JP Morgan calls for clear crypto regulation amid SEC lawsuits

In a research report published on Thursday, US investment bank JP Morgan looked into the lawsuits filed by the Securities and Exchange Commission (SEC) against Binance and Coinbase. The crackdown could create profound changes in the evolution of the crypto industry. It could indeed migrate outside the United States. Accordingly, JP Morgan is urging US lawmakers to establish a comprehensive framework governing the industry. What should we take away from this analysis?

JP Morgan: Taking advantage of the SEC crackdown to regulate the crypto sector

Recently, the SEC filed lawsuits against Binance and Coinbase, two of the biggest cryptocurrency exchanges.

According to JP Morgan’s research report, these lawsuits are based on the fact that the SEC considers the majority of cryptocurrencies to be securities. As a result, it wants to place most companies in the sector and exchanges under its supervision, and bring them to comply with the regulatory frameworks that currently apply to other securities.

However, as Nikolaos Panigirtzoglou explains, classifying cryptocurrencies in the category of securities is not a simple legal question. It is quite ambiguous and requires further reflection. The ongoing SEC vs. Ripple case illustrates very well the lack of legal clarity on the subject.

All of these elements lead JP Morgan to the following conclusion. American legislators must imperatively proposea comprehensive framework on how to regulate crypto-related industries and the relative responsibilities of the SEC versus the Commodity Futures Trading Commission (CFTC)“.

The Urgency of Crypto Industry Regulation

The regulator has filed lawsuits against Binance, its CEO Changpeng Zhao, and the operating company of Binance.US citing alleged violations of federal real estate securities laws. Soon after, it continued its crackdown by filing a similar lawsuit against Coinbase, Binance’s main rival.

This SEC policy disapproved by the Chamber of Commerce has the effect of encouraging players in the crypto industry to migrate outside the United States and to decentralized entities. Also, according to JP Morgan, crypto venture capital funding is likely to remain subdued going forward.

American legislators must therefore react as quickly as possible and establish a complete and precise regulatory framework. If they rule in favor of the SEC, Coinbase, Binance.US and other US exchanges would be forced to register as brokers. At the same time, most cryptocurrencies would now be treated as securities.

While putting these regulations in place can be onerous and expensive for the crypto industry, it should bring several benefits. According to JP Morgan bank research report, the crypto industry would become more transparent and could provide better protection for investors. Assets not to be overlooked for mass adoption!