Cryptocurrency Regulation and Wash Trading Concerns: Insights from Ben McKenzie

Picture Source: BeInCrypto

Actor and author Ben McKenzie, widely recognized for his role in the hit TV series ‘The OC,’ has recently voiced his opinions on the state of the cryptocurrency industry. As the author of the book ‘Easy Money,’ McKenzie delves into the world of cryptocurrencies and their potential risks, shedding light on the need for stricter regulation and the growing concern of wash trading.

Cryptocurrencies as Securities

In a recent interview with NBC News on August 16th, Ben McKenzie strongly advocated for the classification of cryptocurrencies as securities. He believes that such categorization would offer increased security and protection to investors, ultimately mitigating the risk of fraudulent activities within the industry.

McKenzie’s stance resonates with the approach of regulatory authorities like the United States Securities and Exchange Commission (SEC). The SEC has consistently expressed the viewpoint that many cryptocurrencies should be considered securities, based on the criteria laid out in the Securities Act of 1933 and significant legal precedents.

The SEC’s utilization of the “Howey Test,” established in the case of SEC v W.J Howey Co, plays a pivotal role in determining whether a cryptocurrency qualifies as an investment contract akin to a security. This test assesses whether an individual invests with the expectation of profits primarily derived from the efforts of others.

However, the recent legal battle between the SEC and Ripple regarding the classification of XRP showcases the complexities of the issue. The court ruling on July 13th clarified that XRP sold on public exchanges does not fall under the security category due to its non-qualification as an investment contract.

Wash Trading: A Growing Concern

In addition to his advocacy for stricter regulatory measures, McKenzie also highlighted the alarming rise of wash trading in the cryptocurrency industry. Wash trading involves manipulating trading volumes by engaging in artificial buying and selling activities. McKenzie draws attention to the anonymity of blockchain technology, which enables individuals to create multiple accounts, making it challenging to trace ownership and activity.

McKenzie’s concerns about wash trading are not unfounded. He cited a recent report that examined 29 crypto exchanges, revealing that an astounding 70% of them were involved in unregulated wash trading activities.

A prominent example illustrating wash trading’s potential consequences is the case of Binance.US. The SEC accused Binance.US of inflating trading volumes, with allegations pointing towards CEO Changpeng ‘CZ’ Zhao. The regulatory body asserted that Binance.US leveraged multiple accounts managed by Sigma Chain, a Swiss trading firm under Zhao’s control.

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Ben McKenzie’s insights bring to light the ongoing challenges and debates surrounding cryptocurrency regulation and the integrity of trading activities. As the industry continues to evolve, the question of whether cryptocurrencies should be classified as securities remains a contentious topic. Additionally, the rising prevalence of wash trading poses a significant threat to the transparency and legitimacy of cryptocurrency markets.

As discussions and legal battles persist, the collaboration between industry participants, regulatory authorities, and advocates like McKenzie will play a crucial role in shaping the future of cryptocurrencies and their place in the global financial landscape.

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