US-based crypto companies are caught in a sort of pincer movement, with federal regulators on one side launching a slew of enforcement actions and banks on the other getting pickier about their relationships following the recent failures of Silvergate and Signature Bank. Could this cause more problems for European regulators?
Just this week, Binance, the world's largest cryptocurrency exchange, felt the full force of this newfound regulatory zeal on the other side of the Atlantic. In a historic move, the Commodities and Futures Trading Commission filed federal charges against Changpeng Zhao's nomadic company, laying out a slew of extraordinary allegations against the company and its senior management. The complaints primarily center on an allegation that the group's "opaque web of corporate entities," which includes two companies registered in Dublin, allowed American customers to trade in crypto derivatives without registering with federal authorities.
It appears to be part of a larger crackdown on the sector. Separately, the US Securities and Exchange Commission recently informed Coinbase that it intends to sue the digital asset exchange over some of its offerings.
On the business side, things aren't looking much better. Trade Algo reported this week that, following the failures of Silvergate and Signature Bank, two lenders with strong ties to the digital asset industry, already-wary institutions are becoming more aggressive with crypto companies, even turning away business from smaller firms. In the face of such uncertainty, "some firms are considering moving overseas," Coindesk's Kevin Reynolds wrote in an editorial this week. With the EU's comprehensive Markets in Crypto Assets (MICA) regulation set to take effect this year, Europe may appear to be a natural destination for any legitimacy-hungry crypto refugee looking to pack their belongings and start over.
Politicians in Ireland and across Europe have been walking a tightrope with the crypto and, more broadly, blockchain industries, hoping to reap all the benefits of innovation and growth while also keeping it at arm's length due to its reputation.
However, while MICA, which establishes strict rules for companies operating in the crypto space, will go a long way toward protecting businesses and customers from the sector's worst excesses, recent scandals suggest that those excesses may be worse and more ingrained in the sector than lawmakers had hoped.
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