Jun 08, 2023

SEC Action Against Coinbase, Binance Could Spur Web3 Exodus from US

The United States is in danger of losing some of its major Web3 and crypto service providers as the Securities and Exchange Commission (SEC) takes action against Coinbase and Binance.
Sergej Kunz, co-founder of DeFi protocol 1inch Network, believes the SEC’s enforcement action could have a negative effect on the growth of Web3 in the U.S.
Kunz shared his thoughts with Cointelegraph at Money 20/20 Amsterdam, a major global fintech event focused on payments and financial service providers. He expressed his concern that the uncertain regulatory environment in the U.S. could harm the industry.
Kunz also mentioned that he had seen Coinbase’s CEO holding talks with delegates from the United Arab Emirates earlier this year, exploring the possibility of setting up operations in the Middle East. Soon after, news broke that Coinbase was indeed planning to establish a base in the UAE.
The difference between the situation in the U.S. and Money 20/20 is stark. At the event, a number of TradFi players were intermingled with a few companies and service providers from the crypto and DeFi ecosystem, such as Ripple and USD Coin issuer Circle. 1inch Network, a prominent DeFi aggregation protocol, also had a booth at the event, indicating the growing interest of TradFi in Web3.
Europe, on the other hand, has been actively developing regulatory standards for the crypto ecosystem via the Markets in Crypto-Assets (MiCA) regulations. This stands in stark contrast to the U.S., where Web3 firms and proponents continue to call for a regulatory framework.
Kunz said that MiCA is more focused on centralized exchanges, but the efforts to create frameworks for businesses to offer products and services across the continent have been beneficial for the Web3 space.
He also noted that countries such as Switzerland and the UAE have adopted a “how can we help” attitude, making them far ahead of the U.S. when it comes to DeFi regulations.
Kunz added that a major challenge for regulators is understanding how smart contracts and settlements work on blockchain systems. Players like 1inch have been working with regulators in the Middle East to adjust regulatory frameworks about DeFi-related products and services.
Kunz also pointed out the risk of trusting a centralized party to hold funds or assets, citing the collapse of FTX as an example.

The current state of affairs in the U.S. is a reminder of the importance of having clear regulatory frameworks for Web3 and crypto. While countries like Switzerland and the UAE have taken the lead, the U.S. will need to follow suit if it wants to remain competitive in the global market. Until then, the industry is likely to suffer, and the U.S. could risk an exodus of major Web3 and crypto service providers.

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