What’s your party trick?
Is it the way you pop open a beer bottle? The handstand on the dance floor? Or your smooth-talking skills? If you are a regulator however, your party trick is a full-on crackdown, while everyone is enjoying a bullish party.
This past week all eyes were firmly affixed, first on Capitol Hill as Jerome Powell, Chair of the Federal Reserve addressed the House Financial Services Committee on regulating Libra. And then, the focus shifted to Twitter, the ‘official’ communications channel of the U.S President. Trump made his displeasure about not just Facebook and Libra, but Bitcoin and cryptocurrencies, known to the entire world.
If you would ask yourself who the most important and influential Federal government employees were, POTUS and the Fed Chair would rank quite high on the list. Hence, the concern.
While all this transpired, Bitcoin, after a dip from $13,000 to $11,500, held steady. This ringing criticism from the Commander-in-chief did not dent the price which has been rallying over the past few months. Bitcoin, undoubtedly, is in the middle of a bull run, surging by over 200 percent since April.
The Bitcoin bull run and the regulatory crackdown, largely ushered in by Libra, does point to a trend.
Ari Paul, BlockTower Capital’s CIO, shared his theory on the bull cycle-regulatory crackdown that has been plaguing the industry since its commencement, with a few key takeaways. Libra, in his opinion, moved this trend up by “1/2 a bull cycle.”
The first iteration of this cycle was with respect to Bitcoin’s “blackmark,” as the “currency of the Dark Web.” He stated that the king coin “threatened law enforcement with its use on darknet.” However, from Silk Road to the Chicago Mercantile Exchange, that remains a dark forgotten part of the industry.
Fast forward to 2017, Paul stated that ICOs or “security issuances” were the next target of the SEC, with several cease and desist orders being tabled to token issuers and a number of “scam” issuances surfacing, all while the price topped out within $20,000 and fell back down to $3,200 between November 2017 and December 2018.
The third coming of this cycle was with “central banks,” with several apex sovereign banks detailing their angst against the cryptocurrency community. These banks called for bans on cryptocurrency exchanges, trading and, in some cases, even holding digital assets.
2/ first Bitcoin threatened law enforcement with its usage on darknets. Then it threatened the SEC once security issuance got big enough in 2017. Next round was destined to be central banks.
— Ari Paul ⛓️ (@AriDavidPaul) July 13, 2019
Regulators, persistent as they are, do not let up. Paul envisioned that “this level of crypto-scrutiny” would be reserved only when Bitcoin crosses $100,000. However, a ‘cryptocurrency’ launched by a social media giant boasting billions of customers worldwide, and backed by a heavyweight consortium based in Switzerland, pulled that “regulatory paradise” a lot closer.
Libra, in his opinion, has put the cryptocurrency community in the regulators’ “crosshairs.”
The aftermath of something like this will be several top world economies, in a fit of Libra-induced panic, banning Bitcoin trading prior to this bull-regulation cycle concluding.
However, it is unlikely that the United States will take the route that countries such as India and China are likely to take as it is “relatively “liberal.”
This regulation could have long drawn-out consequences for the cryptocurrency community, as the Libra project is only getting started and regulators are already out in full force. Some “retroactive enforcement” could be likely in several crypto-skeptic countries, according to the investment officer.
Libra is still a year out from its official launch, which Facebook officials confirmed will be sometime in 2020. Lawmakers, regulators and central bank heads in the United States, France, the EU, Australia, Singapore, and Japan have all lashed out against it, with Bitcoin recording some of the backlash in its price too.
With a long way to go for both Bitcoin and Libra, where will this bull-regulation cycle take us?