Cryptocurrency prices were off Monday as investors reacted to regulatory efforts in both the U.S. and Europe.
Bitcoin, the most popular cryptocurrency, was down 1.8% to $46,688.69, according to CoinGecko, while ethereum dropped 2.2% to $3,434.11. Dogecoin, meanwhile, was down slightly to $0.145628.
'Worth Watching Closely'
Winston Ma, managing partner of CloudTree Ventures, Author of The Digital War – How China’s Tech Power Shapes the Future of AI, Blockchain and Cyberspace", said "the European Union's forthcoming crypto regulation is likely to have a significant impact on crypto trading and is worth watching closely."
Ma said that last week the EU moved forward with measures to ban anonymous cryptocurrency transactions and possibly prohibit crypto exchanges between the EU and tax havens.
He said the adopted text represents the draft mandate for members of the European Parliament to negotiate the final shape of the legislation with EU governments.
"Currently there are no rules in the EU allowing crypto-asset transfers to be traced and providing information on the originator/beneficiary of such crypto-asset transfers," he said.
The EP as a whole is expected to vote on the measure during the plenary session in April.
Ma noted that the legislation is part of the new EU anti-money laundering (AML) package, "and the sanction issues rising from the Russia-Ukraine war probably served as a catalyst for this AML-related crypto regulation, just like the recent Biden executive order calling similar crypto regulation."
Meanwhile, back in the States, Ryan Grace, Chief Market Strategist at Tastyworks, said that the de-leveraging and liquidity draining impact of the Fed’s policy shift will likely cap any serious rise in crypto prices, but long-term investors can get excited about Biden's executive order and "continued signs of growth across the Bitcoin network."
'Long-Term Bulls Should Take Solace'
"The President’s order related to crypto regulation is a meaningful step towards providing the industry with much-needed clarity and should be perceived as a positive development for crypto," Grace said.
He said that this will "inevitably result in a framework for crypto-focused companies to operate within."
"It will also encourage participation from firms that have previously shied away from the space due to a lack of regulation," he added.
Grace said bitcoin is likely to struggle short-term, due to second-quarter market conditions, but "long-term bulls should take solace in the positive developments regarding the bitcoin network, especially the regulatory clarity offered by the recent U.S. Executive Order."
David Lesperance, managing partner of immigration and tax adviser at Lesperance & Associates, the crypto exchange community is lobbying hard for the U.S. Commodity Futures Trading Commission (“CFTC’) to handle regulatory duties, rather than the Securities and Exchange Commission.
He noted that crypto exchange FTX.com founder Sam Bankman-Fried was recently seen hosting a Washington “networking party for congressional aides, financial lobbyists, and former regulators."
"The SEC is run by crypto expert, Gary Gensler," Lesperance said. "Although he has a fascination with crypto’s underlying blockchain technology he hasn’t been an industry booster."
Instead, he added, Gensler has scared a number of exchanges by warning them that they’re violating the law by selling coins that he views as unregistered securities.
"Lack of registration means steep fines if he is ultimately right," Lesperance said.
'Defi Takes Another Credibility Hit'
Last week, a federal judge dismissed a lawsuit accusing Binance, the world's largest cryptocurrency exchange by trading volume, of violating U.S. securities laws by selling unregistered tokens and failing to register as an exchange or broker-dealer, Reuters reported.
Lesperance said that close observers are noting that the decision of the Manhattan Federal Court to dismiss a civil action against Binance has not answered the regulatory question.
"Rather the case was dismissed because the plaintiff’s waited too long to sue and were unable to show that the crypto-currency involved was sold and bought in the U.S.," he said.
Separately, Lesperance said that DeFi "has taken another credibility hit" during its build-out phase with the Ronin crypto “bridge” heist of roughly $625 million worth of digital currencies.
Ronin is the blockchain underlying the play-to-earn online game Axie Infinity. Bridging is where assets are locked on one blockchain and then replicated on another blockchain.
"In blockchain, the code that underlies smart contracts is the true ultimate authority," Lesperance said. "It determines how DeFi operates and is seen as "the law."
He said that smart contracts are seen as the “rules of the road," but with the amount of stolen wealth from high-profile hacks piling up, this “code is law” ethos is being tested.
"Will this 'code is law' still remain after legislators finish their regulatory push?" Lesperance said
