The race is on to keep regulators from spreading ‘peanut butter’ over crypto boom: Morning Brief

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Wednesday, November 10, 2021

A lot for regulators to chew on, but for crypto the same old menu may not do

On Tuesday, Yahoo Finance joined Decrypt in an effort to spotlight all the ways in which cryptocurrency is now going mainstream. And there are no shortage of headlines trumpeting the ways in which digital coins are capturing the public’s imagination.

Bitcoin (BTC-USD) is trading above $68,000. Memecoins are less of a joke and more of a legitimate investment. Jobs in the sector are being minted at a frenetic pace.

Spot and futures-based exchange-traded funds (ETFs) are shaping up to be the next hot thing. And decentralized finance (DeFi) and digital wallets are drawing in legions of small investors, which is drawing out regulators like the Securities and Exchange Commission (SEC).

Even real estate is getting in on the action.

So as new products like ETFs blossom and the blockchain mints new digital coins (Morgan Stanley recently pegged the crypto universe at around 10,000), which agency is best positioned to serve as the sheriff of what SEC Chair Gary Gensler calls the “Wild West” of financial markets? Should regulators graft decades-old securities laws onto a nascent, technologically advanced sector that’s being championed as nothing less than a financial revolution?

As the regulatory debate takes shape, there’s at least some credence to an argument made by Ripple executive Asheesh Birla to Yahoo Finance’s Jennifer Schonberger on Tuesday. Birla said clearer regulations would bolster the industry’s growth, but warned that the desultory application of outdated laws could harm innovation.

“I’m not advocating taking old regulation and peanut butter spreading it over cryptocurrency,” he said. “We are advocating for clear regs that are modernized for what blockchain and cryptocurrencies can do and so far it hasn’t been clear.”

That theme is particularly resonant, given that Congress is currently weighing a full slate of blockchain-related proposals like oversight of crypto miners that may act as brokers, stablecoin issuance and institutions (DeFi) that lend like traditional banks.

“Is regulation a help or a hindrance?” Morgan Stanley analysts asked in recent research.

“It depends on the form of the regulation, assuming it is similar to what is currently being discussed in the developed economies, defined regulation may increase the attractiveness of adding cryptocurrency exposure to portfolios for institutional investors,” the bank noted.

And as more ETFs come to market, expect the debate over regulation to take center stage. Grayscale CEO Michael Sonnenshein told Yahoo Finance’s Brian Cheung on Tuesday that products based on derivatives or real-time prices “has become a bit of a political issue.”

He added: “In the last week, we’ve actually seen bipartisan support for a bitcoin spot ETF… advocating for this and ensuring there’s a level playing field amongst these applications out there, and investors really do have the optionality.”

The more sophisticated the market grows, the more that critics will clamor for rigorous investor protections. And that means more questions will surface about whether the existing securities architecture is suited for this imposing new digital edifice called cryptocurrency.

By Javier E. David, editor at Yahoo Finance. Follow him at @Teflongeek

What to watch today

Economy

7:00 a.m. ET: MBA Mortgage Applications, week ended Nov. 5 (-3.3% during prior week)
8:30 a.m. ET: Initial jobless claims, week ended Nov. 6 (260,000 expected, 269,000 during prior week)
8:30 a.m. ET: Continuing claims, week ended Oct. 30 (2.050 expected, 2.105 million during prior week)
8:30 a.m. ET: Consumer Price Index, month over month, October (0.4% expected, 0.2% in September)
8:30 a.m. ET: Consumer Price Index, year over year, October (5.9% expected, 5.4% in September)
8:30 a.m. ET: Consumer Price Index excluding food and energy, year over year, October (4.3%. expected, 4.0% in September)
10:00 a.m. ET: Wholesale Inventories, month over month, September final (1.1% expected, 1.1% in prior print)
2:00 p.m. ET: Monthly budget statement, October (-$179.0 billion expected, -$61.5 billion in September)

Earnings

4:05 p.m. ET: Disney (DIS) is expected to report adjusted earnings of 49 cents per share on revenue of $18.78 billion
4:05 p.m. ET: Opendoor Technologies (OPEN) is expected to report adjusted losses of 3 cents per share on revenue of $2.01 billion
4:05 p.m. ET: Beyond Meat (BYND) is expected to report adjusted losses of 38 cents per share on revenue of $106.08 million
4:05 p.m. ET: Compass (COMP) is expected to report adjusted losses of 17 cents per share on revenue of $1.71 billion
4:05 p.m. ET: Bumble (BMBL) is expected to report adjusted earnings of 2 cents per share on revenue of $198.54 million
4:05 p.m. ET: Wish (WISH) is expected to report adjusted losses of 13 cents per share on revenue of $373.89 million
4:05 p.m. ET: Figs (FIGS) is expected to report adjusted earnings of 3 cents per share on revenue of $98.90 million
4:05 p.m. ET: Affirm Holdings (AFRM) is expected to report adjusted losses of 42 cents per share on revenue of $252.15 million
4:10 p.m. ET: SoFi Technologies (SOFI) is expected to report adjusted losses of 11 cents per share on revenue of $252.50 million

Politics

President Joe Biden will visit the Port of Baltimore today to tout the infrastructure bill. It’s a first stop in his efforts to highlight where the $550 billion in new spending will go in the years ahead. The president is also set to meet with European Commission President Ursula von der Leyen.