Crypto firms Coinbase and Ripple play poker with the SEC [Advance Cash ]

Cryptocurrency firms are playing poker with the Securities and Exchange Commission, making bold threats to exit the United States as the regulator steps up pressure on the industry to toe the line.

Major players hope the SEC and Washington will take what crypto watchers see as bluffs seriously and soften the tough line regulators have taken on the industry.

Executives from companies such as crypto exchange Coinbase and blockchain services firm Ripple have been piling up with comments regarding the SEC and signaling plans to move business overseas, in a bid to rally support and to send a message to US politicians worried that the country may be missing out on a key technological innovation.

Coinbase CEO Brian Armstrong said last week that the SEC was on a “lonely crusade” with its tough actions against some crypto companies. He added that Chairman Gary Gensler has taken an “anti-crypto view,” despite having previously been a proponent of the industry when he was an economics professor at MIT Sloan School of Management.

"The SEC is a bit of an outlier here," Armstrong told CNBC's Dan Murphy in an interview in Dubai. "I do not think so [Gensler is] necessarily trying to regulate the industry as much as perhaps reduce it. But it created lawsuits, and I think that's pretty useless for the industry in the United States as a whole."

Ripple CEO Brad Garlinghouse also tore up the SEC this week. When asked about his message to Gensler as the company announced an expansion into Dubai, he joked, "Who?" before later saying that Ripple will have spent $200 million defending against a lawsuit brought by the regulator by the time it is over.

"I find that as a company that started in the United States and as an American citizen, it's sad. I have sadness about that. The United States is overwhelmed not just a little but a lot “, said Garlinghouse. .

"The difficult thing about that is you have a country that I think has put politics ahead of politics and that's not a good move if you're trying to invest in the economy."

Dubai and Europe have proven to be much more supportive markets with their virtual asset regulatory frameworks, Garlinghouse said, adding, "The United States is definitely stuck."

Garlinghouse, Armstrong and other crypto chiefs have threatened to leave the US, underscoring industry concern that the SEC's crackdown is getting too tough. The regulator has taken strong enforcement action against companies including Ripple, Coinbase, Kraken and Paxos, accusing each of flouting securities laws.

The SEC's assertion is that most tokens on the market can be considered securities, which would subject them to much stricter registration and disclosure requirements. Crypto firms, understandably, have refused to have the assets they issue or list on their platforms treated as securities.

The question is: could they really leave? It seems quite unlikely.

"The US is one of the biggest crypto markets, so it's highly unlikely to leave," Larisa Yarovaya, associate professor of finance at the University of Southampton, told CNBC via e -mail.

"Crypto companies' biggest fear is that regulation will cause panic among crypto investors and lower prices. Looking confident (even cocky) is a common tactic of crypto company CEOs. They believe that this will result in investor confidence, overconfidence in some cases, and encourage other irrational behavior among investors, e.g. HODL [hold on for dear life] even when the markets fall."

Ripple's Garlinghouse has been threatening to move its corporate headquarters overseas since 2020. In October of that year, it said the UK, Switzerland, Singapore, Japan and the United Arab Emirates were on the way. study for Ripple's potential overseas move.

It hasn't happened yet.

The Coinbase chief, meanwhile, suggested at a fintech conference in London in April that the company would consider investing more overseas, including moving from the US to other countries. , if the exchange does not achieve regulatory clarity in the United States.

A month later, Armstrong said Coinbase "is not going to move overseas."

"We will always have an American presence... But the United States is a little behind right now," he told CNBC.

The United States is a huge market for the industry, with more than 50 million Americans claiming to own crypto, according to a survey conducted by Morning Consult for Coinbase.

"These companies are much more focused on international markets. But at the high end of the market, personally, I just don't see you leaving the U.S. market completely," Jonathan Levin, co-founder of Chainalysis, told CNBC in an interview in London.

"It's more about how much are you investing in further international expansion where maybe it wasn't as high on the agenda but now let's look at France, let's look at the UK"

On top of that, the practicalities of moving these already large companies out of the United States would be difficult.

"While these industries are virtual in nature, they still need people, and people have families, mortgages and preferences about where they live. Replacing them with local talent in the new place may be more easier said than done," George Weston, a partner at global offshore law firm Harneys, told CNBC via email.

Crypto bosses are responding to concerns from some officials that the United States is mired in regulatory uncertainty while other jurisdictions, such as the European Union and the United Kingdom, have moved forward with proposed regulatory frameworks for digital assets.

SEC commissioner Hester Peirce told a Financial Times conference last week that the United States was “shooting itself in the foot by not having a regulatory regime in the United States.”

She praised the EU for its progress in passing laws for the crypto industry.

The EU is expected to introduce the first comprehensive set of regulations for digital assets, known as Markets in Crypto Assets (MiCA), sometime in 2024.

"It's really commendable that Europe was able to do this so quickly," Peirce said, according to Reuters. "If we built a good regulatory regime, people would come. I think you'll see that with MiCA."

Diego Ballo Ossio, a partner at law firm Clifford Chance, said other jurisdictions, including the UK and the EU, were changing their legislative frameworks to create clear regulatory regimes for stock exchanges.

“This means that other countries are effectively giving US-based exchanges an option – a place to relocate. can be safely innovated and improved," he told CNBC.

Binance, the world's largest crypto exchange, recently said that it has become more difficult for the company to operate in the United States and that it intends to establish a regulated operation in the United Kingdom. .

Patrick Hillman, the company's chief strategy officer, said the United States "has been very confusing over the past six months," pointing to the SEC's actions against Coinbase as a sign of how the country is doing. a "strange place".

While the U.S. crypto industry might be making empty threats right now, there could be a real problem if U.S. regulators don't adopt thoughtful regulation.

"My conclusion is that I think it's more of a saber rattle than a genuine desire to get up and leave the United States, but if the SEC continues on the path it's on, many companies won't "will have no choice but to try a different way of doing business. It's existential," Daniel Csefalvay, a partner at law firm BCLP, told CNBC via email.