Top US Trends - Expect some regulatory pull back along the way as ETH climbs to ATH in Q4, even if it pulls DeFi with it; with derivatives, lending, and decentralized exchanges specifically experiencing possible asymmetric regulatory headwinds (signaled by SEC rhetoric, Infra Bill and Budget Amendment tax reporting expansion). As SEC and CFTC continue to ramp up rhetoric and vie for regulatory scope and influence, expect an acceleration of legislating-by-enforcement action in the next 90-120 days, coupled with the Treasury Department aggressively touting a tax reporting/revenue capture agenda which could affect exchange flows. Dialogue will ensue around proposed legislation after the passing of the Infra Bill in early October, and will take shape towards the end of the year and early 2022 as legislators return to engage in public discourse. Good outcome here will be when the narrative starts to bring agency regulation by enforcement (SEC/CFTC) back to the center over the long term.
- Gensler / SEC power narrative accelerating with comments this week to EU / Regulators [NEGATIVE] - Demands global public policy framework as necessary for long term safe adoption and use of crypto, referencing proliferation of stablecoins (75% of all pairs) across the crypto $2.1T market
- SEC & CFTC vying for regulatory/oversight scope [POSITIVE] - Enforcement landgrab will accelerate enforcement actions, drive price volatility with flight to "safer" assets, while the House explores newly tabled broad based legislation.
- Treasury continues Infra Bill pressure on increased tax reporting via Budget Bill ad on [NEGATIVE] - This uncontestable provision exhibits Biden administration's continued focus on revenue capture at the expense of extending reporting requirements across cryptoverse.
- AML/Anti-Terror Financing continue to be FinCEN's broad attack vector, this time via USPS Inspection training and enforcement standardization [NEUTRAL]
- SEC sues lending platform BitConnect for $2B fraud in ponzi/asset siphoning scheme [NEUTRAL/NEGATIVE] - Regulatory enforcement actions against frauds/scams are low hanging fruit in building agency regulatory foundation in preparation for narrow pre-judication enforcement targeting all facets of DeFi.
Global Regulatory - Primary non-Western economies are accelerating CBDC clearing and settlement trials in a show of support and adoption for global CBDC and stablecoin adoption. Look to see how, and on which side, these countries incorporate private stablecoins into the feedback loop. If positive, this will put increasing pressure on US / Europe to normalize negative stablecoin rhetoric and work on a global regulatory framework. Global economies are waking up in real time to the tax and revenue generation promised by pro-crypto regulation and national PoW mining mandates, indicating a rising toehold of crypto assets on certain sovereign balance sheets in Q1 2022. In a negative signal, traditional crypto tax havens are seeing small but increasing calls to action (via FATF) to participate in anti-fraud and money laundering investigations which could force increased KYC/AML regimes in traditionally low regulation jurisdictions.
- Mature and emerging economies are warming up to taxation and friendly regulation [POSITIVE] = Slovenia proposes 10% crypto tax, South Korea setting up bureau to focus on crypto regulation, India changing course.
- Primary non-western economies and countries (Australia, Mayalysia, Singapore, S.A. and Nigeria) are rallying around CBDC trials [POSITIVE] - Will put increased pressure on global coordination, pulling US and EU to the center.
- Micro-economies are rallying around BTC mining for revenue generation [POSITIVE] - Belarus / El Salvador / Iran coming around and even leaning on BTC mining.
- Binance likely shopping for a sovereign balance sheet partner - [NEGATIVE] Indicating continued global regulatory dialogue with mega CeFis to regulate retail and institutional on/off ramps.
- Seychelles receive request to probe BTC transfers in OneCoin Scam [NEGATIVE] - Starting to see traditional crypto tax havens being held to task over AML/CTF initiatives via fraud investigations.
- [POSITIVE] - Supports global crypto adoption.
- [NEGATIVE] - Lack of clarity creates further confusion for innovators in the space.
*Note, this does not constitute legal, accounting, or tax advice of any kind and should not be relied upon as such. Opinions are my own and are for discussion purposes only. This does not represent the views of Decentral Park Capital or its affiliates.
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