What happened
The crypto market is once again seeing a lot of volatility, but right now the moves have been positive. Investors are moving back into crypto assets broadly, and the big cryptocurrencies are leading the way.
At 11:40 a.m. ET on Thursday, Bitcoin (BTC +0.64%) was up 2% in the last 24 hours, Ethereum (ETH 0.18%) was up 6%, and Solana (SOL +0.61%) has risen 7.3%. These major tokens have pulled the entire crypto space higher.
CRYPTO: BTC
Key Data Points
So what
The theme of the day is regulation, and there were mixed signals for the crypto industry. Securities and Exchange Commissioner (SEC) Chairman Gary Gensler said in a speech this morning that the agency has all of the rules it needs to regulate cryptocurrencies. Gensler reiterated that he thinks "most crypto tokens are investment contracts," which would indicate that most cryptocurrencies will need to be registered as securities, in his eyes.
Gensler's comments followed those of Michael Barr, a member of the Federal Reserve Board of Governors who is in charge of regulating U.S. banks. Barr said he's pushing for congressional action on stablecoins. In his view, stablecoins can present systemic risk, and investors should have transparency around how they work and what they own. This might mean increased scrutiny for cryptocurrencies, but Barr doesn't seem hostile to the industry.
The push for increased regulatory oversight isn't surprising, but it's taking a long time for Congress and federal agencies to finalize rules for the industry. Gensler would like companies like Coinbase Global (COIN 3.48%) to register as brokers and have increased disclosures from token operators, whether they're companies or decentralized organizations.
In a very surprising move, Coinbase also announced that it is funding a lawsuit brought by six people who are challenging the Treasury Department's sanction of Tornado Cash open-source smart contracts and its users. This is an aggressive move by Coinbase to push back against regulators who are starting to having an effect on commonly used crypto products.
Coinbase acknowledged that Tornado Cash could have been used by criminals, but that doesn't mean the code itself or other users of the code should be affected by sanctions. This will take time to play out, but Coinbase is planting a flag on the side of crypto developers.
Now what
Every day there seems to be another big move in cryptocurrencies, and today the market is more bullish on the space. While there's a lot of regulatory uncertainty, I do see a willingness to find regulatory solutions for the industry that will encourage innovation.
At the same time, it's interesting that Coinbase, which has tried to be friendly with regulators, is aggressively defending the industry through funding the Tornado Cash lawsuit. That could give it some good public relations within the community, for now.
I see today's moves as typical volatility, but investors will want to watch regulators' actions in the crypto space. Some tokens could eventually become securities, and it's possible that companies will need to register with the SEC as well. It's all part of the maturation of crypto as an industry.
