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The mood of fear, uncertainty and doubt, otherwise known as FUD, that has gripped some of the largest cryptocurrency exchanges since October intensified last week and had nothing to do with the US presidential election.
“Binance Strange Fud Friday and Strange Huobi Arrest Him Today”, tweeted MyCrypto CEO Taylor Monahan, referring to a Forbes report on Oct. 29 that Binance set up its US unit, Binance.US, as a regulatory decoy and referring to separate rumors that Chinese authorities had detained a senior executive in Huobi.
FUD, which has long haunted the cryptoverse, is commonly defined as misinformation intentionally spread to put a competitor at a disadvantage, to bring down a rival’s share price or the price of a coin, for example. It may also result from government action, such as the arrest by US authorities of the co-founder and former chief technology officer of BitMEX on October 1 or the reported detention of an OKEx co-founder by the Chinese police. early October. It raises speculation: Who is causing the FUD and what is the motivation for that party?
Binance CEO Changpeng Zhao, for example, characterized the leaked document, which detailed the exchange’s alleged 2018 plan to circumvent Bitcoin (BTC) regulation by creating a US subsidiary with a “bogus compliance interest”, such as FUD, adding, “The above document was not produced by a @Binance employee (current or former). “
In any case, the FUD meter appeared to be on the rise last week, particularly as Huobi’s rumors were accompanied by reports of large Bitcoin withdrawals at the Singapore-based exchange. Boxmining creator Michael Gu, for example, announced that he was removing his balances from Huobi “until this FUD is resolved”.
A global push to curb cryptocurrency exchanges?
But was there something behind all those events? Some have suggested that regulators around the world – in the US, China and elsewhere – are now targeting centralized cryptocurrency exchanges, and this is what is causing all the doubts and uncertainties regarding these firms. largely unregulated.
Bobby Ong, CoinGecko’s co-founder and chief operating officer, is skeptical that there was such a unified plan. As he told Cointelegraph, “The timing of all these FUDs [events] seems to be a coincidence, “with the allegations against BitMEX brought to an end as a result of a prolonged investigation.
Monahan, for her part, admitted the possibility that normative actions may indeed be a key source of recent anxiety; but then again, it might just be rivals spreading rumors and allusions about each other. Huobi’s coin, Huobi Token (HT), took a hit when the bad news came, dropping hundreds of dollars on November 2. Monahan shared with Cointelegraph:
“Interestingly, we’ve seen so many confirmed and rumored regulatory action around major futures / derivatives exchanges over the past month. However, it is possible that we are simply seeing an increase in FUD now that these exchanges have their own token – BNB, OKB, HT, etc. The FUD usually reserved for coins / tokens is now linked to the exchange itself. ”
Greater likelihood of application?
But maybe there is a method for all this “FUDiness”. Syren Johnstone, who is Executive Director of the Compliance and Regulatory Program at the University of Hong Kong and has written on the regulation of cryptocurrency exchanges, suggested to Cointelegraph that the global regulatory pendulum is swinging in the direction of tighter control:
“In Hong Kong, the government this week proposed bringing all cryptocurrencies under the supervision of the securities regulator using money laundering concerns as a stepping stone. Legislation has been proposed in the EU and the US that drives cryptocurrencies into existing regulatory silos. These actions indicate that the wind has definitely changed direction – [while] the strengthening of regulatory mandates increases the likelihood of enforcement “.
Jay Hao, CEO of OKEx, told Cointelegraph, “It appears regulators have been more prolific in recent months,” particularly with the legal issues surrounding key exchanges. “However, this is not surprising as some moves have been foreseen by regulators such as the US CFTC and the UK Financial Conduct Authority.”
As for all the fear, uncertainty and doubt that seems to be surrounding centralized exchanges recently, “The market is still largely retail-driven and heavily influenced by news and rumors,” Hao said, adding:
“With the growth of DeFi, there has certainly been more FUD and backlash against centralized exchanges and I think this is more what we are seeing rather than more action from regulators.”
