This week, various media outlets reported that US Treasury Secretary Steven Mnuchin was debating whether or not to implement legislation on self-managed wallets.
This has led some analysts and crypto experts to speculate on whether or not this would affect Bitcoin and the current upward momentum that has driven crypto prices soaring.
The threat of new regulations for the crypto sector is a credible event that has historically had a negative impact on crypto prices. However, this time around, there are a few reasons why the proposed rule is unlikely to cause the price of bitcoin to crash.
The possibility of regulation is priced into the crypto market
Initially, industry executives expressed great concern when Coinbase CEO Brian Armstrong shared what he had heard about the proposed rule.
Last week we heard rumors that the US Treasury Department and Secretary Mnuchin were planning a new regime for self-hosted crypto wallets before his term ends. I am concerned that this would have unintended side effects and wanted to share this concern.
– Brian Armstrong (@brian_armstrong) November 25, 2020
Those worries were compounded when Jeremy Allaire, Circle CEO, told Ryan Selkis that the possible regulation could adversely affect the entire cryptocurrency sector. The comments from the two industry heavyweights led the entire industry to be cautious about the proposed rule.
However, according to recent reports, the rule requires financial institutions to report multiple transactions equivalent to $ 10,000 a day. Compared to the initial rumors about the rule, it’s arguably less strict than it seemed. In fact, some experts say the proposed rule is similar to the existing FATF travel rule.
Given that the rule could be less restrictive than the originally envisaged regulation and the market has had enough time to react, it is possible that the market may have priced it in at this point.
Which way can mnuchin go?
There are two main routes Mnuchin could take to implement the self-custody wallet regulation. First, it could take the conventional rulemaking route, which requires a hearing and 30 days’ notice.
If Mnuchin takes the conventional approach, the proposal would have to be released this week before the president’s current term ends.
Alternatively, Mnuchin could seek a “good reason” for passing the regulation. This would allow Mnuchin to speed up the process. Jason Civalleri, a lawyer, said:
“There is also an exception when an agency expresses an“ important reason ”that the notice / public process requirements are ‘impractical, unnecessary or contrary to the public interest. ‘For example, one possible use of this exception is when a pandemic needs to be stopped. The Treasury Department would have to articulate why it wants to skip this requirement for “good reasons”. Perhaps it can show, for example, that the early implementation of the new rule hinders an extraordinary level of criminal activity. Seems unlikely, but maybe? “
At this point, Mnuchin is more likely to take the conventional approach. To use the “good cause” method, he would need to find sufficient evidence to prove that crypto has significant criminal activity.
Hence, the likelihood that the proposed rule will be implemented in the coming days remains the highest, which would be optimistic for Bitcoin. Matt Odell, a bitcoin and privacy attorney, said:
“The bloc speculating that the US government only needs one exchange to report Bitcoin withdrawals of more than $ 10,000.” I already assumed they did. The concerns Armstrong and Davidson voiced seemed far worse. Perhaps public concern helped. Very bullish if it’s true. “