Experts warn that tough times are ahead for the US crypto industry as regulators continue to clamp down on some of the biggest companies.
The ongoing crypto crackdown, sometimes referred to as Operation Choke Point 2.0, is already on the minds of every industry leader.
But according to Martin Grant, global head of regulatory affairs at financial services firm JST Digital, the regulatory clarity crypto companies want won’t necessarily come anytime soon.
Commenting an article Insider on Wednesday, Grant said that regulators are currently “working hard to change the current regime to provide greater protection for investors.”
“However, when they do, the question is whether the new rules simply bring more clarity to the industry, or whether they are instead ‘crippling an emerging industry.’
At the end of the day, the industry wants clarity,” Grant explained:
“Ultimately, industry participants are looking for regulatory clarity, which has not yet been achieved.”
Grant’s warning followed a broad regulatory crackdown on cryptocurrency in the US.
Among the most notable recent developments was Wells’ announcement that Coinbase had been sent the SEC threatening legal action and a Commodity Futures Trading Commission (CFTC) lawsuit against Binance and its CEO Changpeng Zhao.
Meanwhile, Braden Perry, a former senior trial attorney at the CFTC, said in the same Insider article that more regulation is likely to come simply because more and more companies are switching to cryptocurrency.
Perry explained that the rise of cryptocurrency meant that all types of investors jumped in:
“With the development of cryptocurrency, the crypto investment community has grown significantly, with both experienced investors and novices joining the fray.”
He added that the investment environment for cryptocurrency exchanges and wallets has been “transformed” and said that this means the area is now “ripe for new products and services and for abuse.”
“The ever-increasing number of exchanges/wallets and issues/hacks has certainly served as a shot in the arm for regulators and will likely be the impetus for future rulemaking,” noted a former CFTC lawyer.
In addition, Perry also warned that regulatory crackdowns like the ones we’re seeing now often lead to more volatility in markets, even though the speed at which regulators move may be uncertain.
“[…] such a public move with relatively well-known companies will undoubtedly affect the market, as can be seen from the recent price fluctuations and the collapse of FTX,” he said.