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2024 midyear crypto policy outlook

Key takeaways

  • Crypto policy in the US continues to develop.
  • Recently, the Securities and Exchange Commission (SEC) has provided long-awaited guidelines in a few areas.
  • Crypto supporters also hope a few proposed bills currently going through the House of Representatives will bring further clarity on policy.

As the crypto industry evolves, crypto supporters have been watching for developments in crypto policy. 

Recently, the Securities and Exchange Commission (SEC) took action on a few eagerly anticipated topics. In January, it approved spot bitcoin ETPs, and in May, it announced a rule change that could allow the trading of several spot ether exchange-traded products in the future. The SEC also closed an investigation that sought to classify ether as a security in late June. 

Crypto has also been a topic on the presidential campaign trail. Many hope this will provide a catalyst for more regulations, though significant developments may have to wait until after the election. 

In the meantime, here are 3 policy items the crypto industry is watching closely in the coming months.

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1. A comprehensive regulatory framework for digital assets

In May, the House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (FIT21). The bill establishes guidelines for regulating cryptocurrencies, assigning the responsibility to regulate decentralized blockchains to the Commodity Futures Trading Commission (CFTC), and non-decentralized blockchains to the SEC.

It also includes several other key details, including a definition for “decentralization,” guidelines for which cryptocurrencies qualify as securities versus commodities, requirements for exchanges, stablecoin rules, and a provision giving consumers the right to self-custody their crypto.

If the bill becomes law, it could pave a path for crypto platforms that have shuttered their US operations to return to the market. Platforms that currently offer crypto to US customers may also be able to expand their offerings to include not just more cryptocurrencies, but also functions like staking.

2. More clarity for stablecoins

Stablecoins are cryptocurrencies with values "pegged" (meaning tied) to another asset—often a traditional fiat currency like the US dollar. For example, one unit of a stablecoin that's pegged to the US dollar aims to always be worth $1. Because stablecoins are far less volatile than other cryptocurrencies, supporters believe they can make crypto transactions easier. 

As of early July, the global market cap of stablecoins was greater than $160 billion, according to CoinMarketCap. But as with many other aspects of crypto, domestic regulations are essentially nonexistent, making stablecoins difficult to use in the US.

FIT21 isn’t the only bill attempting to address this issue. In April, a bipartisan team of senators introduced the Lummis-Gillibrand Payment Stablecoin Act, a bill that aims to establish a regulatory framework specifically for stablecoins. Notably, it includes a ban on algorithmic stablecoins. In 2022, a leading algorithmic stablecoin lost its peg, setting off a series of events that helped trigger a crypto bear market.

As of late June, however, the Stablecoin Act has yet to be approved, and likely won’t be prior to the upcoming election.

3. More crypto ETPs on the way?

Crypto ETPs hold cryptocurrencies as their underlying asset, and are convenient ways for those who aren’t familiar with crypto’s cybersecurity nuances to gain exposure to crypto.

In May, the SEC unexpectedly approved a rule change that could allow the listing and trading of spot ether exchange-traded products (ETP) in the future. This was a pleasant surprise for the crypto industry, which had assumed an approval was at least several months away.

So far, the SEC has addressed only bitcoin and ether—the 2 largest cryptocurrencies by market cap—in regards to the trading of ETPs. But supporters hope greater regulatory clarity will clear the way for more cryptocurrencies to have ETPs.

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Exchange-traded products (ETPs) are subject to market volatility and the risks of their underlying securities, which may include the risks associated with investing in smaller companies, foreign securities, commodities, and fixed income investments. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets. ETPs that target a small universe of securities, such as a specific region or market sector, are generally subject to greater market volatility, as well as to the specific risks associated with that sector, region, or other focus. ETPs that use derivatives, leverage, or complex investment strategies are subject to additional risks. The return of an index ETP is usually different from that of the index it tracks because of fees, expenses, and tracking error. An ETP may trade at a premium or discount to its net asset value (NAV) (or indicative value in the case of exchange-traded notes). The degree of liquidity can vary significantly from one ETP to another and losses may be magnified if no liquid market exists for the ETP's shares when attempting to sell them. Each ETP has a unique risk profile, detailed in its prospectus, offering circular, or similar material, which should be considered carefully when making investment decisions.

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