opinion
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A sticky situation persists in the crypto ecosystem as regulators pledge to ‘spring clean’ the entire industry. What started as a juvenile attack on crypto is now almost a full-blown annihilation of an industry whose promise at genesis was financial freedom. The beacon of hope for the unbanked is now subject to the unrelenting matching of regulators towards its end.
Born with a great ambition of mimicking and surpassing traditional finance, crypto continues to suffer life-ending attacks from regulators. Is there any end to the onslaught? You tell me!
Exchange exodus from Canada
The genesis of regulatory uncertainty birthed the exodus of crypto exchanges from Canada. The latest in the frenzy of exits is Binance which announced a Canadian market exit in mid-May. The reason per se, Binance says, is the harsh regulatory climate and watchdogs’ tendency to establish unclear crypto legislation.
Binance had cold sweat over regulations around investor limits and stablecoins. The exchange battled with Canadian regulators regarding the new rules— but all efforts proved futile.
The mass exodus of exchanges in Canada was triggered by the rules Binance criticizes in its tweet.
Earlier this year, on Feb 24, Canadian regulators announced a new framework hinting that all exchanges are bound to register with regulators. Also, exchanges must adhere to new stablecoin rules and investor limits.
At the outset, stakeholders expressed disapproval of the new framework. Paxos exchange led the match to exit Canada. What ensued was a period of uncertainty as more exchanges, including OKX and dYdX, followed; the problem of regulatory uncertainty.
Regardless of the ugly departure, Binance maintains that a comeback is possible in case a new regulatory regime comes into place.
Can’t Binance launch a Binance Canada arm akin to Binance US? Well, the question has recurred a couple of times now. Some argue that the Canadian market is too miniature to trigger such a move.
Even as Binance left, the vacancy in the Canadian market was promptly filled with exchanges like Kraken, Coinbase and Crypto.com.
SEC’s ridiculous crypto onslaught
Citing harsh regulations without calling attention to the disease that is SEC against crypto is shoddy work. The watchdog’s pivotal role in steering hostility toward crypto cannot be overlooked.
The regulator’s head, Gary Gensler, is painted (written) as a major villain in the crypto story. Despite already taking the rogue tag last year, it looks like the ombudsman upped his game in 2023.
With the absolute intent of intensifying the misery on crypto, Gary Gensler’s SEC labelled about 68 cryptocurrencies securities. Such include BUSD, ADA, BNB, SOL, MATIC, ATOM, SAND, MANA, Filecoin, etc.
In a recent startling revelation, Filecoin was surprisingly tagged as a security by the SEC. The watchdog was responding to Grayscale’s share registration.
At the dawn of the year, the watchdog ambushed Kraken, alleging that the exchange illegally issued staking and custodial services. The settlement agreed upon was $30 million.
As a consequence of regulatory ambiguity, several top exchange networks contemplated departing the American market. Bittrex is one such exchange whose American exit was steered by impune regulations. Others like Coinbase and Binance have had similar plans.
A bigger war brewing: Coinbase vs SEC
A big war is brewing between the SEC and Coinbase after the former sued the latter for illegal operations. Part of the SEC’s claims includes Coinbase dealing with crypto assets the federal regulator considers security.
Coinbase’s response was not at all shocking. The exchange, through its head Brian Armstrong declared plans to exit the US.
The showdown between Coinbase and SEC has been going on for months. In March, Coinbase came out guns blazing with accusations that the SEC chose to intimidate instead of creating favourable rules.
The initiation of probes on Coinbases major services like earn, prime and wallet was seen as a final blow to an exchange that has been thriving in the US for years.
On the brighter side, this inbred warfare drew the attention of the US Chamber of Commerce. US commerce chambers believe that the attacks are harmful to innovation.
CBDC Tale; A Freedom driver or Regulators’ instrument?
In writing is a new tale, CBDC, born with the promise of financial inclusion. The ideology of Central Bank Digital Currency stems from decades ago in Finland. However, the evolution of financial technologies revived the development of CDBD by leveraging blockchain.
Despite promising inclusivity, the cost of this new development would be financial freedom. UK, US, and Nigerian citizens have been unforgiving as the three countries begin implementing CBDC. Several countries have anti-CBDC demonstrations.
Florida’s governor, Ron DeSantis, invested much of his political goodwill to fight CBDC promotion in the US. In another uprising, residents of the UK took to the streets to complain about CBDCs. Most residents noted that the tech is implemented to control people’s finances.
The worst is China’s CBDC which allegedly discourages people from saving. In general, two tales a being told, one of inclusivity and the other of rejection.
ISO20022: The Dawn of crypto inclusivity?
As turmoil and uncertainty continue to be reported, a new concept was recently born to standardize high-value payments. ISO20022 is already being used in over 70 countries.
ISO 20022 is fashioned as a system that supports secure payment data. In simple terms, this system offers a flexible standard for financial messages, creating interoperability of financial institutions, key infrastructure and customers.
The banks must accept this standard for the institutions to continue making payment processing services. This new standard affords better-structured transaction data, especially for payment messages.
This system offers compatibility with some crypto blockchains, including Ripple, Hedera, Quant, Stellar, IOTA, Algorand, Cardano and XDC network. Most compatible blockchains, including Ripple and Stellar, are only compatible because of their strong interest in banking technologies.
Will the compatibility of blockchains with ISO 20022 help foster regulatory inclusivity for crypto? Well, it is possible. However, it all comes at a cost. The price is freedom. ISO20022 is designed to give more oversight over digital transfers to banks, a functionality that has been seen to be too good after all. Ask ECB’s Christine Lagarde whether their policies led to inflation, and she will say no, inflation came from nowhere.
Keep watching Fintech Express for more updates on regulation and other fintech-related developments.