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Five Things to Know in Crypto Today: US and EU Regulations Diverge
By:
It was a busy Friday. The crypto market cap tumbled for a third consecutive day, with US government scrutiny, Fed Fear, and recession jitters weighing.
In this article:
Key Insights:
- On Friday, the crypto market cap tumbled by $39.92 billion to $1,117 billion.
- US Secretary of the Treasury Janet Yellen put cryptos in the spotlight during a Financial Stability Oversight Council Meeting.
- EU Parliament makes progress towards a transparent crypto regulatory framework.
Investor sentiment turned sour in the second half of the week. The crypto market fell for three consecutive sessions from Wednesday, with Fed talk and economic indicators from Europe and the US weighing on buyer appetite.
Crypto Market Falls for a Third Session as Recession Fears Bite
On Friday, the total crypto market cap fell by $39.92 billion to $1,117 billion. Significantly, the market cap fell for a third consecutive day, leaving the market cap down $127 billion for the week.
US economic indicators and Fed chatter weighed on investor sentiment, with the latest round of stats signaling the beginnings of a US economic recession.
However, in April, the Services PMI increased from 52.6 to 53.7, with the manufacturing PMI up from 49.2 to 50.4.
For investors, the positive numbers on Friday followed disappointing jobless claims, Philly Fed Manufacturing Index numbers on Thursday, and UK and euro area inflation figures from Wednesday.
The UK and euro area inflation numbers inflicted a $69.4 billion drawdown, with the numbers from Thursday delivering a $16.04 billion blow.
Fed chatter failed to soften, with the Fed hawks out in force, talking about the need for more hikes to tame inflation.
The jury is out on how much further the Fed needs to go. However, further rate hikes could send the US into a recession, with Fed staff projecting a mild recession later this year. However, the US economy could be in for a hard landing should inflation remain elevated.
According to the CME FedWatchTool, there is an 89.1% chance of a 25-basis point interest rate hike in May versus 49.4% one month ago. Significantly, the probability of another move in June has also risen from 16.6% one week ago to 23.4%.
More hawkish Fed bets would be crypto market negative.
US Stays Anti-Crypto with Treasury Secretary Yellen Joining the Chorus
US Secretary of the Treasury Janet Yellen put cryptos in the spotlight on Friday. The US Department of the Treasury released Yellen’s remarks from the Financial Stability Oversight Council Meeting, highlighting the US government’s plans to ensure financial stability.
Among two proposals, the government ‘proposed interpretive guidance on nonbank financial company designations.’
Yellen cited the recent banking developments to highlight the need for the proposed actions. Yellen discussed the need for preventative tools to tackle systemic risks that could arise from nonbank financial firms whose activities or distress could threaten the financial system.
The designation tools would include significant engagement and communication with companies under review. Significantly, the Council will also interact with the company’s primary regulator during any designation review.
In the case of crypto-related firms, the Council would interact with the SEC and CFTC.
EU Parliament Votes in Favor of MICA Regulations
This week, the European Parliament voted 529-29 favoring introducing laws to trace crypto asset transfers. Transfers in excess of €1,000 would fall under the new tracking law.
Lawmakers also voted 517-38 in favor of uniform EU market rules for crypto assets. The law provides consistent crypto rules for consumer protection, environmental protection, and the supervision of crypto assets.
Lead MEP for the MiCA regulation Stefan Berger had this to say,
“This puts the EU at the forefront of the token economy with 10 000 different crypto assets. Consumers will be protected against deception and fraud, and the sector that was damaged by the FTX collapse can regain trust. Consumers will have all the information they need and all underlying risks around crypto-assets will have to be monitored. We secured that the environmental impact disclosure will be taken into account by investors in crypto assets. This regulation brings a competitive advantage for the EU. The European crypto-asset industry has regulatory clarity that does not exist in countries like the US.”
Coinbase CEO Brian Armstrong Hits Out at the SEC
Overnight, Coinbase (COIN) CEO Brian Armstrong shared his latest movements ahead of a legal battle with the SEC, saying,
“Spent the day in DC meeting with members of Congress. We need regulatory clarity in the US for centralized players in crypto for many reasons – consumer protection, national security, economic growth, etc. The SEC has caused untold harm to America with its policy of regulation by enforcement. We will fight to fix that.”
Coinbase shares fell by 2.41% to $59.04 on Friday.
About the Author
Bob Masonauthor
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.
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