The United States holds a significant position in the financial world—all thanks to its dollar being the de facto currency for global exchange. Despite the rise of cryptocurrencies as alternatives, there is a common misconception that the influence of the US might be diminishing. Contrary to this belief, cryptocurrencies have a strong connection to the nation of the Star-spangled Banner, more than you’d think.
It’s no secret that Americans have embraced the allure of digital assets. According to a survey by the Pew Research Center in September 2021, 16% of Americans had invested in or traded cryptocurrencies. This interest was most pronounced among young adults, with 86% claiming familiarity with cryptocurrencies, even if their knowledge was limited.
The US and its residents have played a significant role in shaping crucial narratives around crypto despite the government’s reluctance to actively engage with it.
Stay with us as we highlight the good, the bad, and the ugly aspects of America’s impact on the crypto industry.
Crypto in the USA: The Good
The American crypto ecosystem is well-established, featuring prominent exchanges such as Coinbase, Kraken, and Gemini. These platforms play a vital role in facilitating the buying, selling and storing of various digital assets within and outside the US.
Coinbase, the most popular American crypto company, achieved a historic milestone in April 2021 by becoming the first crypto company to go public. Its listing on NASDAQ with the ticker COIN resulted in the company’s value reaching $85.8 billion on the first day of trading. This was widely regarded as a Netscape moment for the crypto world, drawing parallels to the pioneering days of the World Wide Web when Netscape unlocked the potential of the Internet.
The Coinbase listing acted as a catalyst for the crypto economy, propelling its growth and creating new avenues for users, both individual and institutional. Some of these avenues included improved visibility and increased investment prospects for crypto enthusiasts in the US.
Interest in crypto assets extends beyond American retail investors, with billionaires and institutions like Tesla and MicroStrategy actively investing in Bitcoin and other cryptocurrencies. This influx of funds from high-profile individuals and entities positively impacted token prices and increased the crypto space’s visibility.
The United States has been reported as the richest crypto country, boasting the highest number of crypto billionaires in the world. Notable American billionaires in crypto include Brian Armstrong, the CEO of Coinbase, along with figures like Tim Draper, Michael Novogratz, Chris Larsen, and, of course, the Winklevoss twins: Cameron and Tyler. The wealth accumulated by these individuals can be attributed to the highly developed financial market in the US, which has made it an attractive destination for cryptocurrency investors and entrepreneurs.
The recent emphasis on Bitcoin ETFs underscores the strong appetite of institutional investors in America for cryptocurrencies. The relentless push for the eventual approval from the SEC clearly reflected a keen interest to further integrate digital assets into traditional financial markets.
US Dollar-Denominated Stablecoins
Stablecoins have become integral to crypto trading and remittances, and a prominent aspect of this development is the ascent of USD stablecoins, which are the most popular and widely used in the entire market.
These cryptocurrencies are strategically designed to maintain stability by being pegged to the price of the US dollar, a crucial feature in navigating the volatile crypto market. These financial innovations have played a pivotal role in shaping the narrative of the crypto industry.
Noteworthy names in the realm of USD stablecoins include Tether (USDT), TrueUSD (TUSD), and USD Coin (USDC). The adoption of stablecoins has remarkably surged over time, from $5 billion in December 2019 to surpassing $122 billion by October 2023.
Crypto in the USA: The Ugly
Beyond the sheer size and impact of the crypto market in the United States, certain events occurring within the country have rippled beyond its borders, painting the global crypto industry in a bad light. Here are some of these instances:
Crypto’s Biggest Fail
The US has played home to several high-profile crypto failures, such as FTX, leading to market turmoil and underscoring inherent risks in the nascent industry. The arrest, extradition and ongoing trial of Sam Bankman-Fried, the former CEO of FTX, was particularly damning for crypto in America, fueling critics who relentlessly raved about legal and ethical challenges in the industry.
The fall of FTX cast a shadow over the crypto sector, particularly triggering a rather nasty selloff. The crash of one of the world’s largest crypto exchanges was a gutting blow to the crypto industry. The shockwave ripped through several crypto-exposed firms and institutions, including Coinbase, MicroStrategy, Galaxy Digital, Genesis and Block, among others. Stocks of affected companies mercilessly plunged, driven by mounting fears that the FTX event could have lasting consequences for the crypto industry.
Nearly a year after the incident, the hollow echoes of the collapsed crypto giant continue to haunt the entire industry.
