FUD or regulatory change? Rumor clouds swirl around crypto exchanges

The mood of fear, uncertainty and doubt, otherwise known as FUD, that has gripped some of the largest cryptocurrency exchanges since October heightened last week - and it had nothing to do with the United States presidential election.

In any event, the FUD meter seemed to be rising last week, particularly as the Huobi rumors were accompanied by reports of large Bitcoin withdrawals at the Singapore-based exchange.

"It is interesting that we've seen so much confirmed and rumored regulatory action around the top futures/derivatives exchanges in the past month. However, it may be that we're simply seeing an increase of FUD now that these exchanges have their own token - BNB, OKB, HT, etc. The FUD usually reserved for coins/tokens is now attached to the exchange itself." An increasing likelihood of enforcement?

Jay Hao, CEO of OKEx, told Cointelegraph: "It seems as if the regulators have been more prolific over the last months," particularly with the legal problems surrounding key exchanges.

"With the growth of DeFi, there has certainly been more FUD and backlash against centralized exchanges and I think that this is more what we are seeing rather than major increased action by regulators."

As Monahan told Cointelegraph, holding funds on central exchanges has always been risky, adding: "Now we are reminded that regulatory action can affect end users and their ability to access their funds. The old adage - 'not your keys, not your coins' - remains true."

"Regulated exchanges have higher safety measures as the client funds are segregated and held in custody with a third party. There are also more safety and audit measures put in place by the regulators when issuing licenses to these exchanges."

Gu told Cointelegraph that "Regulation is bound to come," and Johnstone agreed, adding: "There is definitely more regulation coming for centralized crypto exchanges, as evidenced by what's now being proposed and contemplated in the EU.".

In sum, underlying all the recent FUD may be a recognition that governments are looking more closely at large centralized exchanges, especially as cryptocurrencies garner more attention and crypto use becomes more widespread. And this isn't necessarily a bad thing.

As Hao told Cointelegraph, "Most of the scams have been weeded out and exchanges have learned to adapt and build robust platforms." But that doesn't mean that governments won't be demanding more from exchanges in regard to compliance as Bitcoin and other cryptocurrencies become further entrenched.