Cryptocurrency powers hold legislative power, but the Federal Reserve remains a hindrance
According to reports, the Senate Banking Committee is preparing to announce the establishment of the first subcommittee specifically responsible for digital assets.
The Republican Party currently controls the Senate and House of Representatives, and Trump will begin his second term under the leadership of a unified government. Therefore, the Republican Party's control over both houses has opened up a clearer path for the passage of cryptocurrency friendly legislation.
Based on previous efforts, the subcommittee may focus on stablecoins. Its goal is to create a regulatory framework that supports the development of the industry while managing potential risks.
Senator Tim Scott prioritized the cryptocurrency subcommittee and appointed Cynthia Lummis to the leadership position.
Meanwhile, Fox Business Channel reported that South Carolina Senator Tim Scott, the current chairman of the Senate Banking Committee, has made forming a cryptocurrency subcommittee one of his top priorities. As the chairman of the committee, Scott is responsible for overseeing major financial regulatory agencies, including the U.S. Securities and Exchange Commission and the Federal Deposit Insurance Corporation (FDIC).
Scott plans to build on the success of the cryptocurrency subcommittee established by former North Carolina Congressman Patrick McHenry in the House of Representatives in 2023. According to reports, in order to achieve this goal, he has appointed Wyoming Republican Senator Cynthia Lummis, who supports cryptocurrency, as the chairperson of the subcommittee. Her appointment will be approved by a vote in the coming days.
The Banking Committee of the United States Senate and the Financial Services Committee of the United States House of Representatives are important forces influencing the US financial system in both houses of Congress. Among them, the Senate Banking Committee focuses more on macro policies and national strategic regulation, while the House Financial Services Committee is more flexible and rapid in specific legislation and emerging finance areas.
From the current personnel composition, it can be seen that members of the encryption team have significantly strengthened their control over these two institutions compared to before, which will be beneficial for the formulation of encryption laws in the future. Overall, it is also in line with the personnel expectations for Trump's inauguration. The main authority of these two committees is bill making, which means they have legislative power, which may make it easier for some of Trump's encryption bills to be implemented.
Although Trump has taken the lead in formulating and implementing encryption laws (including the Treasury Department, SEC, CFTC, and some key positions in the main agencies responsible for implementing and supervising the laws are currently dominated by encryption members), important financial institutions outside the government, such as the Federal Reserve and some traditional banks, still pose significant obstacles to policy implementation. Currently, the hawkish tendencies of the Federal Reserve have had a serious impact on the cryptocurrency market.
Employment is imminent, strong consensus may trigger market competition
On January 10th, it was reported that less than two weeks before Trump's inauguration ceremony, cryptocurrency industry executives are competing for opportunities to interact with Trump himself and a seat on the planned cryptocurrency advisory committee (which is expected to be established shortly after Trump takes office)
According to insiders, industry insiders plan to use this committee to influence the new government's digital asset policies, which may consist of around twenty CEOs and founders. Currently, most potential appointees have established relationships with Trump and have visited him in recent months.
It is reported that since Trump's re-election in November, Mar-a-Lago has received a large number of cryptocurrency industry professionals, including Crypto.com CEO Kris Marszalek, Coinbase CEO Brian Armstrong, and others. In addition, there are reports that the cryptocurrency industry will also hold a dance party on January 17th to celebrate the inauguration of Trump and Vance, hosted by BTC Inc. and Stand With Crypto.
At present, the cryptocurrency market generally believes that the presidential inauguration day on January 20th will be the peak (or one of the key nodes) of this round of market trend. However, in financial investment, when faced with specific favorable dates, the surge in investor sentiment may lead to short-term irrational exuberance in the market. Some investors may be worried about missing out on opportunities (FOMO) and therefore enter early. At the same time, in order to avoid being trapped at high levels, many investors may take profits in advance due to the mentality of "willing to earn less rather than lose". However, if most investors in the market act early, the market will experience a "rush" situation, resulting in a large outflow of funds before the true peak arrives. In this case, the originally expected high point of the market will be overdrawn in advance, and the market may end before January 20th, which may even trigger a pullback risk.
