The biggest risk for cryptocurrencies is none other exchange implosion or billionaire hackIt's regulation. At least that's what Patrick Hillmann, chief strategist at the world's largest cryptocurrency exchange Binance, said on Monday.
Hillmann argued that US crypto regulations are becoming increasingly strict and misguided, which could cause some “real market volatility” or even “choke” the industry.
“The United States has always been a place that has really fostered great innovation,” he said. told Insider. "Unfortunately, I think [what] that we are seeing now will have a real cost [to investors] over time."
US regulators have stepped up enforcement of crypto regulations in the wake of the collapse from FTX last year, once the second largest crypto exchange in the world.
In January, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued a joint declaration warning banks about the risks of exposure to "activities related to crypto assets". And in the weeks since, the Securities and Exchange Commission (SEC) has dished out seven figure fines to celebrities who promoted cryptocurrencies and clamped down on “staking” features, where users get rewarded for holding certain cryptocurrencies. Crypto exchange Kraken was fined $30 million for improper disclosures related to its engagement function earlier this month.
Binance's Hillmann is particularly concerned about increased regulations against exchange tokens, which are used to facilitate transactions on crypto exchanges, and stablecoins—whose value is linked to an external asset such as the dollar or gold.
After the collapse of the algorithmic TerraUSD stablecoin last year, regulators began investigating popular stablecoins that are supposed to maintain a one-to-one peg to an external asset. But Hillmann said authoritarian regulations could lead to the loss of what he called stablecoin “safeguards” for crypto investors. Cryptocurrency investors often consider stablecoins as a safe haven asset due to their low volatility.
“When you take that away from users at a time like this, that safety net is gone,” Hilmann argued. “At the same time, we are seeing a pressure campaign on US banks to also not service cryptocurrencies. not just do [investors] not having the ability to move your money to a safe [place]they can't take it off the exchanges easily either."
Hillmann's comments come after the New York State Department of Financial Services forced blockchain platform Paxos to stop minting Binance's stablecoin (BUSD) earlier this month, citing "unresolved issues related to Paxos' oversight of its relationship with Binance." On February 12, the Wall Street Journal also reported that the SEC plans to sue Paxos for violating investor protection laws with respect to BUSD. The market capitalization of the stablecoins has fallen from $16.1 billion to just over $12 billion in the weeks since, according to data from Coinmarketcap.com.
While enforcement of cryptocurrency regulations has steadily increased over the past year, the SEC's decision regarding Paxos and BUSD is the first lawsuit targeting a stablecoin and amounts to a major step forward by regulators, which some argue is meant to send crypto back to the market. “finance stripes.”
In January, Binance admitted to management issues with its stablecoin offerings after multiple outlets found irregularities in the collateral used to back those tokens. But the company said last week that it is Approaching an agreement with US regulators to “make amends” and pay penalties for his many legal problems affairs in recent years.
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