New Legal Milestones and Regulations: Signs of a Growing Cryptocurrency Market

These legal milestones and regulations signal a rising cryptocurrency market.

The ripple effect of favorable judgments from the United States Appellate Court in Grayscale’s case related to their Bitcoin ETF (Exchange-Traded Fund) application, along with Ripple’s recent legal victory, foreshadows a new era of cryptocurrency integration into traditional financial frameworks.

These significant developments, combined with the evolving legal landscape, suggest an impending surge in the cryptocurrency market.

A Bitcoin ETF is in the works

Grayscale’s victory in court against the U.S. Securities and Exchange Commission (SEC) marks a significant step toward realizing a Bitcoin ETF in the United States. The court’s admonition to the SEC regarding their “unusual” and “arbitrary” denial of Grayscale’s Bitcoin ETF application offers hope to investors and cryptocurrency enthusiasts.

In essence, this ruling represents a substantial step toward the introduction of the first Bitcoin ETF in the United States.

Pavel Matveev, the CEO at Wirex, stated to BeInCrypto that this is a significant milestone for the cryptocurrency industry. An ETF of this nature would reflect the actual market value of Bitcoin, simplifying the investment process for retail and institutional investors.

“For everyday investors, a Bitcoin ETF could make investing in Bitcoin much more straightforward. They won’t have to worry about directly purchasing and storing cryptocurrencies. Large institutional investors may view the approval of a Bitcoin ETF as a sign that the cryptocurrency market is becoming more legitimate… This could impact prices and how the Bitcoin market operates. This court decision might pique the interest of many more people in cryptocurrency,” Matveev remarked.

Recent online discourse aligns with Matveev’s profound insights. The current situation regarding Bitcoin ETFs has reached a crucial point, with a high likelihood of approval in early 2024. For example, Eric Balchunas, a senior ETF analyst at Bloomberg, believes there’s a 75% chance of approval, based on the positive commitment between the SEC and Bitcoin ETF issuers.

The approval of a Bitcoin ETF could lead to significant institutional investment, with estimates suggesting that up to $17.7 trillion could flow into Bitcoin ETF products.

“While we priced Grayscale’s win into our odds at 65% [previously], the concurrence and decisiveness in the ruling exceeded expectations and left the SEC very little wiggle room,” Balchunas stated.

Many altcoins are not securities

Grayscale’s ruling is not the only legal dispute pushing the SEC towards a more crypto-friendly stance. The SEC’s case against Ripple, another instance where courts challenged the federal agency, offers a nuanced approach to determine whether cryptocurrency tokens should be considered securities.

Matveev suggests that this development may complicate securities fraud claims against token issuers, although it doesn’t entirely eliminate such claims.

“The recent decision in the Ripple case distinguishes between large institutional investors and regular people when it comes to whether the sale of cryptocurrency tokens should be considered a securities transaction. Legal experts argue that this ruling could make it more challenging for class-action plaintiffs to claim they bought unregistered securities,” Matveev added.

These legal precedents serve as challenge tools and may reshape how the SEC deals with cryptocurrency-related financial products. This, in turn, opens the door to more legal challenges from other cryptocurrency companies feeling unfairly treated.

The case involving Bittrex questions the SEC’s jurisdiction in overseeing tokens as securities without clear congressional approval, citing the “major questions” doctrine. The platform argues that the SEC’s complaint against it lacks specificity, as it does not name specific cryptocurrencies listed as illegal on its platform.

For this reason, the argument for alternative regulatory bodies, such as the Commodity Futures Trading Commission (CFTC), entering the cryptocurrency regulation field, is gaining attention. CFTC Commissioner Caroline Pham has proposed a limited-time pilot program to support the development of the digital asset and token compliance market, potentially expanding the legal framework in the United States.

“As the regulator overseeing the world’s largest financial markets, we have a responsibility to proactively embrace new challenges rather than passively observe. That’s why I’m proposing a limited-time CFTC pilot program to support the development of the digital asset and token compliance market,” Pham concluded.

The introduction of the Lummis-Gillibrand “Responsible Finance Innovation” Act also aims to redefine cryptocurrencies with attributes “similar to commodities.” This could shift some regulatory authority from the SEC to the CFTC. This change could have profound implications for the cryptocurrency industry, marking a crucial turning point.

Matveev explains that these initiatives reflect a growing interest in promoting compliance growth in the cryptocurrency industry.

“The presence of alternative regulatory bodies like the CFTC could shape the legal landscape for cryptocurrencies in the United States. It will depend greatly on the outcomes of legislative efforts and the willingness of regulatory agencies to adapt to the evolving cryptocurrency market,” Matveev added.

Global efforts in cryptocurrency regulation

Globally, the United States appears to be trailing behind as Asia and Europe make progress in regulating cryptocurrencies and digital currencies.

The “Markets in Crypto-Assets” (MiCA) regulations in Europe and Switzerland’s “Blockchain Act” are examples of proactive regulatory steps taken overseas. Asia is also rapidly advancing, with China aggressively promoting its digital yuan to facilitate more local currency transactions, as opposed to the US dollar.

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Meanwhile, Japan is emerging as a fertile ground for cryptocurrencies and Web3 innovation, with a focus on regulating stablecoins.

These actions nurture cryptocurrency innovation and establish clear rules and standards for cryptocurrency platforms. As a result, cryptocurrency companies may find it easier to access banking services abroad rather than in the United States.

“It seems that these actions are encouraging cryptocurrency companies to depart from the United States, and our dominance in contributing to open-source cryptocurrency projects is waning. Surprisingly, over 70% of surveyed cryptocurrency developers currently reside in regions like Europe, Latin America, and Africa,” Matveev emphasized.

The current trajectory of legal rulings and regulatory developments is increasing the legitimacy of the cryptocurrency market. This paves the way for more significant institutional investments and wider acceptance of digital assets within traditional investment portfolios. The cryptocurrency market is on the cusp of a new era, with an imminent price surge.