The Ruling
On May 29, 2019, the simmering tension between the United States Securities and Exchange Commission and the cryptocurrency industry erupted into open revolt. Jeremy Allaire, the seasoned CEO of Circle — a company he cofounded after building and taking public two successful tech ventures, Brightcove and Allaire Corporation — published a searing series of public criticisms that laid bare the frustration sweeping through the digital asset sector. His company, which had spent what he described as “tens, if not hundreds, of millions” of dollars to comply with SEC requirements, was being stonewalled at every turn.
The catalyst was Circle’s forced decision to geofence nine crypto assets listed on its Poloniex exchange from U.S. customers. “We are deeply frustrated that we needed to take these steps, which are the result of an increasingly limited environment in the U.S. for crypto assets,” Allaire wrote in a series of tweets that sent shockwaves through the industry. He followed up with a blog post titled simply, “U.S. crypto policy needs to change,” and then a much longer manifesto explaining Circle’s grievances in painstaking detail.
Bitcoin traded at approximately $8,659 on this day, with Ethereum at $269.46 and the broader crypto market capitalization hovering around $270 billion. The market had rallied significantly from its late-2018 lows, but the regulatory cloud hanging over the industry threatened to undermine that progress entirely.
International Precedents
The frustration was not isolated to a single company. Union Square Ventures partner Fred Wilson, a veteran venture capitalist who serves on the boards of both Coinbase and Kik, published his own blistering critique. “For as long as I have been involved in the crypto sector, I have been advocating and advising that companies work with the SEC, cooperate with them, and educate them,” Wilson wrote. “But that has not worked. I am frustrated. So are many others.”
The contrast with international markets was stark. While American firms like Circle and Coinbase invested heavily in compliance infrastructure — acquiring broker-dealers and registering as Alternative Trading Systems — Asian exchanges operated with what Allaire described as “complete disregard of any guidance from the U.S.” These offshore platforms, many run out of China, ignored registration requirements, anti-money laundering laws, international sanctions rules, and U.S. securities laws. The result was a deeply uneven playing field: non-compliant exchanges could list a far wider range of assets at lower cost, while simultaneously capturing market share from their law-abiding American competitors.
“U.S. regulators need to understand that the U.S. is falling behind, and that innovation is happening further, faster outside of the U.S.,” Allaire warned. “Companies that may develop intellectual property in the U.S. are building their corporate structures and operations outside the U.S.”
Enforcement Reality
At the heart of the industry’s grievance lay the SEC’s April 2019 framework for analyzing whether digital assets constituted investment contracts under the Howey test. Rather than providing clarity, the framework deepened confusion. Allaire argued that crypto tokens could simultaneously function as investment contracts, commodities, utilities, and payment instruments — a multifaceted nature that defied the SEC’s binary classification system.
“A single token can be something that has investment contract features — maybe it generates a yield for people, revenue, income generation, there’s some financial feature,” Allaire explained. “The same token can also be a commodity and utility that is used for consuming or accessing a service, network, resource or application, and it can be a payment token or currency. And it can be all three. If you try to treat these things as securities and try to regulate them under the rules that exist for securities in the United States, the utility and currency features are immediately destroyed.”
The regulatory burden extended far beyond the SEC. Coinbase’s chief legal officer Brian Brooks noted that crypto companies had to navigate a patchwork of regulations across more than 60 different jurisdictions within the United States alone, with individual states developing their own crypto-specific laws. “On top of that, parallel work among the SEC, the CFTC and other federal agencies adds further complexity and ambiguity,” Brooks wrote. “Markets do not necessarily need deregulation but they do need clarity to thrive and clarity is currently lacking here.”
The breaking point came with the launch of DefendCrypto.org, an initiative spearheaded by Kik and announced on the Unchained podcast on May 28, 2019. The platform solicited donations from the crypto community with the explicit goal of funding a legal showdown with the SEC. Circle joined the effort, signaling that even the most compliance-focused companies in the space had lost patience with the commission’s “regulate by enforcement” approach.
Market Shockwaves
The regulatory uncertainty cast a long shadow over an otherwise recovering market. Bitcoin had surged past $8,600, fueled by growing institutional interest and anticipation of broader adoption. Ethereum held steady above $269, with developers continuing to build on the platform despite the legal ambiguity. XRP traded at $0.44, with Ripple Labs facing its own SEC scrutiny that would eventually culminate in a landmark lawsuit.
