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.

“Weird Binance fud Friday and weird huobi arrest fud today,” tweeted MyCrypto CEO Taylor Monahan, referring to an Oct. 29 Forbes report that Binance had set up its U.S. unit, Binance.US, as a regulatory decoy and referencing separate rumors that Chinese authorities had detained a senior executive at Huobi.

FUD, which has long dogged the cryptoverse, is commonly defined as misinformation intentionally spread to put a competitor at a disadvantage — to knock down a rival’s stock price or coin price, for example. It can also result from government action, such as the arrest by U.S. authorities of BitMEX’s co-founder and former chief technology officer on Oct. 1 or the reported detainment of an OKEx co-founder by Chinese police in early October. It raises speculation: Who is causing the FUD, and what is that party’s motivation?

Binance CEO Changpeng Zhao, for example, characterized the leaked document, which detailed the exchange’s purported 2018 plan to evade Bitcoin (BTC) regulation by setting up a U.S. subsidiary with a “feigned interest in compliance,” as FUD, adding: “The said document was not produced by a @Binance employee (current or ex).”

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. Boxmining creator Michael Gu, for one, announced that he was removing his balances from Huobi "until this FUD clears up."

A global push to rein in crypto exchanges?

But was there anything behind all those events? Some have suggested that regulators worldwide — in the U.S. China and elsewhere — are now targeting centralized cryptocurrency exchanges, and that is what is causing all the doubt and uncertainty with regard to these largely unregulated enterprises.

Bobby Ong, co-founder and chief operating officer of CoinGecko, is skeptical that there was any such unified plan. As he told Cointelegraph, “The timing of all these FUD [events] seem to be coincidental,” with the charges against BitMEX being brought about as the result of a prolonged investigation.

Monahan, for her part, allowed for the possibility that regulatory actions could indeed be a key source of recent anxiety; but then again, it could just be rivals spreading rumors and innuendo about one another. Huobi’s coin, Huobi Token (HT), took a hit when the bad news broke, falling hundreds of dollars on Nov. 2. Monahan shared with Cointelegraph:

“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?

But maybe there is a method to all this “FUDiness.” Syren Johnstone, who is executive director of the compliance and regulation program at the University of Hong Kong and has written about regulating crypto exchanges, suggested to Cointelegraph that the global regulatory pendulum is swinging in the direction of tighter control:

“In Hong Kong the government this week proposed to bring all crypto-assets under the oversight of the securities regulator by using money laundering concerns as the stepping stone. Legislation has been proposed in the EU and the U.S. that drives crypto-assets into existing regulatory silos. These actions indicate the wind has definitely changed direction — [while] strengthened regulatory mandates increases the 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. “However, this is not surprising as certain moves from regulators such as the U.S. CFTC and the UK’s Financial Conduct Authority have been anticipated.”

As for all the fear, uncertainty and doubt that seem to surround centralized exchanges recently, “The market is largely retail-driven still and heavily influenced by news and rumors," said Hao, adding:

"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.”

It should be noted that OKEx itself became a FUD talking point after an Oct. 16 report by a Chinese news agency saying that the exchange’s founder, Mingxing Xu, had been questioned by Chinese police, which was followed by the Malta-based exchange’s suspension of withdrawals. In a Nov. 6 statement, OKEx apologized “for the inconvenience caused by the suspension of digital asset withdrawals” and denied claims “that a concerned party related to OKEx is under criminal detention.” But meanwhile, users still can’t withdraw funds from the exchange.

What should users do?

Nevertheless, recent events can be worrisome. 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.”

Thus, a user’s best choice to retain control of their cryptocurrency is to use cold storage for long-term holding, and when using “a centralized exchange, they should be aware of the risks and choose an exchange that has strong security, a good track record, and doesn’t actively thumb their noses at regulators.”

Why did Gu withdraw his funds from Huobi? “I’m a victim of the Mt.Gox exchange hack, so I prefer playing on the safer side,” he told Cointelegraph. “Huobi denied claims they are under regulatory scrutiny, but can we really trust them? We saw whales move out of BTC in a couple of large withdrawals.” If the exchange becomes insolvent, would the private keys then be held by a government? One doesn’t really know. “It’s easier to take out funds now and redeposit [them] once it clears up.”

Ong said that users need to understand “that the risk is high for non-regulated exchanges like those that appeared in the news recently. These exchanges can shut down or disappear overnight due to a ‘hacking incident.’” By comparison, Ong outlined for Cointelegraph:

“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.”

That said, centralized exchanges can be useful for investors who aren’t ready to act as their own banker or custodian. “There will always be a place for CEXs as an easy way to onboard people to the cryptocurrency space and to offer users a robust and secure environment to store their funds,” said Hao, adding that “As long as they keep up with local laws, they can offer a secure place for their users.”

Role of China

Some believe that China is playing a role in the recent FUD. Gu told Cointelegraph that “China is also stepping up crypto regulation to push people to use their DC/EP,” the nation’s digital currency project known as Digital Currency Electronic Payment. Ong agreed: “China is pushing hard to get DC/EP adoption and wants to show that it is superior to cryptocurrencies.”

Monahan seemed unconvinced on this point, however stated: “Have we actually seen China upping its regulation? It has been pretty locked down for years now.” She further added: “If we saw action from China akin to the CFTC and DOJ filing criminal charges against the founders of BitMEX then it might be worth investigating that angle. For now, the steps China takes to ensure that its digital yuan has little or no competition remain to be seen.”

Johnstone noted that China’s central bank digital currency is positioned as a fiat currency and a payment tool — something quite different from cryptocurrency — further sharing with Cointelegraph:

“Too many Chinese citizens had acquired cryptocurrencies by the time China prohibited initial coin offerings. It created a legacy problem that will diminish over time. The basic dynamic in China is that you cannot do much with a cryptocurrency but you will be able to do many things with the CBDC.”

Is more regulation coming?

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.”

Related: The case against BitMEX is a compass pointing toward the future of crypto regulation

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 (BTC surpassed $15,600 on Nov. 8) and crypto use becomes more widespread. And this isn’t necessarily a bad thing. “Enforcement and more regulation doesn’t spell the end of cryptocurrencies,” said Johnstone. “The regulatory endgame is a stronger and safer market environment.”

Taking a bird’s-eye view, centralized exchanges have come a long way from the Wild West days of only three years ago. 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.