Half of Bitcoin could ‘implicitly’ affect cryptocurrency regulation.

Further scrutiny surrounding the Bitcoin (BTC) halving event may have an indirect impact on futures regulation.

This is according to Natalia Latka, director of policy and regulatory affairs at blockchain analysis firm Merkel Science.

“While not directly affecting the approach of regulations or regulators, the economic and market dynamics that affect semi-events can indirectly affect regulatory issues, particularly those related to market stability and investor protection,” Latka told Cointelegraph.

The halving and approval of Bitcoin exchange-traded funds (ETF) positions by the United States Securities and Exchange Commission (SEC) in January is helping to fuel the Bitcoin bull run, making crypto hard to ignore.

If bitcoin becomes more volatile during this period of increased interest and mainstream media coverage — a generally unlikely scenario — regulators may feel motivated to consider action.

Latka went on to outline an additional scenario that could lead to more regulatory oversight.

“Bitcoin halving can also affect energy consumption,” Latka said. “As mining rewards decline, less efficient miners may exit the market, which may lead to concentration and geographies of mining operations among larger players.

Latka adds, “This could attract regulatory scrutiny regarding PoW's environmental impact. [proof-of-work]It results in regulations focused on sustainability.

More transparency is needed in the United States

Cointelegraph spoke with Andrew Balthazor, a litigation attorney at Holland & Knight law firm, to better understand the current regulatory framework in the United States.

According to Baltazor, US law is unclear on Bitcoin and cryptocurrency in general.

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“I think there's still some uncertainty about security trading in the United States, although there's a general consensus that bitcoin probably won't. We still don't own Bitcoin or Ether or any cryptocurrency one way or the other for that matter.” Balthazor said.

Unfortunately, when courts do rule on cryptocurrency, those courts aren't strong enough to be binding on the union.

“Of course, we don't tend to get a lot of court judges saying this token is secure in any case. So, we have some conflicting lower court decisions in America that are inconsistent with other courts. So here's the thing.

Without clear guidance from the SEC or the courts, the US finds itself in a so-called “regulation-on-enforcement” situation, where legal behavior is limited by enforcement action.

Latka said, “The lack of clear, upfront guidelines means businesses often find themselves walking into regulatory minefields, unsure whether their operations will comply with current or future legal interpretations.

As Baltazor's experience shows, the situation has a real impact on businesses that want to and try to do the right thing.

“I have clients who are unsure and frustrated that their projects can be considered collateral after paying lawyers to negotiate for years.”

Balthazar said this would only be possible for “deep-pocketed companies,” adding that he would like to see some mechanism for corporations and the SEC to communicate more clearly with each other.

“It would be nice to have a more formal process where the SEC says, ‘Here are our concerns about your project.' For these reasons, we think it equates to safety.” said Balthazore.

A moving target for UK businesses

In the UK, the Financial Conduct Authority (FCA) deals with crypto asset regulation, bringing in regulations that have been well-received in areas such as the licensing of crypto investment products and widely criticized in others as “positive entry conflicts” for UK customers on centralized exchanges.

Latka explains how the UK's regulatory philosophy and implementation creates confusion.

“The UK's approach to regulating crypto assets is a phased amendment of existing regulations. This method involves the gradual implementation of these updated regulations, requiring businesses in the crypto space to adapt to the ever-evolving regulatory landscape,” Latka said.

The approach taken by the FCA means that as corporations evolve and change, they must always keep one eye on compliance issues.

Latka said, “This ongoing adaptation process can result in significant costs and operational inefficiencies for these businesses, along with significant legal uncertainty. The challenge arises when regulations designed for traditional financial systems are applied to the rapidly growing crypto sector.

In March, CryptoUK – the UK trade association for crypto – welcomed the FCA's approval of crypto exchange-traded notes (ETNs). ETNs are similar to ETFs but exclude retail investors.

CryptoUK has asked the FCA to reconsider its position, saying: “We will continue to reassess the existing restrictions on access to suitable financial investments for retail investors.”

Commentators, including Latka, believe that the criticism of the wider regulatory landscape in the UK is broadly true.

Latka said, “There is a clear gap between the growing interest in crypto assets from the public and the regulatory measures in place, which highlights a significant flaw that needs urgent attention.”

Europe takes a different approach.

In Europe, where regulators have introduced awareness regulation for cryptocurrencies, the possibility of a bitcoin halving seems remote.

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The EU markets the Crypto-Assets Regulation (MiCA) introduced in 2023, which provides a more comprehensive regulatory framework than the UK and a more crypto-tailored solution than the United States.

However, even here, Latka said, “further clarifications” are still expected, as well as “the development of technical guidelines, especially regarding the relationship of the MCA with existing EU financial rules and regulations.”

So, even in the EU, with Bitcoin halving only days away, the potential to influence regulatory thinking remains.