JP Morgan Highlights SEC’s Crypto Crackdown: Urgency Mounts for US Lawmakers to Deliver Regulatory Framework in 2023

The US Securities and Exchange Commission (SEC) has taken action against Coinbase and Binance, two of the leading global cryptocurrency exchanges. By launching a series of charges, the SEC has initiated a legal conflict that will play a significant role in shaping the trajectory of cryptocurrencies moving forward.
JPMorgan recently published a research report discussing the potential influence of lawsuits on upcoming cryptocurrency regulations in the United States.

JP Morgan Research Report: Shaping Future Crypto Regulations Amidst SEC Lawsuits and Legal Ambiguity

JP Morgan’s Thursday research report delves into the potential shape of future crypto regulations. The lawsuits by the US Securities and Exchange Commission (SEC) against Binance and Coinbase underline the necessity for American legislators to establish a comprehensive framework governing the crypto industry, clarifying the respective roles of the SEC and the Commodity Futures Trading Commission (CFTC).

According to the report, the SEC holds the viewpoint that the majority of cryptocurrencies should be categorized as securities. As a result, the SEC believes that most crypto companies and trading activities should come under its oversight and adhere to the existing regulatory frameworks that are applied to other securities.

Nikolaos Panigirtzoglou further highlighted that determining the classification of cryptocurrencies as securities is not a simple legal matter. There is ambiguity regarding which cryptocurrencies would be deemed securities. The ongoing SEC vs Ripple case exemplifies the current lack of clear legal guidance in this regard.

Suing Binance and Coinbase Could Create Urgency For Regulations

Last week, the regulatory authority filed lawsuits against Binance, its CEO Changpeng “CZ” Zhao, and the operating company for Binance.US, citing alleged violations of federal securities laws. Shortly after, a similar lawsuit was brought against rival exchange Coinbase. These legal actions have intensified the need for U.S. legislators to swiftly establish a comprehensive regulatory framework within this year, as emphasized by JPMorgan.

Until such regulations are in place, it is expected that crypto activities will continue to migrate outside the United States and toward decentralized entities. Additionally, the bank predicts that funding for crypto venture capital will likely remain subdued.

The note also highlights that if the SEC’s stance is upheld by lawmakers, Coinbase, Binance.US, and other U.S. exchanges would be required to register as brokers, while most cryptocurrencies would be treated as securities.

Impact On The Industry At Large

Although implementing these regulations may impose additional burdens and expenses on the crypto industry, it is expected to yield several benefits. Proper regulation would bring about increased transparency and enhanced investor protection in crypto markets, according to the report. 

The recent actions taken by the SEC have introduced uncertainty surrounding several layer 1 tokens that are potentially considered securities, thereby granting an advantage to established cryptocurrencies like bitcoin (BTC) and ether (ETH), as mentioned by the bank.