The United States could risk an exodus from major cryptocurrency and Web3 service providers as the Securities and Exchange Commission (SEC) has taken action against Coinbase and Binance.
Sergej Kunz, co-founder of decentralized finance (DeFi) protocol 1inch Network, believes that the SEC’s enforcement action against the two centralized exchanges could have a negative effect on the growth of Web3 in the United States.
Speaking to Cointelegraph during Money 20/20 in Amsterdam – a popular global fintech event focused on payments and financial service providers – Kunz highlighted his belief that regulatory uncertainty in the United States could hurt the sector:
“I would say the same thing as Brian Armstrong. It is killing innovation in the United States. All the companies there are thinking of going to another country.”
Kunz added that he had witnessed the Coinbase CEO hold discussions with delegates from the United Arab Emirates earlier this year, exploring the possibility of establishing himself in the Middle East. Within a few weeks, news broke that Coinbase is considering setting up a headquarters in the UAE.
This week’s events in the United States are in stark contrast to the experience at Money 20/20, where a long list of household names in traditional finance were interspersed with a handful of companies and service providers from the cryptocurrency and DeFi ecosystem, including Ripple and the issuer of USD Coin (USDC), Circle.
1inch Network, which has established itself as a notable DeFi trading protocol, also had a booth near the main entrance of the event. The company’s presence among so many traditional finance players seems to indicate the growing interest in Web3.
The European initiative to create strong regulatory standards for the cryptocurrency ecosystem through the Markets in Crypto-Assets (MiCA) regulation contrasts with the lack of clarity on the other side of the Atlantic, in the US, where Web3 companies and its defenders they keep asking for a regulatory framework.
Kunz said that while MiCA refers more specifically to centralized exchanges, efforts to create frameworks for companies to offer products and services across the continent have been positive for the Web3 ecosystem as a whole.
He also revealed that countries like Switzerland and the UAE have taken an open “how can we help” approach, putting them well ahead of the United States when it comes to DeFi regulation:
“They say, ‘how can we help you?’ If you have something that adds value, we can change the framework.”
According to Kunz, one of the main hurdles for regulators is understanding how smart contracts and settlements work on blockchain systems. Companies like 1inch have contacted regulators in the Middle East to adjust regulatory frameworks around DeFi-related products and services.
“When I do a keynote, I try to explain what DeFi and Web3 are. How smart contract settlement is more efficient than centralized settlement.”
Kunz added that events like the FTX bankruptcy indicate the risk of users trusting a centralized party to hold their money or assets.
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