(Aug 7): Aspiring crypto hubs including Hong Kong, Singapore and Dubai, face a more challenging outlook as a brightening US political backdrop for digital assets attracts the attention of companies and investors.

Despite this month’s selloff in crypto markets, optimism in the industry remains high that the regulatory tide is turning in the US. Republican presidential candidate Donald Trump is courting the sector in search of donations and votes, pledging to make the US the “crypto capital of the planet”, in part by firing Securities and Exchange Commission chair Gary Gensler, who cracked down on digital-asset firms for flouting rules.

Prospective Democratic nominee Kamala Harris has yet to take a stance on crypto but there are signs that her advisers are seeking a reset of ties with the industry, according to a report in the Financial Times.

These trends point to the crypto centre of gravity tilting further back to the US, a shift that began with the successful debut of the nation’s first spot-bitcoin and ether exchange-traded funds (ETFs) this year. Those products now face their first major test, after a sharp selloff in crypto assets that peaked on Monday, when bitcoin sank more than 16%.

Venture capitalists are already mulling more US investments and companies are weighing personnel moves.

Capital flows

“Due to the hostile regulatory environment in the US, the availability of opportunities shifted overseas over the last couple of years,” said Cosmo Jiang, portfolio manager at Pantera Capital, the investment firm. “As the US continues to make progress and that shifts back, so will our capital allocation.”

While Trump’s pro-crypto stance is a volte-face — he previously dubbed the sector a “scam” — the overall US backdrop suggests the SEC clampdown has peaked. The likes of Hong Kong, Singapore, Dubai and European nations may have to work harder to woo investment into their digital-asset hubs.

Copper Technologies Ltd, a London-based crypto custodian, is considering a fresh focus on the US market, in the event of a Trump victory, according to a person familiar with the matter, who was not authorised to speak publicly.