Following Coinbase’s recent Wells notice from the SEC, industry experts said the U.S. crackdown on cryptocurrencies and crypto companies would only stifle crypto-related innovation and “weaken” the country.
On March 22, the cryptocurrency exchange became the latest cryptocurrency company to receive a “legal threat” the Wells notice just a month after stablecoin issuer Paxos received its own notice in February. Some think there may be more to come.
Marty Greenspan, head of cryptocurrency research firm Quantum Economics, said he believes U.S. regulators have been unfriendly to cryptocurrencies “from the start.” The recent collapse of crypto- and startup-friendly banks, including Silvergate, Silicon Valley Bank and Signature Bank, is seen by some as part of the regulator's plan to de-bank the crypto industry, dubbed Operation Choke Point. 2.0".
Meanwhile, a White House economic report on March 20 turned into a scathing review of the merits of crypto assets, devoting almost an entire chapter to debunking crypto’s “touted” benefits. Greenspan told Cointelegraph that the rumored action could be in the works, as cryptocurrencies are seen as a “threat” to the dollar’s dominance in global trade a major long-term benefit for the United States.
However, as more and more people around the world start using cryptocurrencies for cross-border remittances, he warned that the U.S. crackdown on cryptocurrencies could actually have the opposite effect on the U.S. dollar: “Surgical removal of cryptocurrencies from the U.S. banking system will only further isolate the U.S. and weaken the U.S. dollar’s status as the global reserve currency.” Adrian Przelozny, CEO of Australian cryptocurrency exchange Independent Reserve, told Cointelegraph that the recent woes in the banking sector are not due to “any failure of cryptocurrencies,” but rather due to banks managing risk in an “irresponsible manner.”
"The White House would do well to review banking practices," he added. Referring to the recent actions against Coinbase, Przelozny said that the “hostile environment for the crypto industry” in the U.S. will push related “jobs, investment, and future innovation” overseas.
“Singapore, Hong Kong and potentially Australia” which are looking at the benefits of the crypto industry could become a better home for it, and those countries “will reap the economic benefits,” Przelozny said. The exact reason regulators are targeting Coinbase is unclear. The SEC declined to comment for this story. Michael Bacina, an attorney and partner at Piper Alderman, agreed that “enforcement model regulation” would “drive crypto asset innovation abroad,” adding:
"It's an odd stance to take given the loss many have faced over the past 12 months involving the collapse of unregulated offshore structures."
Bacina has said for years that the industry has been demanding clarity on how to comply. He pointed to the judge's recent "persuasive" comments in the Voyager Digital bankruptcy case "observing no clear guidance from regulators". He added that offshore jurisdictions will continue to shelter crypto companies until the government charts a path to compliance, “which will result in fewer jobs and increased risks for consumers and investors.”
