There will be no fireworks for the digital asset sector on July 4.
It seems that the course du jour being cooked on the grill this Independence Day could be the cryptocurrency industry itself, with the Securities and Exchange Commission (SEC) and make sure to turn the heat up as high as possible.
That’s because of the agency led by Gary Gensler has decided that virtually any crypto token outside of bitcoin, all over 25,000 of them, can be defined as a security and therefore should be regulated by the agency.
And instead of chasing every single token, the SEC is going straight to the jugular, targeting the big players that facilitate the exchange and trading of digital assets, as well as the industry’s ups and downs into traditional financial ecosystems.
After all, as popularized and promoted by many colonialist pamphlets during the American Revolution of 1776: Cutting off the snake’s head is the best way to kill it.
To date, approximately 70 cryptocurrency tokens are listed as part of the SEC’s wide network of lawsuits, including the much publicity lawsuits filed against crypto exchanges Binance, Coinbase and Bittrex, industry players Ripple Labs and Terraform Labs, as well as other industry actors – meaning the tokens-slash securities, which include many of the most traded digital assets, are officially involved in crypto’s ongoing legal battle .
So, is the light out for crypto in America? Possible.
But abroad it’s a little different depending on where you go – something crypto firms in the US take advantage of even as they try to fight things out on home soil.
Read more: Will SEC Pass Coinbase Land Heads or Tails for Crypto?
Looking for an offshore on-ramp
Crypto companies feeling burned in the US are looking for greener pastures abroad.
Hong Kong, the UK, the European Union (EU) and Singapore are all increasingly seen as attractive jurisdictions by crypto players given the hostile landscape in the US.
There are also island nations, including the Bahamas, Bermuda and the British Virgin Islands. In addition to offering attractive tax environments, these island havens allow companies to technically operate outside the scope of America’s regulatory and government agencies – sometimes with disastrous implications.
At the center of the SEC’s lawsuits is the allegation that of the hundreds of cryptocurrencies traded on both Binance’s US-based platform and Coinbase’s crypto exchange, at least 19 are securities.
And at least five of those tokens alleged to be securities by the SEC’s lawsuits have been cleared for trading by the Hong Kong government’s newly passed crypto licensing rules, the Operators of virtual asset trading platforms licensed by the SFC.
The rules went into effect on June 1.
If reported by PYMNTS, Hong Kong has taken steps to redevelop itself into a hub for cryptocurrencies, even as the digital asset industry and regulatory authorities clash elsewhere in Asia.
Yet crypto remains outright banned in mainland China, and a Chinese economist who once envisioned bitcoin’s “corpse” was recently elevated to top Communist Party official at the People’s Bank of China (PBOC) — an indication that the country is unlikely to soften its stance on cryptocurrency, and that’s it crypto transactions are illegal.
Coinbase has expanded its business in the UK because it appears to be generating revenue outside the US, and the EU was, too the first major economy to approve a crypto licensing framework, Markets in crypto assets (MiCA), this spring.
“This puts the EU at the forefront of the token economy,” he said Stephen Berger, leading MEP for the MiCA regulation. “The European crypto-asset industry has regulatory clarity that does not exist in countries like the US”
Also see: Crypto continues to serve as a case study in behavioral economics
A culture of non-compliance
But is the SEC wrong, or has the crypto sector simply gone too far a few times, leaving too many private investors in the bag while executives go into hiding with billions?
As PYMNTS wrote, after a 2022 full of fraudulent evaporations and disastrous bankruptciesas exemplified by the November burst of the crypto exchange FTX and the rapid fall from grace of the founderSam Bankman-Fried, the federal regulator likely feels burned by the industry after trusting his “let us innovate” plea.
“The crypto community believed and really believed that what they were doing was so new that existing laws impossible to apply’ Amias Gertypartner at QED InvestorsKaren Webster, CEO of PYMNTS, said in a June interview.
This “spirit of non-compliance” has led crypto companies to consistently retreat into “carefully non-compliant steps” to accept that they may be liable for complying with certain existing regulations to the point where they now squabble over miniscule legal technical details. the anger of the SEC, Gerety stressed.
Therefore, business as usual is perhaps the best choice for the embattled industry, as it could support their legal stance. And what’s more American than that?