Biggest Crypto-Influenced Bank Run
In 2022, Silicon Valley Bank (SVB), a prominent crypto-friendly bank that provided crucial services to crypto companies in the United States, experienced a major bank run.
As one of the few institutions catering to the crypto sector when others hesitated due to perceived risks and regulatory crackdowns, the bank held over $200 billion in assets, serving as a vital lifeline for crypto companies.
The repercussions of the SVB bank run reverberated throughout the crypto industry, particularly impacting the USDC stablecoin. USDC’s issuer Circle disclosed that nearly $3.3 billion of the reserves backing USDC were trapped in SVB, leading to a depeg of the stablecoin.
Notably, failed crypto lender BlockFi, which filed for bankruptcy following the collapse of FTX, had $227 million in funds held at SVB.
Silicon Valley Bank’s collapse also affected major crypto entities such as Ripple, Avalanche, and Yuga Labs, along with Pantera, one of the largest crypto-focused VC firms, which counted the failed bank among its three custodians for private funds.
Pantera had raised $1.3 billion for a fund dedicated solely to blockchain-based projects, showcasing the widespread impact of the Silicon Valley Bank crisis on various significant players within the crypto space.
Crypto Biggest Hack
One of the biggest crypto heists on record occurred in 2016—a hack on Bitfinex directly linked to the infamous York-based “crypto couple”, Ilya Lichtenstein and Heather Morgan. The couple allegedly conspired and breached the exchange’s systems to steal approximately 119,754 BTC.
They were caught while trying to launder their proceeds by initiating over 2,000 unauthorized transactions. When they were apprehended in 2022, the value of their loot, originally worth $70 million at the time of the theft, had grown to a staggering $4.5 billion. The U.S. Department of Justice successfully recovered $3.6 billion from this theft, marking the largest financial seizure in its history.
As of 2023, the couple have pleaded guilty and are engaging in negotiations with authorities. However, their legacy as the “American Bonnie and Clyde of Crypto” isn’t fading anytime soon.
Crypto’s Biggest Regulatory Adversary
The regulatory environment in the United States is excruciatingly challenging for crypto users, with cryptocurrency exchanges closely monitored by regulatory bodies such as the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). Enforcement of compliance requirements, particularly Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols, is rigorous.
This regulatory landscape has led to limited choices for US residents, as many popular crypto platforms have been sidelined in favour of those that adhere to stringent regulations. Binance, for instance, had to establish a separate exchange specifically for American customers. This underscores the American market’s influential role in the crypto world.
However, regulatory actions in the US have not been without controversy. Regulatory agencies’ efforts to create clarity while enforcing regulations that are still evolving have created challenges for crypto investors and users. These actions have hampered investment and growth and introduced uncertainty surrounding crypto investments in the US.
The legal battle between Ripple, a US blockchain company, and the SEC over its cryptocurrency XRP has had significant ramifications. The ongoing legal case has hindered XRP’s growth and limited Ripple’s ability to partner with other companies. The outcome of this case is seen as pivotal in shaping future regulations for the crypto industry in the US.
Another notable incident involved the arrest and prosecution of the founders of Tornado Cash, a cryptocurrency mixer, by the US Treasury’s Office of Foreign Assets Control (OFAC). The founders were accused of aiding criminal actors in moving over $1 billion in currencies. These charges have drawn criticism from industry stakeholders, raising concerns about the broader implications of such actions on blockchain technology and crypto usage.
While there is hope that the US government may adopt a more favourable stance towards the crypto industry, ongoing discussions in Congress and exploration of digital currencies, including the potential for a Central Bank Digital Currency (CBDC) by the Federal Reserve System (FRS), indicate a complex and evolving regulatory landscape.
As a crypto superpower, the US plays a pivotal role in establishing global norms through its approach to digital asset regulation. The global economy’s interconnectedness means that the US’s policy choices can have far-reaching consequences for the crypto industry. The regulatory landscape set by American authorities not only shapes the domestic market but also influences how other countries approach and regulate cryptocurrencies.
Final Thoughts
The influence of the United States on the global crypto ecosystem is undeniable, shaping the industry for better or worse. The nation’s economic prowess, dominance in the financial sector, and regulatory initiatives have a profound impact, tethering the future of crypto to developments in America and decisions made by Americans.
However, this unique position the United States holds might not be as consequential as we imagined, especially as it grapples with regulatory clarity and enforcement.
Disclaimer: This piece is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.
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