Regulatory Scrutiny Intensifies, But Crypto Moves On

Bitcoin declines below US$23k as crypto regulation intensifies, which is expected to reach venture capital as well after FTX. BNY Mellon says investors ‘absolutely interested’ in crypto. Money begins to flow back Into DeFi.
Regulatory Scrutiny Intensifies, But Crypto Moves On

February 9, 2023 - Bitcoin lost the US$23k price level in the last 24h on the back of regulatory news regarding the investigations of the exchange Kraken, and potential banning of staking in the US, according to rumors heard by Coinbase CEO Brian Armstrong. According to Bloomberg reports, the SEC is investigating the crypto exchange Kraken for alleged securities laws violations. Bloomberg’s sources claim that the probe is at an advanced stage. Moreover, Brian Armstrong used Twitter to disclose some rumors that the SEC would ban crypto staking in the US for retail customers. As we have been mentioning, the regulators will increase their scrutiny on the crypto industry. If these rumors come to fruition, that would mean a setback for proof of stake cryptoassets.

The regulators are monitoring venture capital investors as well. A CFTC official said that there is a trust deficit among venture capital firms, alleging that there should have been red flags regarding FTX. The SEC is also homing in on venture capital funds investing in digital assets.
The SEC is interested in two areas, how investment advisers, including venture capital firms, are looking out for the best interest for their clients and how advisers are holding crypto for those clients. As expected, in our view, the FTX collapse last year triggered regulators to attack several fronts in order to give a response to the market regarding the harm caused to customers, and this will result in real consequences to the industry.

Despite the tightening regulatory environment for crypto, the head of digital assets at BNY Mellon, Michael Demissie, is convinced that institutional interest in digital assets will not be dampened. Demissie also said that 91% of its institutional clients, representing more than US$1tn in assets under management, were interested in including tokenized products in their portfolios. BNY Mellon also revealed that 86% of institutional players view the crypto market as a long-term investment opportunity. Moreover, there has been a surge in activity in decentralized finance (DeFi) protocols, with Uniswap leading the line. In the past week, Uniswap activity flipped OpenSea, the world’s leading NFT marketplace. This illustrates that the crypto market is moving forward, despite all the FUD from macro to regulatory matters.

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