The United States has long been a beacon of technological innovation, but in recent years, it has seen a troubling trend in the cryptocurrency sector.
A combination of stringent regulations spearheaded by SEC Chair Gary Gensler and growing international competition has led to a notable decline in the US’s share of global crypto development.
Regulatory Roadblocks: The Decline Of US Crypto Innovation
According to a recent report by Coinbase, since 2018, there has been a 26% drop in the proportion of crypto developers based in the US, which highlights the ongoing challenges faced by the industry under the current regulatory framework.
Our latest State of Crypto report shows that as onchain activity + corporate adoption increases, the U.S. lost 14% of developer share since 2018 and is now home to just 26% of crypto developers. Global leadership in technological innovation is ours to lose, but the US gov has to…
— paulgrewal.eth (@iampaulgrewal) June 12, 2024
Industry experts, including Bill Morgan and Paul Grewal, have been vocal on platforms like X, expressing concerns over the implications of such strict regulatory measures.
Grewal particularly emphasized that maintaining global leadership in technological innovation depends on the US government’s commitment to improving its regulatory approach.
Responding to this, Morgan suggests that the actions taken by the SEC, particularly under Gensler’s leadership, have not only stifled innovation but also discouraged the broader market. Morgan noted:
I warned you all in March 2021 what Gensler would do. You all thought the attack on Ripple and XRP wouldn’t touch you. He acted against all of crypto.
Notably, the ripple effect of these regulations from the US SEC clearly indicates the potential long-term consequences on the US’s position as a leader in the crypto space.
The Push For Reform
In response to the growing concerns about America’s competitive edge in technology, there has been a recent push within legislative circles to adapt and revise regulatory approaches.
While initially opposing bills such as H.R. 4763 that aimed to modify digital asset regulations, the Biden administration has expressed a desire to work with Congress to develop a balanced and comprehensive regulatory framework.
This framework promotes responsible innovation while ensuring adequate consumer and investor protections.
Recent legislative actions, including the Senate’s decision to overturn the SEC’s Staff Accounting Bulletin 121 (SAB-121), reflect a growing acknowledgment of the need for regulatory reform.
SAB-121, which required financial institutions to treat crypto assets as liabilities, has been criticized for imposing unsustainable financial burdens on the industry.
The potential passage of the Financial Innovation and Technology for the 21st Century Act (FIT21) further underscores a bipartisan effort to establish a more favorable regulatory environment for cryptocurrencies in the US.
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