Since the start of 2023, regulators have been rigorously targeting the crypto industry. SEC Chairman Gary Gensler is seeking to enforce stricter regulations over the entire sector and its digital assets, proposed to be deemed as unregistered securities– excluding Bitcoin from such a classification.
Recent Steps taken by SEC!
Last month, the U.S. Securities and Exchange Commission (SEC) took action against two digital asset trading companies – crypto broker Genesis and Gemini, founded by the Winklevoss brothers – for providing unregistered security services. In addition, the SEC imposed a $30 million penalty on Kraken, a crypto exchange, for violating securities laws.
Binance, the world’s most-recognized cryptocurrency exchange, has been under scrutiny in recent months, facing fines to resolve various regulatory investigations. This has created a challenging situation for the organization.
Furthermore, investors have been shaken by the latest news regarding Silvergate, the crypto-enabling bank; the firm has announced it will be winding down operations. Last week, Silvergate postponed filing its yearly SEC 10-K report to give an independent accounting firm additional time to finish certain audit procedures. The delayed filing caused its stock to take a sharp drop.
The Current Sentiment around Crypto
James Butterfill, Head of Research at CoinShares, stated that investor sentiment at the present has more to do with the regulatory crackdown and apprehensions about who the authorities will set their sights on next rather than the Federal Reserve’s movements. In addition, investors have consistently withdrawn funds from crypto funds for the past four weeks, mostly due to the lack of clarity over regulations for the asset class.
Since the outset of the COVID-19 pandemic, and with a record injection of liquidity into the market by the Federal Reserve in a bid to cushion the ailing economy, there has been a close correlation between the movements of the crypto market and the stock market. During 2020 and 2021, retail and amateur investors, furnished with capital, have “leaped into” both crypto and meme stocks to take advantage of a buoyant market that has reached unprecedented levels.