The ongoing regulatory enforcement actions are threatening to drive US crypto businesses offshore. The implications of such a shift for the country’s economy are significant, something that has translated into declining crypto prices, making investors even more jittery.

While the market’s concerns regarding the potential removal of the US retail investor from the crypto capital markets are palpable, Arthur Hayes believes the fear is misplaced.

Elimination of US Retail Investors From Crypto

In a recent blog post, the former BitMEX CEO Arthur Hayes said retail investors selling crypto alongside US-domiciled institutions is not wise. He explained that it is completely irrelevant whether the mass affluent and below can own or trade Bitcoin or a subset of “shitcoins.” Even if brokerage platform Robinhood still allowed them to trade “XYZ shitcoin,” they wouldn’t have the available capital to purchase it anyway.

“The capital of the rich, on the other hand, is much more plentiful, and it’s fungible across the entire globe – all thanks to a host of intermediaries that cater to the American wealthy and will dutifully do whatever they are told as long as they receive a phat commission.”

Hayes pointed out that the US population accounts for approximately 4% of that of the world. While “this is an extremely small slice of the pie,” the percentage of wealthy individuals relative to everyone else across the globe is quite high. Hence, investors care about what such a small population does with their money.

If the US government decides to distribute another round of “freshly printed money” – as they did with the COVID stimulus but in the form of interest – it will not go to the mass affluent, who have little to no savings. Hayes said the funds will instead flow straight to the top 10%, or just the top 1%, who hold the majority of wealth in America. This money will then be deployed into “ious forms of hard assets and stores of value.”

This rich cohort, which the BitMEX founder deems as “the most overbanked people in the world,” has access to any and all financial assets traded globally, even if they are American. This essentially means that they can easily buy it from firms Cumberland, NYDIG, and the OTC trading desks of the US-domiciled crypto exchanges like Coinbase and Kraken, which specializes in selling crypto to “rich folks.”

Hayes said selling crypto when the market is at the bottom after buying on top is unwise because it’s important to look into Asia, as China and Japan’s silent currency war for export competitiveness is going to drive a significant amount of credit issuance by the second largest economy. This credit issuance is expected to ultimately weaken the yuan and some of China’s mass affluent to transfer their capital elsewhere, including crypto.

In Comes China

Despite China’s blanket ban on cryptocurrencies, traders are slowly making a comeback through the financial pipes of Hong Kong. Earlier this month, the city-state’s Securities and Futures Commission (SFC) began accepting applications for crypto trading platform licenses.

A Hong Kong lawmaker even invited San Francisco-based Coinbase to come and register in the region. More recently, the Hong Kong Monetary Authority was reported to have been pressuring major financial institutions such as – HSBC, Standard Chartered, and Bank of China – to accept crypto clients.

The act of laying out the red carpet for global crypto exchanges that have been facing regulatory scrutiny in the West is yet another factor that Hayes believes will reignite the market at the same time the “broke-ass American mass affluent are effectively shut out.”