February extended crypto’s early-2023 rebound. Bitcoin recovered the remaining losses tied to last year’s FTX shock, and BTC, ETH, and other major assets continued to post small but steady gains across the month. The move was notable because it happened alongside intensifying regulatory pressure.

In the U.S., the Securities and Exchange Commission (SEC) hardened its stance. On February 15, the agency advanced a proposal to amend the 2009 Custody Rule, raising the bar for crypto businesses offering digital asset custody. The crackdown also fed into market flows: CoinShares data showed $32 million in weekly outflows, and the SEC filed a lawsuit against Terraform Labs and Do Kwon over alleged multi-billion-dollar digital asset securities fraud tied to the Terra ecosystem.

In Asia, policy direction diverged. China maintained its blanket ban introduced in 2021, while Hong Kong moved toward a more constructive posture. With ambitions to position itself as a regional crypto hub, the Securities and Futures Commission (SFC) proposed new licensing requirements for crypto trading platforms that would allow licensed firms to serve retail investors. Exchanges including Huobi and OKX signalled interest in pursuing licences in the region.

The SEC’s War Against Crypto

This month, the US Securities and Exchange Commission (SEC) has toughened its stance against crypto market players. On February 15, the agency announced that a five-member panel passed a vote on a proposal that would amend the 2009 Custody Rule and make it more challenging for cryptocurrency businesses to offer digital asset custodian services in the future. While the industry is waiting for official approval in the matter, the SEC continued its crackdown against crypto, triggering $32 million of weekly outflows at the institutional fund manager CoinShares. Furthermore, the agency filed a lawsuit against Terraform Labs and Do Kwon, the company and its founder behind the now defunct Terra blockchain, for allegedly orchestrating a multi-billion dollar digital asset securities fraud.

Binance In New Trouble

2021 was one of the most challenging years for Binance, as financial watchdogs worldwide exercised increased scrutiny against the crypto exchange. Now, it seems the company is facing a new series of regulatory trouble. As the SEC is tightening its grip on crypto this month, Binance USD has become the centre of a potential lawsuit between the agency and BUSD issuer Paxos. Consequently, investors pulled $2.5 billion of funds out of the stablecoin in five days, with BUSD’s price falling to as low as $0.20 for a brief amount of time against its $1 peg. On top of all this, the SEC also objected to Binance US’s bid to acquire $1 billion of assets of the now-bankrupt Voyager Digital lending firm.

Going Unbanked

Likely as a response to the SEC’s actions in February and the aftermath of FTX’s collapse last year, more banks are abandoning crypto. Just like for businesses in other industries, integration into the financial infrastructure is crucial in the digital asset market players to operate. Only a handful of smaller banks were actively collaborating with cryptocurrency firms, and the same institutions are now reevaluating or scaling back their exposure to the sector, according to a new WSJ report. While Signature Bank decided to cut its ties with Binance, Metropolitan Commercial Bank has shut down its crypto business. Meanwhile, the Federal Reserve denied a request from digital asset bank Custodia to reconsider the latter’s membership application in the Federal Reserve System.

Small But Solid Gains

Last month, Bitcoin managed to recover all its losses since last year’s FTX drama. Now, BTC, ETH, and most major cryptocurrencies have continued to grow in value, recording small but solid gains throughout February. This news may come as a surprise for many, as regulatory scrutiny against market players was rather harsh this month. Binance’s BNB exchange coin, for example, managed to survive the month with minimal losses despite the negative events surrounding BUSD and its issuer Paxos.

Hong Kong Becomes A Crypto Bull

While China imposed a blanket ban on crypto activities in 2021, Hong Kong’s regulations enabled industry firms to operate but with strict rules. For example, retail cryptocurrency trading is prohibited in the special administrative region. However, it seems Hong Kong is now taking a bullish stance toward the digital asset space. With plans to become a regional crypto hub, the Securities and Futures Commission (SFC) proposed new regulatory requirements for cryptocurrency trading platforms that now enables market players to acquire a license to operate in Hong Kong with the ability to serve retail investors. As a result, crypto exchanges Huobi and OKX are now looking to get licensed in the special administrative region.

Staking At Risk

After a recent case between the SEC and Kraken, staking might have become at risk. Earlier this month, the cryptocurrency exchange agreed to settle its case with the agency, paying $30 million in penalties and shutting down its staking service for failing to register the program. As the possibility for similar regulatory actions to follow in the next few weeks and months, many industry players have expressed their concerns over a potential staking ban.

New CBDC Pilots On The Horizon

Seeing them as a way to boost their economies’ efficiency, governments worldwide are increasingly exploring Central bank digital currencies (CBDCs). While China is leading the race but struggles with the slow adoption and full launch of the digital yuan, three nations have announced important milestones in this field in February. While Russia and Japan are launching their CBDC pilots in April, the Laotian central bank has already started testing its state-issued digital currency prototype on February 7.

A Fintech Success Story Amid Mass Layoffs

In the last few months, mass layoffs have become the new trend to cut costs and adapt to the more negative outlook of the global economy in many sectors, including crypto, tech, and fintech. Regarding the latter, a recent TechCrunch report revealed that even the most successful and well-funded industry players — including PayPal, SoFi, Decent, and DriveWealth — are cutting their workforces. In the meantime, a Singapore-based fintech Aspire doubled its value, raised $100 million for Series B funding, and went on a hiring spree with 44 open roles.

Conclusion

February’s pattern was consistent: prices recovered, while the rulebook tightened. The SEC’s focus on custody, staking, and enforcement against high-profile issuers kept pressure on the sector’s core business models, and banks continued to reduce exposure where compliance risk looked open-ended.

At the same time, Hong Kong’s shift toward a licensing regime highlighted how quickly jurisdictional competition can reshape the map for exchanges and retail access. The next stage for crypto looks less like a pure market cycle and more like an infrastructure-and-policy cycle, with custody, compliance readiness, and regulated distribution deciding who compounds gains when risk appetite returns.

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