Last year started on a sour note for crypto. Bitcoin struggled at $16,000. New investors stayed out of the market after FTX.
Getting a clear regulatory framework in the US offered a ray of hope. But the Securities and Exchange Commission had other plans.
Instead of working on a separate regulatory framework for digital assets, the US regulator got into a debate over centralised and decentralised networks. The SEC decided to classify all cryptoassets apart from bitcoin and ether as securities, and launched a crackdown on exchanges for listing them.
On 5 June, the SEC filed a lawsuit against Binance. It charged Coinbase the following day. The crypto community was stunned and the market capitalisation of digital assets dropped almost 10% in two days. Coinbase stock plunged 11% after the SEC’s lawsuit.
But the biggest hit that the US took was to its reputation as a crypto hub. Leading firms started shifting their operations out of the country following the crackdown.
In April, Coinbase said that the company was considering moving its headquarters amid a lack of regulatory clarity in the US. In May, Chicago-based bitcoin payment provider Strike moved its headquarters to crypto-friendly El Salvador.
“Crypto firms are moving out of the US to go to locations like Singapore and the United Arab Emirates,” Cardano founder Charles Hoskinson told Financial News. “The SEC’s constant fight with crypto firms doesn’t help the US. What it does is it kicks out a small window of time that the US has to be a world leader in blockchain and crypto.”
The SEC filed a lawsuit against Ripple in December 2020 alleging that the company conducted a $1.3bn unregistered securities offering in the form of XRP. Despite a 13 July ruling by US district judge Analisa Torres in which she said that XRP was not a security in the secondary market, the SEC is still going after the crypto firms with full force.
Hoskinson believes that the US will eventually sort out crypto regulation in the coming years. But by then it will be too late to attract crypto businesses.
Centralised vs decentralised crypto
Cardano’s Hoskinson also said that in the debate around centralised and decentralised cryptoassets, the SEC has failed to explain why some digital assets should not be considered securities.
“When we ask the SEC about the level of decentralisation of ether and bitcoin to have a benchmark, they don’t have any answers,” Hoskinson told FN. “And even if the SEC defines a cryptoasset as a security, how can someone register that security? For now, the regulator doesn’t have any clear guidelines regarding that.”
In other news
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Regulators took a beating in 2023. Why AI will be their next challenge
Lessons from the year’s top finance books
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Seven European fintech founders tell us their expectations for the sector in 2024 (Business Insider)
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To contact the author of this story with feedback or news, email Bilal Jafar
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- Source: https://cryptoinfonet.com/regulation/the-fintech-files-us-crypto-regulation-its-already-too-late/
