The ripple effects of the United States Court of Appeals’ favorable ruling for Grayscale concerning its spot Bitcoin ETF (exchange-traded fund) application, along with the triumphant stance of Ripple in court, are heralding a new era of crypto acceptance and integration into traditional financial frameworks.
These pivotal moments, coupled with the evolving regulatory landscape, hint at an impending bull run in the crypto market.
A Spot Bitcoin ETF Is Underway
Grayscale’s courtroom win against the US Securities and Exchange Commission (SEC) is a stepping stone to unlocking the potential of Bitcoin ETFs in America. The court’s admonishment of the SEC for its “capricious” and “arbitrary” rejection of Grayscale’s spot Bitcoin ETF application brings hope to investors and crypto enthusiasts.
Indeed, the essence of this ruling is a significant stride towards realizing the first-ever spot Bitcoin ETF in the US.
Pavel Matveev, CEO at Wirex, told BeInCrypto that this is a substantial milestone for the crypto industry. Such an ETF would mirror the actual market price of Bitcoin, simplifying the investment process for retail and institutional investors.
“For everyday investors, a Bitcoin ETF could make investing in Bitcoin much simpler. They wouldn’t have to worry about buying and storing cryptocurrency directly. Big institutional investors might see the approval of a Bitcoin ETF as a signal that the cryptocurrency market is becoming more legitimate… This could influence the price and how the Bitcoin market works. This court decision could make more people interested in and involved with cryptocurrencies,” Matveev said.
Recent online discourse aligns with Matveev’s insights. The unfolding situation with Bitcoin spot ETF has reached a crucial point, signaling a high likelihood of approval by early 2024.
For instance, Eric Balchunas, Senior ETF Analyst at Bloomberg, opined a 75% chance of approval, given the active engagements between the SEC and spot Bitcoin ETF issuers.
The potential approval of a Bitcoin spot ETF could catalyze a massive influx of institutional investment. Estimates suggest that up to $17.7 trillion could flow into Bitcoin ETF products.
“While we factored Grayscale win into our [previous] 65% odds, the unanimity and decisiveness of ruling was beyond expectations and leaves SEC [with] very little wiggle room,” Balchunas stated.
Many Altcoins Are Not Securities
The Grayscale ruling is not the only legal tussle nudging the SEC towards a more crypto-friendly stance. The SEC vs. Ripple case, another instance where courts challenged the federal agency, introduced a nuanced approach to determining whether crypto tokens should be considered securities.
This development, Matveev posited, might complicate securities fraud claims against token issuers, although it does not outrightly eliminate such claims.
“The recent decision in the Ripple case distinguishes between big institutional investors and regular folks when it comes to whether selling a crypto token is seen as a securities deal. Legal experts think this ruling could make things tougher for people bringing class-action lawsuits in cases where they claim to have bought unregistered securities,” Matveev added.
These legal precedents are instrumental in challenging and perhaps reshaping how the SEC handles cryptocurrency-related financial products. Therefore opening doors for more legal challenges from other crypto companies feeling unfairly treated.
“The case involving Bittrex questions the SEC’s authority to regulate tokens as securities without clear congressional authorization, citing the ‘major questions doctrine.’ The platform claims that the SEC’s complaint against it lacks specificity, as it doesn’t name specific cryptocurrency assets that were unlawfully listed on its platform,” Matveev emphasized.
Read more: The Full List of Cryptos Named Securities in SEC Lawsuits
For this reason, the argument for alternative regulatory bodies, like the Commodity Futures Trading Commission (CFTC), to step into the crypto regulation arena is gaining traction. CFTC Commissioner Caroline Pham proposed a pilot program for regulating cryptocurrencies, showing signs of broadening the US regulatory framework.
“As a regulator overseeing the largest financial markets in the world, we have a responsibility to proactively take on new challenges instead of passive observation. That’s why I’m recommending a time-limited CFTC pilot program to support the development of compliant digital asset markets and tokenization,” Pham concluded.
The introduction of the Lummis-Gillibrand “Responsible Financial Innovation” Bill also aims to redefine crypto as having “commodity-like” attributes. Consequently, potentially shifting some regulatory authority from the SEC to the CFTC. This shift could have far-reaching implications for the crypto industry, marking a pivotal moment.
These initiatives reflect a growing interest in supporting the compliant growth of the cryptocurrency industry, as explained by Matveev.
“The presence of alternative regulatory bodies like the CFTC could potentially shape the regulatory landscape for cryptocurrencies in the United States. This will greatly depend on the results of legislative efforts and the willingness of regulators to adapt to the evolving crypto market,” Matveev added.
Global Crypto Regulatory Efforts
On a global scale, the US seems to lag as Asia and Europe are advancing in crypto regulation and digital currency adoption.
Europe’s “Markets in Crypto Assets Regulation” (MiCA) and Switzerland’s “Blockchain Act” are examples of the proactive regulatory steps being taken overseas. Asia is also advancing rapidly with China vigorously promoting its digital yuan to facilitate more trade transactions in local currencies than US dollars.
Concurrently, Japan is emerging as a fertile ground for cryptocurrency and Web3 innovation, with a particular emphasis on regulating stablecoins.
Read more: Crypto Regulation: What Are the Benefits and Drawbacks?
These actions nurture crypto innovation and lay down clear rules and standards for crypto platforms. Subsequently making it easier for crypto companies to access banking services than their American counterparts.
“It seems like these actions are encouraging crypto companies to move away from the US, and our dominance in terms of contributing to open-source crypto projects is decreasing. Surprisingly, more than 70% of crypto developers surveyed now live in places like Europe, Latin America, and Africa,” Matveev highlighted.
The current trajectory of legal rulings and regulatory developments is enhancing the crypto market’s legitimacy. Therefore paving the way for more significant institutional investments and broader acceptance of digital assets in traditional investment portfolios. The crypto market now stands at the precipice of a new era, with a bull run on the horizon.
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