Washington must act now to save the American crypto industry—time is running out.
The global battle for crypto talent and investment is shifting away from the U.S., favoring more welcoming shores. Fortunately, it’s not too late—though it will be soon—for the U.S. to regain its footing, find a way to embrace crypto, and retake the lead in the race for developer talent and venture capital investment.
Right now, the U.S. is struggling to create a legal regime that can foster crypto innovation, while also safeguarding consumers and financial stability. Since the collapse of FTX, the Securities and Exchange Commission has taken an antagonistic view of the crypto industry, doubling down on enforcement actions and threatening the existence of publicly traded companies. The Biden administration is also targeting crypto, singling out the industry for a proposed 30% tax on energy use by crypto-mining operations. The mood is souring in the U.S., and many crypto entrepreneurs are hoping for a change in political winds following the 2024 elections.
In contrast, the EU has taken a more proactive approach, seeking to create a regulatory environment that fosters growth and technological advancements. The recently ratified Markets in Crypto Assets, or MiCA, gives the European crypto industry a workable licensing regime. It’s not perfect, and it doesn’t address NFTs or DeFi, but it’s at least a batch of laws that spells out the rules of the road so EU companies and entrepreneurs don’t need to guess how the bloc intends to deal with their industry.
The U.S. is now seeing a migration of developer talent to more crypto-friendly jurisdictions. According to the venture capital firm Electric Capital, the U.S. has lost 2% of its share of the blockchain developer market per year for the last five years—sinking to 29% market share. The share of developers in the EU is now also 29%—parity for the first time. Part of this reflects the increasingly global nature of the crypto industry, which permits talented developers to live wherever they like. But it’s also undeniable that the regulatory situation in the U.S. is driving this shift.
The perceived regulatory advantages in the EU have also attracted a surge of VC investment in the region’s crypto startups. Venture capitalists are actively seeking opportunities in countries with settled regulatory frameworks. In the first quarter of 2023, the EU and the U.K. surged past the U.S. in terms of
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