into U.S. spot bitcoin ETFs, alongside corporate purchases worldwide, should contribute to this persistent supply deficit. These elements are expected to provide a supportive backdrop for crypto assets in the coming months, regardless of macroeconomic conditions.
In summary, the renewed prospects for a pivotal shift in monetary policy amid global growth concerns, coupled with significant supply scarcity, could facilitate the next wave of adoption, propelling crypto assets into mainstream finance.
It seems the golden era of bitcoin and crypto assets is just beginning.
–André Dragosch, head of research — Europe, Bitwise
Ask an Expert
Q: With the shift in SEC leadership, should companies expect a favorable regulatory environment, or are there new risks they need to prepare for?
A: The SEC’s transition away from regulation-by-enforcement and the establishment of the Crypto Task Force indicate a change in strategy rather than a relaxation of protections against fraud and theft. Key areas of enforcement will remain consumer protection, market integrity, and cybersecurity. Companies should strive for transparency and fair dealings to meet expectations. Additionally, as demonstrated by recent events involving memecoins, plaintiff class action lawsuits and state regulators are likely to fill the gaps left by federal oversight. Market volatility will necessitate enhanced operational resilience to manage these risks.
Q: How does the GENIUS Act compare to other global regulatory frameworks like MiCA, and what implications does this hold for companies operating in both the U.S. and Europe?
A: The GENIUS Act diverges from MiCA in its approach to stablecoin regulation, particularly regarding the emphasis on global adoption and U.S. dollar influence. MiCA focuses on the protection of euro-backed stablecoins within Europe while restricting non-euro stablecoins in specific scenarios. Contrarily, the GENIUS Act, in its proposed form, encourages the international circulation of USD-backed stablecoins, reinforcing the dollar’s positioning in global payments.
For businesses operating across both regions, the Act’s reciprocity provisions may enable more seamless cross-border transactions and regulatory alignment with U.S. standards, potentially expanding the scope for dollar-denominated digital assets.
–Beth Haddock, managing partner and founder, Warburton Advisers
Keep Reading
Despite significant bitcoin ETF outflows, the majority of investors seem to be holding firm.
Strategy plans to raise $500 million through preferred stock to support its next bitcoin acquisition.
SEC Commissioner Hester Peirce shares insights regarding her agency’s digital asset task force.
