Regulators properly target out-of-control crypto companies
With lawsuits against Binance and Coinbase, the Securities and Exchange Commission has targeted some of the largest remaining players in the crypto space, accusing the former of outright fraud and misuse of funds and the latter of failing to register as a securities broker.
If you’re swayed by the argument that crypto assets are currency alternatives and not securities, then here’s a simple question: when was the last time you heard of someone using cryptocurrencies to conduct routine day-to-day transactions?
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Sure, in Bitcoin’s early days true believers would use it to buy clothes and pizzas (and, oftentimes, drugs and illegal digital goods). Those days are long gone; almost everyone who holds any crypto now is doing so as an investment, and a high-risk one at that. People can certainly gamble with their money as they wish, but that doesn’t mean this arena should be the Wild West, especially as regular consumers get suckered into thinking that they’re getting the same regulatory protections as everyone else when they very much aren’t.
Oftentimes, if crypto entities just want to cut and run, there is nothing stopping them. Exchanges aren’t overseen or insured in the same way that traditional financial institutions are. As the lawsuits allege, crypto providers are often well aware they are putting customer deposits at risk and engaging in risky and undisclosed maneuvers that can easily spiral out of their control. If their counter is that we should trust them, then they’re standing on very shaky ground.
The sector will likely respond to these actions by painting itself as a victim of overzealous regulators who hate innovation and want to bring the financial system to heel to keep you, the public, from accessing their promised land of financial freedom and unlimited returns. The rhetoric is tempting, but you shouldn’t forget what’s already happened to thousands of customers of entities like FTX and Luna. They weren’t felled by out-of-control regulators, but by the sort of fraud and incompetence that additional oversight may have actually been able to intervene against earlier.
— New York Daily News Editorial Board
