As a global financial center, the United States has a vital and powerful influence on the cryptocurrency market. The cryptocurrency market is currently valued at about $2 trillion and has huge growth potential, and the direction of U.S. policy largely determines the direction of development of this emerging market.

From the perspective of monetary policy, the Federal Reserve’s interest rate decisions have a broad and far-reaching impact on the cryptocurrency market. For example, when the Federal Reserve considers cutting interest rates, market expectations for interest rates will drop significantly, stimulating a rebound in many financial assets, and the cryptocurrency market is no exception. As an alternative currency system that competes with the U.S. dollar, a decline in U.S. dollar real interest rates may be beneficial to Bitcoin and other mainstream cryptocurrencies.

In terms of regulatory policies, the US government regulates the cryptocurrency market through multiple agencies such as the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Financial Crimes Enforcement Network (FinCEN). This strict regulatory attitude has brought a certain degree of stability to the market, but it has also restricted the development of the cryptocurrency industry to a certain extent.

In addition, the US election has also become an important factor affecting the cryptocurrency market. The attitudes and policy proposals of the two major candidates, Trump and Biden, towards cryptocurrencies not only directly affect their voter bases, but may also have a profound impact on the entire cryptocurrency market. As the importance of cryptocurrency in election discussions continues to increase, it is gradually moving from the margins to campaign chips, becoming an important factor influencing the outcome of the election.

In summary, the impact of US policies on the cryptocurrency market is multifaceted, and its importance and influence cannot be ignored. Next, we will conduct an in-depth analysis of specific US policies.

1. SEC approves Ethereum ETF

In May 2024, the U.S. Securities and Exchange Commission (SEC) approved eight Ethereum-based exchange-traded funds, a move that marked a significant increase in the regulator’s acceptance of cryptocurrencies as a mature asset class. The Ethereum ETF is a financial product that allows investors to understand the price movement of Ethereum without directly owning the cryptocurrency. Its shares trade on traditional stock exchanges, providing mainstream investors with a more accessible and regulated way to participate in the cryptocurrency market.

According to statistics, as of July 2024, the US spot Bitcoin ETF holds $50 billion of BTC, with an average daily trading volume of $100 million. With the approval of the Ethereum ETF, the market is full of expectations for its future development. Standard Chartered Bank predicts that by the end of 2024, the ETF may push the value of ETH to $8,000, and by the end of 2025, Ethereum may soar to $14,000. This price surge is mainly due to the large influx of capital associated with these ETFs, especially considering that Ethereum has lower liquidity than Bitcoin, even a small amount of capital inflow may have a significant impact on the price of ETH.

The approval of the Ethereum ETF not only provides investors with a new investment channel, but also brings more legitimacy and recognition to the cryptocurrency market. It shows that institutional interest is increasing and the market has the potential to expand further.

2.21st Century Financial Innovation and Technology Act

The 21st Century Financial Innovation and Technology Act clarifies the regulatory framework for digital assets, distinguishes between crypto assets with commodity attributes and securities attributes, and establishes different regulatory frameworks.

The bill, driven primarily by Republicans, seeks to establish a system to regulate the U.S. cryptocurrency market, enact consumer protections, give the Commodity Futures Trading Commission new jurisdiction over digital commodities and clarify the Securities and Exchange Commission's jurisdiction over a portion of digital assets in investment contracts.

On May 22, 2024, the U.S. House of Representatives passed the bill by 279 votes to 136, with 71 Democrats and 208 Republicans voting in favor, and 3 Republicans and 133 Democrats voting against. The bill will go to the U.S. Senate for a vote, and if passed, it will go to U.S. President Biden's desk for approval.

The passage of this bill will bring a clearer regulatory direction to the cryptocurrency market, help improve market stability and transparency, and provide more protection for investors. However, even if the bill is implemented, it is still a long way from formal regulation, and the corresponding committee needs to come up with more details.

