“Surgical removal” of crypto will only weaken USD dominance, commentators say
America’s crackdown on cryptocurrencies and firms will only serve to stifle crypto-related innovation and “weaken” the country, industry experts said in the wake of Coinbase’s recent Wells warning.
On March 22, crypto exchange Coinbase became the latest crypto firm to receive a “legal threat” – in the form of a Wells notice, just a month after stablecoin issuer Paxos received its own in February. Some suggest there may be more to come.
Mati Greenspan, the head of crypto research firm Quantum Economics said he believes US regulators have been unfriendly to crypto “since the beginning.”
The recent collapses of crypto- and startup-friendly banks, including Silvergate, Silicon Valley Bank (SVB) and Signature Bank, have been seen by some as part of a scheme by regulators to remove banks in the crypto sector, dubbed “Operation Choke Point 2.0 .”
Meanwhile, a White House economic report from March 20 turned into a scathing review of the values of cryptoassets, spending almost an entire chapter exposing the “designated” benefits.
Greenspan told Cointelegraph that the rumored move could be underway as crypto is seen as a “threat” to the US dollar’s dominance in global trade – a major and long-term advantage for the US
Russia, China and now crypto. Slowly but surely, the US is isolating itself from the global economy. The USD cannot remain the world’s reserve currency much longer under these conditions.
— Mati Greenspan (@MatiGreenspan) March 14, 2023
However, as more people start using crypto for cross-border money transfers globally, he warned that a crackdown on crypto in the US could actually have the opposite effect on the dollar:
“The surgical removal of cryptocurrencies from the US banking system will only further isolate the US and weaken the dollar’s position as the global reserve currency.”
Adrian Przelozny, CEO of crypto exchange Independent Reserve told Cointelegraph that the recent turmoil in the banking sector was not due to “any failure of crypto” but caused by banks managing their risks in an “irresponsible way.”
“The White House would be better served reviewing the practices of the banking industry,” he added.
Speaking about the latest action against Coinbase, Przelozny said the “adversarial environment for the crypto industry” in the US will push the related “jobs, investment and future innovation” offshore.
“Singapore, Hong Kong and potentially Australia” that see the benefits of the industry could prove to be a better home for it, and those countries “will reap the economic benefits,” Przelozny said.
Related: Banks and the Fed have a problem — What about crypto?
The exact reasons why the regulator is targeting Coinbase remain unclear. The SEC has declined to comment on the matter.
Investments in crypto-asset securities can be exceptionally volatile and speculative, and the platforms where investors buy, sell, borrow/lend these securities may lack important investor protections.
@SEC_Investor_Ed to investors: exercise caution with crypto-asset securities.— US Securities and Exchange Commission (@SECGov) March 23, 2023
Michael Bacina, an attorney and partner at Piper Alderman agreed that a “regulation by enforcement model” will “drive crypto-asset innovation offshore,” adding:
“This is an odd position to take, given the losses many have suffered over the past 12 months arose from collapses involving unregulated offshore structures.”
Bacina said for years the industry has been asking for clarity on how to comply. He pointed to the recent “telling” comments by the judge in Voyager Digital’s bankruptcy case, who “observed that there is no clear guidance from regulators.”
He added that until authorities pave the way to regulatory compliance, offshore jurisdictions will continue to house crypto firms “which will cost jobs and increase risk for consumers and investors.”
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