The future of cryptocurrency seems quite challenging during this dropdown situation in the market. Gary Gensler, the chairman of the U.S. Securities and Exchange Commission (SEC), strictly conveyed his views against the digital asset industry. According to him, the ‘vast majority of existing cryptocurrencies are securities, issued to the public violating laws and regulations.
The chairman stated, “Cryptos are not the same as laundromat tokens. Promoters are marketing it, and the investors are purchasing most of these tokens, following or anticipating profits based on the efforts of others.”
The Remarks Regarding Cryptos :
A group of users in the crypto space is demanding a new set of rules specifically for digital assets. According to them, the existing securities law is not suitable for cryptocurrencies. Though, Gensler very clearly explained that no such regulations will be forthcoming. According to him, most cryptocurrencies have to be regulated as securities in the interest of investor protection.
“Nothing about the global crypto industry is inappropriate with the securities laws,” stated Gensler. He further added that investors’ protection is as important regardless of underlying technologies.
The Chairman advised that trading platforms should be registered with the SEC as securities exchanges and broker-dealers. According to him, cryptocurrency and stablecoin operators should register and regulate their tokens.
At the same time, the chairman of the Federal Reserve, James Powell came up with his view. According to him, if the crypto industry intends to play any role in the global financial world, it should be “appropriately regulated”. But remarks on inflation raised more concern.
He also stated that “It is basically our view, and my view, that we should act immediately, confidently, strongly, as we have been working.”
According to Powell, “As long as the inflation remains well above target, the risk would be greater as the user starts to see higher inflation as the norm.”
On the same day, the European Central Bank (ECB) climbed its benchmark interest rate by 75 base points. According to Powell, he suggested the U.S central bank could also follow suit in September.
Mainly, news of benchmark interest rate hikes becomes the major reason for crypto prices to dip. Recently, at the Jackson Hole conference, Powell clearly stated that inflation is the Fed’s top priority. They are aimed to fight it head-on.
His comments caused a sharp decrease in the crypto market. Bitcoin dropped nearly 6 percent. Also, the global crypto market cap fell below $1 trillion after Powell’s hawkish remarks.
Therefore, shockingly, Powell’s remarks seem to have had the reverse effect. At the time of Powell’s remarks, BTC raised from nearly $19,168 to $20,638 at the time of writing. It was a rise of nearly 7.60 percent over the last 16 hours. The second largest crypto, Ethereum, is also facing a similar rally during the same time.
Over the last few months, cryptocurrencies have dropped amidst rising inflation. The key inflation rate touched an all-time high of 9.1 percent in June. It caused a significant dip in the crypto markets. However, inflation has decreased since then. It stepped down 8.5 percent in July. Hence, investors and traders might see Powell’s determination to fight inflation “until the job is done” as a green signal.
Another remarkable reason for the surprise rally in the crypto industry could be the rise in U.S stocks. The Dow Jones Industrial Average raised 0.61percent. Also, the Nasdaq Composite jumped 0.60 percent after Powell’s comments. The relationship between stocks and the crypto market has been effective and notable over the previous few weeks.