The market is currently underestimating the significance of Washington’s evolving attitude toward cryptocurrencies. According to Bitwise CIO Matt Hougan, there has been a significant shift in the US political landscape regarding crypto in recent weeks. While historically a partisan issue, with Republicans generally supporting and Democrats showing resistance, we are now seeing a more positive stance from both sides.
Hougan highlighted several key legislative actions that indicate a changing attitude toward cryptocurrencies in Washington. On May 8, 21 House Democrats voted alongside Republicans to repeal SAB 121, a controversial SEC rule that restricts large banks from holding crypto. This marked the first positive legislative action on crypto in US history. Furthermore, on May 20, 71 Democrats joined 208 Republicans in the House to pass FIT21, a comprehensive crypto bill that would assign primary oversight to the crypto-friendly Commodity Futures Trading Commission (CFTC).
Despite these positive developments, crypto still faces ongoing political challenges. President Joe Biden recently vetoed the repeal of SAB 121, highlighting the complex regulatory environment surrounding cryptocurrencies. Regulatory uncertainty has long been a primary concern for financial advisors and Wall Street institutions. According to a recent Bitwise survey, 64% of US financial advisors cite regulatory uncertainty as the main barrier to greater crypto exposure in their portfolios.
Hougan believes that once the regulatory barriers are lifted, a significant portion of the estimated $20 trillion managed by financial advisors could flow into crypto. This influx of funds could have a substantial impact on the broader market, potentially reaching new heights if Wall Street fully embraces crypto as a mainstream asset. While the market has been largely indifferent to these changes, there is an opportunity for savvy investors to capitalize on this shifting landscape.
The evolving attitude of Washington toward cryptocurrencies has the potential to unlock substantial “alpha” and drive significant growth in the market. Despite facing ongoing political challenges, the recent legislative actions indicate a positive shift that could pave the way for increased adoption of crypto in the mainstream financial sector. It is essential for investors to stay informed and position themselves strategically to take advantage of the changing political dynamics surrounding cryptocurrencies.
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