Why the crypto industry must prioritize regulatory compliance
Crypto projects have been facing a downward spiral since 2020, mainly due to the United States’ Securities and Exchange Commission (SEC) regulatory crackdown. The meltdown demonstrates the risks of experimental and unregulated digital currencies and projects. The impacts of FTX’s failure — which can be traced back to the FTT token’s liquidity crisis — still reverberate through the entire crypto ecosystem, portraying crypto in a bad light and accelerating the wrath of regulators on the industry.
Recently, the SEC sued Binance and Coinbase, the two largest exchanges in the US. State and federal agencies levied fines or brought new cases against the firms they suspected of freewheeling practices. The US financial watchdog accused Binance of operating a web of deception and charged the exchange with 13 offenses. Coinbase was accused of putting customers at risk by functioning as an unregistered broker and clearing agency.
These events underline the risks of non-compliance. But INX, a New York-based digital asset broker-dealer, is showing an example of how its regulation-by-design approach is paving the way and helping the company win in the complex crypto ecosystem.
The INX example of regulatory foresight
The only way to escape the current regulatory carnage and stay afloat for long is to adhere to regulations. INX, for instance, is an exchange that stands out for expanding steadily, right through the current crypto crisis. As a US-regulated broker-dealer, ATS, and transfer agent, INX has added 7 new tokens since Q4 2022.
In 2022, INX reported an annual net income of $208M, which is inclusive of an unrealized gain on the INX Tokens issued of $226M and INX Token warrants of $8.3M. These figures reflect the rapid gains the platform has made despite an environment that is not supportive of cryptocurrencies. The company has been expanding its money transmitter licenses and registrations, now offering cryptocurrencies in more than 40 US states and territories.
INX’s continued success can be attributed to the company’s decision to play by the book right from the start. Currently, INX is among the few exchanges that have flourished in the middle of a crackdown. The company also recently joined hands with Republic, a global financial firm, to push the boundaries of possibilities in the digital economy.
Adequate regulatory control is so important for making crypto a medium of regular use. Adherence to regulations will generate trust among communities that generally view crypto with suspicion. When a crypto enterprise conforms to regulations, it reflects its interest in protecting investors and preventing illegal activities. It also ensures crypto becomes a part of the mainstream financial system with time.
The success story of INX with regulatory bodies demonstrates how compliance with regulations could help crypto enterprises to gain credibility in making them part of the mainstream.
Vertical movement with regulatory approval
In an environment where crypto organizations in general are facing the wrath of regulators, INX has set an example of how an enterprise can embrace innovation while being compliant. Thanks to the reputation it has gained, INX recently collaborated with the Digital Securities Depositary Corporation (DSDC) to issue digital American depositary receipts (ADRs) — a big step in the context of tokenized financial assets.
The stock buyback program of INX shows their optimism towards the future. Usually, companies repurchase their shares when they are undervalued on the market. Another reason why companies repurchase their shares is to prevent an unwanted hostile takeover attempt. But with INX, the NCIB and token repurchase initiative is rather a reflection of the company’s confidence in its growth potential, following its current strides.
How Nabatech could the pave the way for broader crypto adoption
Nabatech, the joint venture of INX and SICPA, has the potential to catalyze the mainstream adoption of digital coins. Thanks to its emphasis on security, authentication, and regulatory compliance, Nabatech can bring credibility, persuading institutions and individuals to adopt digital currencies. Objective of Nabatech is to assist governments and financial institutions globally in developing pioneering sovereign digital assets ecosystems.
The venture bridges the trust gap, which is a primary barrier to mainstream crypto adoption as scams, hacks, and regulatory concerns are troubling the industry. Moreover, Nabatech’s integrated approach, bringing together Decentralized Ledger Technology (DLT) and digital identity technologies, offers a holistic solution for Central Bank Digital Currencies (CBDCs).
Final thoughts
It’s essential to adhere to regulatory standards for the cryptocurrency industry to thrive. Compliance with regulatory standards guarantees the legitimacy of the industry, safeguards investors, prevents fraudulent activities, and facilitates its incorporation into the wider financial system.
Regulatory success stories such as INX’s demonstrate the benefits of compliance measures in addressing the intricate issues and risks posed by the rapidly changing crypto industry. With the ongoing regulatory clampdown on prominent crypto players, INX appears to be in a favorable position to either expand or become an attractive acquisition target.
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