US election result will likely lead to better crypto regulation: S&P analysts

The outcome of the 2024 US elections, in which Republicans take control of the White House, Senate and Congress, could significantly reshape the regulatory environment for cryptocurrency in the country, according to S&P analysts.

According to a recent S&P Global report shared with Crypto.news, this political shift could transform the US approach towards crypto regulation from sanctions-focused measures to a more predictable rule-making framework.

The US has lagged behind other major markets in improving regulatory clarity for digital assets. Regions such as Europe have implemented structured frameworks for stablecoins and other crypto activities.

Stablecoins, a type of cryptocurrency tied to fiat currencies such as the US dollar, are essential to enable blockchain-based payments beyond crypto markets.

But in the US, companies face the risk of enforcement actions resulting in penalties and legal disputes due to unclear definitions of securities. The lack of clarity also affects staking, a process where investors lock up crypto assets to earn rewards. Some firms have stopped offering staking services due to regulatory pressures, while others are challenging these restrictions in court.

“Crypto companies in the US face the risk of fines and enforcement actions related to listing unregistered securities. “This is due to the lack of regulatory clarity that crypto assets are securities,” analysts wrote.

upcoming legislation

Regulatory changes regarding stablecoins and crypto asset custody can be expected in early 2025, S&P analysts noted in their notes.

Additionally, custody services for crypto assets face significant challenges due to existing regulations such as the SEC’s Private Accounting Bulletin – SAB 121. This regulation requires organizations that hold crypto assets on behalf of their customers to report those assets as liabilities, making crypto custody expensive for US banks. .

Although a proposed repeal of SAB 121 was vetoed earlier this year, the new administration may reconsider the issue and potentially pave the way for greater market participation.

Bitcoin reserve?

One of the more ambitious proposals came from Senator Cynthia Lummis; He suggested that the Federal Reserve should purchase 1 million Bitcoin (BTC) in the next five years; This means roughly 5% of Bitcoin’s total supply. While proponents argue that it could protect against currency depreciation and manage the national debt, critics question the feasibility and consequences of such a move.

Source: S&P’s November 20 Global Ratings

Even if the bill does not pass, analysts believe the narrative is changing as interest in Bitcoin’s role in traditional financial markets increases. According to the note, these discussions could further impact the global adoption of Bitcoin by encouraging other nations to take similar measures.

Global coordination – It’s time for the US to catch up

Beyond domestic concerns, S&P notes that the US’s lack of involvement in global regulatory coordination is hindering blockchain innovation in financial markets. Greater U.S. involvement could help scale existing blockchain use cases both domestically and internationally.

“We believe stronger U.S. participation could enable commercial scaling of already well-tested use cases both domestically and globally,” the analysts wrote.

As the United States enters a period of potential regulatory transformation, market participants await lawmakers’ next steps. According to S&P, improvements in the regulatory framework could provide much-needed clarity and open new doors for innovation and growth in the digital asset space.