Cryptocurrency companies in the United States are facing increasing pressure from both federal regulators and banks. The Federal authorities have indicated a new willingness to get tough with the sector’s biggest players in recent weeks, with a spate of enforcement actions.
At the same time, banks are getting more selective about their relationships with crypto companies, following the collapse of Silvergate and Signature Bank. This could mean more headaches for US-based crypto companies.
This week, the world’s largest crypto exchange, Binance, felt the full force of newfound regulatory zeal on the other side of the Atlantic. In a landmark move, the Commodities and Futures Trading Commission brought federal charges against Changpeng Zhao’s nomadic company, setting out a series of extraordinary allegations against the business and its senior leadership in the process.
Chiefly, the complaints center on an allegation that the “opaque web of corporate entities” that ceded control of Binance to Zhao in 2017 was deliberately created with the aim of dodging securities laws.
The cryptocurrency sector is under fire from all sides. Just this week, it was reported that the US Securities and Exchange Commission is preparing to take legal action against Coinbase over some of its offerings, and that already-wary institutions are getting cold feet about working with digital assets. This follows on the heels of the collapse of Silvergate and Signature Bank – two lenders with strong ties to the cryptocurrency industry.
Some firms are looking to move overseas as the uncertain backdrop of the crypto industry makes it difficult to stay afloat. Kevin Reynolds, writing for Coindesk, says that this year’s EU Markets in Crypto Assets (MICA) regulation could make Europe a natural destination for legitimacy-hungry crypto refugees. Politicians in Ireland and across Europe have been walking a tightrope with the crypto and blockchain industries, hoping to encourage their growth while also protecting consumers.
But while MICA, which sets out tight rules for companies operating in the crypto space, will go a long way towards protecting businesses and customers from its worse excesses, recent scandals suggest that those excesses could be worse and more ingrained in the sector than lawmakers might have hoped.
It seems that a sudden flood of crypto businesses is a headache that European regulators would be happy to endure.