U.S. Crypto Regulations Push Business Overseas, 21Shares Report Reveals

Is the UK becoming the new crypto hub as the US receives regulatory criticism?

According to a new report by 21Shares, the regulatory approach in the United States is causing the crypto industry to move overseas.

Julia Smith Last updated: February 1, 2024 02:20 EST | 2 min read

In a recent market outlook report released on January 28 by ETP provider 21Shares, it was revealed that the push by U.S. lawmakers for stringent regulations in the crypto industry is driving business overseas. The report, titled “State of Crypto,” highlights the need for regulatory clarity in the United States, stating that the lack of clarity has resulted in offshore exchanges retaining the majority of spot and futures trading volume in recent years.

The U.S. Desperately Needs Regulatory Clarity

The report from 21Shares echoes criticism previously made by Coinbase chief legal officer Paul Grewal about the United States’ crypto regulatory approach. Grewal described it as an “enforcement-only approach that has only increased consumer risk and driven customers and innovation out of the country.” This sentiment aligns with the statement made earlier this year by Coinbase CEO Brian Armstrong at an Innovate Finance conference, where he emphasized the importance of clarity in legislation and regulation.

According to Armstrong, if countries like the UK and the U.S. fail to provide regulatory clarity, crypto firms will be built in offshore havens. This would result in talent and innovation being drawn away from these countries, ultimately hurting their competitiveness on the global stage.

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Crypto Competition Arises in Light of the U.S. Regulatory Approach

As a consequence of Binance’s exit from the U.S., the report estimates that the cryptocurrency exchange platform may gain further legitimacy and consolidate as the leading exchange in the country, despite an ongoing lawsuit with the Securities and Exchange Commission (SEC). This highlights the increasing jurisdictional competition in the global race for crypto talent, with the UK and Hong Kong emerging as primary examples.

However, it is worth noting that the North American crypto market, primarily driven by the United States, still holds the largest on-chain value globally, with an estimated $1.2 trillion. This emphasizes the significance of regulatory clarity in the U.S. to maintain its dominance in the crypto industry.

The U.K. May Become a Crypto Epicenter

While the U.S. currently dominates the crypto market, the 21Shares’ report suggests that the United Kingdom may take its place as a leading crypto hub. The report cites statements made by Andrew Griffith, former economic secretary to the Treasury, who expressed the government’s ambition to make the UK a global hub for cryptoasset technologies.

The United Kingdom has already attracted several crypto firms, including Kraken, BitStamp, Gemini, and more. These companies are already operating within the country, positioning it as a potential epicenter for the crypto industry in 2024.

Q&A Section:

Q: Why are stringent regulations in the U.S. driving business overseas? A: The lack of regulatory clarity in the United States has resulted in offshore exchanges retaining the majority of spot and futures trading volume in recent years. This has prompted businesses to shift their operations overseas.

Q: How does the U.S. regulatory approach compare to other countries? A: The United States’ enforcement-only approach has been criticized for increasing consumer risk and driving customers and innovation out of the country. Other countries, such as the UK and Hong Kong, are positioning themselves as attractive alternatives due to their more favorable regulatory environments.

Q: Will the U.S. lose its dominance in the crypto market if regulatory clarity is not provided? A: While the U.S. currently holds the largest on-chain value in the crypto market, regulatory clarity is vital to maintaining its dominance. Without it, talent and innovation may flock to other countries, resulting in a loss of competitiveness.

Q: What is the potential impact of Binance’s exit from the U.S.? A: Binance’s exit from the U.S. may lead to the platform gaining further legitimacy and becoming the leading exchange in the country, despite its ongoing legal battle with the SEC.

Future Outlook and Investment Recommendations

Based on the trends and insights provided in the 21Shares’ report, it is clear that regulatory clarity will be a decisive factor in determining the future trajectory of the crypto industry. Countries that fail to provide this clarity risk losing out on talent, innovation, and potential economic growth. As such, investors should carefully consider the regulatory environments of different countries when making investment decisions in the crypto market.

While the U.S. faces challenges in maintaining its dominance, opportunities arise for countries like the UK to establish themselves as leading crypto hubs. Investors should monitor developments in the regulatory landscape and consider diversifying their portfolios to include investments in countries that offer favorable crypto regulations.

References

• Fidelity App Lists Bitcoin ETFs: ARK, 21Shares, VanEck, WisdomTree, Invesco
• Coinbase’s SEC Clash Faces First Major Test as Judge Weighs Longshot Dismissal
• Bitboy Ben Armstrong on Stopping Daily Crypto Show After 3 Years
• Canadian Crypto Exchange Halts Withdrawals and Trading After Security Breach
• Chainalysis: Crypto Crime Amounted to $24B in 2023
• Bitget Reaffirms Industry-Leading Reserve Strength with Latest PoR Ratio of 1.75% (coinjournal.net)
• BlackRock, VanEck, and Others Update Bitcoin ETF Filing Hours After Qui
• Cryptocurrency News on Google

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Disclaimer: This article provides insights and commentary based on available information and should not be considered as financial advice. Please conduct your own research and consult with a professional before making any investment decisions.

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