The United States government is tightening the screws on crypto companies. While this may be considered a worrying development, it's by no means crypto's death knell. Other countries are clearly standing in line to embrace the talent and the money that this fledgling industry provides. The United Kingdom is one such example.

The American financial watchdog SEC is 'regulating by enforcement'. Meaning, lacking a clear regulatory framework, they sue left and right. 

Some examples of the tough love that crypto gets in the US: 

• The biggest US exchange, Coinbase, yesterday got a so-called Wells notice: a formal notification that they will sue Coinbase over some crypto products. Coinbase let it be known that they think the SEC hasn't been reasonable. Coinbase has confidence in their court case.
• Exchange Kraken settled for 30 million and had to shut down their staking-as-a-service product.
• The two biggest banks that serviced crypto companies are no longer in business: Silvergate and Signature. Even though bad risk management was a part of it, the government clearly hasn't stepped in to help. On the contrary, the government's actions hastened the downfall.

The UK stepping up?

Only a year ago, crypto lovers in the EU were a bit grumpy about a new package of regulation - MICA - that will go into effect in 2024. But at least the EU will have a regulatory framework, which is better than a government leaving the crypto industry in the dark whether they are compliant or not. The latest guidance on crypto assets in the US, dates to 2019, and doesn't even mention the concept of staking. This lack of clarity scares any crypto startup that can't afford spending millions on lawyer fees. 

So, in which direction are these crypto startups pulled? The United Kingdom is one such candidate. Its prime minister, Rishi Sunak, announced he wants to make the UK a crypto hub.

Well, let's see what the UK says about its stance on crypto regulation: 

[the UK government wants to] “….establish a proportionate, clear regulatory framework, which enables firms to innovate at pace, while maintaining financial stability and clear regulatory standards”. 

That sounds already better!  

As an example of this clear framework, steps in the UK to regulate fiat backed stable coins in are under way. Also, the UK government is explicitly open to Decentralized Finance.

Conclusion

Will governments ban crypto? While nothing can be ruled out, there are game theoretic forces that push in a different direction. The crypto industry will bring innovation, talent, and money to any country that choses to embrace it. One nation's refusal to go along with it, is another nations' gain. 

Historically, the financial center of the world has flipped between London and New York, the current center of the financial world. Will the pendulum swing back? By the way, there are more contenders: Hong Kong, Singapore, Dubai, El Salvador, and - within the EU - Portugal, are very crypto-friendly.