- Venture Capital firm Andreessen Horowitz has stressed that the government’s stance toward cryptocurrency regulation in the country is stifling innovation in the industry.
- The United States, home to 40% of digital asset developers in 2018, has seen that number slide below 30% in 2022.
- The firm tips clearly defined regulations and an approach by regulatory agencies that protect users while encouraging innovation in the sector.
As more digital asset firms become victims to the bottleneck approach of United States regulators, several industry experts have bemoaned the current reality, with some accusing regulators of ‘killing the sector.’
In its periodic State of Crypto report, a16z, the investment arm of Andreessen Horowitz, stated the recent string of enforcement actions by regulators is gradually taking digital asset innovation away from the United States. The report highlights how dwindling leadership leads to uncertainty in the space.
According to the report, the U.S. was the fore of crypto innovation in 2018, hosting 40% of developers. That figure has since dropped over the years and is under 30% in 2022 as more creators look elsewhere to protect their investments.
Attributing the decline to poor regulation, the report pointed out that innovators are now moving out of the United States.
“Banning new business models or technologies undermines American values and drives innovation and jobs elsewhere. Legal businesses and their customers deserve access to financial services and lawful protections, from banking relationships to data privacy,” the report stated.
Furthermore, traffic from digital asset websites based in the US dropped for the third consecutive year. In 2022, websites like CoinMarketCap and CoinGecko recorded only 15% of website visits from the US, dropping from 23% in 2019.
A solution to the predicament
Regulators must protect investors and rid the market of scams and dubious players. However, the method by which this is done can lead to more problems. This is the current reality in the US as industry executives continue to accuse regulators such as the Securities and Exchange Commission (SEC) of ‘killing innovation’ in the sector.
An example of this is the SEC’s decision to go after digital asset staking, which led to the Commission slamming Coinbase with a Wells Notice and placing a $30 million fine on Kraken for its staking-as-service program. To solve these problems, the report calls for new regulations and agencies’ guidance.
A dearth of wholesome regulations has led to both the SEC and executives being at loggerheads leading to unending litigations like the SEC and Ripple saga.