The U.S. government is trying to kill Binance (BNB-USD). Or, at the very least, mold the company to its desired image.

Crypto evangelists love to brag that the crypto world is borderless. It’s a world supposedly unbeholden to government rules. And yet, in the last couple of years, investors have seen all sorts of regulations from around the world clamp down on digital money and assets. As it turns out, it’s much harder to be a “borderless” market in a world demarcated heavily by borders.

Nowhere is this clearer than in the recent fall of FTX. The supposedly international trading platform has quickly found itself in American bankruptcy courts with both the Department of Justice (DOJ) and Internal Revenue Service (IRS) on its heels. Put another way, we’re watching the start of a head-on collision between cryptocurrency and America’s sphere of influence in real time.

These same forces are now coming for Binance, one of the largest crypto companies in the world, and one of the most outspoken. It claims no home state, and it moves billions of dollars in investors’ assets every single day. Now, it alleges the U.S. is using new laws to box it out of the booming crypto market America has created for itself.

Indeed, it says government officials are using long-disputed claims of Binance’s ties to China to justify its unequal treatment. The result is a power struggle of epic proportions. In one corner, the U.S. is fighting to become a global hegemon in crypto regulation. FTX is only the start. And in the other, Binance is staunchly defending its turf as an independent, “borderless” crypto exchange. Only one will win, and America is a heavy favorite.

Established Borders in a “Borderless” Market

Part of crypto’s appeal is that on a surface level, it is massively different from any other investment class. You don’t need to buy it on a stock exchange, you don’t need a bank account attached to any of your trades, and you don’t need to wait for trading to open and close each day. The crypto world moves incredibly quickly, oftentimes more so than the stock market, which relies on a long chain of brokers and clearing houses.

These pluses come from the market’s purported borderlessness. Without belonging to any single nation’s economy, the market allegedly does not have to comply with government regulations and bureaucratic red tape. This has allowed for projects like Ripple (XRP-USD) and Stellar (XLM-USD) to emerge, taking traditional banks to task by offering faster cross-border payments.

Since its very onset with Bitcoin (BTC-USD), crypto has attempted to distance itself from any national affiliation. At its core, the Bitcoin project allows any two people with crypto addresses to send BTC from one to the other. There is no bank involved, there are no brokers. It’s the purest, simplest form of money movement in the world.

But for all of the utopian visions of a completely borderless financial system, crypto is not going to stay beyond the scope of traditional finance and economics for long. Already, we see nations leaving their influence on the cryptocurrency world. China outlawed crypto transactions entirely, cutting an entire segment of users from the market. India has implemented a 30% capital gains tax on crypto investments, strong-arming users within its borders to pay for their participation. Some projects are getting ahead, like Ripple, which has been collaborating with traditional banks for years, helping to boost its own favor.

America’s Global Economic Dominance

Not coincidentally, the U.S. has been joining the ranks of countries fascinated by the crypto market. And of course, it doesn’t want to participate in crypto, the U.S. government wants to dominate crypto. This lust for authority is exactly what is driving the construction of borders within the market.

The U.S. has a long history of commanding global industries. Oil, drug manufacturing, and even, infamously, banana plantations have seen the far-reaching arm of the U.S. federal government and private corporations. Tech is no new ground for America; by one estimate, the U.S. comprises three-quarters of the entire information technology sector, nearly monopolizing both the software and hardware industries.

As it stands now, the blockchain industry is expected to surge north of $104 billion by 2028. This expected boom, driven by a compound annual growth rate (CAGR) of nearly 56%, is projected largely due to the pivoting of American tech giants toward the space — companies like Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Oracle (NYSE:ORCL) and others. Meanwhile, the country is seeing a renaissance of startups grabbing global attention by way of FTX, Coinbase (NASDAQ:COIN) and ConsenSys.

U.S. Homing in on a Lucrative New Tech

Crypto is a natural new target for the U.S. It has only been around for about 13 years, and the technology that crypto depends on has some interesting and useful real-world applications. The market has also seen tremendous growth since 2019. Although it’s in a downturn now, the global crypto market capitalization was over $2 trillion in the fall of 2021. It’s hard to not notice such an explosive industry.

So, a collision between America and crypto was not a matter of if, but when. And the when seems to be 2022, at least in terms of getting the ball rolling. President Joe Biden’s executive order from March lays the groundwork for a robust set of regulations and even a central bank digital currency (CBDC).

In the months since the government has caught plenty of flak from the crypto world. It has taken much criticism already for attempting to curb aspects of the market it doesn’t like. Most infamous is the Department of the Treasury’s decision to sanction crypto mixing service Tornado Cash. Many crypto investors see the move — which bars Americans from using the service and led to the arrests of its developer in the Netherlands — as a direct violation of the First Amendment’s guarantee of free speech.

