United States (US) Securities and Exchange Commission’s (SEC) crackdown of Binance and Coinbase seems to have created concerns amongst investors. It’s believed this situation has increased the need for regulations around cryptocurrency landscape.
According to Insights IAS, an educational platform, Binance and Coinbase getting impacted by SEC can create uncertainty for US-based crypto traders. The platform further stated that these updates have affected the overall cryptocurrency market, as Bitcoin and Ether witnessed a downward trend in their values. Reportedly, Bitcoin price went below $25,400 post SEC charging Coinbase, while Ethereum dropped to nearly $1,800.
“I think SEC’s moves against Binance and Coinbase don’t address whether cryptocurrencies are securities or commodities. However, these kinds of events should lead to a set of rules for crypto industry going forward,” Edul Patel, co-founder and CEO, Mudrex, a crypto-investing platform, told FE Blockchain.
Upon further investigation, SEC accused Binance for providing inflated values around its trading activity, channelled customer funds, allowed high-profile US customers to continue trading, and didn’t inform investors about surveillance mechanisms. Expert analysis has highlighted the need for user-based research prior to token-backed investments, along with prioritising their diversification. As per American Action Forum, a centre-right policy institute, Congress should intervene in creating digital asset regulations and should also determine the supervisor for it.
“I believe cryptocurrencies are volatile, with price fluctuations in short periods. Investors should be prepared for swings and understand the risks involved. Choosing blue chip projects with a track record can help mitigate risks compared to other cryptocurrencies,” Rajagopal Menon, vice-president, WazirX, a cryptocurrency exchange, mentioned.
From what it’s understood, suggestions have been laid out for cryptocurrency companies to transfer their base of operations outside the US. Insights from a report published by JP Morgan, a financial services company, have highlighted the need for “a comprehensive framework on how to regulate the crypto industries and the relative responsibilities of SEC vs the Commodity Futures Trading Commission (CFTC).”
“By fostering trust, we can create a regulatory framework that strikes a balance between innovation and security. Governments can work with industry stakeholders to establish guidelines, promote transparency, and mitigate risks associated with cryptocurrencies,” Pratik Gauri, founder and CEO, 5ire, a blockchain-based platform, concluded.