Under the chairmanship of Gary Gensler, the US Securities and Exchange Commission (SEC) has pursued a wide-ranging crackdown on the American crypto sector, prompting criticism from businesses and politicians alike. Opponents of Gensler’s approach have argued that it is overly punitive and risks driving the industry offshore, to the detriment of the national interest.
In the latest development, the SEC has dropped charges against two Ripple executives, marking a totemic victory for the US crypto sector and a potential turning point in the SEC’s crusade against it. But will Ripple’s triumph be enough to salvage American innovation in the blockchain space? Or is the damage already done?
Responding to news that the SEC had voted to dismiss charges against Ripple’s CEO Brad Garlinghouse and co-founder Chris Larsen, the company issued a press release celebrating the decision.
However, although the overall tone of Ripple’s statement was jubilatory, it painted a stark picture of the effect years of regulatory uncertainty have had on the UA crypto sector.
Blaming “chaos created by the SEC’s misguided quest for power,” Ripple said that today, nearly 90% of its business comes from offshore demand. Likewise, the firm acknowledged that “hiring remains focused in major international markets,” with roughly 90% of new hires in the third quarter of 2023 originating from outside the US.
Neither is Ripple the only company to pin American job losses on the SEC’s crypto crackdown.
In September, when Binance US cut a third of its staff, the firm stated that “the SEC’s aggressive attempts to cripple our industry and the resulting impacts on our business have real-world consequences for American jobs and innovation, and this is an unfortunate example of that.”
But if the United States has dropped the ball on crypto innovation, which countries have taken up the torch?
In September, Ripple Labs’ co-founder Chris Larsen accused the US Administration of hurting American business interests with its crypto policy.
“We owned it and we don’t anymore because the Biden administration, for whatever reason, decided they wanted to push this industry offshore,” he declared, adding that “it’s London, Singapore, Dubai that are the global capitals of blockchain now.”
Larsen’s view was echoed by Kevin “Mr. Wonderful” O’Leary earlier this month, when the Shark Tank star cautioned that the SEC’s stance threatened to let innovation “slip away,” while more favorable regulatory environments in other countries attract more and more crypto business.
“Where do you think all this innovation is going to go? It’s going to go to the UAE. It’s going to go to Abu Dhabi,” O’Leary stressed.
While burgeoning crypto hubs like those in the UAE are making proactive efforts to attract blockchain startups and international crypto firms, even companies firmly rooted in the US are beginning to shift their focus to other locations. For example, Coinbase has made a strategic pivot toward the European market a key priority in recent times.
Observing that Europe now claims two-thirds of the world’s blockchain jobs, the crypto exchange has lauded the advance of dedicated crypto regulation in the UK and the EU while cautioning that the US risks “forfeiting its influence over the future of the financial system.”
Meanwhile, fellow San Francisco-based exchange Kraken has also doubled down on European expansion, recently snapping up Durch rival BCM in a bid to grow its EU footprint. Like Coinbase, Kraken cited the EU’s Markets in Crypto Assets (MiCA) regulation as one of the key reasons it has opted to invest in the region.
On the other hand, in February, an SEC lawsuit forced the exchange to withdraw its staking services for US customers, in a case that may have emboldened the regulator to bring similar charges against Coinbase.