The company, controlled by embattled digital entrepreneur Changpeng “CZ” Zhao, eliminates about one-third of its workforce, or more than 100 positions, as a regulatory crackdown erodes its business. The departures are another blow to the industry as regulators seek stability in cryptocurrency trading and prevent illicit activities, including ransomware targeting, money laundering, and terrorism financing. The companies also face a growing threat from established financial institutions.
CZ, the chairman and chief executive officer of the world’s largest crypto exchange, has signaled he supports greater sector regulation. Last week, he published a list of ‘fundamental crypto rights’ that he said should underpin a global regulatory framework. The move comes as the industry has come under increased scrutiny amid record market values and investor inflows.
While some argue that introducing rules will slow innovation and stifle crypto growth, others say it’s essential to protect investors and prevent criminal activity. Critics of the status quo point to recent cyberattacks and fraud that have left many victims with worthless investments. In addition, the lack of a central authority makes it difficult to track transactions and identify perpetrators.
Several key players are pushing for stablecoins, which aim to offer the benefits of cryptocurrencies while providing more stability and security. But their success will depend on a clear regulatory framework allowing them to make local and international payments quickly, cheaply, and securely.
Regulators in the United States and other countries are stepping up their efforts to create those rules. In a joint statement on Tuesday, the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation said they planned to begin delineating how banks can legally get involved in the cryptocurrency industry and layout rules for safety, consumer protection and compliance with existing laws.
The United States will likely set the standard for how other nations regulate the industry. Its central bank, the Federal Reserve, is the most powerful in the world, and it has spoken out against risks to global financial stability posed by cryptocurrencies. The country’s securities and commodities regulator, the SEC, has already begun to crack down on shady exchanges.
A former Bank of England deputy governor also raised concerns about Bitcoin’s rise earlier this month. Jon Cunliffe warned that the crypto industry has grown so fast that it could become a “huge source of risk to financial stability.” The Bank of England has no plans to ban or limit cryptocurrencies but is working with other nationals to draw up standard guidelines against money laundering. It will also monitor developments at the European Union level. The EU has been slower to act on the issue but is expected to announce new regulations later this year. They will include requirements for financial institutions to monitor transactions more closely and introduce tougher fines.