What Will Crypto Do After the Crackdown?

After reports of the crypto crackdown, what will happen?

Crypto is intended to be decentralized, transparent, and anonymous, hence there should be rules. A rise in fraud, money laundering, security attacks, and other occurrences has spurred authorities to respond. A necessary and justifiable cryptocurrency crackdown is coming.

You should watch out for hackers and crypto firms that have received cease-and-desist orders for allegedly infringing state securities legislation. Eleven bitcoin firms issued and sold ineligible assets, according to reports. They include Pegasus, Remabit, World Over the Counter Limited, and Elevate Pass. Requesting cryptocurrency assets to construct metaverse software, posing as a DeFi platform, etc.

According to DFPI’s news release on September 27, 2022

“All of the organizations allegedly operated as Ponzi schemes, using investor funds to pay gains to more investors. Each entity had a pyramid-like referral mechanism. The people engaged are excellent high-yield investors (HYIPs). High returns with low risk and excessively consistent returns, a lack of information about the people running the HYIP, the use of ambiguous language to describe how the HYIP generates revenue, referral bonuses, the ability to deposit and withdraw funds using cryptocurrency, and the use of social media to attract investors are typical of these investment frauds.

Even if there have been numerous calls for stricter crypto regulations, the matter must be carefully considered, taking into account available resources, the effort necessary, and any other preparation that could help develop a suitable framework. Last month, California Gov. Gavin Newsom vetoed a crypto measure he signed in May.

The framework’s goals were:

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explicitly implementing new policies controlling stablecoins, such as restricting licensed enterprises to exclusively deal with bank-issued stablecoins backed 100% by reserves and requiring crypto companies to seek a license before delivering services or digital assets to the state’s people.
He said a large investment of general fund resources “should be addressed and accounted for in the annual budget process” His reasons included the “premature” nature of the law, which would have established a licensing regime without prior research or future federal action, and the fact that a new regulatory program would require a state loan of more than tens of millions of dollars. The governor refused to sign the bill, saying he would only work with the legislature to clarify regulations if federal authorities established their position on the new asset class.

Global law enforcement is concerned about cryptocurrency money laundering, not just in the US. Following a forecasted surge in cryptocurrency seizures by the UK’s Metropolitan Police in 2021, the UK tabled the Economic Crime and Corporate Transparency Bill on Thursday to allow law enforcement to confiscate, freeze, and recover crypto assets.

The little red dot, also known as Singapore, marketed itself as a digital asset-friendly location until a growing list of scandals and collapses tarnished its reputation. These include the demise of Terraform Labs and the worldwide search for co-founder Do Kwon; the June collapse of Three Arrows Capital, a crypto hedge fund that started in Singapore; and the recent suspension of Hodlnaut, a Singaporean crypto exchange.

Gleb Kostarev, Binance’s regional head of Asia, said Singapore’s importance relies on regulation. Once a crypto paradise, Singapore has changed.

Kelvin Low, an NUS law professor, said “The reputational damage over the last six months is worse than it seems. When one of these enterprises is discussed, Singapore is always referenced. Experts say Singapore doesn’t do enough to punish or investigate scams. As the MAS emphasized, “none of these failing firms are licensed by the MAS” and are not subject to its control. A blockchain company named ChainUp, which offers technology to crypto exchanges and other customers, sang a different tune. The company is developing in Singapore, and CEO Sailor Zhong backs the regulators’ strategy.

Just the tip of the iceberg. Global governments are not immune to the issues of unregulated cryptocurrency. FSOC presented a 120-page report on the dangers of cryptocurrency on Monday. The study found that many crypto firms have adopted an insufficient regulatory approach, while others engage in regulatory arbitrage. The report is the clearest sign regulators may pay more attention to the crypto industry.

Two days ago, a study from crypto risk-management startup Elliptic said $4 billion in unlawful bitcoin revenues were laundered through DeFi exchanges and other services. A Senate Agriculture Committee plan would bring much of the bitcoin spot market under the CFTC, while securities-like tokens would be controlled by the SEC (SEC). In addition, the House Financial Services Committee is working on a law dealing with dollar-pegged stablecoins. If both measures were passed, institutions and retail would benefit.

Love it or hate it, everyone would benefit from a robust regulatory framework that includes the required regulations immediately. As the U.S. government urges Congress to speed up crypto legislation, a crackdown on cryptocurrencies appears certain, and the crypto world, especially the banking and investing industries, anticipates the go-ahead. As the White House reinforces its position on cryptocurrency, others will follow.

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Disclaimer: This content is mostly the author’s opinion and not financial or investment advice. This is for educational and informative purposes only.

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