Crypto exchanges are in the hot seat as regulators look to clamp down on the volatile asset class
(Kitco News) - The crypto market collapse of 2022 has been one of the most painful bear markets in the brief history of this nascent asset class, as more than $2 trillion worth of value vanished from the total market cap in a matter of months.
As a result of the widespread pain felt by traders in the United States and around the world, the U.S. government has finally begun to get serious about regulating the industry, as evidenced by the introduction of a bill to classify Bitcoin (BTC) and Ethereum (ETH) as commodities on Wednesday.
On Friday, Forbes released a report providing further evidence that regulators are zeroing in on some of the biggest players in the crypto industry as it revealed that every U.S. cryptocurrency exchange – along with the largest exchange in the world Binance – are currency in various stages of being investigated by the U.S. Securities and Exchange Commission (SEC).
This development, which was shared with Forbes by a staffer from U.S. Senator Cynthia Lummis' (R-Wy) office, comes following widely circulated reports that the largest U.S.-based crypto exchange Coinbase is under investigation following allegations of insider trading by members of its staff.
With more than 40 cryptocurrency exchanges based in the U.S., this marks a major escalation in the regulatory crackdown on the historically volatile and unregulated crypto market that has been known to exponentially increase only to be followed by a 90-95% collapse in prices.
|It's a crypto showdown between the SEC and CFTC as a new bill introduced in the Senate seeks to classify BTC and ETH as commodities|
As noted in the following Tweet from Swan Bitcoin CEO Cory Klippsten, it's highly likely that many of the exchanges in question have received Wells Notices, formally informing them that they are under investigation and that actions may be brought against them.
"A senior exec at a large crypto exchange said that based on chatter he’s hearing from members of the SEC, many U.S. crypto exchanges have likely received Wells Notices to formally inform when an action is about to be brought against them, and that most are under investigation." https://t.co/BPkZDTCi3c— Cory Klippsten (@coryklippsten) August 5, 2022
The revelation of ramped-up enforcement actions comes as the industry has suffered a collapse in confidence following the implosion of the decentralized finance protocol Terra and its widely integrated TerraUSD (UST) stablecoin.
The fallout from Terra's demise sent shockwaves across the ecosystem and has claimed many victims, including Three Arrows Capital, a Singapore-based cryptocurrency hedge fund that was ordered to liquidate on June 27 by a court in the British Virgin Islands. Other notable casualties include the crypto brokerage firm Voyager Digital and the crypto lending platform Celsius Network, both of which have filed for Chapter 11 bankruptcy protections.
And it's not just U.S. regulators that have jumped on the regulation bandwagon as the India-based WaxirX exchange has reportedly had its assets frozen by authorities in the country amid an ongoing investigation into suspected violations of foreign exchange regulations.
India’s financial crime-fighting agency said on Friday that it has frozen the assets of WazirX, owned by Binance, as part of its investigation into suspected violation of foreign exchange regulations.https://t.co/Zm7gKkb3AC#wazirx #Crypto— Crypto Lion (@Crypto_Iion) August 5, 2022
With more regulations coming down the pipe, crypto companies and market players are starting to comment that the “Wild West” days of cryptocurrencies are coming to an end.