Introduction

This report summarizes the Web3 industry policy dynamics and macro event overview for December 2024, focusing primarily on the release of U.S. economic data, key events in the cryptocurrency market, and the implementation of EU cryptocurrency regulatory legislation.

The U.S. released important economic indicators, including the Purchasing Managers’ Index (PMI), Employment (ADP Employer Services, ADP), Unemployment Rate, Consumer Price Index (CPI), and Price Index (Personal Consumption Expenditures, PCE), which provide guidance for financial markets and economic analysis. At the same time, the legislative process of Hong Kong’s “Stable Market Bill” and the release of the U.S. Consumer Confidence Index also provided additional economic signals to the market. Most importantly, the entry into force of the EU’s Markets in Crypto-Assets (MiCA) regulation, and the constraints of (EU) 2023/1113 (Travel Rule guidelines) on cryptocurrency exchanges, marked a significant step forward for the EU in digital asset regulation. These events collectively shaped the policy environment and market expectations for December 2024.

Summary

• The U.S. released the final value of the S&P Global Manufacturing PMI for November at 48.4.
• The U.S. released the ADP employment figure for November at 164,000.
• The U.S. released the November unemployment rate at 4.2% and the preliminary value of the one-year CPI expectation for December at 2.9%.
• The U.S. released the unadjusted CPI annual rate for November, showing a year-on-year increase of 2.7%.
• The legislative process of Hong Kong’s “Stablecoin Bill.”
• The U.S. released the previous value of the core PCE, unchanged at +2.8% for November.
• The U.S. released the Conference Board Consumer Confidence Index for December, which showed a decline.
• The EU’s Markets in Crypto-Assets (MiCA) regulation came into effect, and (EU) 2023/1113 (Travel Rule guidelines) was implemented.

Timeline

Key Events

December 2nd — U.S. released the final value of the S&P Global Manufacturing PMI for November
As an important indicator for measuring the health of the manufacturing economy, the PMI indirectly affects cryptocurrency market confidence. The current PMI value is 48.4, higher than the 46.5 released in October. An index value above 50 indicates positive development in manufacturing, while a value below 50 indicates the opposite. Although still below the 50 threshold, it shows that manufacturing activity has improved compared to the previous month. The rise in PMI may be seen as an early signal of economic recovery, boosting investor sentiment towards risk assets, including cryptocurrencies. With increased market confidence, investors may increase their investment in cryptocurrencies, potentially driving up prices. [1]

December 4th — U.S. released the ADP employment figure for November
As a leading indicator of private sector employment, the ADP significantly impacts financial markets. The U.S. ADP employment figure for December was 164,000, the highest since August 2023. This growth was mainly due to increased hiring in the leisure and hospitality sectors. Regarding wage growth, overall annual income increased by 5.4%, lower than the 5.6% of the previous month, continuing the deceleration trend since September 2022. The ADP report reveals the resilience of the U.S. job market. Despite some industry challenges, overall hiring activity is healthy, and wage growth is stable. This may impact the Federal Reserve’s monetary policy decisions and provide a positive signal for the economic outlook. [2]

December 6th — U.S. released the November unemployment rate and the preliminary value of the one-year CPI expectation for December
The U.S. released the November unemployment rate at 4.2%, an increase of 0.1 percentage points compared to 4.10% last month; an increase of 0.5 percentage points compared to 3.70% in 2023, but still below the long-term average of 5.68%. At the same time, the preliminary value of the one-year inflation rate expectation for December in the U.S. was 2.9%, exceeding the market expectation of 2.8% and the previous value of 2.60%. The rise in the unemployment rate may reduce market expectations for the Federal Reserve to raise interest rates, as a higher unemployment rate may indicate a slowdown in economic growth. Typically, in this case, investors may seek higher-risk assets, such as cryptocurrencies, to obtain higher returns. However, the rise in the unemployment rate may also cause market concerns about economic health, leading to increased risk aversion, thereby affecting the cryptocurrency market. On the other hand, the rise in inflation rate expectations may increase market expectations for the Federal Reserve to raise interest rates to control rising prices. Interest rate hikes usually reduce market liquidity, increase borrowing costs, and have a negative impact on the stock and bond markets. For the cryptocurrency market, this may lead investors to reduce their investment in cryptocurrencies and shift to more stable assets, thereby exerting downward pressure on cryptocurrency prices. In addition, the rise in inflation expectations may increase demand for cryptocurrencies as a store of value, as investors may seek to hedge against inflation risk. However, this demand may be offset if inflation expectations lead to more aggressive monetary policy. [3]

December 11th — U.S. released the unadjusted CPI annual rate for November, showing a year-on-year increase of 2.7%
The U.S. released the unadjusted CPI annual rate for November, with the data showing a year-on-year increase of 2.7%, up 0.1 percentage points from the previous value of 2.6%. As an important indicator for measuring inflation, a stable or rising CPI may indicate increasing economic activity, which may increase market demand for risk assets, including cryptocurrencies. The slight increase in the November CPI may not immediately trigger policy changes, but it will strengthen market expectations for the Federal Reserve’s future policy path. If the market expects the Federal Reserve to maintain current interest rates or cut interest rates, this may provide support for the cryptocurrency market. [4]

