The SEC has recently taken a hard stance on cryptocurrency, charging Binance, the world’s biggest crypto exchange, and US-based Coinbase with a range of charges. This is a huge blow to the industry, which has seen cryptocurrency move from a secretive tech playground to a recognized way of investing embraced by Wall Street.

The SEC is trying to enforce that some currencies should be treated as securities, subject to strict regulations and not seen as an alternative to traditional currencies. Supporters of digital currencies dispute the SEC’s approach, claiming the rules are outdated for the likes of bitcoin and ethereum.

Scott Freeman, co-founder and partner at JST Capital, expressed his concern that the SEC’s actions are causing uncertainty and confusion in the crypto world. He and Paolo Ardoino, CTO at Bitfinex, have both called for more proactive guidance and legislation from regulators, rather than regulation by enforcement. Coinbase’s Chief Legal Officer, Paul Gruwal, adds that the industry is stuck in the middle of a power struggle between US regulatory authorities.

The desire to join the financial establishment has led to a push for clear regulation, but this has been hampered by the political gridlock in Washington. Coinbase CEO Brian Armstrong went so far as to suggest that the company might have to consider investing elsewhere in the world if the US fails to provide the necessary clarity.

Although not all countries are in agreement, British Prime Minister Rishi Sunak welcomed the opening of a London office by American private equity giant Andreessen Horowitz to invest in crypto projects. This move has been seen as a step in the right direction, but the US gridlock is causing companies to doubt their position. Realio founder Derek Boirun even wrote a ‘Why I’m leaving the US’ piece for Medium, citing the difficulties he has faced when trying to work with US regulators.

Professor Carol Rose Goforth from the University of Arkansas believes that the US government is making it difficult for financial institutions to engage with cryptocurrencies. This is backed up by the White House, which has denounced cryptocurrencies as ‘too risky’ and ‘largely speculative investment vehicles’.

The hostile climate for crypto has to be addressed, and Scott Freeman believes that it’s up to Congress to provide the required clarity and openness for crypto businesses. Until that happens, Europe and Asia are likely to be seen as more favorable places to innovate.