The recent lawsuits filed by the U.S. Securities and Exchange Commission (SEC) against Binance and Coinbase have highlighted the urgent need for U.S. lawmakers to establish a comprehensive regulatory framework regarding the crypto industry and delineate the responsibilities of the SEC and the Commodity Futures Trading Commission (CFTC), according to a research report published by JPMorgan.
The SEC believes most cryptocurrencies should be deemed securities, thereby requiring crypto companies and trading activities to fall under its supervision and adhere to current regulatory frameworks applied to other securities. However, analysts led by Nikolaos Panigirtzoglou argue that this is not a “straightforward legal case” due to the unclear classification of which cryptocurrencies should be considered securities. The ongoing SEC versus Ripple case further reflects this ambiguity.
Recent lawsuits against Binance, its founder and CEO Changpeng Zhao, and the Binance.US operating company, as well as similar charges against rival exchange Coinbase, have intensified the necessity for a comprehensive regulatory framework, ideally to be implemented by U.S. lawmakers this year. Until such a framework is established, crypto activity will likely continue to shift outside the United States and toward decentralized entities, with venture capital funding in the sector remaining subdued.
If the SEC’s perspective is endorsed by lawmakers, it would entail several implications for the industry. Exchanges such as Coinbase, Binance.US, and others would need to register as brokers, while most cryptocurrencies would be classified as securities. This scenario would prove more onerous and costly for the industry.
Nevertheless, some positives could arise through a more stringent regulatory environment. Crypto markets would be properly regulated, providing increased transparency and investor protection. The recent legal actions by the SEC have also generated uncertainty regarding several layer 1 tokens allegedly considered securities. Consequently, this situation appears to offer an advantage to bitcoin and ether, said the bank.
In conclusion, the necessity for a clear and comprehensive regulatory framework is evident, considering the ambiguous legal landscape currently encountered by the crypto industry. Although the potential outcomes may imply additional challenges and costs for industry stakeholders, a well-regulated market is essential for fostering increased transparency and protection for investors.
Source: Coindesk
