Can Crypto’s Value Proposition Ever Be Translated into Real Value?

In crypto’s post-FTX landscape, one thing is becoming increasingly clear as the dust settles.

Either the US has a crypto problem, or the digital asset industry has a US problem.

This, as the Securities and Exchange Commission (SEC) has for the first time, given a list of crypto firms registered with the agency. There are only nine names, and five of them are now defunct. None of the businesses listed registered during the tenure of current SEC Chairman Gary Gensler.

The list gives no indication of how many other industry players have attempted to register and were either rejected, failed or later abandoned the process.

“If [these organizations] are in US markets, they have to comply … and really use the proven rules of the road that are on the books,” Gensler repeatedly said regarding crypto firms.

“The SEC needs to create a friendlier environment for people trying to follow the law,” so Alan Silbert, CEO of North America for crypto exchange INX, which is one of the few SEC-registered firms still in business.

Stuart Alderoty, chief legal officer at struggling blockchain payments company Ripple, has his own piece advice to industry colleagues: get out of the US

Read more: Is regulation friend or foe of blockchain?

The blink-of-an-eye collapse of FTX’s $32 billion crypto business, and the evaporation of at least 8.6 billion dollars in misappropriated customer funds, has underscored the importance of oversight and consumer protection for both US regulatory agencies and lawmakers, putting them at odds with crypto-sector entrepreneurs who generally seem to prefer the tech world’s ethos of moving fast and breaking things.

After all, entrepreneurs get into business to succeed. If compliance were a recipe for success, they would do it — but if it’s another way, and if their competitors are also taking that path, they’re unlikely to take the fork in the road, according to industry observers.

Still, the crypto sector’s biggest players, increasingly haunted by their past, can’t get out of the way.

As reported by PYMNTS, companies behind Tether stablecoin (USDT) allegedly used forged documents to gain access to the banking system in the past. The allegations include false invoices and contracts that an intermediary provided along with deposits and withdrawals; hide identities behind other businesses or individuals; use company managers and make small changes to the company name; and create shell companies.

Tether and other stablecoins serve as the backbone of the crypto ecosystem by facilitating trading on exchanges and enabling transactions between fiat currency and digital assets.

Increasingly disturbing claims about the legality of the operation

And with FTX founder Sam Bankman-Fried’s criminal charges puncturing his image of crypto’s white knight saviors, in accordance with the law, rival exchange Binance is now in both the top spot and the spotlight.

If Binance’s ability to navigate the industry turmoil and deal with US regulators is a test case for the future of crypto, it looks more murky than rosy.

As reported by PYMNTS Sunday (March 5), Binance reportedly created its US platform as a shield from regulators, with newly disclosed internal memos and interviews from company employees showing a strategy by Binance to position Binance.US as an ostensibly independent company to protect itself from intensifying scrutiny of the company.

A Binance spokesperson told PYMNTS when reached for comment that the arrangement between Binance and its US operations is common in their industry, with Binance’s founders licensing the technology stack to other organizations that were not affiliated with the company.

“While growing at such a rapid pace, we made some initial missteps that have now been rectified,” the spokesperson said. “After a massive investment in compliance talent, processes and technology over the past two years, we are a very different company today when it comes to compliance.”

“In the years since Binance was founded, the company has faced increasingly disturbing allegations regarding the legality of its operations,” it said in a two-part letter sent by US Senators Elizabeth Warren (D-Massachusetts), Chris Van Hollen (D-Maryland) and Roger Marshall (R-Kansas) last week (March 2) to Binance.

“Recent investigations have revealed that Binance appears to be evading US regulators, including the Securities and Exchange Commission; has facilitated at least $10 billion in money laundering and sanctions evasion for criminals and rogue states; and has concealed even the most basic financial the information”, the letter continued.

Binance has until March 16 to respond to the lawmakers’ requests. Whether and how it does so may have consequences for the rest of the industry going forward.

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