US States Embrace Bitcoin Reserve; SEC Advances New Crypto ETFs

TL;DR

• Federal Reserve Chair Jerome Powell calls for a review of crypto debanking practices that limit financial access for digital asset firms.
• Several U.S. states, including Kentucky and Utah, explore adding Bitcoin to their reserves, fueling speculation of a global accumulation race.
• Inflation in the U.S. continues to rise, leading to market fluctuations in both traditional and crypto assets.
• The SEC acknowledges proposals for Grayscale’s XRP and Dogecoin ETFs, moving them into the public review process.
• A judge grants Binance and the SEC a temporary pause in their legal battle, as regulators reconsider their approach to crypto oversight.

Powell Calls for Reassessment of Crypto Debanking Practices

Federal Reserve Chair Jerome Powell has urged regulators to reassess financial rules that have made it increasingly difficult for crypto firms to access traditional banking services. Speaking at a Senate Banking Committee hearing, Powell acknowledged concerns raised by lawmakers, stating that while regulators don’t intentionally block banking access, “sometimes regulation leads things to happening and we need to be working on that.”

The issue has gained attention as crypto firms, including Coinbase, continue to challenge regulatory bodies over restrictions that cut them off from banking infrastructure. While Powell reaffirmed that banks can serve crypto clients if they manage risk appropriately, he emphasized the need for a careful review to prevent overreach and unnecessary exclusion from the financial system.

US States Consider Bitcoin Reserves, Sparking Speculation of Global Accumulation

A growing number of U.S. states are exploring Bitcoin as a reserve asset, with Kentucky leading the way through proposed legislation to allocate up to 10% of its surplus reserves to Bitcoin and other digital assets. Utah could also implement a Bitcoin reserve program as soon as May.

This move has intensified speculation about a broader institutional and governmental shift toward Bitcoin as a mainstream reserve asset. Institutions such as the University of Austin and the Illinois state legislature are pushing for long-term Bitcoin holdings to hedge against inflation, with House Bill 1844 proposing a minimum five-year holding period. Other states, including Texas, Florida, and Pennsylvania, are considering similar measures, fueling speculation about a race to accumulate Bitcoin at the state level.

Inflation Continues to Rise, Crypto Prices Waver

The latest Consumer Price Index (CPI) report revealed that core inflation in the U.S. rose 3% year-over-year in January, exceeding expectations of 2.9%. The 0.5% month-over-month increase marked the highest inflationary jump since August 2023, raising concerns about the Federal Reserve’s approach to interest rate cuts.

The Fed opted to pause rate reductions in January, with Powell indicating there is no urgency to lower rates amid persistent inflation. Traditional markets reacted unevenly to the data, while crypto markets initially saw a sell-off, with Bitcoin dipping below $94,000 before rebounding to $95,000 by Thursday afternoon. The uncertainty around inflation continues to impact risk assets, with investors closely watching the Fed’s next move.

SEC Moves Forward with Proposals for Grayscale’s XRP and Dogecoin ETFs

The U.S. Securities and Exchange Commission (SEC) has acknowledged Grayscale’s proposal to launch an XRP and Dogecoin exchange-traded fund (ETF), marking the next step in the regulatory approval process. The agency posted a 19b-4 form on Thursday, inviting public comments on NYSE Arca’s filing for Grayscale’s Dogecoin ETF.

This acknowledgment initiates the SEC’s review process, where it will decide whether to approve or reject the proposals after public feedback. Grayscale recently launched the Dogecoin Trust, arguing that the token has evolved beyond its origins as a memecoin, now serving as a tool for financial inclusion and payments. With DOGE ranking as the eighth-largest cryptocurrency, interest in broader ETF approvals continues to grow, reflecting increasing institutional appetite for crypto-based investment products.

Judge Pauses Binance-SEC Legal Battle Until April

A Washington D.C. district judge has approved a 60-day pause in the legal dispute between Binance and the SEC, granting both parties time to reassess their positions. Judge Amy Berman Jackson ordered the stay and requested a joint status update by April 14.

The decision follows the SEC’s recent establishment of a crypto task force, led by Commissioner Hester Peirce, to review digital asset regulations. The SEC’s approach to crypto enforcement has shifted under the new administration, contrasting with the aggressive stance taken under former Chair Gary Gensler. The case against Binance stems from 2023 allegations of operating as an unregistered exchange, with the company and former CEO Changpeng Zhao already settling with the Justice Department for over $4 billion in fines.

With the SEC also facing an ongoing legal battle with Coinbase, the next few months could prove pivotal in defining how regulators oversee the crypto industry moving forward.