There will be no fireworks for the digital asset sector this July 4th.
It seems that the dish of the day that is cooking on the grill this Independence Day could be the cryptocurrency industry itself, with the National Stock Market Commission (SEC) making sure to turn the temperature as high as possible.
That's because the agency chaired by Gary Gensler has decided that almost all crypto tokens outside of bitcoin, all 25,000+ of them, can be defined as a security and therefore should be regulated by the agency.
And instead of going after each individual token, the SEC is going straight for the jugular, targeting the major players facilitating the exchange and trading of digital assets, as well as the industry's on-ramps and off-ramps into traditional financial ecosystems. .
After all, as many colonialist pamphlets popularized and promoted during the American Revolution of 1776: Cutting off the head of the snake is the best way to kill it.
To date, around 70 cryptocurrency tokens are listed as part of the SEC's extensive network of enforcement lawsuits, including the highly publicized lawsuits filed against cryptocurrency exchanges Binance, Coinbase, and Bittrex, industry players Ripple Labs and Terraform Labs, as well as other industry players, meaning tokens-slash-securities, including many of the digital assets more traded, are officially implicated in the ongoing crypto legal fight.
So is the lights out for cryptocurrency in America? Possibly.
But things are a little different abroad depending on where you turn, something that US-based crypto firms strive to take advantage of, even as they try to fight things in homeland.
Read more: Will the SEC Sue Coinbase Land Heads or Tails for Crypto?
Looking for an offshore access ramp
Crypto companies feeling burned out in the US are looking for greener pastures abroad.
Hong Kong, the UK, the European Union (EU) and Singapore are increasingly viewed as attractive jurisdictions by crypto players, given the hostile landscape in the US.
there's also island nations, including the Bahamas, Bermuda, and the British Virgin Islands. Beyond offering attractive tax environments, these island havens allow companies to operate technically outside the realm of US government and regulatory bodies, sometimes with disastrous consequences.
At the center of the SEC's lawsuits is the allegation that among the hundreds of cryptocurrencies traded on both the US-based Binance platform and the Coinbase cryptocurrency exchange, at least 19 of them are securities.
And at least five of those tokens that the SEC lawsuits allege are securities have been approved for trading under newly enacted crypto licensing rules by the Hong Kong government, the Virtual Assets Trading Platform Operators Licensed by the SFC.
The rules went into effect on June 1.
As reported Per PYMNTS, Hong Kong has been taking steps to become a cryptocurrency hub, even as the digital asset sector and regulators clash elsewhere in Asia.
Still, cryptocurrencies remain completely banned in mainland China, and a Chinese economist who once envisioned bitcoin's "corpse" was recently elevated to a senior Communist Party official in the People's Bank of China (PBOC) โ An indication that the country is unlikely to soften its stance on cryptocurrency, which is that everyone crypto transactions are illegal.
coinbase has expanded its business in the UK as it seeks to capture revenue outside of the US, and the EU was the first great economy approve a cryptographic licensing framework, Markets in Crypto-Assets (MiCA), this spring.
โThis puts the EU at the forefront of the token economy,โ he said. Stefan Berger, MEP leader of the MiCA regulation. โThe European crypto-assets industry has a regulatory clarity that does not exist in countries like the United Statesโ
See also: Crypto continues to serve as a case study in behavioral economics
A culture of non-compliance
But is the SEC wrong, or has the cryptocurrency industry gone too far too many times, leaving too many retail investors holding the bag while executives walk off with billions?
As PYMNTS wrote, after a 2022 full of fraudulent evaporations and disastrous bankruptciesas exemplified by november FTX crypto exchange explosion and the rapid fall from grace of its founderSam Bankman-Fried, the federal regulator is likely to feel burned by the industry after trusting your "let us innovate" plea.
โThe crypto community believed and had a real conviction that what they were doing was so new that existing laws I couldn't possibly apply," amias geretypartner in QED Investorssaid PYMNTS executive director Karen Webster in a conversation in June.
This โspirit of non-complianceโ has seen crypto companies consistently regress in โcarefully non-compliant stepsโ from accepting that they may be held accountable for complying with certain existing regulations to the point where they are now arguing over minuscule legal technicalities, is in part what has drawn the ire of the SEC, Gerety stressed.
That's why "business as usual" may be the best option for the embattled industry, because it could support their legal position. And what's more American than that?
