According to the Wall Street Journal, crypto executives are adapting their growth strategies as the U.S. market becomes a challenging terrain due to increased regulatory scrutiny. This shift is exemplified by major players like Ryze Labs, Ripple Labs, and Zodia Markets, who are now setting their sights on opportunities beyond American borders.
Matthew Graham, founder and managing partner of Ryze Labs, expressed the industry's sentiments, saying, "In the short term, we can afford to disregard the U.S. But in the long term, it's a loss for everyone." This sentiment captures the dilemma faced by many crypto companies as they navigate the changing regulatory landscape, as the WSJ points out.
For years, the crypto industry operated in a legal gray area, allowing companies to offer their services globally. However, a series of high-profile collapses in the crypto sector last year triggered a more stringent approach from U.S. regulators. According to the WSJ, The Securities and Exchange Commission (SEC) took legal action against Binance and Coinbase, two of the biggest players in the U.S. The Federal Reserve also weighed in, warning against the issuance or holding of cryptocurrencies as it could be inconsistent with safe banking practices. New York regulators, meanwhile, ordered Paxos Trust, a U.S. crypto company, to halt the creation of more tokens for BUSD, a popular stablecoin.
"I think it’s fair to say the U.S. has made it as confusing as possible as to what the rules of the road are for the crypto industry. The SEC has really been at the forefront of that confusion," Ripple Labs CEO Brad Garlinghouse told CNBC in May. “Europe really has provided leadership and countries like UAE ... the growth you’re seeing ... even the U.K. and Singapore — they’re providing the clarity about how they will regulate these digital assets.”
While the U.S. tightens its grip on crypto, regulators in other parts of the world are embracing the industry. The WSJ reports that Hong Kong is positioning itself as a digital-assets hub, Singapore is issuing licenses to crypto firms and proposing guidelines for stablecoin regulation, and Dubai established a crypto-focused regulatory body, attracting various crypto companies.
In response to these developments, Ryze Labs is reevaluating its American-focused investments. The WSJ reported that the venture-capital firm is now demanding that its portfolio companies and potential investments outline how they plan to separate U.S. operations and products or address compliance risks. Ripple Labs, based in San Francisco, is also adjusting its strategy. The company is filling approximately 85% of its job openings outside of the U.S., and by the end of the year, its U.S. workforce will shrink to roughly half of its current size.
Despite the regulatory challenges, U.S. regulators haven't imposed a blanket ban on crypto, says the WSJ. New York financial regulators recently proposed guidance on how crypto companies should list and delist coins, indicating that there is still some room for these companies to operate, albeit under stricter rules.
