Friday, February 3, 2023

Regulators face public anger after FTX collapse as experts call for coordination

The year 2022 is coming to a close and could be one of the busiest for the cryptocurrency industry.The prolonged hibernation wiped out over 70% of the market capitalization and led to a flood of crypto companies. This was mainly due to internal mismanagement and uncontrolled decision making process.

Amidst all the ups and downs, one thing has become clear: Retail customers have lost a significant amount due to lack of regulatory oversight,

Although US lawmakers have promised to bring cryptocurrencies under regulatory scrutiny several times this year, After every major crash involving crypto-related companies like Terra and FTX, we see another round of regulatory debate without concrete action,

The role of regulators has come under heavy scrutiny following the collapse of FTX. Close ties between former CEO Sam Bankman Fried and policymakers, Some reports are pointing to Eight congressmen, five of whom received donations from FTX, tried to block the Securities and Exchange Commission (SEC) from investigating FTX.,

Newsflash: 8 members of Congress tried to stop the SEC from investigating FTX, questioning the SEC’s authority to investigate cryptocurrencies.

5 of those 8 members also received campaign donations from FTX ranging from $2,900 to $11,600.

Coinbase CEO Brian Armstrong was none too pleased with regulators’ failure to prevent another contagion, saying Enforcement measures against US-based companies for wrongdoing by offshore cryptocurrency exchanges to no avail,

Armstrong also blamed the SEC for failing to come up with a rule in time.Due to which almost 95% of trading activities have shifted to foreign currency.

It was a forex not regulated by the SEC.

The problem is that the SEC failed to create a clear regulation here in the US, so many US investors (and 95% of trading activity) went overseas.

Punishing Corporate America for this is futile.

Jim Preysler, co-founder of decentralized exchange service provider, explained that Most don’t fully understand the role of regulators like the SEC,

He told Cointelegraph that: “SEC sets rules and guidelines, For example, the SEC has repeatedly clarified that, Apart from perhaps bitcoin, they see all other cryptocurrency offerings as having potential value., Violators face potential law enforcement and, in extreme cases, may turn to the Department of Justice to initiate a criminal case. Right now, the SEC has a huge backlog of violators that it can run after. They’re still doing precedent-setting kinds of cases: initial coin offerings, influencers, exchanges, lending products, etc.”

“This will set the stage for future enforcement. As the SEC ramps up, we may see cases move even faster and more aggressively.”

as signed armstrong, The inability of regulators and policy makers to come up with clear regulation of cryptocurrencies has been a major driver of investors turning to offshore exchanges.,

Preisler noted Regulation already exists in the United StatesExchanges must have a state-level money transfer license, a banking license to offer cryptocurrency, or an Alternate Trading System (ATS) registration with the SEC if they are offering blockchain-based securities.

They said that Any other regulation may add to existing regulations or potentially replace them, However, “in the United States, without one or both categories, an exchange would be in violation of existing regulations.”

Former SEC attorney Patrick Daugherty told Cointelegraph that “SEC and CFTC (Commodity Futures Trading Commission) US persons have jurisdiction over token sales by or through non-US exchanges, Although the details vary depending on the specific platform or exchange, Many US persons are clients of non-US exchanges, which gives US agencies jurisdiction over them,

when asked Why the SEC Hasn’t Taken Any Timely Action Against Forex, Daugherty Recommends Congressional Hearing and explained that:

“These are questions that House and Senate committee members should be asking in their oversight capacities. There is no effective private remedy against the SEC in a matter like this. That’s what congressional oversight is.”

The CFTC and SEC have faced increased scrutiny following the collapse of cryptocurrency exchange FTX, as the exchange was pushing for the CFTC to become the main oversight commission for the cryptocurrency market. Republican lawmakers have accused the SEC chairman of coordinating with FTX to “obtain a regulatory monopoly.”,

US regulators should take better safeguards

The regulatory process is lengthy due to the number of parties involved, and all legislation must pass through Congress before going into effect. Even then, Regulators, such as the SEC, can use court orders to develop policies that protect their investors., One such example is the ongoing case between the agency and Ripple executives. In this lawsuit, the SEC is using legal means to enforce the law, despite a lack of clear rules, around which crypto assets qualify as securities and which can be considered an asset.

David Kemmerer, CEO of Crypto Tax Solutions Provider Coinledger, Demands Intergovernmental cooperation with tax havens to ensure mutual respect of relevant laws, Too It is important that foreign exchanges only use authorized dealers.,

he also said Regulators must promote safe and efficient markets, so US regulators can block investor flight to offshore exchangesand commented on Cointelegraph that:

“There should also be equity investment from local companies to support innovative and cutting-edge technology. Regulators should also open up additional funds to protect investors from subsidized loans such as offshore exchanges. Similarly, there should be less political interference and better taxation . Friendly”.

In light of the cryptocurrency collapse, US regulators should erect barriers to protect investors while allowing domestic innovation to flourish,

Richard Meeko, legal director at cryptocurrency solutions provider Banxa, told Cointelegraph that Establishing comprehensive cryptocurrency regulation is a long road ahead, but there are clear guidelines that prudent regulators can set and articulate to allow good players in the space to continue to innovate within the US, while holding others accountable., He told Cointelegraph that:

“Regulation through enforcement should not be the primary way of overseeing this sector. In the absence of a strong and uniform regulatory framework, active participation of the sector and creation of appropriate signals and guidance is critical.”

Meeko also suggested cracking down on advertisers and promoters.Stating that “although it is legally based in the Bahamas, the collapse of FTX.US harmed US citizens who had invested in the platform. Cracking down on crypto-influencing campaigns that lack proper disclaimers and/or disclosures (such as conflicts of interest) is one way the SEC can protect consumers,

US regulators have had an on-and-off relationship with cryptocurrencies. Since the FTX debacle, there’s now a major demand for more regulation, Richard Gardner, CEO of cryptocurrency infrastructure provider Modulus, believes that Regulation should mandate prohibiting mixing of client assets and exchange assets, He cited the example of the EU’s MICA regulation, telling Cointelegraph:

“It becomes very easy to argue that competent investors will see a real reduction in risk by using exchanges supervised by US and/or EU regulators. Beyond offshore exchanges, the risk extends to DeFi projects that they are by design are borderless. Not only is there an issue of surveillance, but there are security concerns as the vast majority of assets hacked in 2021 came from DeFi projects.”

He added that the lack of action by regulators is certainly doing the cryptocurrency industry a disservice. Even then, The person responsible for the FTX debacle is the exchange and its CEO Sam Bankman-Fried, “It’s easy and comfortable to pass the ball to the regulators, but what sbf has done is absolutely excessive, Regulators have certainly learned their lesson from recent events and, in an ideal world, this will mean swift action by the incoming Congress,” Gardner said.

The collapse of FTX has put regulators in the crosshairs for their inability to protect investors from losing money due to the collapse of yet another multibillion-dollar company. looking ahead, It will be interesting to see how regulators and legislators address issues of jurisdiction, competition, and oversight in an effort to make the cryptocurrency ecosystem more stable.,

the explanation: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be construed as financial advice or investment recommendation. All investments and commercial dealings involve risk and it is the responsibility of each individual to conduct appropriate research before making any investment decision.

Nation World News Desk
Nation World News Desk
Nation World News is the fastest emerging news website covering all the latest news, world’s top stories, science news entertainment sports cricket’s latest discoveries, new technology gadgets, politics news, and more.
Latest news
Related news