December 18th — Hong Kong’s “Stablecoin Bill” submitted to the Legislative Council for first reading
The “Stablecoin Bill” was gazetted on December 6, 2024, and submitted to the Legislative Council for first reading on December 18, 2024. This event marks a significant step for Hong Kong in the field of crypto-asset regulation. The purpose of the “Stablecoin Bill” is to establish a regulatory regime for issuers of fiat-backed stablecoins to address the potential risks that these stablecoins may pose to financial stability and to ensure adequate user protection. The bill aims to enhance the regulatory framework for virtual asset activities, ensuring that stablecoins are issued and operated under strict regulatory oversight. This contributes to increased market transparency and credibility. By establishing a regulatory regime, user interests will be better protected. The bill requires issuers to maintain a robust reserve stabilization mechanism, ensuring that the reserve assets backing stablecoins consist of high-quality and highly liquid assets, with a total value at all times at least equal to the face value of the circulating fiat-backed stablecoins, and that these assets are properly segregated and custodied. The submission of Hong Kong’s “Stablecoin Bill” to the Legislative Council for first reading represents an important advancement in crypto-asset regulation. It contributes to enhancing market stability and security and has the potential to position Hong Kong as a global leader in virtual asset regulation. [5]

December 20th — U.S. released the November Core PCE Price Index Year-over-Year
The PCE remained unchanged from the previous value at +2.8%. As the Federal Reserve’s preferred inflation indicator, it has a significant impact on the Fed’s monetary policy decisions. The slowdown in the growth of the core PCE price index may indicate that inflationary pressures are easing. If inflationary pressures ease, the Fed may slow down the pace of interest rate hikes or consider interest rate cuts, which may increase market liquidity and have a positive impact on the cryptocurrency market. [6]

December 23rd — U.S. released the December Conference Board Consumer Confidence Index
The Conference Board Consumer Confidence Index primarily reflects consumer confidence in economic conditions. With statistics up to December 16, 2024, the Conference Board Consumer Confidence Index fell by 8.1 points to 104.7 (1985=100). Based on consumers’ assessment of current business and labor market conditions, the Present Situation Index decreased by 1.2 points to 140.2. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, fell by 12.6 points to 81.1, slightly above the threshold of 80, which often foreshadows a recession.

Consumer optimism about the economic outlook has weakened. This decline may reduce consumer spending, affecting economic activity, and have a negative impact on risk assets such as stocks and cryptocurrencies. At the same time, the market may expect the Fed to adopt a more easing monetary policy, such as interest rate cuts, which may have a positive impact on the cryptocurrency market. In addition, declining consumer confidence may increase demand for safe-haven assets and reduce investment in risk assets such as cryptocurrencies. In the long term, the decline in the Consumer Confidence Index may increase market volatility and affect corporate investment decisions. [7]

December 30th — The European Union’s Markets in Crypto-Assets (MiCA) regulation comes into effect
The European Union’s Markets in Crypto-Assets (MiCA) regulation officially came into effect, covering 27 member states and providing a unified regulatory framework for the crypto-asset market. The implementation of MiCA has far-reaching implications for the cryptocurrency market and the broader FinTech industry. MiCA provides clear regulatory requirements for Crypto-Asset Service Providers (CASPs), including capital requirements, risk management, and transparency standards. This helps reduce market uncertainty and enhance consumer and investor confidence in the crypto-asset market. The MiCA regulation requires CASPs to comply with AML/CFT regulations, including customer identification and suspicious transaction reporting. This helps prevent crypto-assets from being used for illicit activities and improves compliance across the industry. MiCA enhances investor protection by setting disclosure requirements and restricting certain high-risk products. This may attract more institutional investors to the market, promoting industry maturity and growth. MiCA may lead to market consolidation, as smaller or non-compliant players may be squeezed out of the market. This may reduce market competition but may also increase market stability and efficiency. While MiCA provides some room for innovation, it also brings compliance costs. For some startups and small businesses, compliance costs may become a challenge. MiCA allows CASPs licensed in one country to offer services across the EU single market through “passporting,” which helps reduce the complexity and cost of cross-border operations. Also coming into effect with MiCA is (EU) 2023/1113 (the Travel Rule guidance), which requires cryptocurrency exchanges to report information on transfers of funds and crypto-assets. This helps improve transaction transparency and prevent illicit financial flows. MiCA imposes strict regulatory requirements on stablecoin issuers, including reserve transparency and compliance. This may have a significant impact on the stablecoin market, especially for issuers who fail to meet the regulatory requirements. [8]

Conclusion

In December 2024, the development of the Web3 crypto industry was significantly influenced by policies, economic data, and market behavior. Key events and policy updates not only depicted the current state of the industry but also demonstrated how these factors interacted to drive industry trends. These dynamics, including policy decisions, the release of economic indicators, and shifts in market sentiment, collectively shaped the future of the Web3 crypto industry. The industry’s progress during this period was driven by a combination of policy updates, economic reports, and market activity. The implementation of the MiCA regulation marked a significant step forward for the EU in crypto-asset regulation, providing clear rules and expectations for the market while also imposing higher compliance requirements on industry participants. This may increase compliance costs for the industry in the short term, but in the long run, it will contribute to enhancing market stability and credibility, promoting healthy development.


Reference:

1. Statista, https://www.statista.com/statistics/271662/purchasing-managers-index-pmi-in-the-united-states/
2. ADP.Research, https://adpemploymentreport.com/
3. Ycharts, https://ycharts.com/indicators/us_unemployment_rate
4. U.S BUREAU OF LABOR STATISTICS, https://www.bls.gov/news.release/pdf/cpi.pdf
5. Hong Kong Government Press Releases,https://sc.isd.gov.hk/TuniS//www.info.gov.hk/gia/general/202412/06/P2024120500422.htm
6. bea, https://www.bea.gov/data/personal-consumption-expenditures-price-index
7. THE CONFERENCE BOARD, https://www.conference-board.org/topics/consumer-confidence
8. Regular United Europe, https://rue.ee/cn/blog/virtual-currency-licence-in-europe/
9. Cointelegraph, https://cointelegraph.com
10. Coindesk, https://www.coindesk.com/business

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