Why is the American crypto industry leaking offshore?
It has been an eventful, layoff -and lawsuit rich year in crypto. The U.S. is struggling to come up with a clear regulatory framework for digital assets and it is leading to many crypto companies’ death and severe slowdown in the industry’s growth. As it becomes clearer and clearer on how big of an impact crypto will have on the base pillars of the world economy, the need for regulations that hold are crucial. The United States is lacking behind its peers like the E.U. and paying a staggering price for it: A recent Electric Capital report states that only within four years, the amount of open source blockchain developers in The Unites States has dropped from 42% to 29%. Companies are rapidly moving offshore as no one wants to be the next target of the sharp claws of SEC.
Putting down fires
Cryptocurrency as a concept is entirely new to the world. The past cannot be used as a prologue and the constant shift and evolution of the industry makes it difficult to regulate. Even the initial question, whether crypto is a security or a commodity, is yet to be answered. For the Securities and Exchange Commission (SEC), whose role is to maintain efficient and fair markets in the U.S. and to whose jurisdictional eye securities fall under, the task to create regulatory framework for crypto has turned out to take longer than for others. SEC’s focus has been more on putting down fires rather than preventing ones. This year was filled with lawsuits against some of the biggest crypto platforms, like Binance and Coinbase. In August, SEC suffered a major loss for one of the world’s biggest digital asset currency managers, Grayscale. The suit was regarding the denied application to turn Grayscale’s bitcoin fund into a bitcoin ETF. The fires that SEC has been trying to put out are taking away resources from the creation of crypto’s regulatory pillars.
Crypto regulations in the E.U., at last
Whereas The Unites States are miserably tagging along the pave way of “what’s next in crypto”, the E.U. are already taking steps towards crypto legislation with The Market in Crypto Assets (MiCa). It is set to outline rules for trading and issuing crypto as well as to show light for consumers around risks, charges, and fees. In addition, MiCA is designed to establish licensing for service providers within the digital asset field. The latter is crucial for crypto companies operating in the E.U. area, as the lawsuits in the US go to show lack thereof.
Complexity brings uncertainty
It is important to note that the crypto industry in the U.S. is complex. After the launch of Bitcoin and altcoins, numerous hacking cases, the FTX event and what else, the industry has been overlooked and simply, let out of regulatory sight. Gathering up shattered pieces flying around as new trends continue popping up is difficult now, after years and years of neglect. As the rivalry between SEC and Commodities Futures Trading Commission (CFTC) on who gets to dictate the crypto industry, adds fuel to re-emerging fires that need to be taken down separately. What still stays overlooked, is the biggest problem: Lack of transparent, clear, straightforward regulations for crypto in The United States.
Maybe things are better in another continent...