3. How US policies change the trend of cryptocurrency market

1. Impact of the Fed’s interest rate hikes and cuts

The Fed’s monetary policy adjustments have a significant impact on the cryptocurrency market. When the Fed raises interest rates, it usually means higher funding costs, slower economic growth and less investment in risky assets. For the cryptocurrency market, investors may shift their attention away from risky cryptocurrencies and toward safer, higher-yielding investments such as bonds and dividend stocks. For example, the Federal Reserve raised interest rates for the 10th time since last year, and cryptoassets such as Bitcoin reacted negatively to the rate hike and have been under selling pressure.

However, when the Fed considers cutting interest rates, market expectations for interest rates drop significantly. As Grayscale’s analysis shows, guidance on possible rate cuts at the Federal Reserve’s December meeting has led to lower real interest rates and a weaker dollar, and could support Bitcoin’s valuation. Meanwhile, U.S. bonds fell sharply and yields fell, spurring a rally in many financial assets, including the cryptocurrency market. Bitcoin gained 13% in December, a gain that, while outpaced by other segments, marked a year of strong returns.

In addition, lower real interest rates may be beneficial to Bitcoin, as Bitcoin is an alternative monetary system that competes with the US dollar. Fundamental changes that lead to a deterioration in the competitiveness of the US dollar, such as falling real interest rates, may attract investors to the cryptocurrency market, thereby supporting the valuation of Bitcoin and other mainstream cryptocurrencies.

2. Impact of SEC Enforcement Actions

The SEC's enforcement actions have brought about many changes to the crypto market. First, in terms of fraud prevention, the SEC filed lawsuits against Binance and Coinbase, the world's largest cryptocurrency exchanges, accusing them of operating as securities exchanges without registering with the SEC. This action sends a clear signal to the market that cryptocurrency trading platforms must comply with regulatory requirements or face severe legal sanctions. This helps reduce fraud in the market and protect the interests of investors.

Secondly, the SEC's enforcement actions help maintain market integrity. By cracking down on violations, the SEC has made the cryptocurrency industry more standardized and improved market transparency and credibility. For example, the SEC asked a federal judge to freeze Binance's U.S. platform assets, a move that prevents the platform from abusing customer funds and maintains market fairness.

Finally, the SEC's enforcement actions clarify regulatory boundaries. Industry leaders said that as the SEC adopts a strong enforcement agenda, U.S. regulators have made it clearer that they want to ensure that cryptocurrencies have no room in the traditional financial system. This makes it necessary for companies that trade cryptocurrencies to recognize that crypto assets are securities and that platforms that exchange these assets must be regulated. The outcome of the legal battle may greatly weaken the growth of the cryptocurrency industry or limit the scope of the SEC's regulatory authority, but in any case, it clarifies the regulatory boundaries of the cryptocurrency market.

4. What is the current cryptocurrency policy in the United States?

1. New regulations to combat tax evasion

The U.S. Treasury Department recently finalized a new rule aimed at curbing tax evasion through cryptocurrencies. Under the new rules, cryptocurrency exchanges and payment processors will be required to report users' transactions to the U.S. Internal Revenue Service (IRS). This move is of great significance for improving tax compliance and preventing wealthy investors from using cryptocurrencies to evade taxes.

The implementation of this new rule will enable the IRS to accurately grasp the amount of tax that taxpayers should pay. At the same time, these platforms will also provide users with 1099 forms to make it easier for them to report their income. The new regulations will be implemented in 2026 and cover all transactions in 2025, but will only apply to platforms such as Coinbase or Binance that hold digital assets. For decentralized crypto platforms, separate regulations are expected to be introduced later this year. This will allow cryptocurrency traders to still report their own taxes in 2024.

Aviva Aron-Dine, assistant secretary for tax policy at the Treasury Department, said the new rules will help investors and the tax bureau obtain the required documents, simplify the tax filing process, and reduce tax evasion by the wealthy. Through this rule, the U.S. government hopes to strengthen supervision of the cryptocurrency market and ensure fairness and compliance with taxation.

2. New Taxation Rules on Cryptocurrencies

The U.S. Internal Revenue Service has determined new rules for taxing cryptocurrencies, and crypto platforms will have to report transactions to the IRS starting in 2026. These are the main contents of the new rules determined by the IRS and the U.S. Treasury Department on Friday, which essentially implements a provision in the Infrastructure Investment and Jobs Act passed by the Biden administration in 2021.

