Is the US Losing the Crypto Innovation Race?
The United States has “nearly lost the game” when it comes to crypto innovation largely due to strained relations with the Securities and Exchange Commission, according to a former regulator and current head of a digital asset consulting firm.
During a panel on digital asset regulation at the WealthManagement EDGE conference, Mango Digital Strategies CEO Charlene Hill Fadirepo compared the position of crypto in the country to the development of the internet, saying the United States were at the forefront of innovation during this period, home to most of the major technology companies. in the space.
But CEOs of crypto exchanges doing risk analysis may find it’s not optimal to stay in the US, with other regions like Dubai, Malta and Singapore positioning themselves as crypto hubs with more tax environments. attractive, according to Fadirepo (who previously served as regulator responsible for audits and assessments of banking supervision at the Federal Reserve).
Firms with large compliance and policy strategy staff can afford to tangle with the SEC on enforcement issues, but others can opt out completely and offshore, Fadirepo warned. .
“If you have the money to fight, and the energy and the resources, you will fight,” she said. “But if you don’t, you’ll pivot and just go to the Caribbean.”
The failure of FTX and the economic effects of a failing major crypto exchange led regulators in Washington to intervene, with Mercedes Tunstall, a partner at Cadwalader, Wickersham & Taft, claiming that the SEC under Chairman Gary Gensler s is essentially engaged in sending letters and initiating inquiries regardless of the specifics of the type of crypto product or service being offered.
But it was “untenable” in the long run for regulators to act as if anything remote crypto was working as security, Tunstall said. The best course of action for exchanges would be to register, but the problem so many people had was that exchanges saw no place where they could register properly.
Tunstall said many financial institutions are reviewing recent information from Coinbase Wells notices a scuffle with the commission as a signal, companies are pushing back on what they see as “regulation by enforcement” (a criticism often cited by advocates for crypto leaders and other regulated industries, like the brokerage space) .
“I think in the air, there’s a feeling that corporate America is going to say ‘you can’t keep not giving us rules to follow, because that’s ridiculous and we’re not going to do it anymore. endure,'” she said.
During testimony before Congress in late March, SEC Chairman Gary Gensler pointed out that the commission’s ability to investigate crypto breaches was “stretched,” arguing that while the crypto field was small compared to all financial markets, it had an inordinate number of compliance issues.
Industry members also see storms on the horizon. According to a CoreData report from last month, seven in 10 advisors believe there will be more cryptocurrency failures this year than in 2022, with 26% expecting it to crash to a greater scale only after the FTX fiasco in November 2022. .
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