As many of us in this regular blog site are aware, the global crypto market experienced a significant shift towards regulation in 2022 and 2023, as governments around the world took steps to ensure the safety and legitimacy of the burgeoning digital currency industry, at least that's how to the official story goes. In reality, many of the moves were also intended to protect established fiat currencies such as the dollar and euro from alternative payment tools that were clearly becoming popular and draining significant cash out of fiat markets. $3 trillion in crypto investments by 2021 was no laughing matter for banks.
In the United States, the Securities and Exchange Commission (SEC) implemented new guidelines for initial coin offerings (ICOs), requiring them to register with the agency and comply with securities laws. This move was aimed at curbing fraudulent ICOs and protecting investors from scams. At the same time, the SEC went headhunting for easy regulatory kills. The agency learned early from the Ripple affair not to take down big elephants that can charge back with painful tusks. Instead, it targeted small, slow cows like Kraken and celebrities pumping shitcoins. It was pathetic but effective; the American crypto market is now hamstrung in fear, with even the big players looking to exit the U.S. physically.
Similarly, in Europe, the European Securities and Markets Authority (ESMA) implemented a framework for regulating crypto assets and exchanges, with a focus on protecting investors and preventing money laundering. The framework includes strict Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements for crypto exchanges and wallet providers. In practice, however, countries like England started clamping down as well, basically rolling up the welcome mat.
In Asia, China and South Korea took steps to crack down on illegal crypto trading and mining activities, with China implementing a ban on all crypto-related activities and South Korea tightening regulations on exchanges. A mass exodus of mining rigs exited the country within months.
Separately, these regulatory changes have had a significant impact on the crypto market, with many investors and traders seeking out regulated exchanges and tokens that comply with the new guidelines. Together, they represent a coordinated effort to protect established fiat markets from the perceived threat crypto represents.
While some early adopters of cryptocurrencies may be resistant to increased regulation, many industry leaders say that it is necessary to bring stability and legitimacy to the market. Most of those leaders are having their campaign coffers padded by lobbyists for big banks and brokerages.
Looking ahead, it is likely that more countries will follow in the footsteps of the United States, Europe, and Asia, implementing regulations to protect investors and prevent fraud in the crypto industry. As the market continues to "mature," the most likely path will be a constrained market that can be controlled and limited and, most importantly, produces profits for the existing players versus new disrupting threats. This is an old record that gets played repeatedly, and the invention of crypto investing is just the latest victim to fall.
Why would anyone think old markets would act differently to a real threat?
