Cryptocurrency regulation may experience an ‘indirect’ impact from Bitcoin halving.

The Bitcoin (
BTC
) halving event has attracted increased attention and scrutiny, which could indirectly impact its future regulation, according to Natalia Latka, policy director and regulatory affairs at blockchain analysis firm Merkle Science. While there is no direct impact on regulations, the economic and market dynamics influenced by halving events could indirectly affect regulatory considerations, particularly in areas related to market stability and investor protection. If Bitcoin becomes more volatile during this period, regulators may be inspired to take action. The halving event could also impact energy consumption, potentially leading to regulatory scrutiny regarding the environmental impact of proof-of-work (PoW) and regulations focused on sustainability. In the United States, the regulatory framework for Bitcoin and cryptocurrency remains unclear, with no definitive statement on whether Bitcoin or any cryptocurrency is considered a security transaction. The absence of clear guidelines means businesses often find themselves navigating a regulatory minefield. The situation is referred to as “regulation through enforcement,” where lawful behavior is measured through enforcement action. In the United Kingdom, the approach to regulating crypto assets involves retrofitting existing regulations in a phased manner, creating confusion and legal uncertainty for businesses. The Financial Conduct Authority (FCA) has received both praise and criticism for its regulation of crypto assets. In Europe, regulators have introduced bespoke regulation for cryptocurrencies, such as the Markets in Crypto-Assets Regulation (MiCA) in 2023. However, further clarifications and the development of technical guidelines are still required. Overall, the Bitcoin halving event has the potential to influence regulators’ thinking in different jurisdictions, highlighting the need for urgent attention and alignment between growing interest in crypto assets and regulatory measures.