Former SEC lawyer John Reed warns of the lack of regulatory oversight in the crypto-ecosystem, citing vulnerability to risks that are never justified.
Binance’s recent withdrawal halts highlight the need for consumer protection and regulatory clarity in the crypto industry.
Reed urges people to get out now due to the lack of oversight, licensure, and insurance, which leaves investors insecure.
Binance, one of the largest cryptocurrency exchanges in the world, has halted withdrawals citing network congestion. This news comes on the heels of an unconfirmed report that the halt occurred right after $3.3 billion bitcoin in aggregated account withdrawals from multiple exchanges. This was addressed in a tweet by John Reed, Former Chief, of the SEC Office of Internet Enforcement.
Lack of Regulatory oversight is a bigger problem
Reed pointed out that the current crypto industry is highly unregulated. Binance is not registered with the SEC, which means that there is no US oversight, audits, inspections, net capital requirements, licensure, or insurance.
If Binance was SEC or FDIC registered, a US team of auditors would be on site and in Binance’s face, demanding to speak to everyone, demanding documents, demanding trading information, and immediately investigating, and referring any suspicious conduct to the US DOJ. But as the crypto industry is highly unregulated, this is unlikely to happen, which makes the investors insecure.
Lack Of Consumer Protection
The broader issue in the crypto-ecosystem is that there is a lack of consumer and investor protections. When a halt or suspension occurs, customers are left holding their breath and praying. Victims of crypto-collapses become unsecured creditors, likely left with nothing.
When a halt, suspension, etc. occurs, customers just hold their breath and pray. Consider all of the victims from the collapses of FTX, Celsius, BlockFi, Voyager, Terra and all the rest — who lost everything after a “halt.”
Should You Exit The Markets?
The risks associated with the lack of regulatory oversight are never justified under any circumstance, according to Reed. He urges all Binance and other crypto platform customers to get out now.
Related: Coinbase Challenges SEC: Is This the Beginning of the End for US Crypto Regulations? – Coinpedia Fintech News
What the crypto industry lacks is no industry oversight, licensure, insurance, etc. This can become scary when a ‘withdrawal halt’ like this happens. Moreover, this is a nightmare for regulators who are worried about fraud, money laundering, and other criminal activities.
The question remains: how long can the crypto-ecosystem continue to operate without proper regulation and oversight? As the industry grows and matures, the need for regulatory clarity and protections for consumers and investors will become increasingly urgent.
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