Which crypto firms are planning to leave the US amid regulatory tensions

Coinbase responded to the notice by claiming that it had asked the SEC for more clarification on the issue but had not received an appropriate response. The exchange also felt the SEC had not been fair when it came to its engagement with digital assets.

The notice only added to a heap of woes Coinbase has faced with regulators. In January, the exchange paid a $50 million fine for allegedly failing to maintain an effective transaction monitoring system to root out ‘suspicious’ activity. The exchange had paid another $50 million to better its compliance program under the direction of the New York Department of Financial Services.

Following a back-and-forth with regulators, Coinbase CEO Brian Armstrong revealed that the company could exit the US market and relocate its headquarters to the United Kingdom if the regulatory situation does not improve.

In early April, peer-to-peer (P2P) crypto trading platform Paxful said that it could wind up its operations on the back of regulatory concerns and internal quarrels. The firm shut down its marketplace earlier in the month and although its wallet remains operational, no new registrations are currently being accepted.

In a blog post, CEO Ray Youssef revealed that key staff departures and an uncertain regulatory landscape were the primary reasons why the 8-year-old firm decided to close its marketplace operations.

Speaking to CoinDesk, Ray Youssef said that even though the company spent millions on compliance, it still ‘was not enough’ in the broader scheme of things. He also indicated that a lawsuit initiated by the company’s co-founder triggered the departure of important staff members.

The crypto lending platform Nexo revealed its intention to exit the US market in December 2022 after negotiations with regulators in the country came to a ‘dead end’. The lender had come under the regulatory crosshair for its Earn Interest Product (EIP), which awarded yields in return for crypto staking.

While contemplating a possible withdrawal from the US market, Nexo said that the US "refuses" to offer cryptocurrency business a suitable path forward and that it was unable to assure its clients that authorities were acting in their best interests.

To alleviate matters, Nexo was directed to pay $45 million in fees and fines regarding its EIP product. Antoni Trenchev, Nexo’s founder and managing partner, said that the company came to a point where retaining US customers was creating difficulties and costs that did not match the expected revenue.

On March 27, the Commodity Futures Trading Commission (CFTC) sued Binance and its CEO Chanpeng Zhao for allegedly offering unregistered crypto derivatives in the US and avoiding compliance. The CFTC argued that the company allowed US customers to trade on its platform, even though some of its products were not registered under US federal law.

Before this incident, reports surfaced that the exchange was cutting ties with US business partners and that the company had temporarily suspended US dollar deposits and withdrawals without providing a reason. Even though Binance has refuted these rumours, there are still concerns over whether the world’s largest cryptocurrency exchange can continue to run its business in the US while facing a banket of regulatory ambiguity.

There are many murky areas in crypto regulation, and it is difficult for a region to pass legislation while upholding the spirit of decentralisation. However, the United States’ crackdown on corporations has drawn scrutiny not only from crypto supporters but also from Members of Parliament.

Recently Representative Patrick McHenry criticized SEC Chair Gary Gensler for punishing crypto firms through regulations without providing a clear path to compliance. US Senator Cynthia Lummis has also said that the failure of the SEC to enact policy is pushing crypto firms away from the US.

Only time will tell whether the United States will embrace a well-received crypto framework. Failure to do so would just increase the number of companies looking for possibilities elsewhere in the world.