Under Democratic rule, the United States’ percentage of successful crypto startups has decreased to 20% from 80% in 2022 due to the SEC’s increased scrutiny and regulatory challenges.
According to a recent report by Alliance, a crypto founder network, the United States’ former dominant position in the global crypto startups arena has declined significantly. Additionally, Qiao Wang, the co-founder of Alliance, attributed the decline in the United States’ proportion of successful Web3 startups to the Democratic Party’s rule.
Overview of Crypto Startups in United States
The data indicates a significant decrease from approximately 80% in the second half of 2022 to a mere 20% presently. Additionally, the future of the crypto sector in the United States is a source of concern for industry insiders due to this trend. The escalating regulatory challenges primarily cause a decrease in successful US-based crypto startups.
The present regulatory environment under Democrats has become increasingly unfavorable for new entrants, according to Alliance’s Wang. “The United States will have no good crypto startups left in four more years of gaslighting by the Democrats,” Wang cautioned.
The ongoing scrutiny by the US Securities and Exchange Commission (SEC) is a substantial factor contributing to the downturn. The SEC has recently increased its investigations into various crypto startups, including significant players such as Coinbase, OpenSea, and Uniswap.
The SEC issued a Wells Notice to OpenSea on August 28. CEO Devin Finzer disclosed that the Securities and Exchange Commission (SEC) thinks that the digital collectibles traded on the platform may be classified as securities. This stance has taken aback the industry.
“We are astounded that the SEC would take such a sweeping action against artists and creators.” OpenSea, recognized for its contributions to the NFT sector, intends to contest the SEC’s stance, contending that its products should not be classified as securities.
Additionally, the SEC’s actions are not singular. Uniswap, another prominent decentralized protocol, encountered a comparable situation when the regulator investigated its operations. Binance and Coinbase also endured similar actions.
Additionally, Finzer cautioned that these regulatory actions could impede innovation in the crypto startup sector of the United States, which would only worsen concerns. “It would be catastrophic if creators ceased producing digital art due to regulatory saber-rattling,” he advised.
Will Donald Trump’s victory alter the status quo?
The SEC’s aggressive posture could also be perceived as a subtle jab at former President Donald Trump in a broader political context. The Republican candidate has recently introduced a new line of NFT collectibles. Trump’s NFT venture may encounter legal obstacles if the SEC’s allegations are validated.
Stuart Alderoty, the Chief Legal Officer of Ripple, addressed the controversy by emphasizing a historical precedent:
“Fun fact: In 1976, the SEC ruled that art galleries, even when promoting and selling to buyers that had investment motives, didn’t need to register with the SEC.”
This historical context lends an additional layer to the ongoing regulatory discussion, as the SEC may lose the case if they sue OpenSea. In the interim, the digital asset landscape and the US crypto startup space are also being influenced by political space. According to experts, the extent of the crackdown could be restricted by providing relief to extant enforcement actions if pro-crypto Trump secures a victory.
The purported crypto reset of Vice President Kamala Harris has not yielded any results, whereas Trump’s pro-crypto stance continues to acquire momentum. Trump has pledged to establish a strategic reserve of Bitcoin. His son, Donald Trump Jr., has also suggested that he is involved in various crypto-related projects, such as a DeFi initiative.
The political climate continues to be a critical factor in the future of crypto regulation and innovation, as Trump currently holds a 50% advantage in Polymarket predictions compared to Harris’s 48%. Additionally, pro-Bitcoin Robert F. Kennedy Jr. withdrew from the presidential election and declared his support for Donald Trump. Consequently, this tandem garnered additional crypto voters’ support, weakening Harris’s position.
