US Crackdown Pushes Crypto Kings Abroad

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Cryptocurrencies like Bitcoin are struggling to gain a firmer foothold in the US as financial regulators crack down on big companies operating in the freewheeling industry (Yuri CORTEZ)

After years on the sidelines, financial regulators in the United States are throwing the book on the freewheeling cryptocurrency industry, with angry entrepreneurs threatening to take their business overseas.

Earlier this month, Wall Street regulator the Securities and Exchange Commission brought a series of charges against Binance, the world’s largest cryptocurrency exchange, and US-based Coinbase.

Both companies, along with the now defunct FTX, were key brands in the crypto industry, helping evolve what started as a secret playground for tech geeks into a new adopted way of investing. by Wall Street.

The SEC has been slowly tightening the screws on crypto since 2020.

But the jabs at Binance and Coinbase have hit the industry with a nose-dive accusation: Some cryptocurrencies are securities that must be traded under strict rules and not an alternative to dollars, yen or euros and out of reach. regulators.

Digital currency advocates have argued that regulators are stuck in the past and applying rules unsuited to the likes of bitcoin or ethereum.

“The cases filed by regulators are likely to increase uncertainty and confusion about crypto as they drag through US courts,” said Scott Freeman, co-founder and partner at JST Capital, which specializes in cryptography.

“We want to see regulators a little more proactive guidance and legislation rather than regulation by enforcement,” said Paolo Ardoino, chief technology officer at Bitfinex, a cryptocurrency trading firm that has been fined by another US regulator, the CFTC, in 2021.

Crypto companies are also “caught in the middle of a turf war” between US regulators, Coinbase chief legal officer Paul Gruwal told AFP.

The industry, eager to join the financial establishment, has called for clear regulation, but progress on that front has been thwarted by political stalemate in Washington.

“If we don’t see regulatory clarity emerging in the US, we may need to consider investing more elsewhere in the world,” Coinbase CEO Brian Armstrong told a conference in London.

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“Everything is on the table, including the move.”

– ‘Wake up’ –

Baffled by the controversies facing crypto, political leaders in several countries are eager to seize this opportunity.

British Prime Minister Rishi Sunak welcomed on Sunday the opening of an office in London by the American private equity giant Andreessen Horowitz, in particular to invest in crypto projects.

New regulation in Europe, while not unanimously favored, “at least gives us a list of rules” and visibility, Bitfinex’s Ardoino said.

The crackdown in the United States has brought a dose of doubt to an entire ecosystem behind cryptocurrency and the idea of ​​blockchain at its core, in which transactions eliminate intermediaries, including governments and banks.

Spooked by Washington’s push, Crypto investor Derek Boirun, who founded Realio, a real estate and blockchain company, posted a “Why I’m leaving the US” article on the Medium website.

Boirun wrote that he had spent money and time working unsuccessfully with US regulators.

“Ultimately, it will be up to Congress to step in to establish the United States as an open jurisdiction for business,” Freeman told AFP.

“In the meantime, we expect Europe and Asia to continue to be seen as more receptive to those looking to innovate.”

But with Democrats and Republicans so bitterly divided in Washington, getting legislation won’t be easy.

“Some of the most outspoken anti-cryptos are Democrats and some of the most pro-cryptos are Republicans,” said University of Arkansas law professor Carol Rose Goforth.

“Hopefully we don’t turn this into a bipartisan mess, but given where the politics are at, it could happen too.”

The anti-crypto climate also stems from the position of the White House, which published an article in March questioning the usefulness of cryptocurrencies.

“The US government is making it very difficult for traditional financial institutions,” especially banks, “to engage in cryptocurrencies,” Goforth said.

The White House succinctly outlined its concerns, calling cryptocurrencies “too risky.”

They are “largely speculative investment vehicles and are not an effective alternative to fiat currency,” he told the paper.

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