NEW DELHI: To draw a contrast with China’s authoritarian model, the regulatory response in the US to cryptocurrencies will likely turn out to be more accommodating given the fast deteriorating state of the US-China relations, according to Christopher Wood, global head of equity strategy at Jefferies.
Despite China’s crackdown, the critical issue has remained what the regulatory attitude will be to crypto in the western world, most particularly in America, Wood said.
The US Securities and Exchange Commission (SEC) chairman Gary Gensler had announced last month that the Commission will come up with a regulatory framework on crypto next year, suggesting that Bitcoin might not be banned overnight.
Greed and Fear, Wood’s weekly research note, assumes that Gensler wants to come up with a definitive regulatory roadmap.
“That would ultimately be very positive since bitcoin or other crypto assets can only really fulfill their network potential, in terms of mass adoption, if they become part of the system,” Wood said in Greed and Fear.
Over the past fortnight, institutions in China intensified crackdown on bitcoin mining after the People’s Bank of China (PBOC) reminded the nation’s banks they are prohibited from engaging in any crypto-related activity.
According to China’s central bank, the speculative trading of virtual currencies will disrupt the normal functioning of the economy and the financial market.
As per industry estimates, over 90% of bitcoin mining has now been shut down in China, which once represented an estimated one-third of the global crypto network’s processing power.
According to Wood, this is a big deal since the message is that China does not want its citizens owning crypto assets. “This is in part because of the clear ability to use so-called stablecoins like Tether to circumnavigate the closed capital account. It is also, more importantly, because China does not want any competition when it launches the digital renminbi nationally, most likely in the fourth quarter of this year,” Wood opined
China’s central bank digital currency (CBDC) is expected to give the government total transparency on its citizens’ savings and spending habits.
“Certainly, the decentralized aspect of blockchain technology, which is so appealing to libertarians opposed to fiat currencies as state monopolies, is the complete antithesis of China’s collectivist system. The People’s Republic of China clearly understands this. This is certainly a far more important issue to Beijing than the carbon generating aspects of bitcoin mining,” Wood wrote.
Jefferies, which had included Bitcoin in their recommended portfolio for a US dollar-denominated pension fund in December at a price of $22,779, maintained the holding at 5% in the portfolio.
Thanks to the institutional demand from corporates such as Tesla and MicroStrategy, Bitcoin hit a fresh record high of $64,804.72 on 14 April. However, concerns over the environmental impact of bitcoin mining and regulatory crackdown in China, the world’s biggest cryptocurrency has tanked close to 50% from its all-time high.
The digital asset was trading at $34,950, up 5.5% at around 2.30pm IST, as per CoinGecko.
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