Why is the crypto market down today?

The crypto market is down today, as market volatility increased and investors digest the Federal Reserve’s minutes which indicate that interest rate hikes could extend for longer than most investors expect.

The downturn comes after the Feb. 14 consumer price index (CPI) print showed higher-than-expected inflation, along with increased regulatory enforcement from the United States Securities and Exchange Commission (SEC).

Cryptocurrency market performance, daily timeframe: Coin360

U.S. crackdown leads to increased crypto outflows

The primary downside catalyst of the day appears to be investors’ concerns over enforcement action against the crypto industry. The recent SEC crackdown on Paxos and Binance and enforcement action centralized exchanges offering staking-as a service, was followed by $32 million in digital asset outflows on Feb. 20. 

The SEC started the recent string of enforcement actions by going after Kraken’s earn program on Feb. 9. In the $30 million settlement announcement, the SEC said it had charged Kraken with “failing to register the offer and sale of their crypto-asset staking-as-a-service program,” which the commission claims qualified as a sale of securities. In addition to the monetary fine, Kraken agreed to cease earn program operations.

Nexo also recently decided to end its centralized staking program. While some are arguing that the staking ban is another nail in crypto’s coffin, Coinbase CEO Brian Armstrong has vowed to fight the action if brought to court.

On Feb. 13, the SEC issued a notice to Paxos, a stablecoin issuer, claiming that BUSD is an unregistered security. Following the SEC announcement, on the same day, New York regulators ordered Paxos to stop issuing BUSD, which is the third-largest stablecoin in the crypto market.

Binance has stated they intend to continue supporting BUSD despite the order against Paxos. American lawyers believe the securities argument against BUSD is complicated due to potential profit from arbitrage, hedging and staking opportunities.

While some decentralized staking protocols may benefit from the recent enforcement action, the crypto…



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