SEC Chair Gary Gensler tweeted birthday wishes to the #Bitcoin White Paper today. “Happy 14th birthday to Satoshi Nakamoto’s whitepaper! It has led to innovation and crypto asset investing. Let’s make sure as crypto enters its 15th year that investors get proper protection.”
Gensler has been widely criticized in various circles within the cryptocurrency and blockchain communities for not appearing to have altruistic motives for the SEC’s recent enforcement actions. The SEC is perceived to be losing a battle with Ripple over whether XRP is a security. Additionally, groups like Coinbase, that once touted their partnership with the SEC, have withdrawn their support in the face of expanding enforcement actions.
Yet, for all the criticism heaped on Gensler, the SEC continues to agree that Bitcoin is not a security. Gensler has continued the policy position put in place by his predecessor. On Thursday, June 14, 2018, the SEC announced that the commission would not be treating Ether or Bitcoin as securities. That policy remains unchanged for Bitcoin. However, pending further developments in the Ripple case, and Ethereum’s transition to Proof of Stake Consensus, it could be subject to re-classification as a security by the SEC.
Bitcoin’s movements in relation to other assets may indicate that investors see it becoming a haven again, after a stretch where it’s traded basically as a risk asset, according to Bank of America Corp. The largest cryptocurrency has a 40-day correlation with gold of about 0.50, up from around zero in mid-August. While the correlations are higher with the S&P 500, at 0.69, and Nasdaq 100 at 0.72, they’ve flattened out and are below record levels from a few months ago. BofA digital strategists Alkesh Shah and Andrew Moss see that as a sign that things could be changing.
“A decelerating positive correlation with SPX/QQQ and a rapidly rising correlation with XAU indicate that investors may view Bitcoin as a relative safe haven as macro uncertainty continues and a market bottom remains to be seen,” the strategists wrote.
Bitcoin has traded in near lockstep with risk assets in the past couple of years, as pandemic-era stimulus flooded the global economy, and then as central banks like the Federal Reserve hiked rates to combat worsening inflation. That’s contradicted one of the main investment narratives put forward by crypto believers, which is that the asset with a fixed supply could serve as “digital gold,” a safe haven free from the influence of decisions by central banks and governments.
The BofA note dovetails with recent comments from the likes of Mike Novogratz, who said on Thursday that he sees Bitcoin as “the canary in the coal mine” alongside gold and expects it to rally before other tokens, as well as Lauren Goodwin from New York Life Investments, who has said that Bitcoin and gold could both be perceived as a central-bank hedge.
Senator Bill Hagerty (R-TN) introduced a bill in the US Senate (S.3970) called the Stablecoin Transparency Act; Representative Trey Hollingsworth (R-IN) also introduced a companion bill (H.R.7328) in the House. Senator Hagerty stated, “This legislation aims to provide much-needed clarity without giving the keys away to unaccountable bureaucrats who threaten to choke off innovation.” The aptly named “Stablecoin Transparency Act” would set standards for the “quality of assets held in reserves” as well as require Stablecoin issuers to report on their reserves.
“Importantly, the Stablecoin Transparency Act states a ‘fiat currency-backed Stablecoin’ as a digital asset that (1) maintains its price by backing the value of the digital asset to a nondigital currency that is denominated in the same currency as the digital asset; and (2) is redeemable on a one-to-one basis in the denominated currency backing the digital asset. The language of the statute mandates that both requirements are met to comply with the definition of fiat currency backed Stablecoin. In turn, the bill defines a “Stablecoin issuer” as “a person that issues a fiat currency backed Stablecoin.”
The Stablecoin Transparency Act also would regulate the quality of the assets that a Stablecoin issuer should have in its reserves. Specifically, the bill defines in mandatory language that each Stablecoin issuer shall hold all reserves associated with each fiat currency-backed Stablecoin in:
Finally, the Stablecoin Transparency Act would require a Stablecoin issuer to publish in its website a report on its reserves that back its Stablecoin. According to the bill, the Stablecoin issuer shall submit its first reserve report no later than 30 days after the date of enactment of the Act and every 30 days thereafter. The bill specifically mandates that the report must be audited by a third-party auditor.
