A new round of hostilities began in November after the collapse of FTX, the crypto exchange founded by Sam Bankman-Fried. Over the following months, the S.E.C. sued a series of crypto lending firms and cracked down on an investment product marketed by Kraken, a popular U.S. exchange.
At the same time, several top financial regulators issued statements warning banks about the risks of crypto. The industry’s supporters labeled the government actions Operation Choke Point 2.0, alluding to an Obama-era law enforcement campaign to prevent banks from working with certain businesses.
“Things definitely took a big turn after the FTX collapse,” said Perianne Boring, who runs the Chamber of Digital Commerce, a crypto advocacy group. “We had a lot of good-faith efforts underway at the S.E.C. and even with other policymakers that are now the big critics.”
As the largest U.S. crypto company, Coinbase has been at the center of the regulatory debate.
After it was founded in 2012, Coinbase rose to prominence by marketing itself as the most trustworthy and compliant crypto exchange. Two years ago, it went public, a watershed moment that seemed to signal the industry’s growing role in U.S. commerce.
Since then, Coinbase has clashed repeatedly with federal regulators. In September 2021, after the S.E.C. stopped the firm from offering a popular investment product, the company’s chief executive, Brian Armstrong, accused the agency of “really sketchy behavior.”
In Washington, Coinbase and other major U.S. crypto companies have fought back against the intensifying regulatory regime, lobbying legislators to create rules tailor-made for the digital asset industry. But as those efforts have fallen apart, some crypto firms have started looking abroad.
At a conference in London in April, Mr. Armstrong said the United States needed clearer rules governing crypto. “If the U.S. doesn’t have this,” he said, “these firms are going to be built in offshore havens.”