Bitwise: Crypto must prove essential value without regulatory framework
Matt Hougan of Bitwise warns the cryptocurrency sector faces an extended period of regulatory uncertainty and doubt if US lawmakers don't approve market structure legislation.
Should the United States Congress fail to approve legislation establishing a clear regulatory framework for digital assets, the cryptocurrency sector must embed itself deeply into the daily routines of Americans, or face potential setbacks when a new administration takes office, according to Matt Hougan, chief investment officer at Bitwise.
In a memorandum released Monday, Hougan explained that the proposed legislation currently advancing through the Senate, which aims to establish clear guidelines for how regulatory agencies oversee cryptocurrency, "would cement the current pro-crypto regulatory environment into law."
Should this legislation not succeed, Hougan warned that a subsequent administration "could reverse today's pro-crypto push," leaving the industry with a three-year window, extending to the conclusion of President Donald Trump's term (in 2029), to "make crypto indispensable to the everyday lives of regular Americans and the traditional financial industry."
If, at the end of three years, we're all using stablecoins and trading tokenized stocks, we'll get positive crypto legislation regardless of who is in charge. But if crypto is instead still operating on the edges, a change in Washington could be a huge setback.
Currently, two Senate committees are working to review and advance cryptocurrency market structure legislation designed to establish clarity regarding how the Securities and Exchange Commission and the Commodity Futures Trading Commission should regulate digital assets.
These markup sessions have experienced numerous postponements as both the Senate Banking and Agriculture Committees have struggled to secure bipartisan backing for the proposed legislation, with various legislators insisting on the inclusion of ethics requirements and prohibitions on stablecoin yields, alongside additional demands.
Crypto on divergent paths depending on bill's fate
According to Hougan, the outcome of the cryptocurrency legislation, regardless of whether it advances successfully or stalls, will carry "big implications for near-term price returns."
The result is two very different pathways for the market. One is an early bull market built on strong expectations. The other is a 'wait and see' market where any optimism has to wrestle with prolonged regulatory grind and skepticism.
Should the legislation be approved, particularly a variant "that the crypto industry is comfortable with," the digital asset market "will rally sharply," according to Hougan.
With legislation in place, investors will assume that the growth of things like stablecoins and tokenization is guaranteed. They'll begin to build that future into prices today.
Conversely, if the proposed legislation does not pass, the trajectory of growth for the cryptocurrency sector will hinge on tangible, real-world advancements, Hougan explained.
Investors will demand that crypto prove real-world adoption before they begin to reward prices, because without that real-world adoption, crypto will be built on a regulatory foundation of sand.
Despite these concerns, Hougan expressed confidence that Congress would ultimately approve the crypto market structure legislation, noting that the Trump administration has thus far "delivered on its election promises to the crypto industry."
But if it doesn't pass, I think we need to prepare for a slower ascent.