Regulatory Realities: 5 Lessons as US Tightens Grip on Crypto

5 lessons for Crypto Enthusiasts and Investors as the US Increases Regulatory Pressure

The US government has recently issued a strong message to the world of Bitcoin, a market worth around US$1.4 trillion.

Just when crypto investors were expecting to move on from the historic conviction of Sam Bankman-Fried, the disgraced founder and former CEO of the defunct FTX crypto exchange, US officials demonstrated yet another show of force against crypto-related criminal behaviour.

Changpeng Zhao, the billionaire founder of Binance, the world's largest cryptocurrency exchange, pled guilty on Tuesday to failing to run an effective anti-money laundering programme, possibly allowing criminal actors of all types to move money via the site.

Here are five lessons from the highest penalty ever issued on a money services corporation in US history, which also happens to be a cryptocurrency firm:

It will require further time for the cryptocurrency sector to shed its negative reputation

Zhao and Bankman-Fried were widely regarded as the industry's public faces. With his guilty plea and Bankman-Fried's conviction, good actors in the cryptocurrency business will have to make a more persuasive case to sceptics that the two were exceptions, not the standard.

In light of Tuesday's revelation, Coinbase CEO Brian Armstrong seized the opportunity to distance his company from Binance, which acknowledged to engaging in anti-money laundering, unlicensed money transmission, and sanctions breaches.

Simultaneously, the government entities in charge of crypto regulation and compliance do not want people to forget about Bankman-Fried and Zhao.

This isn't the FTX firestorm for crypto

After the US Department of Justice revealed that it had filed charges against Zhao after a multi-year investigation of Binance, the value of Binance coin initially fell by around 6%. By Wednesday morning, prices had increased by 3.5%.

Tuesday saw a decline in other cryptocurrencies as a result of the Federal Reserve's broader crackdown, which also involved companies like Tether and Kraken.

Bitcoin fell to US$37,071—a loss of almost US$420, or 1.1%. In contrast, Ethereum dropped US$40, or 2%, to US$1,997 per token.

Both Ethereum and Bitcoin had returned to normal by Wednesday. Ethereum was up 5% while Bitcoin was up 2.4%.

Although Binance is leaving the US, it is not going away

Binance is required under the agreement it made with the authorities to stop doing business in the US.

On Tuesday night, users residing in the United States were met with a notification on Binance.com stating that the service “is unavailable in your country or region.” However, there is some fine print.

The advertisement went on, "Binance.US is a U.S. regulated platform where you can buy, trade, convert, and stake crypto with low fees if you are in the United States or select U.S. territories."

Binance.According to a statement on the website, the US is a subsidiary of Binance that was established in 2019 with the goal of "serving U.S. consumers and adhering to U.S. regulations."

Binance.Treasury authorities stated that as it is a licenced money services firm, the US is unaffected by the declaration made on Tuesday. This implies that US citizens might still purchase and sell cryptocurrencies using Binance.

These days, the government is focusing much more on cryptocurrency

The federal government's stern attitude toward unlawful operations using cryptocurrency is evident in Tuesday's declaration. In other words, the federal government, ranging from the Treasury Department to the Securities and Exchange Commission, is not messing around.

Kraken, another cryptocurrency exchange, was sued by the SEC just this week because it is conducting business as an unregistered securities exchange. Additionally, the agency's lawsuit claims that the exchange mixed the assets of its clients with its holdings.

The SEC has already filed a lawsuit against Kraken. It's only one of many lawsuits the government has brought against cryptocurrency firms like Coinbase and Bittrex this year. The SEC is still pursuing legal action against Binance for allegedly breaking regulations meant to safeguard investors.

Despite a few negative decisions this year, the SEC is anticipated to pursue legal action against cryptocurrency companies to vigorously suppress them.

If Tuesday's significant statement revealed anything, it is that the federal government—rather than just the SEC—is attempting to prevent cryptocurrency fraud.

The Treasury Department, the Commodities Futures Trading Commission, and the Justice Department are also included in this. Even the Justice Department has a National Cryptocurrency Enforcement Team that is tasked with aggressively locating and looking into crimes involving digital assets.

There remains a desire for further regulations

To combat financial crimes, US authorities already have a handy arsenal of legislation at their disposal, including ones that make bank fraud and money laundering illegal.

That's exactly how the government used a cryptocurrency exchange to facilitate the first-ever business settlement.

However, representatives stated that further regulations might be added.

The need for "regulatory clarity" is not new, and new laws governing cryptocurrencies may make it easier for authorities to separate fraudulent schemes from real ones, which would benefit investors and law enforcement.

When and how thoroughly crypto legislation would be implemented are unknown. There are two methods to go about it: first, through Congress, and second, through agency rulemaking at the SEC or CFTC. These would still be susceptible to judicial scrutiny if they were challenged in court.