Lack of regulatory norms leading to market divergence of Crypto in the US, says report

US regulator: Crypto's role in collapse of Silicon Valley Bank and Signature banks is unclear

The market in digital assets continues to evolve, digital assets are instantiated through computer code and depend on computer algorithms to trigger and validate a transaction in a given digital asset. Digital assets cover all types of virtual and electronic assets, regardless of how they are otherwise named or categorized by regulatory agencies, including cryptocurrencies, security tokens, utility tokens, virtual assets, virtual collectables, stablecoins, and altcoins, among others.

Countries across the globe are working crucially to establish a crypto ecosystem and simultaneously handle its implementation. For example, recently, the European Union passed new legislation legalizing digital assets. Also, countries such as Hongkong, and Japan are embracing the use of digital assets.

Amid this, a new analysis published by ARK Invest presented that the regulatory notions are leading to the divergence of the digital market from the US to countries such as the UAE, South Korea, Australia and Switzerland. The report highlighted that regulatory uncertainty seems to be discouraging both existing firms and new entrants in the crypto space. Thus, causing the United States to cede its position at the forefront of a transformative industry to the countries above mentioned.

The analysis discussed that major trading firms, including Jane Street Group and Jump Trading, are curtailing their participation in US crypto markets in response to regulatory uncertainty and risks. Once populated by well-established and credible institutions, the crypto ecosystem in the US now faces a void that is likely to put interest among other institutional investors on hold.

Crypto liquidity in the US has diminished considerably and the volatility of crypto prices has increased. According to CoinMetrics, bitcoin trading volume has dropped 75% from $20 billion per day in March to ~$4 billion last week. Furthermore, last week on Binance, the US the bitcoin price was ~$600 higher than on other exchanges, a signal of weaker price discovery.

The United States have stringent norm regarding regulations and mining of cryptocurrencies for instance, in President Biden’s 2024 federal budget, the proposal for the digital asset mining energy (DAME) excise tax would tax up to 30% of crypto miners’ electricity costs, in 10% increments spread over three years starting January 2024. Further, the fall of FTX further deteriorated the ecosystem development in the country.

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