After underwhelming earnings reports and an absence of good macro news, risk assets underperformed for the week. Crypto assets experienced a “logical and healthy” pullback, giving up most of April’s gains. The Nasdaq Crypto IndexTM (NCITM) fell 10.7%, driven by declines in bitcoin (BTC), down 9.7%, and ether (ETH), down 12.7%.
MiCA, the first EU-wide crypto regulations, is finalized
The lack of regulatory clarity in the US contrasts with other parts of the world, including Europe, which approved the Markets in Crypto Assets (MiCA) regulation on Thursday. The regulation provides a clear regulatory environment for the crypto industry and will come into effect within 18 months across all EU member states. More of our perspective on MiCA and the global regulatory landscape can be found here.
A new SEC definition for ‘Exchanges’ has big implications for crypto and DeFi
This week, there have been important developments regarding crypto regulation. The SEC is considering amending a proposed rule that may require digital asset exchanges and decentralized finance platforms to register with the regulator. This raises the question of how decentralized platforms, which are often maintained by global online communities of coders, can comply with SEC regulations. The crypto market is grappling with increased pressure by US regulators, which, along with a lack of regulatory clarity, may drive innovation and companies out of the country.
US House committee publishes draft stablecoin bill
Another important regulatory event this week was the release of a draft version of a stablecoin bill by the US House Financial Services Committee. Stablecoins currently account for over 10% of crypto markets and serve as a safe haven for crypto funds. They also facilitate fast peer-to-peer and cross-border payments, making them an essential use case in the crypto ecosystem, which takes away the usual price volatility of flagship crypto assets such as BTC and ETH. Furthermore, citizens of countries with inflationary currencies and strong capital controls can use stablecoins as a way to dollarize their savings easily.
SEC targets fallen exchange Bittrex
Bittrex, which was once the largest US cryptocurrency exchange, is facing a lawsuit from the SEC for allegedly violating investor protection laws. The exchange was based in Seattle, but it has already announced that it is leaving the US for good. Last year, the exchange agreed to pay $29 million in fines to the SEC. Bittrex claims that regulators failed to provide sensible policies that would foster innovation and enhance the American economy.
Coinbase CEO won’t rule out relocating company away from US
The world’s second-largest centralized crypto exchange, Coinbase, has announced that it may leave the US due to the lack of regulatory clarity. Coinbase has exchanged letters with the SEC after receiving a Wells notice regarding some of its services. CEO Brian Armstrong has stated that the company is ready to go to court against the SEC.
House Financial Services Committee members grill SEC Chair Gensler
SEC Chair Gary Gensler testified before the US House Financial Services Committee to discuss SEC oversight. The committee had previously issued a letter to Gensler, urging him to work with Congress to provide regulatory clarity and protections for innovators and investors. During the hearing, Chair Gensler was unable to give a specific answer when questioned about whether ETH is a commodity.
Events from Q1’23 reminded many investors of the benefits of a truly global and decentralized digital currency immune to monetary mismanagement. Beyond Bitcoins’s strengthening investment case, our research team shares the most important crypto ecosystem developments in our Q1’23 Crypto Market Pulse report.
What to watch this week:
Amazon, Microsoft, Alphabet, and Meta Platforms, will release their earnings this week, which will provide crucial insights into economic activity. The first-quarter 2023 GDP estimate will be released Thursday and PCE on Friday, both of which will inform the May 3 FOMC meeting.
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