According to the report, without a robust legal framework in place, it is likely that cryptocurrency activities will increasingly shift away from the United States and towards decentralized entities.
In a research report on Thursday, JPMorgan emphasized the importance for U.S. lawmakers to develop a comprehensive regulatory framework regarding the crypto industry, particularly in light of the recent lawsuits filed by the U.S. Securities and Exchange Commission (SEC) against Binance and Coinbase. The report highlights the need for clarity on the regulatory responsibilities of the SEC and the Commodity Futures Trading Commission (CFTC) in this rapidly evolving sector.
According to the report, the U.S. Securities and Exchange Commission (SEC) holds the view that the majority of cryptocurrencies should be categorized as securities. As a result, the report states that crypto companies and trading activities should be subject to the SEC’s oversight and be required to adhere to the existing regulatory frameworks applied to other securities.
The lack of legal clarity surrounding the classification of cryptocurrencies as securities makes it an intricate legal matter, as highlighted by analysts led by Nikolaos Panigirtzoglou. The ongoing SEC vs Ripple case serves as a prime example of the uncertainty surrounding which cryptocurrencies would fall under the securities classification.
Last week, the U.S. regulator, the Securities and Exchange Commission (SEC), filed lawsuits against Binance, its founder and CEO Changpeng “CZ” Zhao, and Binance.US, accusing them of violating federal securities laws. Shortly thereafter, the SEC also sued Coinbase, a rival exchange, on similar charges.
JPMorgan stated that these actions by the SEC are increasing the need for U.S. lawmakers to promptly establish a comprehensive regulatory framework within this year. Until such framework is in place, the report suggests that cryptocurrency activities will likely continue to migrate away from the United States and towards decentralized entities. Additionally, JPMorgan predicts that crypto venture capital funding will remain relatively subdued during this period.
The note states that if the SEC’s position is validated by lawmakers, exchanges like Coinbase and Binance.US, along with other U.S. exchanges, would need to register as brokers. Furthermore, the majority of cryptocurrencies would be subjected to the securities treatment.
The note suggests that although it may pose additional burdens and expenses for the industry, such regulatory measures would have certain advantages. Proper regulation would result in increased transparency and enhanced investor protection within the crypto markets.
The recent SEC actions have introduced uncertainty surrounding several layer 1 tokens that are potentially considered securities, providing an advantage for bitcoin (BTC) and ether (ETH), according to the bank.
Important: This article is intended solely for informational purposes. It should not be considered or relied upon as legal, tax, investment, financial, or any other form of advice.
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