Crypto companies are playing poker with the SEC as agency cracks down on the industry
Major players are hoping that the SEC and Washington takes, what crypto watchers see as bluffs, seriously and soften the hard line that regulators have taken on the industry.
Roman Strelchenko | 500Px Plus | Getty Images
Cryptocurrency companies are playing a game of poker with the Securities and Exchange Commission, making bold threats to leave the U.S. as the regulator steps up pressure on the industry to toe the line.
Major players are hoping that the SEC and Washington takes, what crypto watchers see as bluffs, seriously and soften the hard line that regulators have taken on the industry.
Executives at firms including crypto exchange Coinbase and blockchain services company Ripple have piled on with comments laying into the SEC and signaling plans to shift business overseas, in a bid to rally support and send a message to U.S. politicians concerned that the country may miss out on a key technological innovation.
Coinbase CEO Brian Armstrong said last week that the SEC was on a “lone crusade” with its tough actions against certain crypto companies. He added that Chair Gary Gensler had taken an “anti-crypto view,” despite earlier being a supporter of the industry during his time as an economics professor at the 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 don’t think [Gensler is] necessarily trying to regulate the industry as much as maybe curtail it. But he’s created some lawsuits, and I think it’s quite unhelpful for the industry in the U.S. writ large.”
Brad Garlinghouse, CEO of Ripple, also tore into the SEC this week. When asked for his message to Gensler as the company announced an expansion into Dubai, he quipped, “Who?” before later saying Ripple will have spent $200 million defending itself against a lawsuit initiated by the regulator by the time it is over.
“I find it as a company that started in the United States and as somebody who is a U.S. citizen, it’s sad. I have sadness about this. The U.S. is getting passed not just by a little bit but by a lot,” Garlinghouse said.
“The tough thing about this is you have a country that I think has put politics ahead of policy and that’s not a good decision if you’re trying to invest in the economy.”
Dubai and Europe have proven to be much more favorable markets with their virtual asset regulatory frameworks, Garlinghouse said, adding: “The United States is definitely stuck.”
Garlinghouse, Armstrong and other crypto bosses have made threats to leave the U.S., highlighting concern from the industry that the SEC’s crackdown is becoming too harsh. The regulator has taken strong enforcement actions against companies including Ripple, Coinbase, Kraken and Paxos, accusing each of flouting securities laws.
The SEC’s contention is that most tokens in the market may qualify as securities, which would subject them to much stricter requirements around registration and disclosure. Crypto firms, naturally, have denied assets they issue or list on their platforms should be treated as securities.
Will they stay or will they go?
The question is: could they actually leave? It looks pretty unlikely.
“The U.S. is one of the largest markets for crypto, and hence it is highly unlikely that they will leave,” Larisa Yarovaya, associate professor of finance at Southampton University, told CNBC via email.
“The biggest fear of crypto companies is that regulation will cause panic among crypto investors and prices will go down. To look confident (even arrogant) is a common tactic of crypto company CEOs. They think this will translate into investors’ confidence, overconfidence in some cases, and will encourage further irrational behaviour among investors, e.g. HODL [hold on for dear life] even when markets are falling.”
Ripple’s Garlinghouse has been threatening to move his company’s headquarters overseas since 2020. In October that year, he said the U.K., Switzerland, Singapore, Japan and the United Arab Emirates were under consideration for Ripple’s potential move abroad.
That hasn’t happened yet.
Coinbase’s chief, meanwhile, suggested at a London fintech conference in April that the firm would consider options of investing more abroad, including relocating from the U.S. to elsewhere, if the exchange doesn’t get regulatory clarity in the U.S.
A month later, Armstrong said Coinbase “is not going to relocate overseas.”
“We’re always going to have a U.S. presence … But the U.S. is a little bit behind right now,” he told CNBC.
The U.S. is a huge market for the industry, with over 50 million Americans saying they own some crypto, according to a survey conducted by Morning Consult for Coinbase.
“There’s a much greater focus on the international markets for those firms. But at the top end of the market, personally I just can’t see that ever happening that you leave the United States market completely,” Jonathan Levin, co-founder of Chainalysis, told CNBC in an interview in London.
“It’s more about how much do you invest in new international expansion where maybe that wasn’t as high up on the agenda, but now it’s let’s look at France, let’s look at the U.K.”
