No clarity on US crypto regulation
The US SEC has launched a regulatory clampdown on the crypto industry in response to the FTX collapse, but the outlook for US crypto regulation is clouded by an adverse ruling in the SEC’s ongoing suit against Ripple Labs.
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SEC’s crypto clampdown
US Securities and Exchange Commission (SEC) has launched a controversial regulatory clampdown on the crypto industry. The proximate catalyst behind the move was last November’s collapse of FTX, a major crypto exchange.
Founded in 2019, FTX achieved rapid growth fueled largely by advertising campaigns featuring famous athletes, including MLB superstar Shohei Otani. Its success, however, proved illusory when its wunderkind founder and CEO, Sam Bankman-Fried, was arrested on fraud and money laundering charges. Its FTX Token nose-dived in response, shaking investor confidence in the entire cryptoasset complex.
Alarmed by the FTX debacle, the SEC has brought a series of enforcement actions against major crypto exchanges, beginning with Kraken in February 2023. It alleged that Kraken’s staking-as-a-service program was an illegal securities offering, prompting Kraken to discontinue the service. Staking is the act of depositing cryptoassets with a crypto platform in exchange for a share of cryptoasset income earned by verifying new transaction blocks added to the blockchain. Staking has become popular among investors as an easy way to grow cryptoasset holdings.
In June 2023, the SEC charged Coinbase and Binance with securities law violations. It also sought to freeze some of Binance’s assets on the grounds of improper custody of customer assets. Crypto industry insiders have criticized the SEC’s enforcement actions against leading crypto exchanges as a crackdown intended to stifle the industry.
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