Regulatory actions against crypto giants Coinbase Inc. and Binance by the U.S. Securities and Exchange Commission (SEC) might push the crypto sector toward greater regulatory clarity, says Moody’s Investors Service.
Last week, the SEC brought enforcement action against both Coinbase and Binance, alleging that they violated securities laws in the U.S. and operated unregistered crypto platforms.
These actions may prove costly for the individual companies, the rating agency said in a research note.
“The litigation will likely raise costs for Binance and Coinbase, including possible regulatory penalties and fines, and increased operational compliance and legal costs,” it said. “If the SEC prevails, Coinbase and Binance will likely need to change their business practices, which could result in reduced revenue from activities that may not meet regulatory standards.”
At the same time, Moody’s suggested the actions could be good for the crypto sector overall by pushing Congress to move ahead with proposed regulatory policy reforms that would provide greater clarity and certainty to firms in the space.
For instance, on June 2, the U.S. House Financial Services Committee and the House Committee on Agriculture released a discussion draft of a bill to establish a comprehensive regulatory framework for digital assets in the U.S.
“This draft legislation aims to provide clarity, fill regulatory gaps, foster innovation and ensure consumer protection within the digital asset ecosystem,” the rating agency said.
Among other things, the proposed bill would clearly define regulators’ responsibilities in the crypto space, expand the jurisdiction of the U.S. Commodity Futures Trading Commission (CFTC), create a process for transitioning certain tokens from SEC to CFTC oversight, and introduce an exemption from securities laws for certain assets.
“These provisions are a significant shift in the regulatory landscape for digital assets in the U.S.,” Moody’s said. Unlike the approach taken by European policymakers, the proposed bill doesn’t attempt to create a specific regulatory regime for the crypto industry, it said, but instead seeks to define how crypto fits into the existing U.S. regulatory framework.
Additionally, earlier this year, the House Financial Services Committee proposed a model for stablecoin oversight.
“The acceleration of legislative activity suggests a growing awareness of the need to establish a clear rule book for the digital asset ecosystem, although the topic remains contentious, making it hard to reach a bipartisan agreement,” Moody’s said.
With the sector’s regulation still up in the air, other crypto firms could face their own enforcement actions from the SEC, the CFTC and the U.S. Department of Justice, the report said.