Two leading market-making firms, Jane Street Group and Jump Crypto, are reportedly reducing their digital asset trading activities in the United States due to increasing regulatory pressure. Jane Street is not only making adjustments in the US but also scaling back its global crypto ambitions as regulatory uncertainty makes it challenging for the company to operate to the standard required by regulators in the US.
Despite the cutbacks, both firms remain actively engaged in making markets for cryptocurrencies, albeit on a smaller scale. Notably, the duo does not plan to abandon the realm of crypto altogether. This decision comes at a time when scrutiny of the digital asset industry has risen sharply, following the collapse of notable companies and projects like FTX, founded by Sam Bankman-Fried, and TerraUSD stablecoin.
Regulators have been keeping a watchful eye on trading platforms, stablecoin issuers, and brokers. Earlier this year, Coinbase, the largest US crypto exchange, received a warning from the Securities and Exchange Commission (SEC) concerning possible enforcement actions.
Jane Street and Jump Crypto have both experienced regulatory scrutiny in the United States. This close examination followed the recent cryptocurrency meltdown that saw several major crypto companies collapse. Jump Crypto, a significant supporter of Terra since 2019, faced questions from US prosecutors during an investigation of the failed TerraUSD stablecoin project. Jane Street, a dominant force in markets such as exchange-traded funds and corporate bonds, has traded in crypto since 2017. The firm was also mentioned in a lawsuit filed by the Commodity Futures Trading Commission against Binance, illustrating how US clients accessed the platform, disregarding Binance’s attempts to exclude them.
This growing regulatory crackdown on cryptocurrencies has led several digital asset firms to seek opportunities overseas. Coinbase recently announced its discussions with Abu Dhabi Global Market (ADGM) regulators and Dubai’s Virtual Assets Regulatory Authority (VARA) regarding its activities in the area, including the possibility of establishing a regional hub. Additionally, Galaxy Digital, a global crypto-focused financial services firm, is moving its operations offshore due to the lack of regulatory clarity in the United States. The company’s CEO, Mike Novogratz, stated during a recent earnings conference call that the firm would “grow outside of the US at a much quicker pace than we were growing in the United States.”
As the regulatory landscape evolves, more firms may feel the pressure to adapt their operations, scale back or possibly even move their activities offshore. While some may argue that increased regulation brings legitimacy to the industry, others warn that it could stifle innovation or drive companies to seek more crypto-friendly jurisdictions.
Source: Cryptonews