The world's largest custodian bank and the oldest lender in the U.S., Bank of New York Mellon (BK), has added cryptocurrencies to its custody services, according to a press release on October 11, 2022.
To this point, traditional fund managers interested in holding digital assets – who otherwise rely on BNY Mellon (or other custodial lenders) to perform the necessary back-office tasks related to their usual securities holdings – typically would have had to find a firm specializing in cryptocurrency for custody services.
BNY Mellon currently has $43 trillion worth of assets under custody and another $2 trillion assets under management, according to its second-quarter earnings report. Acting as a custodian, the firm's primary business, usually involves providing less active allocation or financial advice. The bank formed its new digital assets unit last February, saying then that it would "accelerate development of enterprise solutions to service the rapidly evolving digital asset space."
A recent survey sponsored by BNY Mellon highlights already significant institutional demand for a resilient, scalable financial infrastructure built to accommodate both traditional and digital assets. According to the survey, almost all institutional investors (91%) are interested in investing in tokenized products. Additionally, 41% of institutional investors hold cryptocurrency in their portfolio today, with an additional 15% planning to hold digital assets in their portfolios within the next two to five years.
"As the world's largest custodian, BNY Mellon is the natural provider to create a safe and secure Digital Asset Custody Platform for institutional clients," said Caroline Butler, CEO of Custody Services at BNY Mellon. "We will continue to innovate, embrace new technology and work closely with clients to address their evolving needs."
The chairman of the Commodity Futures Trading Commission (CFTC), Rostin Behnam, discussed how his agency would regulate the crypto market in a legislative hearing Thursday (September 22) before the U.S. Senate Committee on Agriculture, Nutrition, and Forestry.
The purpose of the hearing was to review the Digital Commodities Consumer Protection Act (DCCPA) which seeks to empower the CFTC “with exclusive jurisdiction over the digital commodities spot market.” The bipartisan bill was introduced in the U.S. Senate in August by Senators Debbie Stabenow (D-MI), John Boozman (R-AR), Cory Booker (D-NJ), and John Thune (R-SD).Behnam told lawmakers:
“Many digital assets constitute commodities … The CFTC’s expertise and experience make it the right regulator for the digital asset commodity market.”He explained that his agency “facilitates customer protections through its principles-based market oversight and disclosure regime aimed at ensuring transparency, integrity, and security of transactions.”
Behnam proceeded to detail that since 2014, the CFTC has brought almost 60 enforcement digital asset-related cases, including a recent matter involving a $1.7 billion fraudulent bitcoin scheme. “With a lack of full visibility into the digital commodity asset market, the agency’s enforcement program has had to lean primarily on tips and complaints from the public to identify fraud and manipulation,” the CFTC chairman described, adding:
“While we are engaged in a comprehensive effort across the agency to police these markets and their participants with the tools currently available to us, the DCCPA will allow us to apply our full oversight capabilities without restriction.”
Chairman Behnam concluded that “with the additional resources contemplated by the funding mechanism in the DCCPA and the clear mandates for customer education, outreach, and information gathering to ensure that our efforts reach all demographics of the investing community, … the CFTC can move swiftly in effectuating this new regime.”
Meanwhile, two other bills have been introduced in Congress this year to make the CFTC the primary regulator of the crypto spot markets. The “Responsible Financial Innovation Act” was introduced in June by U.S. Senators Cynthia Lummis (R-WY) and Kristen Gillibrand (D-NY). The other bill was the “Digital Commodity Exchange Act of 2022,” introduced in April by Reps. Ro Khanna (D-CA), Glenn “GT” Thompson (R-PA), Tom Emmer (R-MN), and Darren Soto (D-FL).
In addition, the chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, has said repeatedly that the vast majority of crypto tokens are securities and should fall under the purview of his agency. However, he acknowledged that Bitcoin is a commodity. U.S. Senator Pat Toomey said Congress should step in with crypto guidance and the SEC should provide much more clarity on how it regulates the crypto sector.