Even without these new regulations, cryptocurrency holders will need to pay taxes; however, there is no real standardization on how to report these holdings to governments and individual investors. Starting in 2026 (covering transactions in 2025), cryptocurrency platforms must provide a standard 1099 form, similar to the ones sent by banks and traditional brokerage firms.

In addition to simplifying the tax payment process for cryptocurrencies, the IRS also said it is working to combat tax evasion. Decentralized platforms that do not hold assets themselves will be exempted. The introduction of this regulation will have a significant impact on the cryptocurrency market. On the one hand, it will make cryptocurrency transactions more standardized and improve market transparency; on the other hand, it may also bring certain burdens to some cryptocurrency investors and trading platforms.

5. Cases of the US cryptocurrency market being affected by policies

1. Binance is sued

In 2023, Binance, the world's largest cryptocurrency exchange, and its CEO Changpeng Zhao were sued by the U.S. Commodity Futures Trading Commission (CFTC) for violating trading and derivatives rules and providing services to U.S. investors without registration. The CFTC stated that Binance did not register with it, thereby evading a series of its obligations. Since 2021, the CFTC has been investigating whether Binance has failed to prevent Americans from buying and selling cryptocurrencies and their derivatives.

After Binance was sued, Bitcoin fell by more than $1,000 in the short term, falling below the $26,000 mark, and the decline once widened to more than 7%. The SEC also filed a lawsuit against Binance, accusing Binance of misleading investors in terms of trading control, exaggerating trading volume, transferring customer funds, and even mixing billions of dollars of Binance customer funds into accounts held by entities controlled by Zhao Changpeng, in violation of US law. The SEC asked the court to freeze Binance's assets and appoint a receiver. This request is usually used when the SEC is worried that company property may be lost or hidden.

2. “King of Cryptocurrency” Arrested

Sam Bankman-Fried, known as the "King of Cryptocurrency", founded the cryptocurrency exchange FTX in 2022, which later developed into one of the largest trading platforms in the cryptocurrency field. Fried once had a total wealth of up to $26 billion. However, in early November 2022, Fried announced on social media that more than 130 FTX Group entities, including the cryptocurrency exchange FTX and its US subsidiary FTX.us, had filed for bankruptcy.

In December 2022, Fried was arrested in the Bahamas. The Bahamas arrested Fried after receiving criminal charges against him from the United States. The federal government's charges against Fried include online fraud, securities fraud, and money laundering. The collapse of the FTX exchange can be compared to the Enron scandal and the Ponzi scheme. The current US investigation into FTX focuses on the exchange's alleged illegal transfer of huge customer funds to another company controlled by Fried, and the illegally transferred funds may be as much as $10 billion. If the US government prosecutes Fried for online fraud and other crimes, he may face life imprisonment.

3. Changpeng Zhao and Justin Sun were prosecuted

Changpeng Zhao, once the richest Chinese, has seen his assets shrink in just a few years, and has even been accused by the US. On November 22, 2023, the US judicial department announced that Changpeng Zhao had violated US law. His crimes include money laundering, bank fraud, violation of sanctions, and violation of the Bank Secrecy Act. These accusations have had an indelible impact on Binance. In just half a year, it was undoubtedly the largest cryptocurrency exchange, but now its transaction volume has continued to shrink, and its assets have even shrunk by nearly 90%.

On March 22, 2023, the U.S. Securities and Exchange Commission (SEC) formally sued Justin Sun, the founder of Tron and a member of Huobi's global advisory board, for alleged illegal sales of securities, fraud, and market manipulation, and also filed charges against separate violations by his celebrity crypto supporters. The SEC said that Sun attempted to artificially increase TRX trading volume through a virtual trading (wash sale) program, allowing employees to conduct more than 600,000 virtual TRX transactions between two crypto asset trading platform accounts under his control. All the assets (TRX) used in the illegal transactions were provided by Sun himself.

Zhao Changpeng and Sun Yuchen were successively sued by US institutions, showing that US financial regulators have strengthened supervision of the encryption industry. This series of events has also made people worried about the future of the cryptocurrency market.