Crypto's largely unregulated free-for-all is colliding with intensified government oversight globally. As the authorities crack down, crypto exchanges thriving by ignoring rules now face existential crises. So far, 2023 has been one of the most challenging periods for crypto investors, not just because of heightened volatility in crypto prices, but also because of a series of regulatory attacks on some of the largest crypto exchanges in the world, including Coinbase Global (COIN) and Binance.

The Rise and Fall of Crypto Exchanges,
The Rise and Fall of Crypto Exchanges, and the Future of Unregulated Platforms Pixabay

From the outset, Americans have had limited options for crypto platforms, but with the regulators coming down hard on unregulated platforms, investors have seen their trading options further limited, making it difficult to gain exposure to the booming crypto sector.

Amid rising uncertainty about the health and business practices of even the most popular crypto exchanges, The INX Digital Company (NEO: INX) (OTC: INXDF) has emerged as a potential answer to regulators seeking to tame the crypto market practices for investors' safety.

Recent Regulatory Decisions Call For Regulated Crypto Platforms

On June 5, the Securities and Exchange Commission filed 13 charges against Binance, the largest cryptocurrency marketplace in the world. The SEC alleges that Binance operated as a securities exchange and a clearing agency without registration, misrepresented trading controls, and offered unregistered securities for sale to retail investors. The following day, the SEC sued Coinbase, the most popular crypto platform in the U.S., alleging that the company operated as an unregistered securities exchange, broker, and clearing agency. The watchdog also targeted the company's staking business, which allows investors to earn cash rewards for staking their crypto assets.

Previously, the SEC ordered Kraken, a popular U.S. crypto exchange, to discontinue its staking business. On a global scale, many leading crypto exchanges have found themselves at the receiving end of regulatory scrutiny, including KuCoin, BitMEX, Crypto.com, and Huobi. These crypto exchanges have been flying high not so long ago, but regulators eventually decided to intervene with the objective of making crypto investing a safer place for both retail and institutional investors.

A closer evaluation of the regulatory actions taken against Binance and Coinbase reveals that most of these allegations are centered around the unregulated status of these marketplaces. Last April, SEC Chairman Gary Gensler highlighted that crypto exchanges must comply with existing regulations and register with the watchdog to avoid future conflicts of interest and regulatory scrutiny. The lack of a fully regulated crypto marketplace in the U.S. is a challenge for investors, but on the other hand, this presents a lucrative opportunity for newcomers who are willing to offer a regulated crypto trading experience to American investors.

INX May Pivot the Market into a Regulated Solution

INX has gained recognition by achieving the industry's first SEC approval in 2020 to trade cryptocurrencies and security tokens. INX's founder, Shy Datika, foresaw that crypto's mass adoption would require adhering to laws protecting investors, and preventing illicit activities and has been outspoken about it since the rise of crypto in 2017.

Through their INX token-based capital raise, INX has showcased, for the first time, how other crypto companies can raise capital in a regulated environment by embracing existing registration laws.

The security tokens offering process provided by the company marks a new era in investing, as these tokens enable companies to raise capital through investment contracts owned directly on the blockchain network, all while adhering to the SEC regulatory oversight that makes such tokens legally available for both retail and institutional investors.

Complying with regulatory requirements has always been at the heart of INX Digital's business strategy. In its registration statement filed with the SEC in 2020, INX highlighted how it plans to create a first regulated, safe environment for crypto investors that will pave the way for a stable and growing digital asset trading ecosystem that may one day replace the legacy equity market.

The company has made notable progress in achieving this objective while filling a gap in the tear between the legacy capital market and the innovative blockchain-based world.

In a world where unregulated trading platforms are regularly hunted-down by the regulators, INX has (not surprisingly) become a potential acquisition target for the major crypto players , with the company already entering a non-binding deal with Republic to be acquired for a total consideration of $120 million. But this may be just a first-call transaction potentially marking the opening shot for what may become a bidding war on INX between the large crypto exchanges that may find INX to be the pivotal strategic acquisition that could bring them back from the cold of regulatory non-compliance.

Conclusion

It's clear that the global cryptocurrency industry is undergoing dynamic changes with regulators increasingly scrutinizing the activities of leading crypto marketplaces. The market lacks the presence of highly liquidated, regulated, and registered crypto platforms, which has been an ongoing concern for a few years. Innovator players like INX Digital foresaw this issue, and are becoming important pole bearers that may just help the large companies transform the crypto industry.