Key Takeaways

• Crypto.com will suspend institutional crypto trading in the US
• Institutional Crypto Trading Vs Retail Crypto Trading
• Challenges facing the US crypto market
• What does this mean for institutional clients/

Crypto.com, a Singapore-based crypto exchange has announced  suspending its institutional-grade trading operations in the US while keeping its name on Los Angeles’ famous sports arena . The crypto exchange announced retail trading operations will continue unaffected. What does that mean for investors?

Institutional Crypto Trading Vs Retail Crypto Trading

Institutional crypto trading refers to the operation of facilitating the trade of cryptocurrencies for investors and large companies. These trades are often made in large sums, influencing the value, availability, and demand of certain crypto tokens. Retail crypto trading is the process of exchanging cryptocurrencies on an individual level. While some retail trades may include large sums of tokens, they do not hold the same weight on the market as ones made on an institutional level.

Why Is Crypto.com Suspending Institutional Trading In The US?

While Crypto.com is still open to relaunching institutional crypto trading in the US, the company cited that the low demand for institutional crypto trading in the American market has led it to take such a decision. Undoubtedly, the demand issue is a result of the legal issues the market has been facing due to a lack of clear regulations from governmental bodies, mainly the SEC, among other factors. Institutional users were given an early notice of the suspension that starts June 21st.

June 2023 has been a tough year for the American crypto market with many experts predicting a Crypto Exodus. One of the main issues the market finds itself facing is the lack of regulation when it comes to trading and registering crypto assets. The main governmental body responsible for this duty is the US Securities and Exchange Commission (SEC). At the time this article was written, the SEC is waging legal battles against the biggest crypto exchanges in the market, including Binance, Coinbase, and Ripple.

The Coinbase and Ripple cases specifically highlight the main issue the SEC is creating when it comes to market regulation. The SEC has filed a complaint against Coinbase, one of the world’s biggest crypto exchanges, for allegedly operating as a trader of registered securities, while the SEC itself had approved Coinbase’s IPO (COIN). Moreover, the government had used Coinbase to exchange Bitcoins it had seized from a prior arrest. Ripple, whose CEO Brad Garlinghouse had coined the term Crypto Exodus is also facing a complaint from the SEC for a similar matter. In Ripple’s case, the SEC claims that the company illegally trades XRP which it sees as a registered security.

To summarize, the SEC struggles to define the legal basis of crypto assets, not being able to decide whether they hold legal entities of securities or commodities. Also, the SEC struggles to create a clear set of regulations upon which crypto exchanges may operate. 

On the retail side, the company announced that operations will continue as normal. Moreover, the crypto exchange has signed a deal to integrate itself with CoinRoutes . David Weisberger, the chief executive officer of CoinRoutes reported that “CoinRoutes’ aim is to help its clients execute trades at the best possible price, and in order to do this, the company needs an accurate picture of all the liquidity in the market to achieve this.”

What Does This Mean For Investors/Institutional Clients?

That truly depends on the perspective. On one hand, some investors/institutional clients may see the exit of other investors and exchanges from the US market as a potential market gap they benefit from in the longer run. With Binance, Coinbase, Ripple, and crypto-related capital fund firms such as Andreessen Horowitz potentially leaving the market, competition for new market leaders might open up.

On the other hand, some might argue that US regulations being so far behind, compared to other markets, such as Europe, Hong Kong, or Singapore is an ominous sign of the US falling behind in the crypto race, providing less lucrative opportunities compared to its counterparts.