US crackdown on cryptocurrencies and crypto companies will only serve to stifle crypto-related innovation and “weaken” the country, industry experts say in the wake of Wells’ recent Securities and Exchange Commission notification to Coinbase.
On March 22, the crypto exchange became the latest crypto company to receive a “legal threat,” a Wells notification, just a month after stablecoin issuer Paxos received its in February.. Some suggest there could be more.
Mati Greenspan, head of crypto research firm Quantum Economics, said he believes that US regulators have been unfriendly to cryptocurrencies “from the start.”
The recent collapses of crypto-friendly banks and startups, such as Silvergate, Silicon Valley Bank, and Signature Bank, have been seen by some as part of a plan by regulators to unseat the cryptocurrency sector, dubbed “Operation Choke Point 2.0.”
For his part, a March 20 economic report from the White House turned into a scathing review of the merits of crypto assets; the document spent almost an entire chapter debunking the “touted” benefits of cryptocurrencies.
Greenspan told Cointelegraph that rumored action could be underway as cryptocurrencies are seen as a “threat” to the dominance of the US dollar in world trade, a significant and longstanding benefit to the US.
Russia, China, and now crypto. Slowly but surely the United States is isolating itself from the global economy. The USD cannot remain the world’s reserve currency for much longer under these conditions.
— Mati Greenspan (@MatiGreenspan) March 14, 2023
Russia, China and now cryptocurrencies. Slowly but surely, the United States is isolating itself from the world economy. The USD will not be able to remain the world’s reserve currency for much longer under these conditions.
However, as more and more people start to use cryptocurrencies for cross-border remittances globally, he warned that A US cryptocurrency crackdown could actually have the opposite effect on the dollar:
“The surgical removal of cryptocurrencies from the US banking system will only further isolate the United States and weaken the dollar’s position as the world’s reserve currency.”
Adrian Przelozny, CEO of Australian crypto exchange Independent Reserve, told Cointelegraph that the recent problems in the banking sector were not due to “any failure in cryptocurrencies”, but were caused by banks managing their risks in an “irresponsible way.”
“It would be better for the White House to review the practices of the banking sector,” he added.
In connection with the most recent action against Coinbase, Przelozny said that the “adverse environment for the cryptocurrency industry” in the US would drive related “jobs, investment and future innovation” abroad.
“Singapore, Hong Kong and potentially Australia,” which are eyeing the benefits of the cryptocurrency industry, may be a better home for it, and those countries “will reap the economic benefits,” Przelozny said.
The exact reasons why the regulator is going after Coinbase are not yet clear. The SEC has declined to comment on the matter.
Investments in crypto asset securities can be exceptionally volatile & speculative, & the platforms where investors buy, sell, borrow/lend these securities may lack important protections for investors.
@SEC_Investor_Ed to investors: exercise caution w/ crypto asset securities.— US Securities and Exchange Commission (@SECGov) March 23, 2023
Investments in crypto assets can be exceptionally volatile and speculative, and the platforms on which investors buy, sell, borrow, or lend these securities may lack important investor protections.
@SEC_Investor_Ed to investors: be careful with crypto asset values.
Michael Bacina, a lawyer and partner at Piper Alderman, agreed that a “regulation-by-execution model” would “drive crypto asset innovation abroad,” and I add:
“This is an odd position to take given that the losses many faced in the last 12 months arose from collapses involving unregulated offshore structures.”
Bacina said that, For years, the industry has asked for clarity on how to comply with regulations. He pointed to recent “revealing” comments from the judge in the Voyager Digital bankruptcy case, who “noted that there is no clear guidance from regulators.”
He added that offshore jurisdictions will continue to harbor crypto companies until governments set the path for regulatory compliance, “which will cost jobs and increase risk for consumers and investors.”
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