Coinbase, the largest crypto exchange in the U.S., said that while the U.S. still has not presented clear regulatory guidelines for crypto companies and is engaging in a pattern of regulation by enforcement, many other countries are signaling their friendliness to crypto. Ambre Soubiran, the CEO of Paris-based Kaiko, a crypto market data provider, predicted that the U.S. is going to push crypto innovation to Hong Kong.
"One million tech jobs are at risk of going overseas. As the U.S. goes down a path of regulatory uncertainty, the EU, UK, UAE, Hong Kong, Singapore, Australia and Japan are all creating environments for crypto to flourish so that they can capitalize on the next wave of innovation," Coinbase wrote in a March 29 Twitter post.
In an April 1 interview with the Wall Street Journal, Soubiran said that the U.S. approach to regulation could push innovation into a more crypto-friendly country, like Hong Kong, CoinTelegraph reported.
“The U.S. being more stringent these days than ever on crypto and Hong Kong regulating in a more favorable way…is going to clearly shift the center of gravity of crypto assets trading and investments more toward Hong Kong," Soubiran said.
Last month, the U.S. Securities and Exchange Commission (SEC) sent Coinbase a Wells notice, signaling that an enforcement action is incoming. Coinbase Chief Legal Officer Paul Grewal explained in a blog post on the Coinbase website that Coinbase has tried repeatedly to get regulatory clarity from the SEC, but the SEC has not been communicative. He said the notice was vague in its description of exactly which of its services warrant the enforcement action.
"The SEC staff told us they have identified potential violations of securities law, but little more," Grewal said. "We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so." Grewal said that over the course of the last year, the SEC has repeatedly declined to provide feedback on or raise questions about Coinbase's listing process or proposals Coinbase had sent the SEC. One source of confusion over the Wells notice is the fact that Coinbase went public in 2021 and had to get approval from the SEC in order to do so. Grewal said in the post that the Wells notice contained a reference to Coinbase's staking services – "the same staking services referenced 57 times in the S-1, the SEC reviewed in 2021 when we became a public company."
The Biden administration presented an anti-crypto position in its annual Economic Report of the President released last month, which said that although crypto has many potential benefits, it is too volatile and has not achieved those benefits, Federal Newswire reported.
"Some have hoped that crypto assets could act as a form of decentralized money, making the U.S. payment systems faster, cheaper, safe and more inclusive. This vision has not been realized," the report said. The Blockchain Association said in a statement in response to the report that the Biden administration is at risk of being remembered as a "roadblock to a global tech revolution" rather than a "leader of profound innovation."
"While other countries are increasingly receptive to the burgeoning crypto industry, some in government appear increasingly allergic to its promise, sending companies and innovators offshore," Blockchain Association CEO Kristin Smith said.
Hong Kong, on the other hand, announced a plan to become a global crypto hub in January, which includes progressive regulations, according to CoinTelegraph. While the details of those regulations are not cemented yet, in February, Hong Kong’s Securities and Futures Commission (SFC) proposed a licensing regime that would protect consumers and encourage innovation. Hong Kong’s Secretary for Financial Services and the Treasury Christian Hu said in a speech last month that more than 80 crypto-related companies have said they are interested in moving to Hong Kong.
In March, the U.S. Commodity Futures Trading Commission (CFTC) announced a lawsuit against Binance, the largest crypto exchange in the world by volume, for allegedly allowing U.S. customers to trade crypto derivatives without proper regulatory approval. Former attorney and investment banker Matt Levine wrote in a Bloomberg Opinion column that "There are no accusations that Binance is stealing customer money, or even taking big risks with it, which makes Binance look better than some other crypto exchanges I could name ... the CFTC’s case is mainly about letting U.S. customers trade crypto derivatives. It is illegal to run a crypto derivatives exchange in the U.S. without registering it with the CFTC, and it’s not exactly easy to do that either."
U.S. Bankruptcy Judge Michael Wiles wrote in a March 11 opinion that the absence of clear regulatory guidelines for digital asset issuers in the U.S. has created a "highly uncertain" environment for those companies, many of which, Wiles pointed out, have been operating for years "without being subject to clear and well-defined regulatory requirements."
"Regulators themselves cannot seem to agree as to whether cryptocurrencies are commodities that may be subject to regulation by the CFTC, or whether they are securities that are subject to securities laws, or neither, or even on what criteria should be applied in making the decision. This uncertainty has persisted despite the fact that cryptocurrency exchanges have been around for a number of years," Wiles said. He added that the SEC's actions might foreshadow "a wider regulatory assault," but also pointed out that the SEC and the CFTC have sometimes acted in ways that contradict each other when it comes to the crypto industry.
Fifty-three percent of Americans believe “cryptocurrencies are the future of finance,” according to a survey conducted by The Harris Poll last fall. Eighty-one percent of survey respondents said the U.S. needs clearer regulatory guidelines for crypto companies.