The United States — though renowned for its forward-thinking role in the technological revolution — is failing to remain competitive in the burgeoning crypto economy.
On one hand, large-scale institutional investment into crypto means that the US can, in many ways, still be considered at the helm of the industry. On the other hand, the space being made for incumbents to innovate while newer, more specialized players are pushed out of the market is remarkably at odds with the American Dream.
Those of us who admired the rags-to-riches storytelling from afar have been met with a harsh reality, in which only the already obscenely wealthy can prosper.
How did we get here? How did we go from 2022, a year marked by crypto Super Bowl ads and celebrity endorsements, to 2023, when North America’s future in our industry is so unsure?
For many, the current state of affairs can be traced back to profound examples of criminality, corruption and mismanagement.
When LUNA collapsed in May 2022, approximately $60 billion USD in value was wiped from the digital asset space. Those who had been made millionaires by LUNA’s meteoric rise in the previous year lost everything. In November 2022, shocking revelations led to the downfall of crypto exchange FTX and its once-hailed founder Sam Bankman Fried, who has since been accused of commingling funds between separate ventures and grossly abusing user assets.
The total value of digital assets fell below $850 billion by December 2022, from a height of over $3 trillion in November 2021. We entered 2023 firmly rooted in today’s crypto winter.
The role of any regulator is to protect the public, be it in relation to data protection, healthcare provision or digital assets. Regulators in the US are no different — and the crypto market collapse was more than large enough to attract the attention of the US Securities and Exchange Commission.
This year has now seen more regulatory movement against crypto than ever before.
Recent legal action against prominent crypto exchanges like Coinbase and Binance — in addition to serious repercussions for celebrities involved in shilling crypto tokens (including Kim Kardashian) — were illustrative of an effort by the SEC to send a message to the crypto community: Play by the rules, or it’s game over.
Some of the world’s largest and most reputable crypto companies, while founded in the US, have now been exploring other, more supportive jurisdictions for their businesses. Coinbase has signaled a move to Bermuda, and Ripple has expanded into Dubai and is trying to obtain additional licenses in Ireland and the UK. Other companies are departing from the US market altogether, such as Bittrex, which shut down its US operations amid a now-settled SEC lawsuit.
But there are a few bright spots for crypto in the US.
Blackrock, Fidelity and Invesco are still able to drive investment in digital assets and have a positive impact on crypto markets. Most recently, Grayscale won a case against the SEC over its application for a spot bitcoin exchange-traded fund. Bitcoin price spiked dramatically immediately following this news.
Read more from our opinion section: C is for crypto, but the CFTC didn’t get the memo
And there are directions for the US to go from here: There’s a historical memory of innovation taking place in America, where new ideas are supported and seats at the table expanded.
Introducing measures that allow early-stage crypto businesses to prosper will lead to a myriad of new use cases flooding the market. We’ll see financial inclusion skyrocket on the back of DeFi advancements; the traditional banking system flourish with the elimination of roadblocks like shutdown periods; data protection and privacy increase through innovations such as zero-knowledge proofs; healthcare systems be reimagined with digital IDs; and new sources of employment across America.
While large incumbents introduce new investment vehicles for wealthy clients, grassroots projects will transform the lives of everyday people. Instead of allegedly stifling innovation, smart policy can help us to achieve this goal. Around the world, we see working examples of how regulation can support the growth of micro, small and medium-sized enterprises.
The goal of improving people’s lives, shared by the crypto industry and regulators alike, can also be accomplished in a way that protects users. Investments in education, both from private and public sectors, about the nature of digital assets can make the American public more vigilant of suspicious activity and more literate in the new digital economy.
The United States has long been a financial and technological powerhouse, out of which many of the world’s most important developments have been spearheaded.
Sending innovators to build abroad and ignoring talent and potential for goodwill risks the US being left behind as the rest of the world plows ahead. As our industry continues to mature, the opportunity for America to lead the way in yet another societal transformation is ripe for the taking.
Oleg Fomenko is co-founder of Sweatcoin and Sweat Economy, which is establishing the movement economy by realizing the value of physical activitiy and rewarding steps. Oleg has more than 15 years of experience as an entrepreneur. Nine years prior to the launch of Sweat Economy, Oleg co-founded Sweatcoin, a digital currency backed by physical movement and a stepping stone to the launch of $SWEAT – tokenised physical activity.
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