United States regulators have had a complex relationship with cryptocurrency for years now. The SEC, for example, has sued countless companies and accused several of selling unregistered securities, and even the likes of Coinbase and Binance were not spared. This strictness has even extended to granting operating licenses to crypto companies.
Now, we are seeing some of the repercussions of this attitude as new data from Chainalysis shows that stablecoin activity is flowing towards majorly non-US licensed companies. This would imply that consumers are turning towards companies based outside of the US for their needs.
For a long time, stablecoins were a go-between for those who wanted to enjoy cryptocurrency without having to deal with its infamous volatility. So far, stablecoins have been used as a store of value, for domestic purchases, and for entertainment purposes such as crypto dice games. But just like the rest of the crypto industry, stablecoins have had a bit of a rough go recently and a part of this can be put down to regulations.
Major companies like Binance and Coinbase where consumers buy and sell stablecoins have been seemingly targeted by harsh US regulations. In response, customers are finding fewer US-licensed establishments to carry out their transactions. And as the data from Chainalysis shows, they are now simply opting for platforms that are licensed elsewhere. This, in turn, has significant implications for those in and out of the industry.
It is already reflective of the state of the industry but consumer spending moving towards non-US platforms means a loss of revenue for the US-based ones on top of the regulatory issues they already face. This loss of income will also affect the jobs and taxes that would have been generated for the US. And even the US government, which is behind many of these regulatory decisions, will feel some of the brunt.
There is seemingly a race among several countries like the US and the UK to become the biggest crypto hub on the planet. There is a good reason for this, given the potential and profit that the industry brings in. But it is hard to become a crypto hub when you are essentially chasing business away with harsh regulations. Industry leaders have said since last year that the hostile attitude that the US government was taking in the wake of the FTX collapse would have a negative impact, and we’re already seeing this.
Non-investment businesses that deal in crypto like online casinos, domestic merchants, and entertainment companies could also be affected as customers might permanently switch to non-US platforms to avoid regulatory uncertainty. But the most affected, naturally, will be the final crypto consumer who has seen many of the US-based crypto businesses they previously relied on either fold up, move overseas or have to battle with endless legal uncertainty.
This whole saga highlights how the attitudes of regulators can negatively impact the industry. It started with stablecoins, but it is likely that the effects will spread.
