Revolut Self-Shutters US Crypto Business as Coinbase Moves to Dismiss SEC Suit 

It has been a truly humbling past 12 months for the crypto sector.

The alternative value-transfer vehicle, which was supposed to revolutionize the traditional financial system with democratized and trustless access to digital assets, instead enabled one of the biggest financial frauds in U.S. history — the failure of FTX, which spurred a sector-wide crackdown by the U.S. Securities and Exchange Commission (SEC).

Now, the next 12 months could be looking even worse.

This, as ongoing regulatory uncertainty is increasingly seeing businesses take steps to exit the U.S. crypto market rather than deal with the ire of America’s federal regulatory agencies.

High-flying British banking FinTech Revolut is the latest platform to announce it will stop offering crypto services to its U.S.-based customers this fall.

It represents a sharp reverse for the banking app, which saw its revenue triple as a result of the 2021 crypto boom — from $266 million in 2020 to $769 million in 2021, reaching profitability for the first time.

But the London-based financial firm will suspend the ability of US-registered users to buy crypto starting on Sept. 2. A month later, on Oct. 3, all access to Revolut’s crypto platform will be disabled for U.S. users and their remaining tokens will be liquidated at market prices, according to an email sent to customers.

“As a result of the evolving regulatory environment and the uncertainties around the crypto market in the U.S., we’ve taken the difficult decision, together with our U.S. banking partner, to suspend access to cryptocurrencies through Revolut in the U.S.,” the company said.

Revolut’s U.S. banking partner is Metropolitan Commercial Bank, while its American crypto services are provided by a partnership with Bakkt, a publicly traded crypto firm. Bakkt will handle the unwinding of Revolut’s U.S. customer accounts.

An Enforcement-Driven Exodus 

After a year defined by its scandals and collapses, the U.S. crypto sector has wilted under the persistent scrutiny of regulatory agencies. Both the SEC and the Commodity Futures Trading Commission (CFTC) have targeted major players, including Coinbase and Binance, with existential lawsuits, while U.S. banking regulators have issued warnings to the traditional financial sector around the pitfalls of providing much-needed banking services to America’s crypto players.

For its part, Revolut had already earlier this year delisted many of the cryptocurrencies labeled as unregistered securities by the SEC in its enforcement actions against crypto platforms doing business in the U.S., including the Solana, Polygon, and Cardano blockchains.

Revolut says the decision to terminate crypto services in the U.S. will affect less than 1% of the platform’s global customers. The company’s cryptocurrency offering reportedly accounts for less than 5% of revenue.

And Revolut is not alone in its decision to exit its U.S. crypto business after a year marked by collapses and regulatory heat.

Video game retailer GameStop will end support of its digital asset wallets Nov. 1, citing regulatory uncertainty. The meme stock retailer posted a message on its website reading: “Due to the regulatory uncertainty of the crypto space, GameStop has decided to remove its iOS and Chrome Extension wallets from the market on November 1, 2023.”

The company unveiled its digital asset wallet in May 2022, saying it would let gamers and others store, send, receive and use crypto and nonfungible tokens (NFTs) on several decentralized apps without leaving their web browsers.

The crypto service barely lasted 18 months.

Meanwhile, retail trading platform Robinhood has seen its crypto business continue to slide. The firm reported that crypto trading is down 18% quarter over quarter, and the company’s digital asset vertical pulled in just $31 million for the most recent reported quarterly earnings.

Robinhood also delisted from its platform the crypto assets named in the SEC’s lawsuits against Binance and Coinbase.

“Staying mindful of applicable regulations … we look forward to continuing to invest in crypto,” Robinhood Markets Co-Founder and Chief Executive Officer Vlad Tenev said, adding that the crypto side of his business has “continued to soften.”

Coinbase at the Center 

The company at the center of it all, Coinbase, has seen its own transaction volume fall by nearly 70%.

The biggest name in the American crypto industry — as well as one of the most embattled — Coinbase has moved to dismiss the SEC’s case against it.

“Today, Coinbase filed our brief asking the Court to dismiss the SEC’s case against us. Our core argument is simple — we do not offer “investment contracts” as that term has been construed by decades of Supreme Court and other binding precedent. By ignoring that precedent, the SEC has violated due process, abused its discretion, and abandoned its own earlier interpretations of the securities laws. 

By ignoring that precedent, the SEC has trampled the strict boundaries on its basic authority set by Congress,” tweeted Coinbase chief legal officer Paul Grewal on Friday (Aug. 4).

Coinbase has long held this argument, with Paul Grewal, the company’s chief legal officer, writing last year, “Coinbase does not list securities. End of story.”

Those arguments still haven’t stopped the SEC from suing it or other firms from protecting themselves by exiting the sector.