Is regulation about to kill cryptocurrency? No one knows, but it is obvious regulators are ramping up the attention they’re paying to crypto after the SEC accused Binance and Coinbase Global of violating the law. Barron’s Jack Denton reports:
Doomsayers have called the death of cryptocurrency many times since Bitcoin launched 14 years ago. This week provided another opportunity after the Securities and Exchange Commission accused two leading exchanges of violating a slew of U.S. laws.
The crackdown against Binance and Coinbase Global COIN +1.41% (ticker: COIN) darkens long-term prospects for crypto exchanges. More broadly, the cases raise critical questions about whether tokens aside from BitcoinBTCUSD +1.08% should be regulated as securities, and whether any crypto platforms should be allowed to operate in the U.S. without radical overhauls. If the SEC ultimately prevails in court—which could take years—the industry would face much stricter oversight, forced to play by the same rules as the New York Stock Exchange, brokerages like Morgan Stanley (MS), and the thousands of companies that trade publicly.
The crypto industry, with its libertarian ethos, has long claimed it should be treated differently; Coinbase has even sued the SEC to try to push it to establish crypto-specific rules. The SEC may now press courts to decide the issue with its cases against Coinbase and Binance, though other cases, including one involving the company Ripple, could provide some clarity in the near-term.
For now, the market seems to be betting that crypto will adapt and move forth. The price of Bitcoin has stabilized, along with other tokens and crypto stocks. The SEC’s moves weren’t a surprise—partly because the agency had warned Coinbase back in March that it would be sued. After a year-long bear market, selling pressure appears to have dissipated. “There just aren’t that many sellers left, especially after the wipeouts that occurred in 2022,” says Bob Ras, co-founder of trading platform Sologenic.
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