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The backstory: Back in 2015, New York shook things up with a new crypto licensing system, causing some digital asset companies to consider packing up and leaving. But the Big Apple is still a prime spot for digital assets, despite some recent hiccups. But things got pretty hairy in the crypto realm when the collapse of crypto exchange FTX triggered a wave of defaults and catastrophes that experts called "crypto contagion."
More recently: Last week, the US Securities and Exchange Commission (SEC) was making moves left and right, settling a US$30 million complaint against Kraken and ordering it to pause its staking services. Paxos had to stop issuing one of its stablecoins, too, after regulators and the SEC came knocking. Internationally, Singapore, which has historically been one of the most crypto-friendly countries, is considering tighter regulations for retail investors.
The development: Now, the crypto world is unsure about new rules on the horizon, leading some firms to consider moving to more crypto-friendly places. Hong Kong, for example, is introducing a new exchange-licensing system in June. And Dubai just released a finalized framework for crypto firms. These regions also offer impressive tax benefits, making them even more attractive as potential new bases for crypto companies.
"Given the increasing level of regulatory scrutiny and enforcement we have seen, several US crypto investors are growing a bit nervous," said Zhuling Chen, CEO and founder of Singapore-based staking firm RockX. "Whoever has interest and wants to stay in crypto will choose friendlier countries, where the rules are clear."
"We're seeing a lot of scrutiny across various sectors in crypto in the U.S., with the two most recent areas being staking and stablecoins. This is an obvious repercussion of the fallout from FTX, Luna, and the general contagion in crypto over the last year," said Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, to CNBC.
"From a precedent standpoint, there are compaternies here in the US who tried to comply with the laws, and those are the ones being targeted right now," said Jeff Dorman, chief investment officer at Arca. "It's very challenging to operate in an unknown environment."
"It's probably a no-brainer that the US as a framework is making it a less attractive place to invest," said Daniel Seifert, Coinbase Global Inc.'s EMEA Vice President. "You will always hear that businesses like certainty and they like to know where they stand, and the US at the moment is not really providing that for crypto firms."