It is worth noting that the problems in the US cryptocurrency regulatory system became apparent with the filing of the said lawsuit against cryptocurrency exchange Binance. The fact is that representatives of the Commodity Futures Trading Commission clearly stated in court filings that they consider Bitcoin, Etherium, Lightcoin, as well as USDT and BUSD to be commodities, not securities.

At the same time, another regulator, represented by the US Securities and Exchange Commission, regularly reminds us that all cryptocurrencies except Bitcoin are supposedly securities.

This case clearly shows the lack of understanding of what is going on even between the largest US regulators. Well, with such an approach, it is quite difficult to create conditions for large companies to operate adequately inside the country.

How cryptocurrencies should be regulated

Zhao shared his thoughts on the necessary regulation of the industry during the Hong Kong Web3 Festival event this Wednesday. Here’s one of his quotes in which the richest person in the digital asset industry shares his thoughts on what’s going on.

The lack of regulatory clarity is the worst. Having bad restrictive regulations is better. But pushing unclear regulations and then prosecuting people for enforcing them is very, very bad.

It should be noted that the US does have unclear cryptocurrency regulations, as previously highlighted by the blockchain industry. In particular, Ripple CEO Brad Garlinghouse said early last month that registering digital tokens with the US Securities and Exchange Commission is essentially impossible, although its chairman Gary Gensler regularly insists it is necessary. Accordingly, US cryptocurrencies are unlikely to be able to avoid problems, leaving them constantly at risk.

Overall, Chanpen is not surprised by the fact that regulators are trying to pull most of the crypto industry’s controls from already existing laws for traditional assets. However, this course of action will not work, as crypto is a fundamentally new type of investment that needs an updated approach from regulators.

To implement such an approach, executives of major cryptocurrencies should also take steps on their part, says Zhao. Here is his quote, cited by Cointelegraph.

It’s very important to actively engage with regulators. We can’t just say, “Hey, look, we’re decentralised. We can’t just be found.”

To be fair, regulators previously had a similar complaint against Binance. They "couldn't find" its head office for a long time, with Zhao himself proudly proclaiming his decentralised business model. He later became much more cooperative and has repeatedly called for a dialogue with regulators.

According to The Block’s sources, the Binance chief also shared another interesting point of view during the conference.

Regulators are trying to control cryptocurrencies by shutting down banks, shutting down the industry’s access to traditional currencies and imposing more restrictions on traditional financial markets, but this is actually pushing more people to invest in cryptocurrencies and doing the opposite of what they want to do.

Zhao also commented on what’s happening with Hong Kong, where locals will be able to conduct fully legal coin transactions from June 1, 2023. Here’s his quote from Twitter.

Hong Kong banks are starting to support cryptocurrencies. We’re going to see capital moving into the region going forward. USDT alone has a market capitalisation of $80 billion. And other stabelcoins will follow.

As a reminder, last month three major banks in the US that were actively working with crypto start-ups were shut down. Nevertheless, attempts to trim the digital asset industry’s connection to the traditional finance sector are unlikely to do much damage to crypto in the long term.

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But on a different scale, there could still be a problem with it. As a reminder, we previously wrote about how such actions by regulators could significantly reduce liquidity in the industry. Cryptocurrency companies also have to enter into new partnerships and find other ways for capital to flow from the traditional economy to crypto.

Despite all the “efforts” by regulators over the past few months, Bitcoin’s value has now set a new yearly high. Most cryptocurrencies are rising in price on expectations of a change in the US Federal Reserve’s policy on the benchmark lending rate, and nothing is likely to stop it.

We believe that the hardest part of the road to the next global bull run is already passed - many cryptocurrency companies have gone bankrupt, unscrupulous players have left the market, and the next halving is getting closer by the day. Therefore, even targeted actions by regulators against the industry are unlikely to hinder growth over the next year or two. Accordingly, investors should continue to wait, while at the same time studying the cryptocurrency niche in search of new promising projects. In the past, this approach has yielded significant returns.

What do you think about it? Share your opinion in our ex-wealthy cryptochat. Expect a new bullrun there.