The United States, more specifically the Securities and Exchange Commission (SEC), is on a witch hunt when it comes to digital assets. According to Gary Gensler, every single asset except for Bitcoin (and Ethereum?) is a security, and as such, the SEC has opened up lawsuits against two of the biggest exchanges in the world in Binance and Coinbase. Whether Gensler’s claims are legally proven in court is a whole other matter that is likely to take years to sort out.
In the meantime, it’s expected that a lot of innovative crypto industry members and companies will move out of the US into more friendly waters. This could mean going somewhere such as Hong Kong, Dubai, or London. London in particular is being talked about more and more as a new international crypto hub, but is it actually a good base for crypto? Let’s discuss what the US is doing before giving London their fair shake.
US Enforcement Actions Giving Others Opportunity
In early June, the SEC opened up lawsuits against Binance and Coinbase on the 5th and 6th, respectively. They named a variety of assets in the lawsuits as securities including Tether USD (USDT), Cardano (ADA), Polygon (MATIC), Solana (SOL), and Binance Coin (BNB), all of which are within the top 15 digital assets by market cap.
The market reacted fairly negatively towards the news, with the assets mentioned (apart from USDT) experiencing fairly significant dips in value before bouncing back. A big reason why those assets started to drop is because many US and Canadian exchanges decided to just delist the assets named by the SEC (despite there being no legality to their claims), forcing sell-offs by many holders. This was likely seen as a buying opportunity for those in countries with more welcoming regulatory bodies, such as the EU countries and London.
Why London is Attractive to the Crypto Industry
Though London left the EU with the now infamous Brexit vote, the nation is mostly in line with the EU when it comes to crypto. The EU is looking to pass their Markets in Crypto Assets (MiCA) bill, which will provide clear guidelines and regulations for centralized cryptocurrency exchanges and decentralized finance users.
Meanwhile, London and the UK have their Financial Services and Markets Bill, which for all intents and purposes will do the same thing. In addition, many members of UK parliament are vehement in their support for both digital assets, and proper regulation, not the least of which is their young Prime Minister Rishi Sunak who said, “It’s my ambition to make the U.K. a global hub for crypto-asset technology.”
Research from Recap named London as the city most ready to be a crypto hub based upon a variety of factors including quality of life, number of crypto events, people working in crypto-related jobs, and research and development on crypto as a percentage of the GDP.
Thanks to its strong financial infrastructure and variety of startups, with over 2,000 people working in crypto and over 800 crypto-based companies, London took the top spot, ahead of Dubai. London also hosted the second highest number of crypto conferences and events.
In one of the first of possibly many shifts towards London, Andreessen Horowitz, the Silicon Valley venture capital firm that previously backed companies like Airbnb and Coinbase, announced it’s opening its first firm outside the US in London. The company mentioned it was looking to take advantage of the UK’s more welcoming environment for crypto entrepreneurs and that it expects the UK will become a global leader in the digital asset sector.
With the complete uncertainty that exists in the US regarding crypto regulation, it seems likely that Andreessen Horowitz won’t be the only company to open up an office somewhere more friendly like London. Coinbase’s CEO Brian Armstrong has already mentioned the possibility of moving the company out of the US, though it seems likely he’d prefer the US just made regulation a bigger priority rather than enforcement. Until the US does that though, places like London could easily become the new international hub for crypto.