Crypto Exchanges Might Be Forced To Register With The SEC, Investment Banking Giant Warns

JP Morgan strategists led by Nikolaos Panigirtzoglou have warned the cryptocurrency community that centralized crypto exchange platforms might soon be forced to register with the U.S. Securities and Exchange Commission (SEC) following the major events that unfolded last week.

"Eventually, the SEC position might be confirmed by lawmakers and Coinbase, Binance.US and other U.S. exchanges would have to register as brokers and most cryptocurrencies would be treated as securities," the strategists said in a note seen by The Block.

"This could be more onerous and more costly for the crypto industry but there could be positives as well, as crypto markets would be subjected to similar regulations applied to traditional markets such as equities and thus offer more transparency and investor protection," they added.

The JP Morgan strategists further noted that the financial regulator's efforts demand that U.S. lawmakers craft a clear regulatory framework in the country as early as this year since the absence of such would probably drive crypto businesses offshore and into decentralized entities, making venture capital funding among crypto businesses limited.

The strategists think regulations are good because "it would clear the industry from bad practices and bad actors, which in turn is necessary for the industry to mature and see more institutional participation."

In the lawsuits filed by the SEC against Binance and Coinbase, two of the world's largest centralized cryptocurrency exchange platforms, the Wall Street major regulator declared a list of crypto assets as securities, including Polygon's MATIC and Solana's SOL.

The strategists then claimed that if the financial regulator would win the legal battle, then it could trigger the delisting of tokens from exchanges and restrict the potential development of the blockchains behind the tokens.

"Given that most of the tokens targeted by SEC are Ethereum competitors, often called in the crypto world Ethereum killers, [last] week's SEC actions raise the chance that Ethereum would further increase its dominance in smart contract blockchain space," the strategists noted, according to The Block.

On Monday, Rep. Warren Davidson (R-Ohio) and House Majority Whip Tom Emmer (R-Minn.) introduced the SEC Stabilization Act, which seeks to restructure the SEC and effectively remove Gensler from his post.

While the proposed legislation marks a significant move by Republican lawmakers in their efforts to challenge Gensler's leadership, its impact is only surface deep since it does not address the issue of crypto assets classification, which even both the SEC and the Commodity Futures Trading Commission (CFTC) could not agree on.