Bitfinex Cutting Out U.S. Customers — Fallout from SEC Ruling on ICOs

Another example of U.S. capital controls puts us at a greater disadvantage in the global marketplace.  The SEC ruling on ICO’s will further retard capital mobility in the future. 


If you are an American, you only have a few days to but any Initial Coin Offering currently listed on the cryptocurrency exchange, Bitfinix.  In a statement released by Bitfinex last night, U.S. customers were deemed too much of a risk to continue serving.

According to the company’s latest announcement, Bitfinex will also be making other changes to its service, no longer accepting verification requests for U.S. individuals effective immediately. Further, in the next 90 days, it will gradually discontinue all services to U.S. customers.

The exchange explained that the decision follows a recent investigation by the U.S. Securities and Exchange Commission (SEC) on how tokens issued by way of an initial coin offering (ICO) may be considered securities.

“We anticipate the regulatory landscape to become even more challenging in the future,” the statement reads.

This decision by Bitfinex is important for a few reasons:

  1. It tells us Wall St. is truly terrified of the crypto market and the potential of the blockchain.
  2. Wall St. fears not being able to be the book-runner on these ICO’s.  They’ve been cut out of most of them.  The volume isn’t going through their exchanges.
  3. This is a form of capital control, like FATCA and banning U.S. citizens from trading Forex, designed to push money back into Wall St. while purporting to ‘protect investors.’ Yeah, tell that to the buyers of the SNAP IPO.
  4. The long-term ramifications are bearish for the U.S. dollar and worse for the American people who are being walled off from protecting their wealth.
  5. Foreign investors will think twice about putting their long-term faith in the U.S. as cryptocurrencies become more mainstream.  SEC rules like this will remain in effect for years.
  6. This will slow down the price appreciation of ICO’s for EOS and SAN as they now lose one of the two exchanges that U.S. citizens could utilize to participate, since the ICO itself is off-limits to us as well.

Never forget the first rule of international finance:

Capital flows to where it is treated best.

That used to be the United States.  It is rapidly looking to no longer be the case.  And expect in the next few weeks for the talking points to center around ‘policy coordination about dealing with these crypto-thingys.’

CNBC will be all over this, not that anyone’s watching, so will the War Street Journal, Financial Times and Marketwatch.

When Newsweek runs a cover warning about the “Dire Threat of Bitcoin” that will be your sign that things are about to explode.

I give it about four to six months the way things are going.

Contrast these things with the crypto-news coming out of Russia and you tell me where capital is likely to be treated best in the coming years.  China has begun opening up its sovereign bond markets for capital inflows to recycle offshore yuan built up by foreign governments and corporates in trade.

This is rapidly becoming your big battleground.  Bitcoin is surging towards $4000. Ethereum is solidly back above $300 and exchanges like Bitfinix are about to cut themselves off from a major part of their addressable market.

When capital is treated badly it goes somewhere else.  Who’s going to pick up Bitfinex’s slack?  Kraken?  They’ll cave to the SEC.

What I know is that people always find a way to get around anything the government tries to ban.


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