The urgency comes against the backdrop of the UN warning of an impending Fed-induced recession. Fed rates have begun to sting, hitting developing countries exceptionally hard.
The pressure is clearly showing in the United States, as the administration looks to speed up the framing of a regulatory framework for crypto. Officials have already issued warnings that any further delay could significantly impact investors. With several nations drifting towards crypto adoption, investors are keen to invest in the space. The Biden administration is reportedly worried about the potential fallout of another stablecoin collapse and wants more clarity from regulators on regulating Bitcoin and other crypto assets.
The U.S. Financial Stability Oversight Council (FSOC), in a report, urged lawmakers to come to an agreement around crypto spot market regulations. However, officials in the loop about developments have revealed that they are likely months out from passing any legislation, which likely means that, as things stand, no progress will be made this year.
The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are both jostling for authority over the crypto space. The SEC, on its part, wants to classify digital assets as securities, which would mark a huge step backward for the crypto industry. The FSOC report, in an attempt to break the deadlock, has suggested cooperation between the two agencies to close out any loopholes allowing operators to find favorable regulations.
“Some crypto asset businesses may have affiliates or subsidiaries operating under different regulatory frameworks, and no single regulator may have visibility into the risks across the entire business.”
The Biden Administration’s push for regulatory clarity comes against a warning that the central bank monetary policy could push the world into a recession. The United Nations Conference on Trade and Development (UNCTAD), in a report issued on the 3rd of October, stated that world economic growth could slow down to 2.5% in 2022 and then drop to 2.2% in 2023. The report stated that the impending slowdown could cost the world economy $17 trillion, with developing countries bearing the brunt.
Central banks across the globe have been aggressively hiking interest rates which threaten to cut off growth and make life harder for households, firms, and even governments. U.S., rate hikes have had a significant impact on poorer and developing countries, which have seen their currencies weaken significantly against the U.S. dollar. A weak currency means fewer funds for investment. However, this could also result in a tilt towards crypto, with investors using it as a hedge against the currency’s devaluation.
“This year’s interest rate hikes in the United States, for example, could cut $360 billion of future income for developing countries.”
The report added that corporations with significant market power are taking advantage of the current scenario, significantly raising markups and boosting profits at the expense of poorer nations.
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