Each day, Coinrule will run through the state of the digital assets market for Blockbeat, your home for news, analysis, opinion and commentary on blockchain and digital assets.
“The enemy of my enemy is my friend” may be an apt phrase to describe the upcoming US election in relation to crypto. The current Biden administration has demonstrated its disdain towards the industry with increasing aggression recently. On Wednesday, the Biden administration also publicly chose their side, and may have made US crypto holders’ election voting decision a lot simpler.
The Biden administration made a statement saying they would veto any legislation that would allow banks to custody crypto. This statement was prior to a House of Representatives vote to stop the Securities and Exchange Commission (SEC) from using the restrictive regulation. Thankfully for the crypto industry, the House voted for stopping the regulation, even with Biden’s veto threat. The SEC’s Staff Accounting Bulletin No.121 states banks should hold customers’ crypto as liabilities on their own balance sheets. This forces banks to hold reserves against the crypto they had in custody. Doing this is highly unattractive for banks and causes them burdensome capital requirements.
Additionally, no other assets require this rule for custody. This strongly disincentives banks from holding crypto for their customers. For some crypto holders this may be irrelevant. In their eyes, everyone should be the custodian of their own crypto anyway. However, for further adoption of crypto, banks will be an obvious solution for those who prefer less responsibility in dealing with custody and don’t mind having less control.
Biden spoke on the matter, saying the vote limits “the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto-assets” and “would introduce substantial financial instability and market uncertainty.” This seems especially questionable considering the lack of regulatory comprehension the SEC has provided to the crypto industry. With the SEC’s recent attack against self-custody wallets, it makes crypto custody even more confusing. Seemingly, the fundamental issue for the Biden administration isn’t where you hold your crypto, it’s the fact you are holding it.
On Wednesday night, Biden’s election rival, Donald Trump, also made comments on crypto. This time they were in a positive light. The former president was hosting an event for his own NFTs where he stated he was “for crypto.” He also mentioned he doesn’t want US crypto companies going elsewhere due to hostile regulations. Trump also stated he will now try to accept campaign donations in crypto. However, it is wise to remember Trump was once opposed to crypto, and even Michael Saylor was also once a crypto bear. Now his company holds over $13 billion worth.