The United States is losing its share of the cryptocurrency market due to unclear regulations in the industry. According to a CryptoQuant research report, over half of the bitcoin (BTC) held by crypto firms for their clients has moved to offshore and international exchanges. BTC reserves on US-based crypto exchanges have fallen to 2017 levels, as they are being lost to non-US platforms. The lack of a clear rule book for the crypto industry has driven crypto firms to offshore locations.
Regions like the EU and Hong Kong, which have developed comprehensive regulations for the nascent economy, are experiencing an inflow of capital, talent, and digital asset firms. Hong Kong has opened up to crypto companies and committed to adopting the “same activity, same risks, same regulation” principle for entities similar to traditional financial firms.
Exchanges Exit US Market
Several exchanges have decided to exit the US, with others ceasing certain products and services due to violation accusations. American exchanges have little-to-no exposure to perpetual futures trading markets, which have a volume of 11 times that of spot trading volume, as firms are not allowed to offer the service.
The trading volume of international crypto exchanges is four times greater than that of US-based platforms, and bitcoin’s spot trading volume dominance in the US has fallen below 2017 levels and is currently at 21%. In contrast, Asia’s spot and futures trading volume growth is as high as 30% and 20%, respectively.
US Stablecoin Market Cap Plummets
CryptoQuant’s research found that the market cap of US-based stablecoins has plummeted by 35%, losing $15 billion so far in 2023. In addition to decreasing BTC reserves in the US, ether (ETH) reserves have also been on a steady decline, with about 56% of ETH on crypto exchanges held outside the United States.
The US remains the world’s dominant player in the bitcoin mining industry. However, the country could lose that position due to bad regulation, as the government is targeting miners with the possibility of higher taxes. The US is losing its crypto market share as regulatory uncertainty drives firms and assets offshore.