The Validation of Mainstream Adoption: Why Crypto Needs Broker Licenses
By Louis Bellet, CEO of Yellow Network
The recent news that Crypto.com has acquired an Australian broker license marks a significant milestone in the evolution of the cryptocurrency industry. While some may view this development as just another headline about mergers and acquisitions, it’s actually a validation of something long overdue: the recognition that crypto trading needs proper regulatory oversight.
The Dangers of Unregulated Exchanges
In recent years, we’ve seen firsthand why unregulated exchanges are a recipe for disaster. The collapse of FTX exposed the fundamental dangers of trying to be everything to everyone – marketplace, custodian, market maker, token issuer, etc. – while operating with minimal regulatory oversight. Billions in client assets vanished because the industry accepted the fiction that basic broker-dealer regulations somehow don’t apply to crypto.
The State of Crypto Trading
Let’s face it: the current state of crypto trading is a far cry from mainstream adoption. Memecoins are marketed like lottery tickets, influencers shill tokens without disclosing payments, and exchanges hide behind VASP registrations while allowing manipulated markets to operate. This approach may be profitable in the short term, but it’s a recipe for keeping crypto on the fringes of finance.
Traditional Finance vs. Crypto
Traditional finance isn’t perfect, but try pulling off a pump-and-dump scheme on the New York Stock Exchange. You can’t launch a fake stock, run a bogus initial public offering with made-up financials, and vanish with everyone’s money. By design, the infrastructure won’t let you. And when things do go wrong in traditional markets, investors get repaid first.
The Need for Broker Licenses
In crypto, we see this level of fraud regularly, enabled by exchanges hiding behind VASP registrations or e-money provider status like it’s some kind of shield. ‘We’re just providing technology services!’ they claim. This approach might have made sense in crypto’s early days, but it’s inadequate for today’s market size and complexity.
The Flaws of VASP Registrations
When registered as a VASP, an exchange says it moves digital assets around. That’s it. There is no real responsibility for market integrity, no severe requirements for asset segregation, no meaningful protections against market manipulation, no controls on misleading advertisements, and no evaluation of investor profiles to prevent exploitation.
The Technical Problems
But the technical problems are just as severe as the regulatory ones. Look at how exchanges handle crosschain trading right now. They’re either running their own bridges, which have lost billions of dollars to hacks, or forcing users to go through third-party bridges that create additional points of failure. It’s all because they’re trying to patch the lack of proper broker infrastructure.
The Need for Infrastructure
Proper broker infrastructure looks like this: client asset segregation, real-time risk management, crosschain trading without exposing users to bridge risks, and actual compliance with securities laws. To most people, it’s boring stuff. However, the boring stuff keeps people from losing their life savings.
Why Technology Alone Isn’t Enough
Technology alone isn’t enough to build a safe and secure crypto trading ecosystem. You need the proper regulatory framework, too. Think about traditional brokers for a second. When you open an account at Fidelity or Charles Schwab, you’re protected by actual regulations with actual teeth. Your assets are segregated. The broker has to maintain certain capital levels.
The Era of Hiding Behind VASP Registrations is Ending
The choice facing crypto exchanges is simple: evolve into properly licensed brokers with actual infrastructure or become irrelevant. Crypto.com’s move is a good start, but we still need more. Legitimate brokers are entering the space with proper licenses and infrastructure, and regulators are finally cracking down on the VASP nonsense.
Using Proper Broker Licenses and Purpose-Built Infrastructure
Using proper broker licenses and purpose-built infrastructure is essential to building the future of finance. It’s not a matter of checking the box on bare minimum regulatory requirements that, in many jurisdictions, remain far from fit for purpose. It’s about building a crypto trading ecosystem that’s actually safer than traditional finance, not more dangerous.
The Industry Must Step Up
The technology exists. The regulatory frameworks exist. We need the industry to step up and do things right. Using proper broker licenses and purpose-built infrastructure is not just a compliance issue; it’s an existential one. Will crypto exchanges evolve into properly licensed brokers with actual infrastructure, or will they become irrelevant?
Conclusion
Using proper broker licenses and purpose-built infrastructure is essential to building the future of finance. It’s time for the industry to step up and do things right. We need more legitimate brokers entering the space, and we need regulators cracking down on VASP nonsense. The era of hiding behind weak VASP registrations while pretending to be a serious trading venue is ending.
The Future of Finance
The future of finance isn’t about checking the box on bare minimum regulatory requirements. It’s about building a crypto trading ecosystem that’s actually safer than traditional finance, not more dangerous. We need proper broker licenses and purpose-built infrastructure to achieve this goal.
Your Move, Crypto Exchanges
Crypto exchanges have a choice to make: evolve into properly licensed brokers with actual infrastructure or become irrelevant. The era of hiding behind weak VASP registrations while pretending to be a serious trading venue is ending. It’s time for the industry to step up and do things right.
Louis Bellet is the co-founder of Yellow Network and a serial entrepreneur in fintech and crypto.
This article is for general information purposes only and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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