In a recent report, JP Morgan, an American multinational financial services company, analyzed the impact of the regulatory crackdown on crypto entities in the United States. The firm stated that the U.S. regulatory crackdown is pushing American crypto firms to look for opportunities overseas.
The research report containing examples of crypto firms and their plans as the regulators intensified their actions was released on Thursday. Analysts led by Nikolaos Panigirtzoglou wrote:
The U.S.-based arm of Binance has called off its deal with Voyager, while Coinbase launched Coinbase International, a crypto derivatives exchange outside the U.S., as a proactive measure in response to rising U.S. regulatory pressures.
Further, JP Morgan suggests that while the crackdown has increased pressure on crypto firms, more importantly, the lack of clarity on important topics has acted as a catalyst. One of the important issues highlighted by the firm was Ethereum’s (ETH) status as a security as it will ultimately impact the cryptocurrency’s demand and liquidity.
Addressing the collapse of the banking system, the report stated that the regulatory clampdown has also “deterred institutional investors from engaging with crypto.” Further, it writes that this has pushed investors to buy gold rather than Bitcoin (BTC) to act as a hedge against a potential “catastrophic scenario” in the wake of the collapse of Silicon Valley Bank.
Speaking about the performance of Bitcoin, the firm stated that the asset’s rally this year appears to have been driven by retail buying rather than institutional investors. The largest cryptocurrency has gained 76% year-to-date. Further, it states that another catalyst for Bitcoin’s outperformance has been Bitcoin Ordinals. Reportedly, Ordinals is a new protocol that allows non-fungible tokens (NFTs) to be stored on the Bitcoin blockchain.
The regulators in the United States have been implying significant pressure on crypto companies in recent times. While some suspect it to be hailing from the collapse of the FTX exchange in November, it certainly is proving to be harmful to the growth of innovation in the country as has been highlighted by several lawmakers and industry participants previously.
Notably, the US Securities and Exchange Commission (SEC) has been on an enforcement spree and has targeted various crypto firms. The firm has sent Wells Notice to Coinbase and Paxos and has fined Kraken accusing them of violating federal securities laws by selling unregistered security. After receiving the notice, Coinbase hinted towards a potential change in their location to the UK.
On the other hand, the Commodity Futures Trading Commission (CFTC), has sued Binance and its CEO accusing them of selling unregistered crypto derivative products in the country against federal law. To such actions, the companies expressed their disappointment as well as aggression calling the regulators out for their hypocrisy and failure to provide clarity on the regulations.