JPMorgan Strategists Foresee Mandatory SEC Registration for Crypto Exchanges

JPMorgan analysts predict that crypto exchanges may eventually be required to register with the SEC. The classification of numerous blockchain tokens as securities by the SEC could favour Ethereum, according to the analysts.

Crypto exchanges based in the United States, such as Coinbase and Binance.US, who were recently sued by the Securities and Exchange Commission (SEC), might come under increasing regulatory scrutiny to register with the organization, as suggested by JPMorgan analysts.

Analysts led by Nikolaos Panigirtzoglou at JPMorgan proposed in a recent report that "The SEC might get legislative support, leading Coinbase, Binance.US, and other domestic exchanges to register as brokers, and most cryptocurrencies would be classified as securities." They added, "While this could increase burden and costs for the crypto sector, there are potential benefits, like crypto markets adhering to regulations similar to traditional markets such as equities, providing greater transparency and protection for investors."

Last week, the SEC took legal action against Binance, Binance.US and Coinbase for alleged violations of U.S. securities laws. The regulatory body hopes that the courts will enforce its regulations for stock exchanges on these companies or halt their crypto asset trading in the country.

JPMorgan analysts emphasized that the SEC's endeavors underscore the necessity for U.S. legislators to establish a clear regulatory framework this year. In the absence of such clarity, they believe that crypto activity in the U.S. is likely to migrate overseas and towards decentralized entities, and venture capital investment in crypto will continue to be constrained.

The analysts noted that regulations would be advantageous as they would "weed out industry malpractices and unscrupulous players, which is essential for the sector to mature and attract more institutional involvement."

JPMorgan Predicts Further Growth for Ethereum's Dominance In its lawsuits against Binance and Coinbase, the SEC categorized several crypto tokens, including Solana's SOL and Polygon's MATIC, as securities.

If the SEC comes out on top, the result could be exchanges delisting these tokens, thereby curbing the potential development of their respective blockchains, JPMorgan analysts opined, adding that this could work in Ethereum's favor.

"Seeing that most tokens targeted by the SEC are rivals to Ethereum, frequently dubbed 'Ethereum killers' in the crypto sphere, the recent SEC measures enhance the likelihood that Ethereum will continue to expand its supremacy in the smart contract blockchain arena," the analysts said.

JPMorgan also remarked specifically on BNB's classification as a security, suggesting that in the unlikely event of Binance collapsing, the BNB token could retain some value as long as the BNB chain remains functional.

The analysts cautiously added, "This supposition is admittedly not a certainty, given that the Binance exchange is currently at the heart of the BNB blockchain."