It should be noted that OKEx itself became a FUD talking point after an Oct. 16 report from a Chinese news agency that said the founder of the exchange, Mingxing Xu, had been interrogated by Chinese police, followed by the suspension of the exchange. Malta-based withdrawals. In a November 6 statement, OKEx apologized “for the inconvenience caused by the suspension of digital asset withdrawals” and denied claims “that an OKEx related interested party is in criminal detention.” But in the meantime, users cannot withdraw funds from the exchange yet.
What should users do?
However, recent events can be troubling. As Monahan told Cointelegraph, holding funds on central exchanges has always been risky, adding, “We are now reminded that regulatory action can affect end users and their ability to access their funds. The old adage – “not your keys, not your coins” – remains true. “
Therefore, a user’s best choice to maintain control of their cryptocurrency is to use cold storage for long-term holding, and when using “a centralized exchange, they should be aware of the risks and choose an exchange that has a strong security, a good track record and does not actively browse regulators. “
Why did Gu withdraw his funds from Huobi? “I’m a victim of the Mt.Gox trading hack, so I prefer playing on the safer side,” he told Cointelegraph. “Huobi denied that they are under regulatory control, but can we really trust them? We’ve seen whales come out of BTC in a couple of large withdrawals. “If the exchange goes insolvent, would the private keys then be held by a government? No one really knows.” It’s easier to withdraw funds now and redefine [them] once it is cleared up. “
Ong said users need to understand “that the risk is high for unregulated exchanges such as those recently appeared in the news. These exchanges can stop or disappear overnight due to a “hacking incident”. In comparison, Ong outlined for Cointelegraph:
“Regulated exchanges have higher security measures as client funds are segregated and held in custody with third parties. There are also more security and control measures put in place by regulators when licensing these exchanges. “
That said, centralized exchanges can be useful for investors who are not ready to act as bankers or custodians. “There will always be a place for CEXs as an easy way to integrate people into the cryptocurrency space and to offer users a solid and secure environment to store their funds,” said Hao, adding that “As long as they keep up with local laws, they can offer a safe place for their users. “
Role of China
Some believe China is playing a role in the recent FUD. Gu told Cointelegraph that “China is also stepping up regulation of cryptocurrencies to get people to use their DC / EP,” the nation’s digital currency project known as e-payment with digital currency. Ong agreed: “China is pushing hard to get DC / EP adopted and wants to prove it is superior to cryptocurrencies.”
Monahan did not seem convinced on this point, however he said: “Have we really seen China increase its regulation? It’s been pretty stuck for years now. “He further added:” If we see action from China similar to the CFTC and DOJ filing criminal charges against the founders of BitMEX, then it might be worth investigating this point of view. For now, the steps that remain to be seen. China takes steps to ensure that its digital yuan has little or no competition. “
Johnstone noted that China’s central bank digital currency is positioned as a fiat currency and a payment instrument – something very different from cryptocurrency – further sharing with Cointelegraph:
“Too many Chinese citizens had acquired cryptocurrencies before China banned initial coin offerings. It has created an inheritance problem that will diminish over time. The underlying dynamic in China is that you can’t do much with a cryptocurrency, but you will be able to do a lot with CBDC. ”
Is more regulation coming?
Gu told Cointelegraph that “regulation is bound to come,” and Johnstone agreed, adding, “There is certainly more regulation on the way for centralized crypto exchanges, as evidenced by what is now being proposed and contemplated in the EU. “.
Related: The case against BitMEX is a compass pointing towards the future of cryptocurrency regulation
In summary, behind all of the recent FUD there may be a recognition that governments are looking more closely at large centralized exchanges, especially as cryptocurrencies are garnering more attention (BTC surpassed $ 15,600 on Nov 8) and the use of cryptocurrencies becomes more widespread. And that’s not necessarily a bad thing. “Enforcement and more regulation doesn’t mean the end of cryptocurrencies,” Johnstone said. “The regulatory endgame is a stronger and safer market environment.”
Looking from above, centralized exchanges have come a long way since the Wild West days of just three years ago. As Hao told Cointelegraph, “Most scams have been eliminated and exchanges have learned to adapt and build solid platforms.” But that doesn’t mean governments won’t ask more of the exchanges in regards to compliance as Bitcoin and other cryptocurrencies take root further.
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