The SEC, for its part, declined to comment on the industry’s criticisms but pointed reporters to its FinHub page, which announced a public forum on digital assets scheduled for May 31, 2019. The event would be open to the public and webcast — a small concession that did little to address the core complaints about the lack of formal rulemaking or clear guidance.
Wilson perhaps captured the sentiment best when he wrote that the SEC’s “unwillingness to come up with new rules paired with their ‘regulate by enforcement’ strategy is hurting the crypto sector, pushing it offshore, and is causing most of the new projects to raise capital outside of the US and/or put together legal structures that look like Frankenstein monsters.”
Closing Thoughts
The events of May 29, 2019 marked a turning point in the relationship between the cryptocurrency industry and U.S. regulators. For the first time, the sector’s most established and compliance-oriented companies publicly abandoned diplomacy in favor of confrontation. The formation of DefendCrypto.org represented a collective decision that engagement had failed and that only legal action — or the threat of it — could force the SEC to provide the clarity the industry desperately needed. The question was no longer whether the regulatory status quo was sustainable, but how much damage would be done before it finally changed.
Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or investment advice. The views expressed are based on publicly available information from May 2019 and do not reflect subsequent regulatory developments.
Allaire spending hundreds of millions on compliance and getting geofenced anyway was the moment crypto realized SEC engagement was a trap
circle spent hundreds of millions on compliance and still got forced to geofence 9 assets. the SEC strategy was literally regulate by exhaustion. bleed companies dry until they give up
the talent drain to Singapore and Dubai was already starting in 2019. Circle going public just accelerated it. 6 years later the US is still playing catch-up
Allaire published public letters because the SEC doesnt respond to private ones. going public was the only move left after years of being ignored
circle spent hundreds of millions on compliance and still had to geofence assets. the SEC playbook is just weaponized ambiguity
geofencing 9 assets from US customers while the rest of the world traded freely. american exceptionalism at its finest
circle spent hundreds of millions on compliance and their reward was being forced to geofence their own product. the ROI on SEC engagement was literally negative
SEC made compliance impossible and then punished companies for non-compliance. the ROI on engaging with them was literally negative
jeremy allaire publishing public letters because private engagement got him nowhere. that tells you everything about the process
allaire publishing public letters because private engagement failed. when the compliance route burns you that badly, going public is the only leverage left
going public was strategic but the audience was other crypto people. actual policymakers were not listening
poloniex was the canary in the coal mine. circle bought it for $400M then had to gut the listing because SEC wouldnt give clear guidance. lost the entire premium they paid
the irony is allaire was one of the most pro-compliance CEOs in crypto and he still got steamrolled. playing by the rules bought him nothing but legal bills
circle spent hundreds of millions on compliance and still got geofenced. the SEC doesnt want compliance, it wants submission
the US geofencing 9 assets while the rest of the world traded them freely is why crypto talent moved to singapore and dubai. policy has consequences
Jian Liu singapore and dubai ate the US lunch on crypto talent. 6 years later still trying to claw it back with FIT21 and stablecoin bills
geofence_ FIT21 came 5 years too late. the talent that left in 2019 aint coming back. singapore built a whole industry on US regulatory fumbling
circle proved you could do everything right compliance wise and still lose. the system was never designed to let crypto companies win domestically
rest of the world traded freely while US customers got locked out. american crypto policy was a gift to singapore and dubai on a silver platter
Jian Liu singapore and dubai didnt just eat US lunch, they built an entire parallel industry. the 2019 Circle geofence was the starting gun
Dmitri V. Singapore didnt just eat US lunch, they built the entire regulatory framework that made US companies want to relocate. proactive vs reactive regulation
hundreds of millions on compliance just to get geofenced. Allaire should have just moved operations to Singapore in 2018 and saved the shareholders a fortune
compliance_tax_ hundreds of millions spent and they still got geofenced. at some point you stop engaging and just move operations. Circle should have gone to Singapore in 2018
compliance_tax_ hundreds of millions on compliance just to geofence your own product. circle was the case study for why engaging with SEC was a losing strategy
burning hundreds of millions on compliance just to geofence your own product. the SEC playbook is weaponized ambiguity and circle was the test case