Reflecting on the Strict US Crypto Climate

The U.S. market has become a tough playing field for crypto companies of all kinds. The reason for that is the increased regulatory scrutiny by the nation’s financial watchdog, the Securities and Exchange Commission (SEC).

Recently, there has been a growing shift in favor of regulating the crypto industry, with multiple court cases being brought forward by the SEC against major crypto-centric institutions including Binance, Crypto and Grayscale.

First, the SEC went after Binance, filing 13 charges against Binance entities and founder Changpeng Zhao. Charges included unregistered offers and sales of the BNB and Binance USD tokens, the unlawfulness of its staking program and its failure to register the Binance.com platform as an exchange or a broker-dealer agency.

In the end, Binance and the SEC reached an agreement to avoid a full asset freeze of the platform in the U.S. and keep customer assets in the United States.

The federal move against the world’s largest crypto exchange has caused it tremendous losses in market capitalization as well as reputation, effectively forcing it to take its business elsewhere to more crypto-friendly climates.

In June of this year, the SEC also moved against Coinbase, alleging the exchange violated federal securities laws by operating as an unregistered broker, exchange and clearing agency for cryptocurrencies that were securities. In response, Coinbase fought back to get the SEC lawsuit dismissed, alleging that crypto should fall out of regulator's oversight.

The Grayscale case

But the SEC’s concerted campaign against the crypto industry has an earlier date in 2022, when Grayscale was denied its application to convert its spot Grayscale Bitcoin Trust (GBTC.PK) into an exchange-traded fund (ETF) for listing on the New York Stock Exchange's Arca market.

The case has been closely watched by the cryptocurrency and asset management industry players, some of which have been trying to convince the SEC to approve a spot Bitcoin ETF for years.

The main argument behind it is that it can allow investors to gain exposure to Bitcoin, the world’s largest cryptocurrency, without having to own it. The SEC, though, worries that spot bitcoin ETFs will be vulnerable to manipulation.

On August 29th of 2023, a U.S. District Court judge ruled that the SEC was wrong to reject an application from crypto asset manager Grayscale Investments to list an ETF that tracks the price of bitcoin in a landmark decision.

Grayscale’s legal victory is helping others which are waiting in the wings with spot BTC ETF applications, including BlackRock and Goldman Sachs. Following the recent Grayscale victory, Bloomberg analysts have raised the probability for an approved spot Bitcoin ETF by the end of 2023 to 75% from 65%.

The verdict

One lawsuit after the next, the stringent regulatory climate in the United States is pushing cryptocurrency firms outside of the nation and towards other crypto-friendly nations. Countries including Germany, Switzerland and the United Kingdom.

Explore our blog on Europe’s most crypto-friendly countries to grasp an outlook on the countries which can become established as the global crypto hubs of tomorrow.