Jefferies' Equity Strategist Expects Accommodating US Crypto Regulation Unlike China's Authoritarian Model

The head of global equity strategy at Jefferies, an investment bank and asset management firm, says that cryptocurrency regulation in the U.S. would “ultimately be very positive” for bitcoin or other crypto assets. It will also be more accommodating than China’s authoritarian approach to crypto regulation.

US Regulation Would ‘Ultimately Be Very Positive’ for Mass Adoption of Bitcoin, Cryptocurrencies

Christopher Wood, Head of Global Equity Strategy at Jefferies, discussed cryptocurrency regulation in his most recent weekly research note, Greed & Fear.

Jefferies is a diversified financial services company engaged in investment banking and capital markets, asset management, and direct investing. The company claims to be “the largest independent, global, full-service investment banking firm headquartered in the U.S.,” according to its website.

Wood reportedly said that the regulatory response to cryptocurrency in the U.S. will likely be more accommodating than “China’s authoritarian model” given the fast deteriorating state of the U.S.-China relations.

He expects the U.S. Securities and Exchange Commission (SEC) to come up with a definitive regulatory roadmap, citing the new SEC chairman, Gary Gensler, who is pushing for a regulatory framework on cryptocurrencies. Gensler has repeatedly said that crypto exchanges need more regulation, asking Congress to weigh in. Wood opined:

That would ultimately be very positive since bitcoin or other crypto assets can only really fulfill their network potential, in terms of mass adoption, if they become part of the system.

Recently, China has been cracking down on bitcoin mining and the People’s Bank of China (PBOC) has reminded banks in the country that they are prohibited from engaging in any crypto-related activity. According to industry estimates, over 90% of China’s bitcoin mining capacity has been shut down.

Wood explained that China does not want its citizens to own cryptocurrencies, elaborating:

This is in part because of the clear ability to use so-called stablecoins like tether to circumnavigate the closed capital account. It is also, more importantly, because China does not want any competition when it launches the digital renminbi nationally, most likely in the fourth quarter of this year.

China is actively working on a central bank digital currency (CBDC) and has been testing the digital yuan in various cities. Over 3,000 ATMs in Beijing now offer digital yuan withdrawals. Some analysts believe that China’s absolute control over its state-backed digital currency will boost demand for cryptocurrencies.

Wood detailed: “Certainly, the decentralized aspect of blockchain technology, which is so appealing to libertarians opposed to fiat currencies as state monopolies, is the complete antithesis of China’s collectivist system. The People’s Republic of China clearly understands this. This is certainly a far more important issue to Beijing than the carbon generating aspects of bitcoin mining.”

Jefferies trimmed gold exposure in favor of bitcoin in December last year in its recommended portfolio for U.S. dollar-denominated pension funds. “The 50% weight in physical gold bullion in the portfolio will be reduced for the first time in several years by five percentage points with the money invested in bitcoin,” Wood explained at the time. The firm has maintained a 5% BTC holding in the portfolio.

The SEC and the CFTC recently cautioned investors about funds investing in bitcoin futures. While Gensler has pushed for cryptocurrency regulation to protect investors, the SEC has left bitcoin and cryptocurrency off its regulatory agenda this year.