Cryptocurrency Space's “Regulatory Picture” Is Improving, Says Wall Street Analyst Tom Lee

  • Bitcoin bull Tom Lee has recently argued the cryptocurrency ecosystem's "regulatory picture" is improving.
  • This as various companies are "running towards" regulations, which could potentially affect bitcoin's price.

Fundstrat Global Advisors’ co-founder and well-known Bitcoin bull Tom Lee has recently weighed in on the cryptocurrency ecosystem’s regulatory outlook, and argued it is currently improving, which may reportedly help cryptocurrency prices rise.

In a note sent to clients, as reported by CNBC, the Wall Street analyst wrote:

"We believe the regulatory picture is now improving — best evidenced by Coinbase and Circle 'running towards' regulation. We are basing this on the notion that Coinbase and Circle would only take these actions if such was the case."

Tom Lee

Goldman Sachs-backed Circle, which recently acquired Poloniex for $400 million, is looking to acquire a federal banking license, and plans on registering with the US Securities and Exchange Commission (SEC) as a brokerage and trading venue to help investors buy and sell tokens deemed securities.

Coinbase, one of the largest crypto exchanges in the United States, is as CryptoGlobe covered one step closer to becoming the first SEC-regulated exchange, thanks to its acquisition of securities dealer Keystone Capital.

In his note, Lee added that Fundstrat believes both companies would “only make these moves if their perception of regulatory risks in crypto was improving. The Wall Street analyst further touted their announcements as an “implicit acknowledgement that the regulatory tide is shifting.”

Lee has in the past argued bitcoin’s price has been affected by regulatory uncertainty, specifically after he predicted the flagship cryptocurrency could surge as much as 70 percent during this year’s Consensus conference, when in reality it dropped nearly $2,000.

Per Lee, this uncertainty has been holding back demand, while preventing institutional investors from entering the market. SEC chairman Jay Clayton has recently shed some light on how cryptocurrencies are seen by the regulator, as he revealed cryptos like bitcoin aren’t seen as a security, while tokens issued through initial coin offerings (ICOs) often are.

According to Robert Cohen, chief of the Cyber Unit in the Division of Enforcement at the SEC, the regulator is looking to police crypto markets, without stifling innovation. Cohen was quoted as saying:

"We want to encourage innovation and new ways of raising capital. If there's a new and exciting tech people should have an opportunity to invest in it."

Robert Cohen

Notably, Tom Lee is known as a “bitcoin mega-bull,” as his price predictions see the cryptocurrency hit $25,000 by the end of the year, and $91,000 by March 2020. A few days ago, the mega-bull refuted various bearish arguments against the cryptocurrency and maintained his bullish price predictions.

ErisX Tells Regulator's Why Ethereum Futures Would Create Better Markets

  • Nasdaq and Fidelity Investments-backed ErisX exchange sends explanation letter to CFTC.
  • Letter explains that regulated Ether-based futures contract would create more efficient crypto markets.

ErisX, a US-based digital asset exchange, has filed a comment letter with the US Commodity Futures Trading Commission (CFTC) - after the federal regulator requested more information regarding Ethereum (ETH)’s current market.

Submitted on Friday, February 15, ErisX’s letter asserted:

The introduction of a regulated futures contract on Ether would have a positive impact on the growth and maturation of the market.

As covered, ErisX is a newly launched cryptoasset exchange that received $27.5 million in starting capital from multi-trillion dollar investment manager, Fidelity and Nasdaq Ventures, which is Intercontinental Exchange’s (ICE) VC investment division.

Consistent With CFTC's Efforts

In December 2018, ErisX’s management revealed its plans to offer bitcoin (BTC), litecoin (LTC), and ether (ETH) spot trading and it also noted that it was seeking regulatory approval - in order to list cryptocurrency futures at a later point this year. Explaining why such futures contracts would help investors, ErisX’s letter noted that “listing and trading Ether futures compliantly on CFTC regulated markets is consistent” with the financial regulator’s efforts to create “open, transparent, competitive, and financially sound derivative trading markets.”

The letter from ErisX further mentioned that regulated crypto-based futures would “prohibit fraud, manipulation, and abusive practices in connection with derivatives and other products subject to the (Commodity Exchange Act) CEA.” According to the CFTC, bitcoin can be considered a commodity as it has been designed to potentially replace existing fiat currencies (as a medium-of-exchange). Because of bitcoin and ethereum’s decentralized nature, they are arguably not securities, the CFTC has clarified on several occasions.

Explaining the differences between the Ethereum and Bitcoin protocol, ErisX’s letter has stated: 

Ethereum built upon some of the architectural principles of Bitcoin to extend [its] functionality of [a] distributed, (cryptographically) secured, (blockchain-enabled) record-keeping system to include new computational capabilities for the execution of arbitrary code.

"Unregulated Exchanges And Brokers" Trying To "Fill The Gap"

Per ErisX’s analysis of current trends in the global Ethereum (and larger digital asset) market, there is still not a proper regulatory framework in place. This, according to ErisX, has discouraged several large enterprises from entering the fragile crypto ecosystem. At present, ErisX believes there’s a trend emerging in which “unregulated or lightly regulated ‘exchanges’ [and] ‘brokers’ [are trying] to fill the gap, many of them off-shore.” However, ErisX cautioned there may be certain risks associated with this type of market such as increased volatility and liquidity fluctuations.

As noted in ErisX’s letter:

Not unique to Ether, but [current crypto markets could suffer due to] the current fragmented global market structure of trading platforms and ‘exchanges’ with significantly varying degrees of regulatory oversight and operational transparency and integrity.

By introducing standardized, CFTC-regulated Ether-based financial products, ErisX argues the crypto space might receive a more positive response from institutional investors - which could potentially lead to “more robust, liquid, and resilient markets.”