The ongoing regulatory feud in the United States has gained attention from entities across the globe. Adding to the list is JP Morgan , one of the biggest multinational investment firms, who has highlighted the need for clarity in crypto regulations in wake of the recent Securities and Exchange Commission’s (SEC) recent regulatory crackdown on the crypto industry.
In its recent research report, JP Morgan said that SEC’s recent lawsuits against two biggest crypto exchanges highlight the dire need of comprehensive framework to regulate the industry. The report also outlined the role that the regulatory feud between the two regulatory agencies has to play in this. Quoting the report:
The U.S. SEC’s lawsuits against Binance and Coinbase highlight the need for U.S. lawmakers to come up with a comprehensive framework on how to regulate the crypto industries and the relative responsibilities of SEC vs the Commodity Futures Trading Commission (CFTC).
Further, the report adds that the SEC thinks most cryptocurrencies should be classified as securities which will make most crypto companies and trading to fall under its supervision and comply with regulatory frameworks that are currently applied to other securities. In reference to SEC’s actions against crypto firms in name of securities, the analysts highlights the regulator’s ongoing case with Ripple. Analysts led by Nikolaos Panigirtzoglou wrote this isn’t a “straightforward legal case,” and it is unclear which cryptocurrencies would be classified as securities. It added that the SEC versus Ripple case is a reflection of this lack of legal clarity.
Referring to SEC’s recent enforcement actions, JP Morgan said that the moves are “creating more urgency for U.S. lawmakers to come up with a comprehensive regulatory framework by this year.” Until this happens, crypto activity will likely continue to move outside the U.S. and into decentralized entities. Crypto venture capital funding will also likely remain subdued, the bank said. Additionally, the report said if the SEC’s stance is confirmed by lawmakers, Coinbase, Binance.US and other U.S. exchanges would have to register as brokers and most cryptocurrencies would be treated as securities.
In its conclusion, the report said that while this could be more “onerous and costly” for the industry, it would bring some positives because crypto markets would be properly regulated and offer more transparency and investor protection. According to the report, last week’s SEC actions has created uncertainty about a number of other layer1 tokens that are alleged to be securities, creating an advantage for Bitcoin (BTC) and Ethereum (ETH).
Last week, the SEC sued two largest exchanges- Coinbase and Binance accusing them of selling unregistered securities. In the case of Binance, the SEC filed 13 charges against the exchange, including unregistered offers and sales of the stablecoins – BNB and BUSD, its services namely the Simple Earn and BNB vault products, and its staking program.
A day after the lawsuit, the regulator filed an emergency motion to freeze assets of Binance.US as earliest as possible. At first Binance called the motion unwarranted and an act to enjoy an upper hand during the lawsuit, but later decided to delist several BTC and BUSD advanced trading pairs. Not just that, the exchange has also decided to halt USD services by June 13.
Nonetheless, the SEC’s enforcement oriented approach has been vividly criticised by the industry as well as some lawmakers for driving innovation away. In a recent tweet, Senator Cynthia Lummis (Republican-Wyoming), vowed to bring favourable and comprehensive regulation for the crypto industry.