On top of this, the practicalities of moving these already large companies out of the U.S. would be tough.
“Although these industries are virtual by their nature, they still need people, and people have families, mortgages, and preferences on where they live. Replacing them with local talent in the new place may be easier said than done,” George Weston, a partner at global offshore law firm Harneys, told CNBC via email.
Regulatory certainty outside the U.S.
Crypto bosses are playing up to some officials’ concerns that the U.S. has become shrouded in regulatory uncertainty while other jurisdictions, like the European Union and U.K., have charged forward with proposed regulatory frameworks for digital assets.
Hester Peirce, a commissioner at the SEC, said at a Financial Times conference last week that the U.S. was “shooting ourselves in the foot by not having a regulatory regime in the U.S.”
She praised the EU on its progress with waving through laws for the crypto industry.
The EU is expected to bring in 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 get that done so quickly,” Peirce said, according to Reuters. “If we built a good regulatory regime, people would come. I think you will see that with MiCA.”
Diego Ballo Ossio, a partner at law firm Clifford Chance, said other jurisdictions including the U.K. and EU are changing their legislative frameworks to create clear regulatory regimes for exchanges.
“This means that other countries are effectively providing US based exchanges an option – a place to move to. It is not unthinkable that a U.S. exchange decided to create operational hubs in non-U.S. jurisdictions where the product can be safely innovated and enhanced,” he told CNBC.
Binance, the world’s largest crypto exchange, recently said it has become more difficult for the company to operate into the U.S. and that it was minded to establish a regulated operation in the U.K.
Patrick Hillman, the company’s chief strategy officer, said the U.S. “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 in a “weird place.”
While the U.S. crypto industry might currently be throwing out empty threats right now, there could be a real issue if regulators in America don’t move forward with thoughtful regulation.
“My conclusion is that I think it is more sabre rattling than a genuine desire to up and leave the U.S., but if the SEC continues down the path it is on, many firms will have no choice but to try another way of doing business. It is existential,” Daniel Csefalvay, a partner at BCLP law firm, told CNBC via email.
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Nvidia says it follows export laws ‘to the letter’ a day after AI chip sales to China stopped
Jensen Huang, co-founder and chief executive officer of Nvidia Corp., during the opening ceremony of the Siliconware Precision Industries Co. (SPIL) Tan Ke Plant in Taichung, Taiwan, on Thursday, Jan. 16, 2025.
An Rong Xu | Bloomberg | Getty Images
A day after Nvidia revealed it would incur $5.5 billion in costs related to canceled orders for the H20 chip, which the government said this week requires a license to export to China, the company said it abides by rules on where it can sell its artificial intelligence processors.
“The U.S. government instructs American businesses on what they can sell and where — we follow the government’s directions to the letter,” an Nvidia representative said in a statement.
Nvidia said the statement was in response to a House Select Committee focused on national security threats from China, which opened an investigation into Nvidia’s sales on Wednesday. The H20 was introduced by Nvidia after the Biden administration restricted AI chip exports in 2022. It’s a slowed-down version intended to comply with U.S. export controls.
Nvidia’s brief comment is an indication of how the company is going to defend its business in Washington, D.C., as its technology draws increased scrutiny related to national defense and security. The company’s stock price tumbled almost 7% on Wednesday.
Nvidia’s chips have the vast majority of the market for AI applications, and some were used by China’s DeepSeek to build R1, which upended markets in January.
On Wednesday, the chipmaker touted the taxes it paid, its U.S.-based workforce, and its role as a technology leader.
The company’s exports even help the U.S. fix its trade deficit, the statement said, directly addressing President Trump’s stated reason for introducing tariffs earlier this month.
“NVIDIA protects and enhances national security by creating U.S. jobs and infrastructure, promoting U.S. technology leadership, bringing billions of dollars of tax revenue to the U.S. treasury, and alleviating the massive U.S. trade deficit,” according to the statement.
One challenge for Nvidia is that the H20 was legal for export to China until last week, under previous Biden administration rules. But the House Select Committee said on Wednesday the sale of H20 chips for the past year was effectively a “loophole.”
“The technology industry supports America when it exports to well-known companies worldwide – if the government felt otherwise, it would instruct us,” Nvidia said in its statement.
