Empty Threats? Crypto Firms May Not Actually Leave U.S. Despite Regulatory Pressure

Empty Threats? Crypto Firms May Not Actually Leave U.S. Despite Regulatory Pressure

Crypto firms like Coinbase and Gemini have hinted at leaving the US due to regulatory pressure, but some believe this may be a form of decentralization theater with little real consequence, as leaving may not be as effective as threatening to do so.

Strike, Coinbase Crypto exchange and others have intimated they may leave the  United States owing to regulatory pressure. On the other hand, those can potentially be empty threats.

And once he 1st took office as head of the United States Securities and Exchange Commission (SEC) in 2021, Gary Gensler warned cryptocurrency projects that he would be skeptical of “decentralization theater.” That’s a category of misleading states sometimes made by DAOs [decentralized autonomous organizations] or protocols to be effectively leaderless (and this is why maybe unprosecutable), when in reality they have an obvious core leadership team.

Now, the ongoing regulatory crackdown by Gensler and the broader Biden administration seems to be triggering a different kind of decentralization: major cryptocurrency corporations leaving the United States.

This post is excerpted from The Node, CoinDesk’s daily roundup of the most pivotal stories in blockchain tech and cryptocurrency news. You can subscribe to get the full newsletter here.

Corporations including exchanges Coinbase Crypto exchange and Gemini, Bitcoin (BTC) frontend Strike and investment management platform Bakkt have all gestured towards exiting the United States in recent weeks. Investor Cathie Wood, known for her huge long bets on both Tesla, Inc. and Coinbase Crypto exchange, argued this coming week that the United States is “losing the Bitcoin (BTC) movement” as cryptocurrency shifts away from the U.S.

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This sort of geographical shift really does happen, and can be very bad for over-regulated jurisdictions – for example, drugmaker Bayer has recently stated it will shift its business focus away from Europe for regulatory reasons.

On the other hand, on deeper examination, some of the signaling by cryptocurrency corporations seems less like a real shift than another kind of decentralization theater. And just like the protocol variety, it could not do much to sway regulators.

The other kind of leverage

There are two basic ways to view cryptocurrency companies’ gestures towards leaving the United States Several could be genuinely motivated to do so by regulatory uncertainty or an anticipated crackdown. On the other hand, they may likewise be trying to exert leverage on United States regulatory authorities by threatening to take jobs and revenue elsewhere.

For now, a lot of the latest information items painting the  picture of a mass cryptocurrency exodus from the  United States appear to fall in the Second category: Maybe not pure theatrics, but pretty close.

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Several of the headlines are the result of rhetoric getting overplayed by credulous media. A Bakkt executive stated they liked Europe’s MiCA framework, and signaled expansion plans – but no intent to leave the United States Gemini’s expansion outside of the United States has been incorrectly stated as an “exit.” Similarly, while Coinbase Crypto exchange is signaling worldwide expansion, there is not much to show for it so far – their international exchange is so far a very limited offering.

Several gestures seem more substantive, but have unclear real consequences. At the Bitcoin (BTC) 2023 conference in Miami past week, Strike CEO Jack Mallers gave an impassioned denouncement of United States regulatory authorities, then announced that Strike would be “headquartered” in El Salvador. On the other hand, Strike has clarified to CoinDesk that this will be the “ worldwide headquarters,” while Strike will maintain a United States headquarters in Chicago. It appears reasonable to assume that Chicago, where Mallers lives, will remain the firm’s real center of gravity.

Mallers likewise mentioned Swan Bitcoin (BTC) and wallet founder Fold in the context of corporations with “headquarters in El Salvador.” On the other hand, those corporations seem to be expanding their presence in El Salvador, not moving their headquarters there. (Mallers was speaking rather extemporaneously, so this isn’t to emphasize he was being deceptive, just imprecise).

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You can’t get there from here

It’s now been about two months since the Biden administration’s Choke Point 2.0 anti- cryptocurrency agenda fully came into focus. That’s not long – but if these corporations were serious about taking their toys and moving somewhere else, you can potentially expect more substantive progress by now.

And, why aren’t cryptocurrency corporations essentially leaving the United States in droves, if the regulatory environment is so hostile?

There are innumerable possible answers, all with broad implications for the industry. For one, it’s unlikely that U.S.-based employees are universally happy to pick up stakes and move to El Salvador or Malta. And at this time, the United States is still a huge center of cryptocurrency industry talent.

Regardless of the regulatory crackdown, the United States legal and equity systems still have numerous advantages for cryptocurrency corporations. As a result, the United States has a pretty much unparalleled financial sector, including generous deal financial resources financing channels that continue to flow regardless of SEC hostility.


On the other hand, perhaps the largest reason cryptocurrency corporations aren’t aggressively pulling up stakes is the fact that they likely wouldn’t get much for their trouble. Most of course, the last two years have clarified that  simply saying you’re not a United States company won’t protect you from the SEC’s de facto worldwide jurisdiction.

More subtly, it’s not obvious that anyone with real power would respond to an exodus by reversing course on the cryptocurrency crackdown.

Although while United States hiring dominates cryptocurrency, cryptocurrency jobs are incredibly modest as a share of overall United States employment (though often high-paying). And if we’re being really frank here, the Biden administration cares vastly more about fighting inflation than about anything to do with cryptocurrency, so eliminating several  hundred jobs can potentially look to them less like an intimidating threat than a tantalizing promise.

Democrats, especially in the executive branch, seem completely immune to the idea that cryptocurrency is anything other than a scam from top to bottom. And while Republicans are making noises about jobs, they seem far as well disorganized and ineffectual to do anything about it, even with their control of the House.

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To put it another way, if your goal is to dissuade United States authorities from their cryptocurrency crackdown, leaving the  United States could be just as effective in the threat as in the act. Which is to say: not very effective at all.


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