THE likely departure of US Securities and Exchange Commission (SEC) chair Gary Gensler following Donald Trump’s victory in the presidential race is sparking a rally in cryptocurrencies that were previously identified as unregistered securities by the markets watchdog.
Tokens associated with projects such as the decentralised exchange Uniswap and the layer-2 blockchain Polygon, which were named in various SEC complaints, have surged 38 per cent and 20 per cent respectively over the past three days, outpacing crypto market bellwether Bitcoin’s 14 per cent gain, according to data compiled by Bloomberg.
Under Gensler’s leadership, the SEC spearheaded an aggressive regulatory crackdown on the digital asset industry, bringing numerous cases against crypto companies and traders, including major participants such as Coinbase Global and Ethereum developer Consensys. Notably, Trump had pledged to fire Gensler on the first day of his second term while addressing a Bitcoin conference in Nashville.
“The SEC has actively pursued a regulation-by-enforcement approach in recent years, targeting specific projects with direct actions, including issuing Wells Notices,” asset manager 21Shares said in a note. “This broad market reaction reflects optimism about the anticipated regulatory easing under the new administration,” the report said.
The election results have also provided a boost to Ether, the second-largest cryptocurrency, which had previously lagged behind Bitcoin. Ether’s price has risen 21 per cent in the aftermath, as investors anticipate a more favourable regulatory environment for the asset under a new SEC leadership.
The regulatory uncertainty surrounding Ether has dampened the success of US Ether exchange-traded funds (ETFs), which have not replicated the same level of interest as their Bitcoin counterparts. Many deem the Ether ETF’s as an ‘incomplete product’ as they do not allow investors to reap passive income via staking yields.
“The question still lingers: is staking a commodity or a security?” said Jesper Johansen, chief executive of Ethereum staking platform Northstake. “Asset managers need to know how to safely incorporate staking into their Ether ETFs to satisfy the token’s total returns.”
Currently, US$6 billion sitting in Ether ETFs is not being staked, marking significant missed economic opportunities, Johansen said. “Ether ETFs are not as competitive and are stifled by unclear and unsustainable regulation,” he added. BLOOMBERG
