Crypto Conversion To TradFi Becomes Objective For Regulators

The shock wave from the collapse of the world’s second largest centralized crypto exchange is still reverberating. In addition, it has given regulators all the ammunition they need to work harder on the embryo industry.

On November 15, Reuters reported that US regulators launched a raft of investigations into the now-bankrupt FTX exchange. The report states that the Securities and Exchange Commission is deploying its usual arsenal of violations of securities laws.

It is possible that this could set the precedence for classifying exchange-based tokens as securities. This will have the biggest impact on behemoths Binance and BNB. It will also affect OKB, Leo Token, Cronos (CRO), KuCoin (KCS), and Huobi Token (HT), among others.

On November 14, Federal Reserve Vice Chairman Lyle Brainard stated that crypto has the same risks as traditional finance. So it should be subject to the same rules, he said.

“Crypto finance, as it is not different from traditional finance in risk, should therefore be under regulatory purview.”

lil brainard
Lyle Brainard: Deposit Photos

crypto alert shot

This is a major warning shot in the bow of the crypto industry and what it means. Regulating crypto in the same way as banking and traditional finance would subject users to the same restrictions, intrusive paperwork, and state oversight. This will eventually reduce their financial independence even further.

Nevertheless, something must be done to prevent a centralized entity from causing so much harm in the future. The assets themselves are not the problem, it is the people running these unregulated platforms.

This was prompted by unconfirmed comments by Deutsche Bank analyst Marion Labour. She reportedly said that the FTX collapse exposed structural issues in the crypto industry. These include “inadequate reserves, conflicts of interest, lack of regulation and transparency, and unreliable data.”

However, he added that this second crypto winter will be a net positive as “the collapse of FTX will bring the crypto ecosystem closer to the established financial sector.”

regulatory action is coming

On November 14, the Federal Reserve’s top regulatory official, Michael Barr, said that tighter monitoring of crypto assets is coming. This includes “security measures” to ensure that crypto companies are subject to the same regulations as other financial firms, he said.

The 2022 crypto crash is quite different from the one in 2018. At the time, it was powered by ICOs (initial coin offerings) raising Ethereum and then dumping it in the markets. This time, it’s driven by venture capital firms pouring billions into highly dubious organizations like FTX.

Either way, the anti-crypto brigade of central bankers and politicians has far more gunpowder than they do now.


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