The future of crypto could be determined by the Senate Agriculture Committee. No, that’s not a misprint. That’s because the Commodity Futures Trading Commission (CFTC) is working hard to become the primary regulator of the crypto industry, and the CFTC falls under the purview of the Senate Agriculture Committee. An expanded role for the CFTC is widely perceived as good news by the crypto industry, which sees the CFTC as a much more crypto-friendly regulator than the SEC.
It is noteworthy that the regulatory turf war between the CFTC and the SEC is being played out publicly these days. SEC chief Gary Gensler has publicly demanded that his agency regulate the crypto industry, and now the CFTC is hitting back. CFTC head Rostin Behnam just threw a bone at the crypto industry by suggesting so in a chat at the NYU School of Law Bitcoin (BTC 3.60%) could double in price if his agency is allowed to set the rules. A doubling would send Bitcoin on a trajectory from its current price of around $20,000 to almost $40,000.
Is crypto a security or a commodity?
Whether the CFTC or the SEC will regulate crypto hinges on a single question: is crypto a security or a commodity? If it’s a security, the SEC can regulate it. If it’s a commodity, the CFTC has to regulate it. According to current guidelines, crypto is only a security when there is an investment treaty where people pool their money in a common venture to make a profit.
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In the case of Bitcoin, there is almost 100% consensus that it is a commodity. In fact, some have argued that bitcoin may be the only crypto that can escape regulation by federal securities laws. The SEC’s Gensler has gone so far as to claim so etherthe second largest crypto by market cap, should now be classified as a security.
So wait, you’re probably thinking, what on earth does the Senate Committee on Agriculture know about crypto that the SEC doesn’t know? Well, the Senate Agriculture Committee knows a lot about commodity trading in wheat, corn, and pork bellies. According to the Senate Agriculture Committee, cryptos are to be considered “digital commodities” that are traded on exchanges.
And the committee also knows a lot about metals like gold and silver, both of which are also traded on major exchanges. And the CFTC is allowed to regulate this. So if bitcoin really is “digital gold” – shouldn’t it be regulated the same way physical gold is?
The Bitcoin Price Prediction
To be clear, it’s a bit odd that the head of the CFTC is setting a price target for Bitcoin. Maybe that wasn’t the intention, but it’s almost as if he’s suggesting with some kind of political dog whistle: “Hey, if you have crypto lobbying power in Washington, I would suggest that you lobby for the CFTC if you like see the price of bitcoin go up.” That could explain why all the bipartisan legislation coming out of Washington these days is playing an outsized role for the CFTC and why the crypto industry seems to be positioning itself behind the CFTC as the regulator of choice.
According to CFTC chief Behnam, Bitcoin’s price could double because financial markets thrive on certainty. Creating a level playing field for an industry helps attract more participants. As a result, introducing regulatory certainty to crypto would likely attract institutional money inflows from Wall Street. Many of the biggest names in finance are simply waiting for a signal from Washington that it is okay to invest in crypto.
With institutional investors’ increasing interest in crypto this year, it’s not out of the question that Bitcoin could double in price. When BlackRock announced a partnership with coin base For example, to enable crypto trading for institutional clients, some predicted Bitcoin would surge to $250,000. This was based on the assumption that large pension funds and endowments would start allocating a small portion of their portfolios to crypto. A doubling in price to $40,000 may seem outrageous at first, but it’s certainly not out of the question.
A vote for the CFTC is a vote for Bitcoin
It’s hard to predict the various plot twists that may take place in Washington, DC these days, especially with the 2022 midterm elections approaching. Given that the Senate Agriculture Committee is now pushing legislation to make the CFTC the primary regulator of crypto to make, as well as the fact that the CFTC is publicly saying it can boost the price of bitcoin, it should be clear who crypto should be rooting for. If the CFTC regulates crypto, the price of bitcoin could double.
Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, Inc., and Ethereum. The Motley Fool has a disclosure policy.
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