The United States’ crackdown on cryptocurrencies and firms will only serve to stifle crypto-related innovation and “weaken” the country, said industry pundits in the wake of Coinbase’s recent Wells notice.
On March 22, crypto exchange Coinbase became the latest crypto firm to receive a “legal threat” — in the form of a Wells notice, just a month after stablecoin-issuer Paxos received its own in February. Some suggest there could be more to come.
Mati Greenspan, the chief of crypto research firm Quantum Economics said he believes U.S. regulators have been unfriendly to crypto “since the beginning.”
The recent collapses of crypto and startup-friendly banks, including Silvergate, Silicon Valley Bank (SVB) and Signature Bank have been viewed by some as being part of a scheme by regulators to un-bank the crypto sector, dubbed “Operation Choke Point 2.0.”
Meanwhile, a March 20 economic report from the White House turned into a scathing review of the merits of crypto assets, spending almost an entire chapter debunking its “touted” benefits.
Greenspan told Cointelegraph that the rumored action could be underway as crypto is seen as a “threat” to the U.S. dollar’s dominance in global trade — a major and long-standing benefit to the U.S.
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
However, as more are beginning to use crypto for cross-border remittances globally, he warned a crackdown on crypto in the U.S. could actually have the opposite effect on the dollar:
“The surgical removal of cryptocurrencies from the U.S. banking system will only isolate the United States further and weaken the dollar’s position as the global reserve currency.”
Adrian Przelozny, CEO of crypto exchange Independent Reserve told Cointelegraph the recent banking sector woes were not due to “any failure in crypto” but caused by banks managing their risks in an “irresponsible way.”
“The White House would be better served to review the practices in the banking industry,” he added.
Speaking about the most recent action against Coinbase, Przelozny said the “adversarial environment for the crypto industry” in the U.S. will push the related “jobs, investment and future innovation” offshore.
“Singapore, Hong Kong and potentially Australia” who are eyeing the benefits of the industry may prove a better home for it and those countries “will reap the economic benefits,” Przelozny said.
The exact reasons the regulator is targeting Coinbase are still unclear. The SEC have 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.
— U.S. Securities and Exchange Commission (@SECGov) March 23, 2023
Michael Bacina, a lawyer and partner at Piper Alderman agreed that a “regulation by enforcement model” will “drive crypto-asset innovation offshore,” and added:
“This is a strange position to adopt given the losses many faced in the last 12 months arose from collapses involving unregulated offshore structures.”
Bacina said for years the industry has asked for clarity on how to comply. He pointed to the recent “telling” comments made by the judge in Voyager Digital’s bankruptcy case which “observed that there is no clear guidance from regulators.”
He added until governments lay out the path to regulatory compliance, offshore jurisdictions will continue to harbor crypto firms “which will cost jobs and raise the risk for consumers and investors.”