And this is just a drop in the bucket in terms of the country’s plans to transform crypto.

U.S. Government Playing “Crypto Bouncer” to Its Citizens… And Companies

After picking what projects its residents will have access to, the U.S. government now seems to be picking and choosing what non-American entities it wants working with American companies. Biden’s “protectionist” executive order on foreign investment is one piece of evidence. But, the recent drama surrounding Binance’s bid for Voyager Digital’s assets is perhaps the most damning evidence of America’s efforts to monopolize the crypto market.

In May, when the crypto market crashed, it dragged a multitude of crypto investing companies down with it. Among those is Voyager Digital, a New York-based firm that held nearly $6 billion in assets before tumbling into bankruptcy over a matter of weeks. Companies that weathered the storm more easily, like Binance, have been interested in buying out its assets. When the bankruptcy court ordered an auction for Voyager Digital’s remaining valuables, the more well-to-do entities raced to place bids.

The auction came down to bids between FTX and Binance. Ultimately, FTX won the auction with a $1.4 billion offer. However, the results have led to much controversy. Binance asserts that the U.S. government ensured an unfair advantage for FTX in the bidding process to keep foreign entities out.

Binance Asserts Foul Play in Voyager Digital Auction

The U.S. has taken many liberties in its policing of the crypto world. The way in which the Securities and Exchange Commission (SEC) chooses projects to investigate is fairly arbitrary, and the only evidence it needs to launch such investigations is a precedent set by a 1940s Supreme Court case that came about many decades before “digital money” existed.

This Binance story is just another way in which the country is bending its rules in order to push around a non-American entity — at least, that’s what Binance asserts. The complaint stems from the fact that the Committee on Foreign Investment in the U.S. (CFIUS) asked Binance to put extra money on top of its Voyager Digital bid as “insurance,” in case a CFIUS review caused the bidding process to be delayed.

Both companies bid roughly the same amount, and Binance asserts that the CFIUS request is largely responsible for it losing the auction. Moreover, the request came as a surprise, as the five-year-old company has been investing in the U.S. for years now and says it has never before been asked for this type of insurance payment.

In February, Binance invested $200 million in Forbes. In September, with the Voyager Digital auction underway, the company’s Binance Labs venture capital arm invested an undisclosed amount into Palo Alto-based Aptos Labs. The company has even contributed $500 million toward Elon Musk’s acquisition of Twitter. So, what gives?

The U.S.-China Tech War

Much of the controversy surrounding this battle between Binance and Capitol Hill is centered around the U.S.-China tech war. Binance says the U.S. is deliberately mischaracterizing the company as having a Chinese base. Those who ascribe to this theory might think the government is using this incorrect assumption to keep American assets out of foreign hands. Could this story be another brazen step by the United States to selectively choose which countries it will allow to work with its domestic blockchain businesses?

Binance Chief Communications Officer Patrick Hillmann has branded the decision by the CFIUS as “xenophobic”, rooted in the misguided belief that Binance is a Chinese company. And given the timing of U.S. policy decisions, the theory that the U.S. is lashing out suddenly does hold water. After all, the CFIUS inquiry — the first ever presented to the company — comes just days after Biden issued an executive order barring Chinese investment in U.S. technology.

Binance Is Not a Chinese Company

For years, Binance has been fighting a misconception fueled by Binance CEO Changpeng Zhao’s Chinese ethnicity that it is a Chinese company. This is due in large part to the fact that it was a company based in China. Binance was founded in the East Asian nation in 2017 but moved out months later when the Chinese government banned cryptocurrency trading. Nowadays, it has no main headquarters, and refers to itself as an “international” company, as spokesperson Jessica Jung reiterated in the midst of the Voyager Digital fallout.

While he was born in China, Zhao clarifies that his family moved to Canada when he was young. Zhao studied in Canada, and he says that he presently holds only Canadian citizenship. Some confusion also lies in the fact that Zhao did move back to China in the mid-2000s to pursue a career in asset trading technology, kickstarting his career in cryptocurrency.

Binance has also had to make statements on the identity of Guangying Chen, a Chinese woman whose name is listed on early Binance documents as the company’s legal representative while the company was based in China. Zhao explained that Chen was an early employee, and as a Chinese national, her name on company documentation made operations smoother. Nevertheless, the damage had been done. America’s regulators had successfully branded Binance as a “Chinese” company, and the firm now faces multiple CFIUS investigations.

Why Is the U.S. Treating Binance Like a Chinese Tech Giant?

It’s understandable through all of this how the U.S. might have been confused by Binance’s “borderless” operations. But what incentive might the U.S. have to deliberately “misunderstand” the company’s home country?

Well, the U.S. has obviously noticed the blockchain cash cow is on the horizon, and it knows that American companies are drumming up some serious heat on the world stage. Surely, it also notices that Binance is perhaps the biggest force standing in its path to dominating the global market.

