Crypto asset companies encounter a tough choice: learn to live with regulators or experience their madness.
The Big Crypto industry includes exchanges such as Coinbase and Binance with issuers of stablecoins backed by other assets, like USD Coin backer Circle and Tether. These exchanges process several billions of dollars each month while the market value of two stablecoins reached more than $80bn. This activity is messing with the regulated traditional financial system.
Many exchanges allow deposits and withdrawals from bank accounts and through primary payments cards. Issuers of USD Coin and Tether say that they are backed by reserves with short-term debt by traditional companies. That means they might become significant outside of the cryptocurrency market, which indicated interest at the Federal Reserve.
What Do Crypto Companies Face?
Crypto companies are also running to public equity markets. This year, US-based Coinbase is listed on Wall Street while the Circle is planning to debut in New York. Hedge funds and financial companies are also planning to get into the game.
Crypto companies submitting themselves to further scrutiny should have an easier time operating within traditional finance boundaries. However, several companies try to make progress in this area. For example, Hong Kong-based Crypto.com became the first crypto company to get an electronic money institution license in Malta. It allowed the company to issue card payments and offer bank transfers straight to customers.
Gemini, the UK-based crypto company, has become a registered crypto-asset company approved by the Financial Conduct Authority. Regulators are taking a more robust line in the scrutiny. For example, Tether and exchange Bitfinex agreed to pay $18.6m penalties after New York’s attorney said they unlawfully covered massive financial losses.
In the previous month, the FCA issued a customer warning against Binance, which faced concerns about its compliance practices. Big Crypto groups enjoying market leadership will meet heavier demands on transparency, compliance, and consumer protection.