The United States is the de facto regulator of crypto

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Illustration: Eniola Odetunde/Axios

The crypto world has been asking a single question for a decade: Who’s in charge here? The answer has now emerged: it’s the Americans.

Why it matters: US authorities consider the entire world to be within their jurisdiction to some degree. No one else behaves quite like this, so the United States ends up being the de facto global regulator.

Catch up quickly: Last month, as you may have heard, a Bahamas-based crypto exchange failed, along with its associated Hong Kong-based trading vehicle. The consequences came thick and fast:

Between the lines: Bahamian authorities seem to have been reduced to little more than plaintive tweets.

Big news: Copenhagen-based Danske Bank this week paid $2 billion to the US Department of Justice to resolve a settlement over its lax money laundering controls.

As Bloomberg’s Matt Levine points out, the transactions in question were carried out at the request of Russian clients at an Estonian branch of a Finnish bank owned by a Danish bank. Nevertheless, the lawsuits were led by Americans and there was even a parallel $400 million securities fraud settlement with the US SEC, for good measure.

Be smart: Binance, the only major global crypto exchange now that FTX is gone, is stepping up its lobbying operation in the US, three months after appointing Patrick Hillmann as director of global strategy.

Hillmann, whose LinkedIn URL is “crisis communications,” has built his career shaping American public opinion. Binance has a small footprint in the US, but it’s clear that from a business perspective, the main existential threat comes from the US.

Overview: Thanks to the dollar’s status as the world’s reserve currency, the United States has always considered almost all major international financial transactions anywhere in the world to be within its jurisdiction.

When an American financial executive spends a lot of time on Capitol Hill, as former FTX CEO Sam Bankman-Fried did, and is treated heroically by the American press, there is no doubt that he will eventually answer to US authorities.

Conclusion: The crypto world has spent many years promulgating the useful fiction that there is a significant difference between US and foreign-based crypto companies. Ultimately, however, US officials don’t care about these distinctions at all.

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