- US-based cryptocurrency exchange Coinbase on Wednesday revealed that the Securities and Exchange Commission had threatened to sue it over the Lend programme.
- Other leading cryptocurrency exchanges like Bitfinex and Binance too have been under the radar for their trading practices.
Cryptocurrency exchanges have been under scrutiny for quite some time now, largely due to number of incidents of hacks and issues related to anti-money laundering controls. Many investors have faced the brunt of it and have been struggling to find a way around it. With the users not revealing their crypto earnings, the government and regulators are contemplating of bringing a law to counter it. They are looking to draw roadmaps to streamline the highly unregulated industry and turn it into a more in-line form of service.
Regulation has largely been a boogeyman since cryptocurrency inception in 2010. Regulations can best be described as a sign of a mature market. But the recent tussle between the Coinbase and the Securities and Exchange Commission (SEC) has opened up several scars that can be best described a monopoly of the regulators. The US-based cryptocurrency exchange Coinbase on Wednesday revealed that the SEC had threatened the exchange to sue over its Lend programme.
Coinbase has been under the radar for some time since March 2021. The Commodity Futures Trading Commission (CFCT) too came down hard and filed charges for misleading reporting on its GDAX platform.
The Coinbase story
Coinbase CEO Brian Armstrong in a series of tweet accused the crypto regulator that it’s been partial towards the exchange despite having a series of talks. Coinbase said that despite being in talks with the SEC for more than six months, the regulator issued a Wells Notice. A Wells notice is the formal notification which regulators issued with an intention to sue the company. Surprised upon receiving the notice, which stated that SEC may sue the exchange without explaining the proper reason for the same. Coinbase was in talks with the SEC for the Lend programme and were waiting for the regulator to get back on the same.
Armstrong further tweeted that the crypto holders on the exchange have been earning yield on their assets and it made sense to lend out the funds to earn the return. Instead, the SEC subpoenaed records from Coinbase, adding that if the exchange were to proceed with the launch, then they will sue them.
Coinbase is not the only one
In fact, Coinbase is not the only one to bear the brunt of regulators. Other leading cryptocurrency exchanges like Bitfinex and Binance too have been under the radar for their trading practices. In August, Binance, the world’s leading exchange, was banned to operate due to the risks it poses to the users by the Britain's Financial Conduct Authority (FCA).
The FCA had stopped Binance from operating and alternatively imposed several requirements on the platform. Besides, Binance had received warnings from various financial watchdogs around the globe who are primarily worried about illegal use of cryptos and trading policies.
Bitfinex too received warnings from CFTC's Division of Enforcement, BFXNA due to its trading practices. Later on, the company had to alter its mode of transaction and regulate the exchanges in a more stringent manner.
In India too, WazirX received a notice from the Enforcement Directorate, Government of India, wherein it was asked to explain a transaction worth Rs 2,790.74 crore. Stating that it violated the foreign exchange rules under the Foreign Exchange Management Act (FEMA). ED had sent notices to WazirX directors Nischal Shetty and Sameer Hanuman Mhatre.
The regulators around the globe have become more stringent about rules and how exchanges operate. SEC chief Gary Gensler has, in fact, been the most vocal about the crypto regulations. In letter to US Senator Elizabeth Warren, he warned that investors are not getting enough protection against crypto financial frauds. He said there is a need for a stronger regulation and that the SEC needs a greater oversight to regulate the market.
Since then, many countries have raised their voices for cryptocurrency regulations and have been actively working to chart a framework that would ensure that market and the exchanges are kept in check.
It won’t be wrong to say that this could well be the good for the future and we would see a stronger and more stringent regulations being drawn up to ensure investors are protected.