The government is also investigating whether shipments of restricted chips to China went through Singapore, Nvidia’s second-largest market by billing address with just under $24 billion in sales in the company’s past fiscal year, according to filings.
Nvidia clarified on Wednesday that its Singapore revenue indicates sales with a billing address in the country, often for subsidiaries of U.S. customers.
“The associated products are shipped to other locations, including the United States and Taiwan, not to China,” Nvidia said.
In addition to Chinese export controls and the congressional investigation, Nvidia also faces additional restrictions on what it can export starting next month, under “AI diffusion rules” first proposed by the Biden administration.
WATCH: Nvidia’s $5.5 billion hit may prove the AI digestion phase is here
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Former cybersecurity agency chief Chris Krebs leaves SentinelOne after Trump targets him in executive order
Former Cybersecurity and Infrastructure Security Agency Director Chris Krebs testifies before a Senate Homeland Security and Governmental Affairs hearing to examine claims of voter irregularities in the 2020 election, in the Dirksen Senate Office Building, in Washington, U.S., December 16, 2020.
Jim Lo Scalzo | Reuters
A week ago, President Donald Trump signed an executive order targeting former Cybersecurity and Infrastructure Security Agency Chief Chris Krebs, and calling on the government to suspend the security clearances of any entities with whom he’s associated. The order specifically named SentinelOne, Krebs’ employer.
On Wednesday, Krebs announced his resignation from SentinelOne, a cybersecurity company with a $5.6 billion market cap. While Krebs said the choice was his alone, his swift departure is the latest example of the effect Trump is having on the private sector when it comes to pressuring people and institutions that he personally dislikes.
Krebs had served as SentinelOne’s chief intelligence and public policy officer since late 2023, when the company acquired his consulting firm.
“For those who know me, you know I don’t shy away from tough fights,” Krebs wrote in an email to SentinelOne staffers that the company posted on its website. “But I also know this is one I need to take on fully — outside of SentinelOne. This will require my complete focus and energy. It’s a fight for democracy, for freedom of speech, and for the rule of law. I’m prepared to give it everything I’ve got.”
Krebs served as the first CISA director from 2018 until he was fired in November 2020 after declaring that the presidential election, which Democrat Joe Biden won, was “the most secure in American history.” CISA is part of the Department of Homeland Security.
In his executive order on April 9, which took the extraordinary approach of going after a specific individual, Trump called Krebs a “bad-faith actor who weaponized and abused his Government authority.”
“Krebs’ misconduct involved the censorship of disfavored speech implicating the 2020 election and COVID-19 pandemic,” the order said. “Krebs, through CISA, falsely and baselessly denied that the 2020 election was rigged and stolen, including by inappropriately and categorically dismissing widespread election malfeasance and serious vulnerabilities with voting machines.”
Trump directed the attorney general, director of national intelligence and “all other relevant agencies” to suspend “any active security clearances held by individuals at entities associated with Krebs, including SentinelOne, pending a review of whether such clearances are consistent with the national interest.”
The Wall Street Journal was first to report on Krebs’ departure from SentinelOne, publishing a story on Wednesday based on an interview with Krebs. He told the Journal that he was leaving to push back on Trump’s efforts “to go after corporate interests and corporate relationships.”
The demands on SentinelOne resemble campaigns that President Trump has waged against law firms and universities that he’s tried to strongarm into making significant changes in how they operate or else lose government contracts or funding.
SentinelOne, which uses artificial intelligence to detect threat and prevent cyberattacks, doesn’t disclose how much of its revenue comes from the government. But the company acknowledges in the risk factors section of its financial reports that it relies on government agencies for some of its business and can be hurt by changes in policy.
“Our future growth depends, in part, on increasing sales to government organizations,” the latest quarterly filing says. Specific to Trump, SentinelOne said that the establishment of the Department of Government Efficiency, which Elon Musk is running, could lead to budgetary changes that “adversely affect the funding for and purchases of our platform by government organizations.”
SentinelOne CEO Tomer Weingarten told employees in a memo, also posted to the company’s site on Wednesday, that Krebs “helped shape important conversations and strengthened public-private collaboration.” The company previously said, in a blog post after the executive order, that fewer than 10 employees had security clearances.
“Accordingly, we do not expect this to materially impact our business in any way,” the post said.
WATCH: Krebs on cyberthreats
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