The United States is losing blockchain developers at an alarming rate, with a report by Electric Capital suggesting that the trend has been ongoing since 2017. Although ‘brain drain’ is a term synonymous with developing countries, the negative stance the US has constantly maintained toward innovation with distributed ledger technologies, is driving blockchain talent to other jurisdictions.
“Thousands of incredibly talented people have left the US to move to other jurisdictions in the past year,” Peter Smith, the head of Blockchain.com, a crypto exchange said during the Qatar Economic Forum in May.
Blockchain Developers Declining By 2% Yearly In The US
Blockchain developers are abandoning the US, and according to the Electric Capital report, industry stakeholders are concerned. In the last 12 months alone, their number has fallen by 6% – a situation that is raising questions especially with the Securities and Exchange Commission (SEC) lodging numerous lawsuits against crypto entities, including Binance and Coinbase in 2023.
“The question is does it matter and why,” Archie Finance CEO Paul Stavropoulos said. “The first and most important thing is the overall growth of the ecosystem. That has been constant, which is fantastic, but it’s not good that the U.S. is losing market share.”
The percentage of crypto developers located in the US decreased from around 40% in 2018 to below 30% in 2022, Cointelegraph reported citing data by Andreessen Horowitz, a crypto venture capital company that also goes by a16z.
One of the key insights that you’ll find from the report is that blockchains have more active users, and more ways to engage than ever before.
We’re seeing more monthly active addresses – unique addresses sending on-chain transactions each month – than ever.
Last month we saw…
— a16z crypto (@a16zcrypto) April 11, 2023
Despite the worrying blockchain developer situation in the US, their number has been growing exponentially at a global level. In the first seven years of the 14 years crypto has been developed as an open-source technology, there were “1,000 monthly active developers” writing code.
This number shot up to more than “22,000 monthly active developers,” during the latter seven years and has continued to increase to 23,343 in 2023 as the Electric Capital stated.
Maria Shen, a partner at Electric Capital, believes that it is actually not “a bad thing that the US is losing market share of develops,” implying that what the industry should focus on is the overall growth of the sector at a global scale.
“COVID has been a huge help in building remote teams; it’s no longer taboo to build a team with folks all around the world,” Stavropoulos added.
It is no longer a requirement to have developers centered in the United States, especially with seamless access to a global talent pool. Stavropoulos argues that “the scary thing is when innovation doesn’t touch the US at all because of accredited investor rules or people don’t want to be jailed.”
Most of the talent leaving the US has been absorbed by the United Arab Emirates, France, Singapore, Portugal, London, and Hong Kong, according to Smith. These and other countries, unlike the US, have been “very constructive” when it comes to providing clear regulatory oversight of the industry, in turn, attracting “a huge amount of talent.”
As companies and blockchain developers shun the US due to stringent unclear regulations, countries like Singapore and the European region are coming up as “the two most certain environments that we have,” Smith said.
Singapore has emerged as a frontrunner in the Asian region, especially in terms of financial regulation, a TechCrunch report said. The Monetary Authority of Singapore, the country’s financial regulatory body, implemented the Payment Services Act in January 2020. This comprehensive regulatory framework covers both traditional and cryptocurrency exchanges, bringing all payment-related services under a single umbrella.
India has over the years come up as a worthy contender in the crypto industry, with its blockchain developer share growing from 2% in 2017 to 6% in 2022.
The SEC and CFTC Stifling Blockchain Innovation in the US
Generally, regulatory agencies across the world continue to express the need to curb the crypto “wild west,” but contrary to the US, they are making considerable steps toward providing oversight of the digital asset market.
Unfortunately, the situation in the Joe Biden-led superpower is far from turning a new leaf, especially with the SEC and the Commodities Futures Trading Commission (CFTC) regulating the crypto industry by enforcement as opposed to providing clear guidance. The agencies went after Binance and Coinbase, two of the leading crypto exchanges, and implicated up to 64 tokens as securities including Cardano (ADA), Solana (SOL), and Polygon (MATIC).
“That is coming at the expense of investing in America. The vast majority of our resources and capex investments are outside the US,” Blockchain.com’s Smith added during the international forum.
Despite apprehensions raised by crypto stakeholders over the unfavorable state of regulation in the US, which often see companies suddenly sued, a bipartisan bill, introduced in the Senate on July 18 by Sen. Jack Reed seeks to introduce stringent measures for the Decentralized Finance (DeFi) covering Know Your Customer (KYC) and Anti-Money Laundering (AML).
The bill, introduced at night and titled ‘The Crypto-Asset National Security Enhancement and Enforcement (CANSEE) Act’ is already causing jitters across the crypto space as many fear it would obliterate the DeFi Sector in the US, making an already dilapidated situation worse.
If the bill is ascended into law, it would mean that DeFi activities are subjected to the same stringent rules as centralized crypto exchanges such as Coinbase and Binance, many of which are entirely impossible to enforce for these platforms. Entities running DeFi platforms would be held accountable for all activities and may be called upon to answer questions, or even sued.
“If nobody controls a DeFi service, then — as a backstop — anyone who invests more than $25 million in developing the project will be responsible for these obligations.”
The controversial bill also seeks to expand the scope of the Treasury Department AML mandate beyond the conventional financial system, arguing that “as new technologies like cryptocurrency increasingly enable new ways to conduct financial transactions, it is critical to extend Treasury’s authority to crack down on illicit financial activity that may occur outside the banking sector.”
Case in point:
The definition of "control" is so broadly worded that it's meaningless. No thresholds, no specifics, just "control," as determined by the Secretary of the Treasury. Completely and utterly unworkable.https://t.co/rVk26MJwfA
— Meat (🥩,🥩) (@MeatEsq) July 19, 2023
The state of crypto in the US is getting worse by the day, with the exodus of blockchain developers starting to seem like a drop in the sea. The bipartisan bill does not provide “actual guidance” on how players in DeFi can adhere to the Bank Secrecy Act (BSA) and the related reporting requirements.
Unless US regulators change tactics, the region will continue to miss out on talent, due to brain drain, eventually stifling innovation.
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