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Some industry experts suggest that the recent actions taken by the SEC against Coinbase and Binance, both operating in the U.S. and the Cayman Islands respectively, could potentially yield positive outcomes for companies based in the United States. These regulatory measures are believed to bring about much-needed clarity in the long run. However, in the short to medium term, such actions might force these firms to shift their focus and allocate their resources elsewhere.
“Regulatory pressure does create an incentive for exchanges to move overseas; for the digital asset industry specifically, it’s a much easier shift because there are no factories to move,” said Jason Allegrante, Chief Legal and Compliance Officer at infrastructure firm Fireblocks.
Coinbase has made a recent announcement regarding its acquisition of a license to provide services in Bermuda. This move is aimed at establishing a crypto-trading platform outside of the United States. Additionally, Coinbase is reinforcing its operations in Canada, a country that has implemented stricter regulations for cryptocurrency firms. However, Coinbase has managed to secure an enhanced Pre-Registration Undertaking, demonstrating its commitment to adhering to the forthcoming regulatory framework.
“I suspect we will see more and more moves like this,” Andrew Lawrence, co-founder and CEO of Censo Inc., an on-chain custody solution said. “Yes, the U.S. is the biggest market, but people who are building in the crypto industry are doing so not because of the size of the market now, but because of the size of the market in the future and people are seeing that this future is not looking good in the United States.”
Ben Caselin, Vice President & Chief Strategy Officer at centralized crypto exchange MaskEX, agreed. “All eyes are now set on other jurisdictions,” he said. “This is not the best time for crypto startups in the U.S. Larger players such as Coinbase are able and should engage the regulator to come to solutions, but entrepreneurs and small businesses in crypto are probably better off in other jurisdictions.”
For his part, SEC chief Gary Gensler signaled he’s not too worried about the prospect of crypto firms leaving the U.S. On Tuesday he told Bloomberg TV that “we don’t need more digital currency… we already have digital currency, it’s called the U.S. dollar.”
Fireblocks’ Allegrante said even though the U.S. might be the most profitable market for some exchanges, that may not be reason enough for them to focus all their efforts there. “When a company publicly announces plans to establish exchange operations outside of the United States, you can assume that there are plans in place to shift that balance over time,” Allegrante said about Coinbase.
However, disregarding the U.S. market will not be a simple task.
“The U.S. market was supposed to deliver the next major wave of crypto interest, so it will be hard to completely abandon it,” Edward Moya, senior analyst at foreign exchange Oanda, said.
Despite receiving a warning from the SEC about potential law enforcement action in March, Coinbase's CEO, Brian Armstrong, reaffirmed the exchange's unwavering commitment to the United States. In light of the lawsuit, Coinbase expressed its determination to persistently focus on operating within the U.S.
Mark Palmer, a representative from brokerage firm Berenberg Capital Markets, suggested that this confrontation might be only the initial phase of a much larger and more protracted conflict.
“The exchanges, led by Coinbase, will likely take their fight to the courts while hoping that the political winds change in the U.S. such that more crypto-friendly leaders would be in charge,” Palmer noted.
