The Biden Administration Is Easing Up on Crypto (a Vibes Analysis)

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As an analyst, I’d rephrase the given text as follows:

Yesterday, according to Bloomberg Intelligence, the probability of the SEC approving spot Ethereum ETFs was estimated to be at 25%. However, this figure has significantly increased to 75% as of today. If approved, these ETFs could potentially attract substantial institutional investment into Ethereum, the second largest crypto asset by market capitalization, similar to how Bitcoin was impacted by its own collection of ETFs. Notably, a decision regarding VanEck’s spot Ethereum ETF is anticipated on May 23rd by the SEC.

Secondly, last week, a bipartisan legislation titled the “Deploying American Blockchains Act of 2023” was approved by House representatives with a vote of 334 to 79. Although it has a limited scope, this bill empowers the current Secretary of Commerce, Gina Raimondo, to take necessary and suitable actions that boost America’s competitiveness within the blockchain sector.

Prior to the Senate’s decision on the Financial Innovation and Technology for the 21st Century Act (FIT21), this bill, which is regarded as the most crucial crypto-related legislation with a high probability of being enacted into law, is under consideration. As my colleague Nikhilesh De eloquently puts it:

I discovered that the leaders of the Democratic House caucus on the Financial Services and Agriculture Committees conveyed to their committee members that despite their opposition to the FIT21 bill, they wouldn’t actively discourage voting in favor of it. In essence, they allowed their members the autonomy to make their own informed decisions when casting their votes.

As a crypto investor, I can tell you that the ongoing situation in the House and Senate is reminiscent of their previous efforts to revoke Staff Accounting Bulletin 121 from the Securities and Exchange Commission (SEC). This bulletin imposed stringent capital requirements on cryptocurrency custodians, effectively preventing banks from entering the crypto space. Both the crypto and Traditional Finance (TradFi) communities have expressed strong opposition to this rule.

When President Joe Biden pledged to veto the bill aiming to revoke SAB121, he paved the way for congress members, including notable Democrats such as Senate Majority Leader Chuck Schumer from New York and Finance Committee Chair Ron Wyden of Oregon, to cast votes in line with their moral convictions.

It’s uncertain whether Biden will reject the legislation, even though the Government Accountability Office (GAO) determined that the SEC acted inappropriately when imposing the cryptocurrency guidance. Nevertheless, it’s worth noting that rational and collaborative crypto regulations can still be achieved with bipartisan support, despite resistance from critics like Senator Elizabeth Warren (D-MA).

With regard to Warren, there’s a possibility her influence within the Biden Administration could be waning. Yesterday marked the announcement of Federal Deposit Insurance Corp. Chairman Martin Gruenberg’s intention to resign, following Senate Banking Committee Chair Sherrod Brown’s request for him to step down.

During the financial crisis in 2023, under the guidance of Gruenberg – who is known to be close to Sen. Warren – the FDIC adopted a firm stance against cryptocurrencies, which led to the collapse of three mid-sized banks. Although this event does not directly involve crypto, it’s important to note that both Warren and Gruenberg share similar perspectives on the subject.

The FDIC’s report identified poor risk management and ineffective leadership as primary reasons for Signature Bank’s failure. However, it also highlighted Signature Bank’s connections to crypto industry deposits as a significant contributing factor. In response, the FDIC included cryptocurrencies in its annual report on risks facing US banks and initiated intensive supervisory conversations with relevant institutions.

As a crypto investor, I’ve closely followed the developments in the industry and have come to appreciate the perspectives of experts like Nic Carter. According to him, Castle Island Ventures co-founder, Michael Gruenberg is among the key players behind what he refers to as “Operation Choke Point 2.0.” This term signifies a new wave of government actions aimed at crippling the crypto sector.

See also: The Reality Behind the Crypto Banking Crackdown | Opinion

As a crypto investor, I’d like to emphasize that there are important points to keep in mind regarding the recent resignation of Martin Gruenberg from the Federal Deposit Insurance Corporation (FDIC). Firstly, he stepped down under political pressure following allegations of sexual harassment at the FDIC. It’s important to note that no accusations were directly leveled against him. However, he did fail to address a toxic workplace culture, which led Senator Brown to call for his removal (which Senator Warren deemed “politically motivated”).

The Gruenberg situation doesn’t indicate a decrease in power for Sen. Warren’s faction, despite some speculation. John Deaton, who is running against Warren in the upcoming election, criticized her for protecting one of her allegedly disgraced associates.

