Richie Lai, the co-founder and CEO of Bittrex, a Seattle-based cryptocurrency exchange, announced March 31 that due to the regulatory and economic climate in the U.S., the company is shutting down its domestic operations.
Bittrex's announcement came shortly after the U.S. Securities and Exchange Commission (SEC) notified crypto exchange Coinbase of an impending enforcement action, and the U.S. Commodity and Futures Trading Commission (CFTC) filed a lawsuit against crypto exchange Binance.
"Today is a bittersweet day," Lai said in a message to customers on the company website. "This month we turned 9 years old; and while I am excited and proud that we’ve come this far, I am also very sad. Today, Bittrex is beginning the process of winding down its U.S. operations. Don’t worry – all customer funds are safe and available to withdraw; however, it’s just not economically viable for us to continue to operate in the current U.S. regulatory and economic environment."
Lai said in an announcement posted on the company's website that when he and the other Bittrex co-founders started the company in 2013, they were focused on building revolutionary technology that would provide customers with a fast, secure and fair platform. However, the crypto ecosystem has changed significantly in the last nine years, Lai said.
"Regulatory requirements are often unclear and enforced without appropriate discussion or input, resulting in an uneven competitive landscape," he said in the post. Lai said that although he and the other co-founders "made great strides toward accomplishing our goal of maturing the crypto space," it is "no longer feasible" for Bittrex to operate in the U.S. He said they will shift their focus to "helping Bittrex Global succeed outside the U.S." U.S. Bittrex customers can continue trading until April 14 and can withdraw their funds until April 30.
Bittrex's announcement comes amid a wave of penalties and enforcement actions from regulatory agencies, following closely on the heels of a fine from the SEC levied at crypto exchange Kraken, a Wells notice sent by the SEC to Coinbase, the largest crypto exchange in the U.S. and a lawsuit filed by the CFTC against Binance, the largest crypto exchange in the world, Decrypt reported.
Paul Grewal, the chief legal officer of Coinbase, said in response to the Wells notice that Coinbase has repeatedly asked the SEC to put out clear regulatory guidelines so that Coinbase and other crypto companies can follow them, but he said the SEC has not been communicative. Last summer, the SEC asked Coinbase if it would be interested in registering with the SEC and laying out what a potential path for registration would look like, given that a path for crypto exchanges to register does not currently exist. Coinbase said it was absolutely interested in registering with the SEC and developed and proposed two different models for registration.
"We spent millions of dollars on legal support to build these proposals and repeatedly asked for the SEC’s feedback. We got none," Grewal said. He said the SEC also declined multiple invitations to provide feedback or raise questions about Coinbase's listing process. "If our regulators cannot agree on who regulates which aspects of crypto, the industry has no fair notice on how to proceed. Against this backdrop, it makes no sense to threaten enforcement actions against trusted public companies like Coinbase who are committed to playing by the rules. It makes even less sense to threaten enforcement actions unless an industry participant concedes that non-securities can be regulated by the SEC. That is for Congress to decide," Grewal said.
The CEOs of both Coinbase and Binance have repeatedly called on the U.S. to implement clear regulations for crypto companies. In an interview with the Austin Journal, Brian Armstrong, the CEO of Coinbase, said he welcomes regulations and believes they will play a key role in restoring trust to the industry that was damaged by FTX's high-profile bankruptcy, but that politics is proving to be a barrier in moving regulations forward.
“Some regulators don’t want regulatory clarity for crypto, because they are actually trying to curtail the industry,” Armstrong said. “Harsh rhetoric and regulation by enforcement, without creating clear rules for everyone to follow, has pushed much of the industry outside the U.S., which has resulted in American investors and businesses being harmed.”
Binance said in a blog post that its goal has always been to protect users and encourage innovation, and it believes that greater regulatory guidance will ultimately serve to help grow the crypto industry. The blog post quoted Changpeng Zhao (CZ), the Canadian CEO and founder of Binance, who said, "Before there were clear guidelines for the industry, we have always held Binance to the highest standard to prioritize our users' best interests — a goal that we share with regulators around the world." In February, when the United Kingdom's economics and finance ministry issued a consultation paper outlining the next steps in its digital asset regulation plan, CZ said in a tweet, "Happy to see the UK, a global leader in fintech, work on progressive crypto regulation...Regulation provides certainty and a safe space for innovation."
Ambre Soubiran, the CEO of Paris-based Kaiko, a crypto market data provider, predicted that the U.S.'s regulation-by-enforcement approach is going to push the crypto industry to Hong Kong, which has been moving forward with a plan to become a global hub for crypto innovation, CoinTelegraph reported.
“The U.S. being more stringent these days than ever on crypto and Hong Kong regulating in a more favorable way…is going to clearly shift the center of gravity of crypto assets trading and investments more toward Hong Kong," Soubiran said in an interview. Hong Kong’s Secretary for Financial Services and the Treasury Christian Hu said in a speech last month that more than 80 crypto-related companies have said they are interested in moving to Hong Kong.
