“Cryptocurrencies are dead in America.”
Billionaire tech investor Chamath Palihapitiya is certain of this , speaking in a recent episode of the All-In podcast.
For Palihapitiya, the final blow to cryptocurrencies in the United States was dealt by supervisory bodies. This being the case, US citizens will soon no longer have a point of reference where to buy crypto .
“Well, (U.S. Securities and Exchange Commission Chairman) Gary Gensler even blamed the banking crisis (last month) on cryptocurrencies… so the U.S. authorities turned their guns firmly on the line.”
Three US banks, all linked to cryptocurrencies, have collapsed or been closed by US regulators. This has sparked fears of a crisis in the US banking sector.
Crypto threatens the establishment
The threat to the establishment remains, according to Palihapitiya , one of the main reasons for the authorities’ decisive intervention against cryptocurrencies.
Companies that issue cryptocurrencies “have perhaps been the ones that have threatened the establishment more than others,” he noted. Then you added that crypto companies were also “the ones that, to be honest, exerted more pressure than any other economic sector in the start-up phase”.
This year, the US SEC has stepped up efforts to regulate the crypto industry by enforcing available laws.
Last month the commission issued a warning to the Coinbase exchange , the first to also be listed on the stock exchange.
The Commission confirmed that it will soon take legal action against the exchange for “offering of unregistered securities”. The reference, once again, is related to staking programs and some of the token prices.
Coinbase recently sued the SEC demanding it respond to a 2022 petition seeking clearer rules regarding cryptocurrencies.
According to what was disclosed, the company is also considering the possibility of exiting the United States if the regulatory situation does not improve.
The SEC also forced Kraken to cease its staking service and took action against BUSD stablecoin issuer Paxos , again alleging that BUSD is a security.
He is also promoting a ban on investment advisors from trading in cryptocurrencies.
Good entrepreneurs pay the price for the regulatory vacuum
The billionaire financier is certain that firms like Coinbase are “paying the price” for what fraudulent firms like FTX have done, damaging the reputation of the cryptocurrency industry.
Chamath harshly criticized the authorities for neglecting good companies like Coinbase and for allowing themselves to be duped by scammers like FTX .
“Coinbase respected the rules, got in line, tried to do things right. It seems like every step of the way, from the makeup of the board of directors, to the appointment of executives, to the way they try to interact with regulators, they have probably been the most penalized in getting a license,” he said.
Chamath added that “the exchange that came closest (to obtaining the license) was the most fraudulent one… FTX. How is it possible?”.
SEC Chairman Gensler recently appeared before Congress , where he was grilled by mostly Republican lawmakers for being too anti-cryptocurrency.
Lawmakers also pressed Gensler on his agency’s lack of clarity with industry workers.
“Supervision through enforcement of existing rules is neither sufficient nor sustainable… You are punishing digital asset companies for allegedly failing to comply with the law that they do not know whether it will apply to them,” noted Patrick McHenry , representative of the Commission for Chamber Financial Services.
During the congressional hearing, Gensler refused to clarify whether Ether (ETH) is a security or not.
What is the solution?
Some congressmen who spoke during SEC Chairman Gensler’s speech expressed the opinion that the United States needs a new regulatory framework for cryptocurrencies. This would be an essential step to provide certainty and prevent companies from establishing themselves abroad.
The European Union has just passed a major legislative package on cryptocurrencies, called the Markets in Cryptocurrency Act ( MiCA ). This defines key rules for the sector, which is seen as a new asset class and is not based on rules established in the 20th century for traditional assets such as stocks and bonds.
Major Asian financial centers, such as Hong Kong, Singapore and even Taiwan, are also making moves to regulate cryptocurrencies as a new asset class. The first introduced a new licensing regime for crypto companies.
The United States must follow suit if it does not want to lose its grip on one of the most promising sectors and technological innovations of this century.