Cryptocurrency Exchanges “Crying for Regulation,” According to New Study
Contrary to popular belief, major cryptocurrency exchanges believe more regulation is needed to safeguard the industry from manipulation and volatility, according to a new study by electronic payment company Mistertango.
Crypto Exchanges Desire More, Not Less, Regulation
In a study of 24 cryptocurrency exchanges across Europe, Asia, South America and Oceania, Mistertango found that 88% of respondents felt current regulatory standards are insufficient to safeguard against the illegitimate use of cryptocurrency. To understand why so many exchanges want more comprehensive regulation, it’s important to reflect on what scares them in the first place.
According to the report, nearly a third of crypto exchanges say that a major market crash is the biggest threat facing their industry. Although they did not elaborate, their response to other questions indicated a growing fear of being squeezed out of operation by regulated financial institutions.
Case in point: 40% of exchanges say reducing barriers to crypto funding by banks will improve acceptance of digital currencies. More than half (55%) believe cryptocurrency traders should be subject to Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines governing traditional financial services.
“Until now, the industry has not had its say on regulation,” Oleksandr Lutskevych, CEO of CEX.IO, said in a Misterlago press relese. “It has been widely supposed that crypto companies want to avoid a regulated environment, but this is far from the truth. The industry is all too aware that regulation will lead to the maturity of the market and ensure businesses remain free from suspicion of involvement with illegitimate uses of cryptocurrency.”
According to a press release that circulated on Tuesday, Mistertango’s study surveyed exchanges with at least $100 million in daily trading volumes. Data provided by CoinMarketCap on Tuesday showed only 19 exchanges meet that minimum threshold.
Calls for Regulation Grow
While calls for regulating cryptocurrency exchanges are nothing new, voices within the industry have become increasingly vocal about the need for regulatory reform.
Earlier this year, more than a dozen Japanese crypto exchanges formed a self-regulatory body to bolster trust following a $530 million heist of Coincheck, a Tokyo-based trading platform. In South Korea, virtual exchanges have embraced proposals to bring cryptocurrency trading platforms under the umbrella of regulated financial institutions. Once again, the impetus for change came from multiple cyber attacks exposing tens of millions of dollars in user funds.
As Forbes recently reported, a new cryptocurrency exchange by the name of Blocktrade.com has launched in Europe with the goal of complying with financial regulations. If approved, the exchange will fall under the purview of the recently implemented MiFID II framework.
In the United States, the market for initial coin offerings (ICOs) is also experiencing a gradual shift to ensure new tokens comply with federal securities laws. The U.S. Securities and Exchange Commission (SEC) considers most ICOs to be securities, which means token issuers must abide by a different set of guidelines to not only attract investors, but list their asset on an exchange.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.