The Great Crypto Migration

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If you're in the banking and tech industry, you are probably feeling the pressure of the latest news?on banking failures and the US government's attempts to regulate crypto.

“What a miserable time!” – one might think.

But what if I told you these developments are?not all bad news?

With the tightening review in the US, many Web3 Companies may migrate to Europe, where there is defined regulation and open government support. This exodus would translate into significant?opportunities from a talent and economic perspective.

US “crackdown” on crypto

But first, let’s have a look at the journey so far.

(If you are aware of what’s been going on, you can skip this section.)

After the FTX collapse last year, SEC stepped up their review of crypto companies, charging several companies with violating security laws (e.g. Kraken below). Other US government agencies have followed a similar path, with the White House releasing a?statement?warning of the risks associated with crypto.

In addition, the recent collapse of three high-profile US banks (Silvergate, Signature Bank and SVB) has exacerbated the US focus on Web3. Only this week, Binance, Coinbase and Custodia Bank have all been in the news for charges, notices and denied applications (see below for detail).??

This pressure could result in Web3 companies moving to Europe and providing services to non-US citizens. In fact, some companies are already doing so, a trend that could escalate.

After Binance and Crypto.com, Circle is also looking to set up its European headquarters in Paris.

“Stablecoin issuer?Circle has applied for a French crypto?asset license as part of a wider growth strategy for Europe”

Why Europe is attractive for Web3 companies

Due to its welcoming regulators, innovative environment and talent pool, Europe is best placed to receive those companies.

Regulatory Clarity

Regulatory clarity starts to emerge with the MiCA regulation (expected to enter into force in 2023). Even though some may perceive regulation as too tight, clarity is critical for companies to build and scale.

Financial Innovation Acceptance

The Open Banking and UK Sandbox are both examples of how Europe has previously accepted and worked with innovative ideas in Financial Services. Such precedents create an environment for Web3 to leverage for future collaborations with Web2 companies.

Developers Pool in Europe

The sapphire report states, “Europe is becoming the hotbed for web3 developers”.

Due to its global characteristics, most web3 companies already have a remote-first approach to their talent pool, so leveraging developers across Europe would be a small change from existing models.

Potential benefits to Europe

This potential relocation to Europe would translate into significant opportunities from a talent and economic perspective.

Talent

• US talent relocate to Europe: Typically known for creating Unicorn startups, US talent would bring expertise and technology experience to Europe.
• European talent: Increased opportunities for European talent to work on Web3 opportunities and new innovative companies.

Economic Perspective?

• VC Investment: Regarding capital, the US is still one of the most significant sources of investment for startups. With many companies moving into Europe, VCs would start looking over the pond and investing more in European-based companies, with some even reallocating their Headquarters.
• Economy: Injection of talent, job openings and startup creation would fuel the European economy with new capital and opportunities.???

Final Thoughts

Of course, not all is loom and gloomy. The intense discussion and review by the US Government and regulators can also create fear and uncertainty for the crypto ecosystem, with companies deciding to either pause or stop initiatives in this space.

The reality is that the industry still has a lot of scammers and fraudsters making the news every week. Unfortunately, such news and sentiment keep enterprise and mass adoption away and distracts us from the real opportunity.

Clear regulation would be a good outcome for all Web3 Companies and one we should pursue. With regulation, companies have a clear path to define market fit and strategy, and customers feel protected from risks associated with joining a new industry.?

Is the US approach the right way? Or should we pursue a more collaborative one?

I will let you decide.

The reality is that Europe (at least for now) may benefit from the recent developments.

Until next time

Thanks for reading!

If you want to come on this journey,?subscribe?and get involved.

This is a new and exciting space, so ideas and perspectives may change as we learn more and technology improves.?

Any views or opinions represented are personal and belong solely to the author and do not represent those of people, institutions or organisations with which the author may or may not be associated in a professional or personal capacity unless explicitly stated.