Expect Intensified Regulatory Scrutiny Of Bitcoin
With bitcoin hitting new highs and unprecedented corporate attention, it is time to prepare for regulatory and political challenges.
The most recent move in bitcoin kicked off with the announcement by Elon Musk that Tesla had purchased $1.5 billion of bitcoin. Twitter, Mastercard and Bank of New York are just a few of the companies that have been linked to bitcoin in the past week.
We can definitively state:
· The market cap of all crypto is truly meaningful as bitcoin is at almost $1 trillion, up from just over $200 billion in September.
· The ease of access and the “use” case is gaining momentum. On that front, PayPal was a leader from a more mainstream access than the crypto trading platforms that dominate flows (and have themselves, improved in leaps and bounds, at least from an ease of use standpoint).
· There is starting to be some sort of “crypto pop” associated with companies embracing crypto (though, paradoxically, Tesla stock is lower since they made their big announcement).
· Having witnessed the impact of Robinhood, Reddit threads, etc., it is naïve to underestimate the potential impact of those investors (who, on average, seem to favor crypto currencies).
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· It is rapidly attracting regulatory attention.
Yes, bitcoin has been attracting regulatory attention for some time, but that scrutiny is going to intensify now that it has exploded in the mainstream. Basically, it was a back burner issue for the authorities because it was kind of niche, but now they are prioritizing crypto strategies rapidly. The ECB’s Lagarde weighed in on bitcoin earlier this year and spoke about it again last week. Janet Yellen is talking tough about bitcoin.
Academy Securities addressed the issues surrounding ransomware and bitcoin in our Cyber – Be Concerned report. The use of crypto in ransomware continues to be an issue facing authorities. The Financial Crimes Enforcement Network (FinCEN) is working on rules to deal with digital assets.
The rapid rise in valuations (along with ongoing criminal use), are the driving forces behind the increased scrutiny. Whether regulators have let the horse out of the barn remains to be seen but expect some serious attention to be focused on crypto as regulators try and rein in this breakout.