Fuzzy U.S. Crypto Rules to Push Firms ‘Offshore’

• Coinbase CEO Brian Armstrong says that fuzzy U.S. and U.K. crypto rules could force crypto firms to move offshore. 
• Recent SEC actions created an unfriendly image. 

Transparent crypto regulations are a must for the industry to work on, and it is hard to operate in ambiguous environments. The recent attacks on the crypto entities by the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) prevent crypto firms from working optimally. Armstrong argues that until the U.S. and the U.K. present clear crypto regulations, the industry might develop “offshore.”

Efficacies of Unclear Crypto Regulations

Lawmakers and agencies are tightening their grip to regulate the crypto industry; they are suing these entities for trading securities, unethical practices and more. They want them to follow specific rules but must tell them which ones to follow. Moreover, such constant attacks make it difficult for the industry to work diligently in the country.

Coinbase was recently issued a Wells notice regarding selling unregistered securities; the infamous case of SEC vs. Ripple has been ongoing since December 2020, where the agency is accusing XRP as a security. The recent closure of crypto-friendly banks like the Silicon Valley Bank and others, all these actions are making the working environment hostile.

In November 2022, in a black swan event, FTX, once among the leading crypto exchanges globally, filed for bankruptcy. Coinbase chief Brian Armstrong spoke at a conference the Innovate Finance Industry body held. He argued that the FTX saga caused a loss of around $8 Billion and called attention to the need for clear crypto regulations. 

Armstrong emphasized the need for clarity in crypto regulations onshore during the conference. If the U.S. and the U.K. cannot clarify it, the crypto entities might have to move to offshore havens. However, some major European Union economies have drafted bespoke crypto rules; transparency still needs to be added in the United States.

Are the U.S. and the U.K. Handling Crypto Correctly?

The recent slew of attacks on the crypto entities by the U.S. SEC has garnered unwanted attention and created an unfriendly image of the agency. However, as the agency says, these actions were to make them follow specific rules and prevent them from engaging in illicit activities like money laundering or drug/human trafficking. But a clear, concise set of rules must be included. 

In February 2023, Britain’s finance ministry released its first set of rules for crypto regulations. At the same time, the Financial Conduct Authority said in March that the strict regulations are supposed to “detoxify” the crypto sector. 

In an April 17, 2023 tweet, Brian Armstrong praised the pace at which Britain is moving to regulate crypto and showed his excitement to keep investing in the U.K. He also called out the banks in Britain for their more challenging approach toward customers transferring cash to crypto. However, in their defense, banks are trying to avoid fraud. 

One of the biggest U.K. lenders, NatWest, recently imposed some limits in March 2023 on customer transfers to cryptocurrency exchanges. This was done to protect customers from so-called “crypto-criminals.”

Moreover, Armstrong pointed out that some U.K. banks are blocking fiat payments to crypto companies, which needs to be corrected. He argued that controlling fraud and illicit activities is good, but an outright ban does not sound good. 

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