In the aftermath of Bitcoin’s sharp decline from its record-breaking peak of $69,000 in late 2021, the cryptocurrency industry has grappled with immense challenges. Many fraudulent activities, including asset theft, wallet hacks, security breaches, and the collapse of several crypto platforms like Terra and FTX, occurred.
These events have cumulatively resulted in a massive loss of about $2 trillion in crypto assets. In addition, the crypto industry sector faces intense regulatory pressures from US regulators which aim to meet the demands for a clear regulatory framework within the industry.
According to reports, the recent lawsuits filed by the SEC have targeted Binance and Coinbase, the two leading global cryptocurrency trading platforms. The regulator accused them of operating unregistered securities exchanges and brokerages.
Additionally, the SEC claimed Binance and Coinbase have been conducting their operations without the necessary registrations, violating federal securities regulations. In a recent interview, Ed Moya, a senior market analyst at Oanda Corp, described the SEC’s actions as akin to playing “whack-a-mole” with crypto exchanges.
Furthermore, the SEC reportedly filed a complaint against Binance and its CEO, Zhao, alleging a series of misconducts, including mishandling customer funds, providing false information to investors and regulators, and violating securities regulations.
Similarly, the commission has accused Binance of promoting the use of virtual private networks (VPNs) to conceal the location of US customers and gain access to the leading exchange, which is deemed as an illicit practice.
Coinbase, despite its previous claims of adhering to US laws, has also come under scrutiny from the SEC. The commission has accused Coinbase of engaging in unlawful financial activities, such as trading securities, and failing to register as a securities exchange.
SEC’s Enforcement Brings Regulatory Definition To Crypto
Some crypto enthusiasts see the recent crackdown by the SEC as a crucial measure to introduce much-needed clarity into an industry that has suffered from a shortage of regulation for an extended period.
However, in a recent interview, Paul Grewal, the chief legal officer of Coinbase, expressed that the lawsuit would compel the SEC to establish a definitive regulatory framework for digital assets. He stated, Coinbase has been operating in uncertainty for the most part, as the SEC has refrained from informing it until now about the specific products and services that raise their concerns.
This development is expected to bring about a significant shift in the regulatory landscape of the cryptocurrency industry, providing guidance and addressing the longstanding ambiguity that has prevailed.
Currently, it is impossible for Coinbase or any other operational exchange or intermediary to acquire SEC registration that would enable them to list and trade registered digital asset securities. The current situation, coupled with ongoing lawsuits and regulatory convulsion, could potentially diminish the influx of venture capital into the industry, failing numerous projects focused on crypto.
In other words, the stringent actions taken by the SEC bring into question the entire crypto industry and whether these crackdowns are essential for establishing clear regulatory frameworks, according to the report.
US-based Crypto Firms Set To Explore Offshore Markets
The recent regulatory pressure from the SEC forces crypto firms to shift and explore other markets, such as the United Kingdom, Brazil, and the Bahamas, where regulations are more precise and clear.
In addition, Coinbase is actively pursuing an extensive expansion of its virtual currency presence worldwide, with special operations established in Italy, Germany, the Netherlands and Ireland, according to reports.
Moreover, the company is contemplating the possibility of relocating to the United Kingdom and Dubai, seeking regulatory environments that are more accommodating and favorable.
Despite facing a ban from the UK regulator in the previous year, Binance is trying to attain regulation in the UK, displaying its commitment to comply with the necessary regulatory standards.
According to Nana Murugesan, Vice President for International and Business Development at Coinbase, the cryptocurrency industry aims to revitalize its growth by targeting countries like Brazil. The objective is to introduce and popularize the “play to earn” concept in favelas, encouraging young people to engage in educational opportunities.
Murugesan emphasized the importance of creativity in the current resource-constrained environment and highlighted the industry’s commitment to adapting and exploring innovative strategies. This signifies their ongoing efforts to foster development and inclusion within the cryptocurrency ecosystem.