Other analysts have pointed out that after Trump officially takes office, February will become a "vacuum period" for cryptocurrency market news. According to Trump's previously revealed work schedule, there was no mention of any cryptocurrency related content during his 120 day tenure, and his focus will be on immigration and government restructuring. The two meetings of the Federal Reserve in the first quarter also avoided February and were held in January and mid to late March of 25 years. Therefore, without additional news support, the market is likely to experience a certain pullback after Trump takes office, and fluctuate repeatedly in a lower range in February.
Standard Chartered expands into the crypto blue ocean, IMF intervenes in Kenya's crypto market
On January 9th, Standard Chartered Bank announced that its newly established Luxembourg entity (a regulated financial institution established by Standard Chartered Bank in Luxembourg) will serve as a regulatory gateway into the EU market, providing cryptocurrency and digital asset custody services to EU clients. Luxembourg, with its balanced regulatory and financial environment, can meet the growing demands of the EU market. Previously, Standard Chartered had launched digital asset custody services in the United Arab Emirates.
With the official introduction of the EU's Crypto Asset Market Regulation Act (MiCA), the EU's regulatory framework in the field of cryptocurrencies is becoming increasingly sophisticated. The MiCA Act specifies the classification and regulatory requirements for encrypted assets. This has resulted in the EU market clearing out a group of competitive cryptocurrency companies like Tether. This provides new development space for cryptocurrency service providers, attracting numerous institutions including Standard Chartered Bank to enter.
From a macroeconomic perspective, the EU and Eurozone economies are expected to grow by 0.9% and 0.8% respectively this year, and are expected to rebound to 1.5% and 1.3% respectively next year. Although the economy has rebounded, the overall growth rate is still relatively slow. The average global economic growth in 2024 is 2.8%. In addition, under multiple pressures such as falling but unstable inflation, geopolitical tensions, and structural challenges, the cryptocurrency market is seen by the EU as the next strategic growth point. This also triggered a rapid rush of crypto gold miners.
According to a report on January 9th, the International Monetary Fund (IMF) has recommended that Kenya create a clear and predictable regulatory environment for the cryptocurrency market to protect consumers and address risks related to anti money laundering (AML) and counter-terrorism financing (CFT).
It is reported that Kenya has a leading cryptocurrency usage rate in Africa and is implementing a cryptocurrency tax policy. The Kenya Revenue Authority (KRA) collected approximately $77.5 million in taxes from 384 cryptocurrency traders in the 2023-2024 fiscal year.
The IMF pointed out that although Kenya is leading in the use of cryptocurrencies, it still relies on outdated regulations in traditional markets, and its regulatory efforts in the cryptocurrency market are still insufficient, leading to an increase in cryptocurrency related fraud and criminal activities. The IMF recommends that Kenya develop a cryptocurrency regulatory environment that is consistent with international frameworks and standards, while considering the unique challenges and opportunities of the local market, to ensure that the regulatory framework can protect consumers, maintain financial stability, and promote innovation.
The main responsibility of the International Monetary Fund (IMF) is to maintain the stability of the international monetary system. The IMF's involvement in Kenya's cryptocurrency regulation this time may imply its intention to gradually incorporate cryptocurrencies into the regulatory scope of the global monetary system. This measure to some extent reflects the IMF's emphasis on the rapid development of the cryptocurrency market and potential policy adjustments, as the IMF currently does not recognize the "monetary" nature of cryptocurrencies.
In addition, choosing Kenya, a country that is relatively leading in the use of cryptocurrencies but lacks regulatory oversight, may be a pilot attempt by the IMF to test the feasibility of its cryptocurrency regulatory framework with lower risk and lay the foundation for future promotion in other larger economies. Of course, this trend still needs to be observed in terms of the IMF's involvement in the Kenyan cryptocurrency market. The known ways of intervention include assisting Kenya in market analysis, providing regulatory advice, and strengthening cooperation between Kenya and international regulatory agencies.
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