2023 saw many governments recognize crypto ‘publicly’ as a legitimate financial asset and implemented regulations to help citizens benefit from its advantages and protect them from the potential risks of using it as an investment vehicle
This process wasn’t smooth for every country, notably the United States. Virtually all its organs of government—and its residents—seem to have different perspectives on what crypto is and how it can or should be used.
This diversity of opinions impeded the nation, a major player in the global financial arena, from fully embracing this new financial paradigm powered by blockchain technology.
Despite these challenges, the U.S. continues to be a central hub for key players in the crypto space and seems poised to adopt a more definitive stance. Consequently, 2024 was eagerly anticipated by all participants in the U.S. cryptocurrency space.
Bitcoin Exchange-Traded Funds (ETFs) have taken centre stage as predicted, with the U.S. Securities and Exchange Commission (SEC) finally approving multiple applications from global financial asset managers to offer the pioneering crypto asset to their clients.
The approval of Bitcoin ETFs has generated considerable excitement, signalling widespread public acknowledgment and government support for crypto.
However, this newfound legitimacy also implies the little freedom from scrutiny the crypto space has enjoyed so far will end or become very limited.
Over the past 11 years, the U.S. SEC rejected over 20 crypto-ETF applications. The current SEC Chair, Gary Gensler, attributes these past rejections to interpretations of laws at the time and highlighted below are excerpts from his statement released after the January 10 approval,
“Importantly, today’s Commission action is cabined to ETPs holding one non-security commodity, bitcoin. It should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities.
Nor does the approval signal anything about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws.
As I’ve said in the past, and without prejudging any one crypto asset, the vast majority of crypto assets are investment contracts and thus subject to the federal securities laws.
Sponsors of bitcoin ETPs will be required to provide full, fair, and truthful disclosure about the products…these products will be listed and traded on registered national securities exchanges.
Such regulated exchanges are required to have rules designed to prevent fraud and manipulation, and we will monitor them closely to ensure that they are enforcing those rules.
Furthermore, the Commission will fully investigate any fraud or manipulation in the securities markets, including schemes that use social media platforms. Such regulated exchanges also have rules designed to address certain conflicts of interest as well as to protect investors and the public interest.Today’s action does not approve or endorse crypto trading platforms or intermediaries, which, for the most part, are non-compliant with the federal securities laws and often have conflicts of interest.”
Crypto Would Be Under More Regulatory Oversight in 2024
The SEC might indeed be on a losing streak with the crypto industry in recent times, but it still has many battles to fight.
The outcomes of these battles guarantee one thing, whether positive or negative, for the regulator: more clarity on the rules governing crypto in the U.S. And with this clarity will also come more regulations.
The authorities in the U.S. will be looking to avoid a repeat of the FTX fiasco, where many investors, many of whom were Americans, lost more than $8.9 billion. We see this with Binance’s settlement deal with the U.S. Department of Justice in November 2023.
An often overlooked aspect of this deal is the appointment of a court-appointed monitor. The imposition of regulatory oversight on the world’s biggest crypto exchange is a crucial starting point for regulatory coverage that could extend to other exchanges. However, how it would play out is still an important thing to observe in 2024.
U.S. SEC’s Ongoing Lawsuits with Crypto Companies in 2024
The US SEC’s queue of lawsuits against crypto companies will be significant in shaping the market’s trajectory.
Notably, Binance is still entangled in another legal dispute with the regulator; Coinbase is also dealing with similar charges and Ripple’s case, which has dragged on for three years, is expected to come to a conclusion this year.
The outcome of these lawsuits could have far-reaching consequences on what bitcoin and crypto’s future looks like in the U.S., as the SEC aims to subject virtual currencies and digital assets to regulations similar to stocks.
However, over the years, Binance and other crypto firms have sought to influence the creation of a new regulatory framework favouring the crypto sector, contending that many existing rules, particularly those of the SEC, do not apply to crypto because they are a new financial asset class.
Meanwhile, the White House and Legislators will also be making their moves, particularly with the upcoming presidential elections.
In 2023, the Republican-led House of Representatives established committees and sponsored new bills to pass regulations solidifying crypto’s place in U.S. laws while the White House, to quote Axios Crypto’s Brady Dale, “was knives out for cryptocurrency.”
The political drama between the Democrats, who want crypto relegated to the abyss, and the Republicans, whose attempt to wrestle back control seems to depend on how well they can prop up the benefits of the new financial technology, would be an exciting watch this year.
The U.S. Crypto Sector Should Gear Up For Increased Public Exposure and Adoption
The formal approval of Bitcoin ETPs enables investors in traditional finance markets, many of whom are already keen on entering the crypto sphere, to access Bitcoin directly.
Many prominent institutional investors like BlackRock, Wisdom Tree Funds, Invesco, Galaxy Digital, Grayscale, and Valkyrie Fund applied for a Bitcoin ETP to the SEC, and there are speculations that the approval of ETFs could inject at least $60 billion into the Bitcoin market.
The positive impact extends beyond Bitcoin, as the approval paves the way for other cryptocurrencies. Ether ETFs are already a thing, and many more will surely follow.
This shift enables U.S. residents to join the global community in owning and managing crypto with government endorsement. While this deviates from the original vision of crypto enthusiasts, it represents a substantial step towards mainstream acceptance.
With the approvals, Bitcoin and the crypto sector are expected to cross the threshold of acceptability required to become a permanent fixture in the global financial landscape. A
s it is now, the sector exists on the fringe and is slowly making its way to full public consciousness as a legitimate asset.
Interestingly, these projected high adoption levels will coincide with the Bitcoin halving event and create the conditions that could make for the first Bitcoin-led bull market since 2013.
If this is the case, we can expect an influx of new investors hoping to catch the thrills of astronomical increases in the value of their financial assets.
Final Thoughts
The U.S. crypto industry’s 2024 outlook appears optimistic with intriguing nuances, marked by signs pointing towards a potential bull run for Bitcoin, especially with the introduction of ETFs, expected to drive increased public adoption.
However, though a good thing, the cost of this would be increased regulations and crypto as we know it today would slowly become something different. How much it will diverge from the ideals is still uncertain and is something to watch out for.
It is going to be a long year, so fasten your belts and get ready for the ride. Store digital assets safely, and if you want to get into the market, do your research well and properly understand what you are getting into. In the evolving world of crypto, staying informed and prepared is vital to navigating the nuances and opportunities that lie ahead.
Disclaimer: This piece is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.
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