Crypto Firms Make a Bluff with the SEC

Crypto Firms Make a Bluff with the SEC as it Tightens the Check and Balance on their Operations

Various crypto companies, including some of the big players in the market, are now threatening the U.S. market as regulatory authorities continue to crack down on the industry.

Most notably, the Securities and Exchange Commission (SEC) has taken now taken a tougher stance when it comes to regulations for the crypto industry. In a bid to get the SEC to back down, the crypto companies are testing their lobbying powers with a game of poker with the SEC.

They are threatening to leave the US crypto market if the SEC doesn’t back down on their crackdown. However, their exit is debatable, since the U.S. has a massive market — over 50 million Americans have crypto holdings in their portfolio.

The Tug of War between the SEC and the Crypto Companies

One of the major reasons the SEC has increased its monitoring of the different crypto companies is because of the crypto crash during the last financial quarter of 2022. Even coins like Bitcoin and Ether saw a massive downfall in their value.

As a result, it caused the overall crypto market valuation to fall by 66%, wiping out nearly 2/3 of investor wealth. With this massive setback, investors and lawmakers have increased their demands for more regulatory pressure on crypto firms.

This was one of the primary reasons why the SEC decided to tighten its curbs against cryptocurrency companies and exchanges. However, it has led to a game of poker by the exchanges and firms, where they have been making bold threats to exit the U.S. market.

Threats by the Crypto Companies

The growing pressure from the regulator has been a major concern for many crypto companies, leading to this situation. Many big players hope that doing so will cause the SEC and Washington to take a step back.

Crypto watchers, analysts, and experts call this move by the crypto companies as a “bluff,” and an attempt to soften the hardline that the SEC has taken against the entire market.

Top management at various firms such as the blockchain service provider Ripple and crypto exchange Coinbase has all adopted the same storyline. They are trying to give signals regarding shifting their business overseas to rally support and send a strong message to U.S. lawmakers.

Will the Companies Stay or Leave?

The main question is: will these crypto companies and firms leave? This seems pretty unlikely.

Larisa Yarovaya, associate professor of finance at Southampton University, commented on the situation saying that the U.S. is one of the largest crypto markets in the world. So, it is highly unlikely that they would exit the market anytime soon.

She further added how the biggest fear of crypto companies was that increased regulation could lead to a panic situation, causing the crypto prices to go down. Therefore, they wanted to look confident (even arrogant) by using this common tactic.

They believe that this will lead to investors’ confidence or overconfidence in a few instances. As a result, it will probably lead to irrational behavior among traders such as HODL [hold on for dear life] even when markets aren’t performing well.

Ripple has also made threats time after time to shift the company’s headquarters to a different country since 2020. The company even announced that it would be considering different countries such as Japan, Singapore, Switzerland, etc., to move its headquarters.

However, that hasn’t happened until now. Additionally, Coinbase’s CEO also implied during the London fintech conference that it would consider moving out of the U.S. into a different location if they don’t get much clarity on the regulatory authority’s crackdown but that didn’t happen as well.