- According to hedgewithcrypto, the number of legal issues involving crypto decreased by 30% in 2019.
- According to (SEC) Chair Gary Gensler, the crypto industry is “playing games” with the US SEC.
- There is a court ruling in the SEC labelling nine different tokens as securities. They include; AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, and KROM.
Over the past few months, legal institutions such as the US SEC have effectively had a grip on the crypto Industry. Since the FTX crash, governments and intuitions have trod on thin ice with their receptive legal bodies. The number of legal issues in crypto has also rapidly increased, with the governments flagging any “suspicious” movements. The 2022 crypto winter has effectively caused severe damage to the industry. More so on how various governments approach crypto. Many are now wondering if this is an attempt to legalize and secure digital currency. Or is it a ploy to gain control?
The need for crypto regulations today
Within less than two decades, digital currency applications have dominated the globe and Africa. Over the year investing in cryptocurrency was seen as a lucrative way to earn money. This trend gradually escalated when the first crypto millionaire, the Winklevoss brothers, first merged in 2017 during the highest peak point of Bitcoin. This effectively rallied the entire crypto industry. It showed that investing in crypto could potentially transform lives.
Also, Read SEC warns crypto traders and investors of the looming honey trap.
In Africa, a similar case erupted when Nigeria gained a complete makeover with the rapid growth of crypto. Soon its natives were steadily abandoning their highly volatile fiat currency Naira. Fortunately, the government saw this as an opportunity and capitalized on it. Soon Nigeria was at the top of Africa’s crypto Industry, and its benefits were noticeable.
Unfortunately, due to the highly lucrative concept of digital currency scammers and hackers flood the ecosystem. The rate of embezzlement of crypto coins and the rise of fraudulent exchanges soon became a problem in many ecosystems. In Africa, South Africa has one of the highest digital currency adoption rates. Unfortunately, it also has the highest crypto scam rate in Africa. To curb these dilemmas and prevent scenarios such as the MT Gox, One Coin and other known crypto scams and hacks, crypto regulations became a necessity.
The formation of crypto regulations essentially brought order to a lawless land. Through its creation, it prevents market manipulation and protects investors and crypto traders. Crypto volatility essentially defines how crypto traders earn or lose money within the crypto industry. Its demand and value concept is rather open to investment manipulation. In 2021 the manipulation of the market was at its peak. Only a few investors manage to profit from the chaos ensured by the 2022 crypto winter.In addition, crypto regulations bought balance between the government and the crypto community. Concepts such as stablecoins essentially threatened the very economic growth of countries if not applied correctly. Aside from protecting crypto traders from scammers, it brought some sense of balance between crypto and fiat currency. Unfortunately, many have had a change of heart on whether crypto regulations are useful.
With the 2022 crypto winter, there is a steady increase in legal issues in crypto. This is brought by the sudden crash of FTX that revealed that even top crypto exchange firms mishandle customer funds. Unfortunately, rather than protect customers, we might need to accept that it’s a ploy to control crypto.
Increase in a lawsuit involving crypto regulations
According to hedgewithcrypto.com, the number of legal issues involving crypto decreased by 30% in 2019. At the time, various governments and organizations had recognized the value of using digital currency. Unfortunately, this number steadily increased to over 48% in 2022.
Also, Read Crypto regulation framework in Africa: Why we need it and who benefits.
The US SEC handles a majority of the cases held in 2022. Despite the new nature of crypto regulations, there are still several loopholes. As a result, these lawsuits relate to unregistered services and securities that are common nine the crypto Industry. These cases have ranged from Initial Coin Offering Fraud to unregistered services and theft cases. In addition, there is an increasing number of unlawful promotions of cryptocurrency.
According to the research, the latter accounts for the majority of the legal issues in cryptocurrency. A prime example involves the Kim Kardashian incident. According to Google, over 50,000 articles were generated highlighting the lawsuit imposed on the famous model. What is quite intriguing is the fact that within the past half-decade, less than 30% of the cases involved falsifying company revenue and pyramid scheme fraud.
With less than two months in 2023, the US SEC and other legal institutes have taken drastic and stern measures in violation of set crypto regulations. According to (SEC) Chair Gary Gensler, the crypto industry is “playing games” with the US SEC. He claimed that the legal issues in crypto today revolve around crypto exchange platforms purposely neglecting the rules set. To show its distaste for the matter, the SEC is rebuffing its crypto regulation system. This ensures that the efforts for digital currency have no choice but to comply with the government’s will.
Currently, several legal bodies term crypto as a security. This means that it represents fractions of assets with real value such as equity, a company, real estate etc. Essentially security tokens or crypto give value to the concept of digital currency. As a result, various crypto regulations depict how, when and what conditions are applied to such a commodity.
Unfortunately, not many see it in such a light. Recently Kraken crypto exchange received a $30 million fine since it allegedly ran an unauthorized crypto staking program. Crypto exchange CoinEX is facing legal suits since State Attorney General claims it is an unregistered securities broker and commodity broker-dealer under state law. SEC also charged Ishan Wahi, a former product manager at Coinbase, with the illegal purchasing and selling of 25 crypto assets. All these charges revolve around the common law terming crypto as a security.
The crypto Industry is not happy
The increase in lawsuits and legal issues in cryptocurrency results in the limitations and freedom of the entire concept of web3. One of the few benefits cor crypto regulations is its ability to hold organizations and governments responsible for their actions. A prime example is the FTX Crash. Since it violated several crypto regulations and laws, it is held responsible for compensating the affected organizations and crypto traders. In addition, with government involvement growing, the adoption of the crypto industry is simple. Collaboration is far easier than the competition, and finding a way to incorporate the use of digital currency is the ultimate goal of crypto.
Also, the Read Kraken crypto exchange was fined US$30 million for violating crypto regulations.
Unfortunately, this loses all means when a set legal regulatory body imposes crypto rules in an attempt to bend crypto to the government’s will.There is a court ruling in the SEC labelling nine different tokens as securities. They include; AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, and KROM. Any crypto exchange offering these tokens could face state and federal regulatory actions. While it is still unclear as to why these tokens were specifically chosen, it shed an ominous light on the true motives of the SEC.
In truth, the legal issue in crypto should only revolve around cases that affect the crypto ecosystem. The 2022 crypto winter caused a significant amount of damage and fear towards the crypto industry. Despite this, the use of digital currency is still steadily growing. We are yet to witness any massive change in the crypto regulation system. However, with the recent trend, we should be prepared for any drastic changes.