Binance is the largest crypto company in the world. It’s a household name, right up there with Bitcoin and Ethereum (ETH-USD). It operates in every country except for the U.S. (a satellite entity called Binance.US serves American customers, operating wholly independently from Binance) and at the market’s peak, the company was processing $76 billion in crypto transactions every day.

Binance truly is the Amazon of crypto trading. And just as Amazon has found itself influencing world politics, so too is Binance cozying up to governments around the globe. The company stands a legitimate chance of influencing politicians in ways that would help it thrive.

By curbing the influence of Binance on the crypto industry, the U.S. could help its own companies make headway in leading it. Atop the global economic benefits of doing this, whipping the crypto world to its preferred image would have domestic benefits. Surely, the politicians credited with paving the way for a new cash cow will receive great praise for it.

The 2024 election will be a formative one for the next era of American politics. It will also be one in which the two dominant political parties will take hard stances on the matter of cryptocurrency. Both sides will be vying for the credit of bringing billions to the country through this new industry. President Biden, who already set the pace as the first president to introduce a comprehensive policy strategy on crypto, will need to push hard on the industry to appease an electorate that’s only becoming more interested in it.

The U.S. Wants to Set Crypto Regulation Precedents

By the year 2024, it’s safe to assume Americans will be seeing the first wave of crypto laws coming down the pipeline. More lawmakers will be hip to the market’s operations. More legislature like Senator Cynthia Lummis’ robust crypto bill will see deliberation. And, more agencies will have greater expertise on blockchain technology as they continue to research the market as part of Biden’s first crypto executive order.

Not to mention, 2024 is a major year for American politics. Up for re-election, Biden will be pulling out all the stops to once again defeat likely challenger Donald Trump. With crypto becoming a new policy focus, crypto fanatics will be weighing any stances the candidates have on the matter. Biden has a chance to get in the good graces of these constituents by signing responsible regulations into law.

And, as stated previously, the U.S. is often a bellwether for global policy. Thus, it’s safe to assume that many countries will be taking the U.S.’s lead when these policies come into law.

Hampering International Competitors

If the U.S. hopes to set the pace for the rest of the world, it will likely want its own companies leading the market. After all, Capitol Hill and FTX founder Sam Bankman-Fried are already no strangers to each other. The billionaire entrepreneur has testified in Congress, spent millions on campaign donations and even dropped by the White House for a special meeting with Biden’s advisors.

Of course, Capitol Hill and Binance are also not exactly strangers either. But, Binance attracts attention for all the wrong reasons. It is the target of SEC probes, allegations of sanctions violations and the focus of Department of Justice case files. Meanwhile, FTX’s downfall was manufactured by the company itself, not by regulators. Running with little supervision, FTX was able to hide its turmoil behind the scenes until an insider catalyzed its epic collapse in early November. And outside of the odd probe by state regulators, FTX had been free from the scrutiny Binance faces up until its collapse, even as it operated to a similar magnitude.

By mischaracterizing Binance, accidentally or purposefully, the Treasury blocked the company from further growth. More importantly, it allowed FTX to line itself with more valuable assets to grow as a crypto powerhouse.

The Voyager Digital auction aside, the constant probing of a company that doesn’t even operate within America is evidence enough that the U.S. has it out for Binance. Knowing the context of the company’s massive operations and involvement in global politics allows one to deduce why that might be. And this deduction only grows stronger when one sees the momentum American companies are generating on the world stage.

So What Comes Next?

The era of borderlessness in cryptocurrency is almost over. There is a China-shaped hole in the market, and users everywhere are beholden to local laws and tax provisions whether they want them or not.

The U.S. is loath to miss an opportunity to lead the rest of the world. And, with competitors like China and Russia bowing out of the market completely, there’s reason to believe it will be able to do just this. Blockchain stands to be a technological Manifest Destiny – America just needs to deal with its adversary first.

So what comes next for Binance?

There’s enough evidence to suggest that regulators are making purposeful, anti-competitive moves to the benefit of American companies, all while preventing further growth for Binance. Take, for example, the ongoing probe into Binance’s sanctions violations. The Justice Department is looking to potentially criminally charge Changpeng Zhao for these violations by his company. Meanwhile, American exchange peer Kraken faced a paltry $362,000 fine for the same exact activities and has resumed business as usual.

With this in mind, it’s safe to assume that Binance has a bigger target on its back than regulators have let on until this point. 2024 is set to be one of the most fierce political battles yet, and the crypto market has grown large enough to demand a robust infrastructure by then. Certainly, Binance will be a focus of these coming regulatory demands. The U.S. might not be able to destroy the company entirely, but it is certainly trying to get Binance to bend the knee to its ultimate vision for the future of crypto.

On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.