The cryptocurrency market has entered 2023 with regulatory pressure after a difficult 2022. A Binance official is sounding the alarm bells and states that stricter US regulations could create a big wave in the crypto market.
“There can be big fluctuations in the cryptocurrency market!”
Patrick Hillmann, Binance Chief Strategy Officer, worries that strict cryptocurrency regulations in the US could stifle the industry and cause huge market volatility. After a year of unprecedented failures, crypto experts have remained hopeful that 2023 will mark a fresh start for the industry. Instead, the industry found itself on the receiving end of severe pressure from the US government. While the Securities and Exchange Commission (SEC) issued fines and other penalties to crypto lending firms late last month, federal banking officials issued statements that appear to make it harder for crypto companies to operate in the country.
The biggest threat that regulation poses to the cryptocurrency market is not the crash of another cryptocurrency exchange or the theft of millions of dollars. At least, that’s what Patrick Hillmann, chief strategy officer at Binance, the world’s largest crypto exchange, said on Tuesday. Hillmann noted that US cryptocurrency laws are becoming increasingly strict and narrow-minded, which could cause some serious turmoil in the crypto market or possibly suffocate the growing industry if it continues. Talking about the ongoing crypto push, Hillmann noted:
The USA has always been a place that fosters truly great innovation. Unfortunately, we see that this will come at a real cost to investors over time.
Post-FTX, regulatory pressure builds on crypto
As you follow on Kriptokoin.com, as a result of the dramatic collapse of crypto exchange FTX, formerly the second largest in the world, US regulatory authorities have stepped up enforcement of existing crypto rules. The Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Foreign Exchange Control issued a joint statement in January, warning banks of risks from ‘crypto-asset-related activities’. The statement was issued along with a general warning.
In the weeks that followed, the SEC issued seven-figure fines to celebrities who defended cryptocurrencies and banned features known as ‘staking’, in which users were rewarded for holding certain cryptocurrencies. Earlier this month, California-based Kraken exchange was fined $30 million for inappropriate disclosures linked to its staking feature.
Stablecoins and exchange tokens on target
Hillmann is concerned about the proliferation of crypto regulations specifically targeting stablecoins and exchange tokens. Stablecoins and exchange tokens are cryptocurrencies whose value is pegged to an external asset such as dollars or gold. Exchange tokens are used to facilitate transactions on crypto exchanges. “At a time like this, when you take it from users, the safety net goes away,” Hillmann says. He also states that they are seeing a pressure campaign on US financial institutions to stop serving crypto. For this reason, according to Hilmann, crypto investors cannot easily withdraw money from exchanges, as well as not being able to shift their money to a safe place.
Hillmann’s remarks follow the New York Department of Financial Services’ order for blockchain platform Paxos to cease printing Binance’s stablecoin (BUSD), citing unaddressed issues with Paxos’ management of its partnership with Binance. While BUSD retained its one dollar peg, it lost market share significantly against rivals such as USDC and USDT.
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