Cryptocurrencies had a very eventful week with ether surging due to the much anticipated “London” update finally kicking in and other regulatory announcements.
Here are the top stories that caught our eye.
Ethereum network update kicks in
E1P-1559, an update to the Ethereum network which aims to make transaction fees less volatile and more predictable, kicked in on Thursday.
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It was prompted by the fact that fees for ether transactions (called “gas”) were apt to fluctuate wildly, leaving users to guess how many tokens an ether transaction would use, which previously undermined the network’s efficiency.
Now with the network update in place, users will pay a base fee instead, which will be determined through algorithms depending on how busy the network is. Users can also pay a tip to the miner to have their transaction processed faster than other users who do not opt to tip.
Ether prices rose 4% on Thursday in the run up to the update.
SEC chief Gary Gensler calls crypto the “Wild West”
The Securities Exchange Commission – the US financial regulator – made a scathing criticism of cryptocurrencies this week.
SEC chair Gary Gensler branded cryptocurrencies the “Wild West” and called for more oversight, in a speech for the Aspen Security Forum. At present, there is no regulatory agency that controls the market for digital currencies and other related assets.
In a separate interview with CNBC, Gensler said many crypto assets are considered securities, so they should fall within the SEC’s remit – something about which there is a lot of debate.
While bitcoin is classified as a commodity under the Commodity Exchange Act, which means that, like other commodities, it is not regulated, many coins are not, which means those coins could be subject to regulatory oversight by the SEC.
Gensler’s comments shed light on the key issues in the SEC’s legal action against cryptocurrency Ripple. The SEC claims Ripple conducted an unregistered securities offering, something which Ripple denies, arguing that its XRP token is a commodity and shouldn’t be regulated by the SEC.
Crypto markets get concessions on Biden’s infrastructure plans
The US unveiled a $1trn bipartisan infrastructure agreement this week, and cryptocurrency investors were able to win some last minute concessions.
Cryptocurrency exchanges were initially caught off guard last week by plans to partially fund US president Joe Biden’s bipartisan infrastructure agreement – which includes money for railways, roads and broadband access – by higher taxes on cryptocurrencies.
The changes were expected to generate around $28bn in additional tax revenue over the first ten years, says Bloomberg.
The bipartisan plan is the first part of Biden’s infrastructure agenda. It proposes $550m in new spending over five years above projected federal levels, and is widely perceived as one of the most game-changing plans in the country’s history.
The latest legislative text released this week omitted some of the terminology that had caused concern among crypto market watchers.
Language that specifically mentioned decentralised exchanges or peer-to-peer marketplaces was omitted, to be replaced with a looser definition of brokers, meaning that decentralised peer-to-peer exchanges may not specifically be required to report transactions.
Part of the reason that Biden is targeting crypto is to raise money to fund his eye-wateringly expensive infrastructure agenda. Another reason, however, is a desire to tackle the underreporting of bitcoin gains. As it stands, crypto exchanges do not have to report gains and losses incurred by customers, but this could change even with the more generous text.
Crypto markets update
Here’s what happened in the crypto market in the last seven days
- Bitcoin rose 1.8% to $40,581
- Ether rose 16% to $2,754
- Dogecoin fell 1.7% to $0.19
- Cardano rose 7% to $1.38
- Binance Coin rose 6% to $333
What investors need to watch out for
US Senate debates Biden’s infrastructure deal
It is worth watching out to see how senators back Biden’s $1trn infrastructure deal and whether it becomes law.
“While it is important to note the bill does not levy any crypto taxes, if this bill passes, it will have an adverse effect on the crypto industry as it places undue burdens on companies and startups in a nascent space who are already struggling to comply with existing regulations,” says Antonio Brasse, CEO of crypto trading platform BlockQuake.
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