Bitcoin: Is tighter scrutiny likely?
As bitcoin’s price continues its breakneck rally, tighter rules may be on the horizon, depending on who forms Joe Biden’s new team.
- Bitcoin price climbs back above US$27,500 on Wednesday (30 December 2020) after paring gains a day earlier
- The cryptocurrency and its peers have attracted swelling interest, shattering price records in recent months
- However, there could be stricter oversight of the nascent cryptocurrency industry in the US
- Proposed rules include requirements for traders to disclose their identities
Bitcoin price seesaws after winning streak
Bitcoin's price dropped to as low as US$26,111 at about 13:14 GMT+8 on Tuesday (29 December 2020).
Since then, prices have recovered over 6%, hitting US$27,698 at 08:29 GMT on Wednesday (30 December 2020).
The digital coin had blasted past US$28,000 to an all-time high on Sunday (27 December 2020). This prompted cryptocurrency exchange Luno’s Vijay Ayyar to say that bitcoin may be ‘very close to the top’, although it could still possibly hit US$30,000.
An inevitable pullback in bitcoin’s price will likely be smaller than previous corrections, Ayyar added, noting that ‘we might only see 10-15% drops’.
The US Securities Exchange and Commission (SEC) also recently accused Ripple Labs, which markets the XRP token, of misleading investors and failing to abide by regulations on offering unregistered digital assets.
As a result, investors have been moving to bitcoin and other digital currencies, said Ayyar.
In recent months, investors have rushed to cryptocurrencies like bitcoin to hedge against US dollar weakness and inflation risk amid massive stimulus injections. Still, critics continue to doubt the long-term viability of cryptocurrencies as stable assets.
Why crypto’s future may hinge on Biden’s administration
Regulators may also soon scrutinise the world’s biggest cryptocurrency more closely, following its whirlwind rally and near quadrupling in price this year.
Possible headwinds could come from Joe Biden’s incoming administration. The industry has generally faced challenges with Democrats, who prefer more regulation and oversight, said CoinShares’ Meltem Demirors.
On the other hand, the US’ top currency regulator, Brian Brooks, warned that the new administration may roll back regulations meant to protect consumers. For example, national banks were allowed this July to provide cryptocurrency custody services, but this might possibly come undone with Biden in the White House, according to Brooks.
Any measures will depend on who fills the administration’s main roles. For instance, Janet Yellen, Biden’s pick to helm the Treasury Department, has said she is ‘not a fan’ of bitcoin, calling it ‘highly speculative’. Yellen has also commented on cybersecurity concerns around anonymous cryptocurrencies.
Forbes’ Roger Huang posited that one avenue the administration could take is Treasury-based enforcements that severely restrict or even ban self-hosted cryptocurrency wallets.
Over at the SEC, bitcoin-friendly Gary Gensler may also possibly replace Jay Clayton, viewed as anti-crypto, as chairman.
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