Insiders in cryptocurrency hoped that 2023 would bring a fresh start after a year of unprecedented failures. Instead, the U.S. government has been pursuing a vigorous crackdown against the industry. Late last month, the Securities and Exchange Commission (SEC), imposed fines and other penalties against crypto lending firms. Federal banking officials also published statements that appeared to be designed to make it difficult to conduct business in the country for crypto companies.
SEC’s Crypto Crackdown
Regulation is not the greatest threat to cryptocurrency. It does not lead to the collapse of another cryptocurrency exchange, or the theft of millions of dollars. That is at most what Patrick Hillmann, chief strategy officer of Binance, stated on Tuesday. Hillmann stated that the U.S. cryptocurrency laws are becoming more stringent and shortsighted. This could cause serious crypto market turmoil or even suffocate the industry if it continues.

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Hillmann was quoted saying the following when he spoke out about the ongoing crypto crackdown:
The United States has always been a country that has fostered great innovation. Unfortunately, I believe what we are seeing now will come at a real price [to investors] over the course of time.”
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Due to the collapse of the crypto exchange FTX (previously the second largest in the world), regulatory authorities in the United States have increased the enforcement of existing crypto rules. The Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency jointly issued a January statement warning banks about the potential exposure to “cryptoasset related activities.”

The SEC imposed seven-figure fines on celebrities who supported cryptocurrency and cracked down upon “staking” features that allow users to earn rewards for keeping certain coins. The $30 million fine was imposed on the Kraken exchange in California earlier this month for making inappropriate disclosures about its staking feature.
Crypto Washout in the Making
Hillmann is particularly concerned by the proliferation of crypto regulations targeting stablecoins or exchange tokens. Stablecoins or exchange tokens are cryptocurrencies that have their value tied to an external asset such as gold or the dollar. To facilitate transactions on crypto exchanges, exchange tokens are used. Hillmann stated that “when you take this away from users at times like these, that safety net disappears.”

He also said that they are seeing a campaign to get U.S. financial institutions out of crypto servicing. According to Hilmann, crypto investors are not able to withdraw their funds from the exchanges and cannot move their money to a safe place.
Hillmann’s comments follow the New York Department of Financial Services’ order that Paxos stop minting Binance’s stablecoin, BUSD. This was due to unresolved issues in Paxos’ management of Binance’s partnership. BUSD’s market share was significantly lost to rivals USDC and USDT at the time of writing.
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