US lawmakers unite against SEC as crypto regulations tighten worldwide

This May, the Fed noted that it would not cut rates anytime soon, and the BTC price fell below $57,000 at the beginning of May. Despite that, it is unexpectedly becoming a good time for the crypto market. The Bitcoin ETF has had record inflows since March, hedge funds are reporting record numbers of crypto investments, and US lawmakers have passed anti-SEC resolutions.

Other crypto regulation updates outside the US include a new crypto bill in Turkey, a mining ban in Venezuela, regulatory uncertainty in the EU and consultations between crypto regulators in India.

US lawmakers unite against the SEC?

The US Senate passed a resolution against the SEC to cancel Rule 129, which obliges banks to declare their crypto balances to the commission. Senators voted 60 – 38; both Republicans and Democrats supported this resolution. However, Biden has already claimed that he will veto it.

Anyway, this is the first such case where the US Congress and Senate have agreed with each other on crypto regulation. The resolution was supported by both Republicans and Democrats, including Majority Leader Chuck Schumer. Lawmakers are gently signaling to the SEC and its chairman, Gary Gensler, that the commission need not abuse its authority over cryptocurrencies and banks.

Growing numbers of investments in Bitcoin ETF

In mid-May, some major institutional investors made headlines by announcing their stakes in Bitcoin. Hedge fund Millennium invested about $2 billion, while Morgan Stanley invested $270 million. The State of Wisconsin Investment Board also revealed that it has approximately $164 million in Grayscale and Blackrock Bitcoin ETF. Meanwhile, with the US CPI index for April coming in 0.1% lower than expected, Bitcoin’s price rose to $67,000. Last week, according to Farside Investors, we saw $948.3 million in inflows into US spot Bitcoin ETFs.

Last but not least, Pantera Capital has invested a large amount in the cryptocurrency TON—which is unknown, but probably exceeds Pantera’s investment in Solana ($250 million). Chicago Mercantile Exchange (CME Group) has also recorded increased institutional demand for bitcoin and plans to begin direct spot bitcoin trading.

Regulatory uncertainty in the European Union

Meanwhile, Europe is gearing up for the full implementation of the MiCA crypto regulatory framework. Overall, this is not the best news for the industry—there is a lot of uncertainty about how cryptocurrency companies will continue to operate in Europe. This affects not only medium-sized VASPs, but also the big players in the market.

In April, it became known from Tether’s CEO, Paolo Ordoino, that the company does not plan to obtain a license for USDT in the EU. Last week, Kraken exchange announced that it will delist USDT for its European customers. Tether will presumably develop euro-denominated stablecoins in the EU. However, it is unknown how this will happen – so far, the capitalization of euro-denominated stablecoins has remained relatively small.

At the same time, European countries continue to implement their classic VASP crypto-regulatory frameworks, which oblige any crypto-entities operating in the country to obtain a license/registration. For example, the French financial regulator Autorité des marchés financiers (AMF) informed the public that Bybit has been operating illegally in the country since 2022 because it did not obtain a license from the regulator. Bybit is included on the AMF blacklist as a company that does not comply with existing regulations in the country.

Turkey to pass new crypto bill

Last week, the ruling party introduced a crypto bill in the Turkish parliament. The new legislation regulates licensing procedures for crypto entities, compliance and AML. Local financial regulator Capital Markets Board (CMB) will be the main institution in this process.

India updating crypto regulations

Although pending new elections, the National Government has so far resisted its legislative initiatives to regulate cryptocurrencies – regulators are doing it instead. Local financial regulator – SEBI has published its recommendations dedicated to crypto regulation in the country. It recommends dividing crypto activities by regulators: SEBI to regulate ICOs and securities, Central Bank – stablecoins, FIU – VASP registrations.

FIU started VASP registration in the country late last year, and 28 companies have been registered. Last week, the first two foreign exchanges, Binance and Kucoin, were also approved to operate in the country.

Venezuela imposes a mining ban

Despite the existing economic and political issues in Venezuela, cryptocurrencies are legal in the country. It also has regulations for mining. Unfortunately, the local Ministry of Electric Power claimed last week that it would disconnect existing mining farms from the grid. The government explained this initiative by citing the high load on the country’s electricity networks. In addition, the decision may be related to the country’s anti-corruption campaign—the government previously seized 2,000 devices in the city of Maracay and 11,000 mining devices in the state of Carabobo. It has yet to be determined whether the ban on mining in Venezuela will be temporary or permanent.

Such initiatives to ban or limit mining due to high load on power grids are not uncommon. For example, in 2021, mining was banned in Iran for four months. The Central Asian countries of Kazakhstan, Uzbekistan and Kyrgyzstan have also imposed certain restrictions on the activities of mine operators.

VanEck ETH ETF application

Finally, I want to remind you of the important event of the coming week – on May 23, the SEC is expected to rule on VanEck’s Ethereum ETFs. Bloomberg analyst Erik Balchunas said last week that the SEC is unlikely to approve any mock Ethereum ETF. He suggests that according to the commission’s current position, it evaluates Ethereum as a security. Indeed, the probability of rejection is quite high, but let’s see what the regulator decides.

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