It’s worth remembering that Congress and the White House operate independently of each other, as does the Securities and Exchange Commission (SEC). Therefore, actions taken by the Biden administration towards Gary Gensler or legislators regarding cryptocurrency should not be assumed to be related. These events signify separate advancements for crypto.

“Could there truly be a powerful motivator fueling these advancements across the board? What is causing this widespread transformation? And why would a Democrat-led administration unexpectedly embrace cryptocurrencies?”

The 100 pound gorilla

In the context of this situation, it’s worth noting that during the election, the Republican Party’s representative, who is none other than former President Donald Trump, has deliberately reached out to the crypto community as a key aspect of his campaign approach.

As an analyst, I have observed that the former president appears to have recognized the growing influence and financial clout of the crypto community. Consequently, he has been actively courting their favor. While some skeptics may dismiss this as mere self-interest, given Trump’s involvement in NFTs and ownership of various cryptocurrencies, I believe it’s a more nuanced perspective to consider his actions as part of a larger political strategy.

As an analyst, I can observe that the intersection between cryptocurrencies and Donald Trump’s public persona holds an intriguing connection. Cryptocurrencies have the power to capture the interest of many individuals, much like Trump with his charismatic presence. Furthermore, there is a specific group of people who become agitated by crypto, mirroring the same demographic that Trump often manages to provoke. Additionally, influential figures in the crypto community, who can sway public opinion through their positive endorsements, are highly valued. Coincidentally, Trump thrives on the praise and affirmation from his supporters.

As an engaged crypto investor, I’ve witnessed the growing voice of passionate advocates like Ryan Selkis, founder of Messari, who have long emphasized the importance of unifying the crypto industry into a powerful political force. This idea has gained traction in recent months as crypto-centric Political Action Committees (PACs) have seen an increase in influence in Washington D.C. These groups are reportedly investing substantial funds – tens of millions of dollars – to shape elections at various levels across the country.

See also: Bitcoin Is Free and Fair but Not Progressive | Opinion

Although it’s debatable which side holds the “apolitical” crypto narrative more accurately, there’s merit in recognizing the industry’s intriguing paradox. Crypto, born from Occupy Wall Street-era populism, has simultaneously gained notoriety as a playground for the “ridiculously wealthy.” This contradiction bears striking similarities to certain aspects of the Trump phenomenon. Frankly, I find it somewhat astonishing that it took Trump so long to embrace this paradoxical realm.

Let’s get to the crux of the matter: Why has Trump endorsed crypto now? It’s no secret that Trump sees this as a divisive issue he can exploit against his opponent, President Biden. Although the wider public may not be privy to the intricacies of cryptocurrency regulations, an impressive number of registered voters own crypto and hold a favorable view towards it. Approximately 25% of independent voters – a significant voting bloc – have invested in crypto. This percentage is expected to grow further with the introduction of crypto ETFs.

From Trump’s perspective, acting as a counterpoint to Biden’s administration’s cautious approach towards cryptocurrencies has gained him support from crypto enthusiasts who dislike his other policies. To address this issue effectively, President Biden could consider one of two options: Firstly, he might reconsider his stance on cryptocurrencies and adopt a more supportive or accommodative position. Alternatively, he could minimize the controversy by easing restrictions or presenting a more favorable regulatory framework for digital currencies.

The situation is further complicated by the fact that most Americans don’t engage with or show much interest in crypto. However, regulatory blunders have resulted in a surprising level of public empathy for the industry. The most significant setback being the SEC’s controversial approach to approving Bitcoin ETFs, which was criticized as “arbitrary and capricious” by a higher court.

There’s increasing concern that the careless and prejudiced attitude towards cryptocurrencies observed in some Biden administration actions may be pervasive. The public desires a secure and regulated crypto space, with strong consumer protections. They are not interested in complicated debates over whether an asset falls under the category of a security.

As a crypto investor, I can understand how the regulatory crackdown on cryptocurrencies in 2022 might have seemed politically advantageous at the time, given the industry’s tumultuous state. However, with prices rebounding once again, it now seems that such heavy-handed regulations may be a waste of resources. Not only that, but pushing too hard against the crypto industry could lead to backlash from insiders and experts in the field.

The idea that Biden may be changing his stance on cryptocurrencies is purely conjectural; there isn’t any concrete proof to support it. However, it’s worth noting that significant progress has been made in crypto legislation recently, and ETF approvals for Ethereum are once again a possibility. Additionally, Trump managed to win over the crypto community’s “single issue” voters. This theory can’t be definitively proven, but it gains more credibility with each positive development in the crypto space.

At the end of the day, politics, like crypto, really is all about vibes.