As the US Securities and Exchange Commission (SEC) continues its regulatory crackdown on the crypto industry, major players are feeling the heat. Just days after Coinbase made its exit from the USA, two of the leading market makers for the crypto market – Jane Street and Jump Crypto – announced their departure as well.
The reason? A lack of regulatory clarity and heightened scrutiny have made it increasingly difficult for these entities to operate within the US. What does this mean for the future of crypto in the US? Let’s take a closer look
Jane Street And Jump Crypto Exit Us Crypto Market
Two prominent market-making firms, Jane Street and Jump Crypto, are discontinuing their crypto trading activities in the US due to increasing regulatory pressure. However, both companies will continue to engage in market-making activities in the crypto industry.
Jane Street has decided to scrap its plans for global crypto expansion due to regulatory uncertainty making it challenging for the firm to comply with its internal standards. Meanwhile, Jump Crypto, the digital asset division of Jump Trading, will no longer operate in the US but is planning to expand globally.
The regulatory crackdown in the US against the crypto market has intensified following recent crises involving FTX and Terra-LUNA, in which Jane Street and Jump Crypto were involved. Jump Crypto provided liquidity and funds for the TerraUSD algorithmic stablecoin, while Jane Street is mentioned in the US CFTC’s lawsuit against Binance and has links to FTX and Sam Bankman-Fried, whose executives previously worked at Jane Street.
Impact of Jane Street and Jump Crypto Exit
Liquidity plays a crucial role in the stability of the crypto market, and market makers like Jane Street and Jump Crypto provide the necessary support. Unfortunately, the market has been losing liquidity throughout the year, and the exit of these two major market makers is likely to further intensify this trend.
This could spell trouble for crypto exchanges such as Coinbase and Binance, which have already witnessed reduced liquidity in recent months. The shortage of liquidity was one of the main reasons behind the crypto contagion that occurred last year, highlighting the importance of maintaining sufficient liquidity in the market.
US Exchanges Lost Market Share as International Competitors Gain Ground
In the first quarter of 2023, US-licensed crypto exchanges, including Coinbase, Kraken, and Binance.US, have experienced a significant drop in market share. Specifically, Coinbase accounted for 1.31%, Kraken 0.60%, and Binance.US 0.37% of the market share. The decline in trading volume on Coinbase from 7% in January to 5% in March is further proof of the downward trend.
These losses in market share are in sharp contrast to the rise in trading volume on crypto exchanges located outside the US. This trend is mainly due to the regulatory crackdown against crypto in the US, which is causing traders to look beyond US-based exchanges for more favorable trading conditions.