If you ask venture capitalist Chamath Palihapitiya, the crypto industry is all but done in the United States, and the reason for that has nothing to do with failed projects or Web3 companies but U.S. regulators.
"Crypto is dead in America," Palihapitiya said during a recent episode of the "All-In Podcast," which he co-hosts with fellow investors Jason Calacanis, David Sacks and David Friedberg.
Palihapitiya blamed Securities and Exchange Commission Chairman Gary Gensler for the agency's crackdown on cryptocurrency offerings, which it considers securities.
"You had Gensler even blaming the banking crisis on crypto ... The United States authorities have firmly pointed their guns at crypto," said Palihapitiya, who added that Coinbase Global Inc. was "paying the price" for ostensibly trying to work with regulators in good faith.
Coinbase has publicly revealed that it was under investigation by the SEC and has indicated it might leave the United States.
Cryptocurrencies plunged last year in the wake of the collapse last spring of the Terra USD stablecoin, which was supposed to be pegged to the dollar. They dropped further following the rapid failure in the fall of FTX Trading Ltd., which at the time was one of the largest cryptocurrency exchanges.
When Silicon Valley Bank collapsed in March, Circle Internet Financial Ltd, a cryptocurrency company, revealed it had more than $3 billion in assets at the bank. Circle's so-called stablecoin dropped below $1 in value in the wake of the banking crisis, Forbes reported.
Palihapitiya founded Menlo Park-based venture capital firm Social Capital. He also briefly ran for governor of California in 2021 when a recall election unsuccessfully attempted to unseat Gov. Gavin Newsom.
Gensler was nominated to head the SEC in early 2021 and was confirmed by the Senate and subsequently sworn into office in April that year.
Most cryptocurrency trading services are likely hosting exchanges of tokens that should be regulated as securities, Gensler said in prepared remarks for a conference at Penn Law last year.
"The probability is quite remote that any given platform has zero securities," Gensler said. "In my view, regulation both protects investors and promotes investor confidence, in the same way that traffic laws protect drivers and promote driver confidence. It’s at the core of what makes markets work."
CNBC first reported Palihapitiya's comments.
