For any industry to survive, it needs proper regulation that will provide a framework for the industry to flourish and grow. The same thing applies to the cryptocurrency exchange industry.
The cryptocurrency industry is faced with compliance issues, as shown by the recent scandal that rocked major exchanges like OKEx, and BitMEX.
The crypto industry not strange to scandals
Over the years, there have been a high number of cases brought against the industry’s top trading platforms by regulators. The case against the high-leverage derivatives platform BitMEX is a perfect example.
Earlier in the month, BitMEX was charged by the U.S Commodity Futures Trading Commission (CFTC) for violating its regulations and operating with an unregistered trading platform.
The charges extended to the executives of the platform, including Arthur Hayes, its chief executive officer, who was charged for violating the Bank Secretary Act.
The case against Hayes led to the sudden drop of OKEx’s exchange token, with little hope of any rise in the future.
Meanwhile, in a recent sophisticated hack, more than $200 million worth of customer funds were stolen from Singaporean exchange KuCoin. The successful hack has further dented the already bad reputation of the industry.
These scandals could have been prevented if there were clearer and more comprehensive regulations in the industry. With a proper regulatory platform, cryptocurrency exchanges will be obliged to ensure the safety of customer funds. In other financial sectors where there are solid regulation frameworks, customers or account holders are assured their funds and deposits are safe.
But the cryptocurrency industry is still struggling to reach the level of regulation required to take the industry to the next level.
Cryptos not trustworthy due to lack of compliance
Since the first Bitcoin whitepaper in 2008, Bitcoin and the cryptocurrency industry have seen a lot of growth, with more players in the industry than ever before. There has been increased healthy competition amongst decentralized applications (dApps), blockchains, wallets, as well as trading platforms. Of course, healthy competition is not enough for any industry to reach its potential. It also needs proper regulation. Unfortunately, the lack of proper regulation seems to be the primary problem with the industry.
Some top players in the industry have been fined for violation of regulations, which seem not understood by the violators. Most of the fines have been for underreporting or carrying out the sales of unregistered securities.
The regulatory problem is also what has been keeping the industry from moving forward. Many giants in the mainstream financial sector still don’t trust the sustainability drive in the cryptocurrency world, with news of financial loss or regulatory breach springing up all the time in the industry.
The general feeling by the public about cryptocurrency is one of untrustworthy mainly because of the lack of oversight. Scam is still the one word a lot of people relate cryptocurrency with. That’s because of the negative news always pushed by the media.
As a result, many crypto enthusiasts believe providing a better regulatory framework will go a long way to change this feeling the public has about cryptocurrencies.