Unveiling The Divergence of US Crypto Policy from the Global Landscape
“The July Fourth Celebration Lacks Fireworks for the Digital Asset Sector.
This Independence Day, the cryptocurrency industry itself appears to be the main course sizzling on the grill, with the Securities and Exchange Commission (SEC) intending to intensify the heat to its maximum.”
The reason behind this is that the agency chaired by Gary Gensler has made a comprehensive determination that nearly every crypto token, encompassing over 25,000 varieties apart from Bitcoin, can be classified as securities. Consequently, the Securities and Exchange Commission (SEC) is asserting its regulatory authority over these tokens.
Rather than pursuing individual tokens, the SEC is taking a decisive approach by focusing on the key players facilitating digital asset exchange and trading. They are also targeting the vital connections linking the crypto industry with traditional financial ecosystems.
This approach resonates with the sentiment popularized during America’s 1776 revolution, as advocated in numerous colonialist pamphlets: severing the head of the snake is the most efficient way to eradicate it.
Up until now, approximately 70 cryptocurrency tokens have been ensnared in the wide-ranging enforcement lawsuits orchestrated by the SEC. Notable lawsuits have been directed towards prominent crypto exchanges such as Binance, Coinbase, and Bittrex, industry leaders like Ripple Labs and Terraform Labs, as well as other significant players in the sector. As a result, these tokens, which include many of the widely traded digital assets, have become officially entangled in the ongoing legal battle within the crypto industry.
Does this mean the end of crypto in America? It could be a possibility.
However, the situation abroad presents a slightly different landscape, depending on the specific jurisdiction. This has prompted U.S.-based crypto firms to scramble and explore opportunities overseas while simultaneously engaging in legal battles on their home turf.
Exploring an Offshore Gateway: Seeking Alternative Entry Points
Crypto firms, disillusioned by their experiences in the U.S., are actively seeking more promising opportunities overseas.
Crypto companies, feeling the heat in the United States, are actively seeking opportunities in foreign lands. Hong Kong, the United Kingdom, the European Union (EU), and Singapore are emerging as appealing destinations for crypto players due to the increasingly hostile regulatory environment in the U.S.
Additionally, island nations like the Bahamas, Bermuda, and the British Virgin Islands are gaining attention. Apart from offering enticing tax regimes, these island havens provide a chance for companies to operate outside the reach of American regulatory bodies, sometimes resulting in unforeseen consequences.
At the core of the SEC’s legal actions lies the accusation that out of the numerous cryptocurrencies traded on Binance’s U.S.-based platform and Coinbase’s crypto exchange, at least 19 qualify as securities. Intriguingly, at least five of these tokens, classified as securities in the SEC lawsuits, have received approval for trading under Hong Kong’s recently implemented crypto licensing regulations known as the Virtual Asset Trading Platform Operators Licensed by the SFC.
Effective June 1, the newly implemented regulations have come into force.
According to PYMNTS, Hong Kong has been actively transforming itself into a cryptocurrency hub, despite conflicts between the digital asset sector and regulators in other Asian regions.
However, mainland China continues to uphold a complete ban on cryptocurrencies, and the recent promotion of a Chinese economist, who previously expressed pessimism towards bitcoin, as a high-ranking Communist Party official in the People’s Bank of China (PBOC), suggests that the country is unlikely to relax its strict stance on cryptocurrency. In China, all crypto transactions are deemed illegal.
Coinbase has expanded its operations in the United Kingdom, aiming to generate revenue beyond the U.S. market. Meanwhile, the European Union (EU) took the lead by introducing a comprehensive crypto licensing framework called Markets in Crypto-Assets (MiCA) during the spring. Stefan Berger, the lead Member of the European Parliament (MEP) for the MiCA regulation, stated, “This places the EU at the forefront of the token economy, providing the European crypto-asset industry with regulatory clarity that is currently lacking in countries like the U.S.”
A Culture of Compliance
However, is the SEC justified in their actions, or has the crypto sector simply failed to establish adequate safeguards, resulting in numerous instances where retail investors suffer losses while executives escape with vast sums?
As PYMNTS noted, following a tumultuous 2022 marred by fraudulent schemes and catastrophic bankruptcies, such as the high-profile collapse of the crypto exchange FTX and the subsequent downfall of its founder, Sam Bankman-Fried, the federal regulator now finds itself hesitant to trust the industry’s “let us innovate” appeals.
The crypto community held a firm belief and strong conviction that their endeavors were so groundbreaking that traditional laws could not possibly be applicable, stated Amias Gerety, a partner at QED Investors, during a conversation with PYMNTS CEO Karen Webster in June.
This prevailing “culture of noncompliance” has witnessed crypto firms consistently taking cautious steps away from acknowledging their potential liabilities regarding existing regulations. They have reached a point where they now engage in trivial legal arguments, which has become a source of frustration for the SEC, as emphasized by Gerety.
Considering this situation, maintaining a “business as usual” approach might be the most prudent decision for the industry in turmoil, as it could provide stronger legal support. And what could be more in line with American values than that?
In conclusion, the digital asset sector in the United States is facing a challenging July Fourth celebration as the Securities and Exchange Commission (SEC) intensifies its regulatory actions. The SEC’s classification of most cryptocurrencies, apart from Bitcoin, as securities has led to extensive enforcement lawsuits targeting key players in the industry. While this may not mark the end of crypto in America, it has prompted many crypto firms to explore opportunities overseas, with destinations like Hong Kong, the United Kingdom, the European Union, and Singapore emerging as appealing alternatives. However, it is essential for the industry to adopt a culture of compliance and work towards establishing adequate safeguards to address regulatory concerns. By doing so, the digital asset sector can secure stronger legal support and align itself with American values.
