The United States’ crackdown on cryptocurrencies and crypto firms will only serve to stifle crypto-related innovation and “weaken” the country, industry pundits say in the wake of Coinbase’s recent Wells notice from the Securities and Exchange Commission.
On March 22, the crypto exchange became the latest crypto firm to receive a “legal threat” — 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 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, with the paper spending almost an entire chapter debunking crypto’s “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 significant and long-standing benefit to the U.S.
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 Australian crypto exchange Independent Reserve, told Cointelegraph that 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. would push the related “jobs, investment and future innovation” offshore.
“Singapore, Hong Kong and potentially Australia” — who are eyeing the benefits of the crypto industry — may prove a better home for it, and those countries “will reap the economic benefits,” Przelozny said.
Related: Banks and the Fed have a problem — What about crypto?
The exact reasons the regulator is targeting Coinbase are still unclear. The SEC has declined to comment on the matter.
Michael Bacina, a lawyer and partner at Piper Alderman, agreed that a “regulation by enforcement model” would “drive crypto-asset innovation offshore,” adding:
“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 that “observed that there is no clear guidance from regulators.”
He added that offshore jurisdictions would continue harboring crypto firms until governments lay out the path to regulatory compliance, “which will cost jobs and raise the risk for consumers and investors.”
Magazine: Unstablecoins: Depegging, bank runs and other risks loom