The Changing Winds Surrounding Cryptocurrency

It appears the boot on the throat of crypto is being lifted.

There is little doubt that, over the past 4 years, crypto was targeted. We saw
Operation Choke Point 2.0 where regulators pressured banks to not support companies involved with cryptocurrency.

Then we have everyone's favorite Gary Gensler, the Chair of the SEC, who used crypto as his personal punching bag.

Over the course of this year, during campaign season, we watched crypto become a viable topic. Some ran on the platform while others came in with a strong position. Since the results electing Donald Trump as President, along with the Republicans picking up both houses, the crypto market is on fire.

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The Winds Surrounding Cryptocurrency Are Changing

We are watching things spreading rapidly. With the elections over, talk is now done, it is time for action.

Here is where a major transition is taking place, something driven by the change in outlook.

The first piece of news is that 18 states are now suing the SEC, Gary Gensler, and the 5 commissioners. This is something that was long overdue.

The complaint alleges that the SEC has unlawfully expanded its jurisdiction without Congressional approval, as evidenced by its aggressive enforcement actions against crypto firms.

"The SEC has not respected this allocation of authority," the complaint states. “Without Congressional authorization, the SEC has sought to unilaterally wrest regulatory authority away from the States through an ongoing series of enforcement actions targeting the digital asset industry.”

As always, the question is why now?

This is a matter that should have been taken up two years ago. The SEC did not suddenly exceed its authority. States should have stepped in back then.

My guess is we are watching a political move. Gensler has not said he would resign from his position. He could stay on until his term ends in 2026.

Most, when there is a change in party occupying the White House, will step down. However, there is not a mandate. A lawsuit could be a way to put pressure on Gensler.

The plaintiffs argue that the SEC’s actions have stifled innovation and harmed one of America’s fastest-growing economic sectors. They cited enforcement cases against major crypto players like Coinbase, Ripple, and Kraken as examples of the agency’s heavy-handed approach.

The SEC, its chair, Gary Gensler, and Commissioners Caroline Crenshaw, Jaime Lizárraga, Hester Peirce, and Mark Uyeda are the defendants. Notably, Peirce and Uyeda have consistently spoken out against.

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There is little doubt the actions by the SEC have stifled advancement while driving innovation out of the country. We started discussing this a few years back.

That said, is that something that SEC is responsible for? I don't know if that amounts to much. Of course, there is legal opinion and then there is the court of public opinion.

Again, this might be more than just a legal play.

Bitcoin As A Reserve

We all heard the campaign promises of Donald Trump to make Bitcoin part of the United States Strategic Reserve. Cynthia Lummis, the Senator from Wyoming and long time crypto advocate, has proposed selling gold to fund the reserve. This is something that will likely get taken up once the new Congress is in place.

One interesting tidbit about this is the fact that we are focusing upon the national level. This strategic reserve is for the Federal Government. What about the states?

Here is where the first shot was fired.

Pennsylvania might get into the game also.

The new bill, called the Pennsylvania Bitcoin Strategic Reserve Act, introduced in the Pennsylvania House of Representatives on Thursday, is the first of its kind and would allow the state’s treasury to allocate up to 10% of its roughly $7 billion state funds into bitcoin as a way to help combat inflation and diversify its investments beyond traditional assets like bonds and cash reserves.

Here is where we see the tentacles spreading.

Obviously, the numbers for Pennsylvania are much smaller than the Federal Government. That said, $700 million is nothing to sneeze at. Pennsylvania is a rather large state but it is nowhere near the largest.

What kind of numbers would we be looking at with California, Texas, Florida, and New York? Perhaps these states do not follow suit but it is unlikely that none of them get involved.

If something passes at the national level, it could filter to many of the states.

This bill is the second Bitcoin bill to go through the Pennsylvania House.

The strategic reserve act is the second piece of crypto-related legislation to go in front of the state legislature this year. Last month, the state’s House passed a bill to protect residents’ rights to self-custody digital assets and ensure their ability to use bitcoin as a payment method.

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It is expected that both would be signed by the Governor.

An Industry Ready To Take Off

We have history to fall back upon regarding where the industry is likely to go.

For years, gambling was treated similar to crypto. In fact, Operation Choke Point was utilized under President Obama to target the gambling (along with cannabis) industry. At that time, gambling was illegal in a number of states.

This all changes a couple years ago when the United States Supreme Court decided states didn't have the authority to ban it. Since that time, gambling has flourished. We see major corporations now involved, with advertisements on most sporting events.

Crypto, albeit not illegal, could face similar tailwinds.

My view always was that crypto did not require government support to succeed. In fact, even with the headwinds, we still see major growth over the past few years.

However, if the government simply gets out of the way, things would take off. It does appear, that governments might even be supporting the industry.

To me, that equates to a massive explosion. The entire industry was hindered as some of the largest companies were afraid to get involved. We are now witnessing a total change in sentiment.

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