Why the USA is cracking down on Crypto: A Quest for Utility

Amid the growing popularity of cryptocurrencies, the U.S. has initiated a rigorous crackdown that has sent shockwaves throughout the market, leading to significant price fluctuations. The pivotal question then emerges — is the leading global superpower overlooking an innovative trend, or is there a nuanced rationale behind their regulatory crackdown?

The motives behind the surge in regulatory actions are complex and varied. Detractors suggest that the U.S.’s primary concern isn’t protecting the average investor, a claim frequently articulated by the Securities and Exchange Commission (SEC). Instead, they argue, the blooming crypto market — which soared beyond a record $2 trillion in 2021 — is siphoning capital away from traditional financial systems, especially the USD. This has prompted regulatory bodies worldwide, including the U.S., to intensify their oversight of the industry, alarmed by potential risks to financial and monetary systems, systemic risks, and the possibility of enabling financial crime. Notably, the U.S.’s intention to safeguard its local markets and uphold the dominance of the USD seems to be THE driving factor.

To visualize the crypto crackdown, consider OpenAI’s ChatGPT, a subscription service priced at approximately $30 per month. Subscribers derive tangible utility from the service, minimizing their concerns over potential legal issues or regional bans. Now, juxtapose this with the world of cryptocurrencies. An investor might regularly accumulate cryptocurrencies (or “stack sats”), but the real-world utility these assets provide is questionable. With a few exceptions, the majority of cryptocurrency holders are primarily speculating on price, rather than using the currency for regular transactions. The dramatic response of the crypto market to price drops uncovers its utility limitations. When a subscription service like ChatGPT sees a price drop, users celebrate the reduced cost for the same value. In contrast, a dip in cryptocurrency value triggers panic among investors, indicating their usage is not tied to consistent, reliable utility.

As such, the U.S. perceives minimal risk in its crypto crackdown, given that the market appears to be more speculative than practical. The U.S. has implemented a simple yet effective strategy, initially targeting exchanges and coins associated with Initial Coin Offerings (ICOs), which may fall under securities regulations. The intensity of the U.S. crackdown on cryptocurrencies is anticipated to rise, potentially influencing every platform and coin, even Bitcoin, through various regulatory measures such as banning Mining. The forthcoming 2024 U.S. presidential election could reshape the regulatory terrain, but it remains uncertain whether truly pro-crypto candidates will emerge.

Navigating this evolving landscape hinges on utility. If the industry can encourage the adoption of cryptocurrencies for practical uses, market prices will naturally adjust. Investors would be wise to consider backing coins that offer strong utility and have sidestepped regulatory scrutiny by avoiding ICOs. Ethereum and DeFiChain serve as prime examples due to their tangible utility and regulatory compliance. Ultimately, it will be the cryptocurrencies providing real, tangible utility that will likely endure the U.S.’s regulatory onslaught and continue to prosper in the future. The market will naturally separate the wheat from the chaff, highlighting those coins offering value beyond mere speculation.

In conclusion, although the future of crypto remains somewhat nebulous, the path to survival is evident: utility. Cryptocurrencies must evolve from speculative assets to tools that deliver solid, practical benefits to their users. By achieving this, they can withstand the regulatory crackdown and cement a lasting position within the global financial system.