Kraken crypto exchange CEO says a global regulatory crackdown could happen as adoption of digital coins grows

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The bitcoin price has soared in 2021

Kraken crypto exchange CEO Jesse Powell said a global regulatory crackdown on cryptocurrencies could happen, particularly as adoption becomes more widespread and governments step in to lay down rules for the market.

In an interview with CNBC on Monday, Powell said he did not think regulations will be clear-cut anytime soon and there was a risk that tough rules could come into place that might hobble use of cryptocurrencies. “I think there could be some crackdown,” he said.

Powell said he hoped the US and other large economies would not take too narrow a view on cryptocurrencies and succumb to the pressures of preserving the existing global financial system.

“Some other countries, China especially, are taking crypto very seriously and taking a very long-term view”, Powell said. China is planning to launch a digital yuan, while the Federal Reserve is still in the early stages of examining in the possibility of a digital dollar.

Many international regulators, governments and institutional investors are wary of cryptocurrencies. Their key features, such as anonymity and self-governance are a key part of the attraction for users, but there are also questions around security and the use of bitcoin to fund illegal activities, such as money laundering.

Stricter regulations might aim to combat this. The US is for example considering investor identity checks if trades break a certain threshold, but “something like that could really hurt crypto and kind of kill the original use case” Powell said.

South Korea has recently tightened regulations further to prevent illicit crypto-funded activities, while India is considering an outright ban on possession and trading of cryptocurrencies.

Bitcoin’s high levels of volatility have also contributed towards some skepticism. Since the start of the year, it has traded at levels ranging from around $30,000 to a new record high of around $63,000 on Tuesday.

In March, Federal Reserve Chairman Jerome Powell said high volatility was the key reason bitcoin and other cryptocurrencies could not replace the dollar. Various governments are however working on central bank digital currencies, which would work similarly to cryptocurrencies, but be regulated and overseen by central banks and national regulatory bodies.

Kraken’s Powell said he believed any kind of ban on using cryptocurrencies might be too late and only serve to increase interest in digital assets. “It would certainly send a message that the government sees this as a superior alternative to their own currency”, he said.

Last week, Securities and Exchange Commission commissioner Hester Pierce – whose nickname is “crypto mom” – said she saw no possibility for a governmental ban on bitcoin. She said even if it was forbidden, people would still carry on trading it.

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