Cryptocurrency exchanges Binance and Coinbase have found themselves in the crosshairs of the US Securities and Exchange Commission (SEC). Binance was hit with 13 charges, including operating unregistered exchanges and broker-dealers, as well as misrepresenting trading controls and oversight. This led to a drop in the value of named tokens and further tarnished the reputation of blockchain and web3 technology in the US.
Coinbase, on the other hand, was surprising to see targeted by the SEC. The exchange had received approval for its IPO in 2021 and had attempted to register as a securities exchange with the SEC. This move by the SEC highlights the uphill battle faced by Coinbase and other companies in trying to legitimize cryptocurrencies in the US.
The crypto community has rallied around Coinbase, as the exchange positions itself as the white knight in this battle with the SEC. However, tarring Coinbase with the same brush as Binance seems to indicate an organization that is anti-crypto. This leaves many individuals and organizations in the US frustrated with the SEC’s actions.
The impact of the SEC’s actions is not limited to the cryptocurrency industry. US institutions are becoming more cautious about engaging with blockchain technology, and any initiatives related to public blockchain networks are likely to be put on hold until there is clearer regulatory guidance.
In contrast to the US, the UK has seen a boost in blockchain regulation. Leading venture capital firm Andreessen Horowitz (a16z) announced that it would open its first office outside of the US in the UK. The UK is approaching blockchain and digital asset regulation in a sensible manner, working with the industry to understand the attributes and risk profile of decentralized services. The UK has also implemented regulatory sandboxes and focuses on an outcomes-based approach while prioritizing consumer protection.
Europe as a whole is making progress in legislation toward crypto and public blockchain technologies, with frameworks like MiCA coming into force and initiatives such as the FCA’s regulatory sandboxes and the EU’s Blockchain Services Infrastructure. This favorable regulatory environment in Europe presents a significant opportunity for a16z and other firms looking to invest in web3 technologies.
If US regulators continue to resist embracing blockchain technology, more talent and opportunities may shift to other markets. Many voices in the tech industry see the US as missing out on the potential of web3, and the longer it is attacked, the harder it will be for the US to catch up.
While the recent SEC actions have negatively impacted the crypto markets, it will only be a temporary setback in the path to broader adoption of web3. Companies like Coinbase, known for their commitment to compliance, will weather the storm. Meanwhile, the permissionless and decentralized networks powering web3 will continue to thrive and develop, cementing their importance in the future of technology.