The United States, home to the world’s largest economy, Silicon Valley, and a vast supply of talent and investment has some appeal for promising crypto startups. But motionless local adoption, an uncertain regulatory climate, and an increasingly inflexible tax regime threaten to make the country less attractive.
Strengths of the U.S. Crypto Sector
The United States has dominated global markets for more than a hundred years. And from the mid-20th century onward, high-tech innovation centered in Silicon Valley and other tech business hubs has been a cornerstone of the country’s economic growth.
In the years since its inception, the U.S. crypto space has exploded. Today, the largest U.S. crypto company, Coinbase, has a market capitalization of more than $9 billion. And in the second quarter of 2023, the company reported revenue of $708 million.
However, despite the sector’s strong growth over the past decade, some members of the business community have identified growing challenges for cryptocurrency startups in the United States.
U.S. Crypto Adoption Is Outpaced by Other Countries
In many ways, the United States was a pioneer in the use of cryptocurrencies among businesses and consumers. But in recent years, the adoption rate has decayed. In 2022, the U.S. ranked fifth in Chanalysis’ global crypto adoption index, behind Vietnam, the Philippines, Ukraine and India.
And while faithful U.S. proponents of cryptocurrencies are as passionate as ever, holders remain in the minority. Certainly, it is difficult to identify exactly what proportion of the country owns cryptocurrencies.
The slowing growth in adoption rates could suggest that most Americans remain wary of cryptocurrency investments and unconvinced of the technology’s potential for payments.
Regulation Drives an Exodus of U.S. Crypto Firms
Beyond slowing adoption, a challenging regulatory situation also threatens to derail the U.S. crypto sector as several major crypto exchanges have already exited the U.S. market.
Facing a court battle with the Securities and Exchange Commission (SEC), Bittrex ended its U.S. operations in April. It is a similar story for Revolut. Earlier this month, the FinTech startup blamed “an evolving regulatory environment” when it withdrew its crypto trading service in the United States.
Leaders Question the Future of the U.S. Crypto Sector
In the middle of a SEC crackdown and a slowdown in growth in the space, business leaders have suggested that startups turn their attention elsewhere. In a statement on August 25th, Antonio Juliano, who founded the exchange dYdX, commented that Cryptocurrency creators should simply stop serving U.S. customers for now and try to re-enter in 5 to 10 years.
According to Juliano, the challenges of operating in the U.S. do not justify the rewards. Especially when there is plenty of appetite for crypto services elsewhere.
After all, dYdX is based in San Francisco but cannot legally offer its services in the United States. However, Juliano remains optimistic about the future of the U.S. crypto market.
For others, the future is less certain, Ryan Selkis, CEO of Messari, put his opinion bluntly in a recent tweet. As he put it: There is no future for cryptocurrencies in the U.S. if Biden is re-elected. In this respect, it is important to stress that few CEOs are as blatantly partisan or grandstanding as Selkis.
Nevertheless, fears remain high that the U.S. risks losing its edge in an area where it has all the ingredients for success. And crypto entrepreneurs face an uncertain future if they decide to set up shop in the country.
By Audy Castañeda
