The U.S. Securities and Exchange Commission (SEC) has intensified efforts towards regulating crypto in the country. This is in spite of a lack of regulatory clarity, which has made it impossible for crypto companies to know what is expected of them.
While the commission has always taken a stand against the crypto industry, it has invested more to clamp down on crypto this year than ever. One of the arguments the SEC holds is that all crypto assets – except Bitcoin – are securities, and all exchanges that trade them should be registered under the commission as securities exchanges.
Ripple and XRP were the first to face a lawsuit on the matter, and the case has been ongoing since 2020. This time, top crypto exchanges Binance and Coinbase were dragged to court within 24 hours, and while the case is on, the question is will crypto exchanges ultimately be forced to register with the SEC?
A group of strategists with JPMorgan, led by Nikolaos Panigirtzoglou says this is possible. In a note on Thursday last week, they wrote:
“Eventually, the SEC position might be confirmed by lawmakers and Coinbase, Binance.US and other U.S. exchanges would have to register as brokers and most cryptocurrencies would be treated as securities.”
“This could be more onerous and more costly for the crypto industry but there could be positives as well, as crypto markets would be subjected to similar regulations applied to traditional markets such as equities and thus offer more transparency and investor protection,” the note added.
Most crypto enthusiasts would argue that such a move will compromise everything that crypto stood for – the minimized scrutiny of the space, which gives investors the liberty of controlling their own money.
The strategists at JPMorgan are however hopeful that this push by the SEC could eventually force legislators to come up with proper regulation for the industry. “it would clear the industry from bad practices and bad actors, which in turn is necessary for the industry to mature and see more institutional participation,” they said.
The outcome of the case will, however, be determined by the conclusion on whether cryptocurrencies are securities or not, and the Ripple case will play a pivotal role in answering this question.