Cryptoverse: Bitcoin is afraid of commitment, Mr. Biden

FILE PHOTO: US President Biden and Secretary of Commerce Raimondo hold a virtual meeting with business leaders and state governors in Washington
FILE PHOTO: U.S. President Joe Biden and Secretary of Commerce Gina Raimondo (not pictured) hold March 9, 2022. REUTERS/Jonathan Ernst

March 15, 2022

By Medha Singh

(Reuters) – Bitcoin loves to flirt with the mainstream. But now that the US President is saying he wants to take things seriously, crypto might be getting cold feet.

When Joe Biden ordered officials to issue reports on cryptocurrency’s role in future finance last Wednesday, bitcoin surged as much as 9% and ether jumped 8% as many crypto fans hailed a potential milestone in mainstream adoption.

“The real meaning is that the President of the United States is talking about crypto,” said Jack McDonald, CEO of Standard Custody, a firm that provides digital asset custody solutions for institutional investors.

But cryptocurrencies are complicated.

While Bitcoin danced above $42,500 following the news, it has since given up those gains and is now back around $38,000. Similarly, Ether has fallen back to $2,500.

That appears to be a muted market reaction to the White House’s first formal statement on crypto – although for those who can truly understand Bitcoin, which is still licking its wounds from China’s rejection and nursing nagging unrest, it is losing its identity.

Regulation can be a double-edged sword.

Some industry watchers are seeing bullish signs for Bitcoin, saying the president’s announcement could predict U.S. regulations on crypto that will pull far more institutional money away from pension funds and insurance companies.

“Biden’s executive order could signal the end of the crypto Wild West as we know it,” said Edmund Kulakowski, senior advisor on financial crimes at London-based regulatory software firm Fenergo.

However, for the crypto players who find success in the wild, this may not be such good news.

“Quantum-driven hedge funds that employ arbitrage and quantitative strategies typically excel in more volatile and unstructured markets,” said Ganesh Iyer, chief marketing and strategy officer at New York-based technology firm IPC.

“Only time will tell how and when this market will mature. Until then, there is now an opportunity for hedge funds to leverage ultra-low latency networks to make the most of volatile, compliance-light and liquid crypto markets.”


There is also little certainty about America’s regulatory intentions, as Biden has given federal agencies six months to create guidance on best course of action.

For one, it is not clear who will be the crypto sheriff or whether crypto should be treated as a security or a commodity.

Both the Securities and Exchange Commission (SEC), which oversees exchange-traded stocks and therefore tokens, which qualify as securities, and the Commodity Futures Trading Commission (CFTC), which has oversight over the commodities and derivatives markets, have their input to play in reports.

“Details regarding the SEC, CFTC and other financial regulators are scant,” said Jerald David, president of Arca Labs, the innovation arm of Los Angeles-based digital asset manager Arca.

Shane Rodgers, a former investment banker and CEO of PDX Coin, a crypto-to-fiat payments app and utility coin, said he’s waiting to see how regulation might evolve, particularly in terms of defining the SEC’s role.

Until there is more visibility, he added, “the government can forget about innovation in the crypto space in the US because, for one, I will not be hiring people or spending large sums of R&D money in this country.”


What seems certain, regardless of how this plays out, is that the US measures will have a major impact on the global crypto industry.

America, the epicenter of traditional finance, is quickly becoming the same for crypto; 43% of the world’s crypto hedge fund managers are now based there, according to PwC, while the United States is now also the hub of bitcoin mining after China cracked down on that part of the industry last year.

Standard Custody’s McDonald called Biden’s order a “symbolic document.”

“He didn’t come out and say it was cheating or bad actors doing bad things,” he added. “On the contrary, there is an acknowledgment that digital assets have a place in the future, that this industry requires a thoughtful approach to regulation.”

(Reporting by Lisa Mattackal and Medha Singh in Bengaluru; Additional reporting by Elizabeth Howcroft in London; Writing by Alun John in Hong Kong; Editing by Vidya Ranganathan and Pravin Char) Cryptoverse: Bitcoin is afraid of commitment, Mr. Biden


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