When the spring breeze rises, how will the subsequent compliance of cryptocurrency proceed?
Written by: Pzai, Foresight News
According to the Wall Street Journal, the SEC abandoned its investigation into Uniswap Labs on February 26. Previously, the SEC had also dropped or postponed investigations into OpenSea and Coinbase.
Since Gary Gensler took charge of the SEC, there has been considerable criticism regarding the regulation of the cryptocurrency sector in the United States. As the cryptocurrency market has gradually flourished, the fines imposed by the SEC have sharply increased in recent years, reaching as high as $4.7 billion in 2024, surpassing the total of the past six years (with the Terraform Labs UST incident accounting for a significant portion). Over the past decade, the SEC has issued fines totaling nearly $3 billion in the field of digital assets.
However, with the rise of Trump, the active embrace of cryptocurrency has prompted the SEC to begin implementing regulatory processes that tighten control over the cryptocurrency sector, even reaching a point of "vacuum" to some extent. On February 4, the SEC released the work plan for its cryptocurrency working group, marking a significant transformation in the U.S. regulatory landscape for cryptocurrencies. This working group aims to bring more clarity to the regulatory framework for crypto assets while maintaining support for innovation. What does such a significant shift mean for the market? As the spring breeze rises, how will the subsequent compliance of cryptocurrency proceed?
Regulatory Shift
Previously, the SEC's regulatory storm had spread to several exchanges (such as Binance, Coinbase, Kraken, etc.) and top cryptocurrency protocols (such as Ripple, TON, Consensys, etc.). Ripple Labs attracted attention in the crypto market due to its involvement in whether XRP should be classified as a security under U.S. law, facing a fine of $125 million, while Telegram was fined $1.24 billion for illegally selling unregistered tokens in its TON token issuance. This also highlighted that in previous regulatory trends, the SEC focused on specific company case regulations rather than broad regulations in the cryptocurrency field, creating uncertainty in the sector.
With the victory of the cryptocurrency industry, 18 states in the U.S. have accused the SEC and its commissioners of overstepping their constitutional authority and treating the cryptocurrency industry "unfairly" as of November 2024. In a September 2024 interview with Foresight News, SEC "crypto mom" Hester M. Peirce expressed disappointment with the regulatory policies at the time: "I am frustrated by our lack of progress, which motivates me to continue advocating for better interaction with the crypto world. I hope to see a future direction for the SEC where it exists not just as a 'Securities and Enforcement Commission,' but where crypto projects feel they can truly come and communicate with us and register when necessary."
After this turning point, Teresa Goody Guillén, a former litigation advisor to the SEC and partner at BakerHostetler law firm, also predicted that the number of cases the SEC brings against cryptocurrency companies will decrease in the new year, and in the future, it can only file lawsuits in cases involving securities.
Further Reading: Interview with SEC "Crypto Mom": Behind the $3 billion in fines over 10 years is insufficient regulatory progress in the U.S.
The New SEC
In its recent actions, the SEC has indeed been steadily advancing the "compliance" of cryptocurrency regulation, including withdrawing appeals against rules rebutting crypto traders; promoting cryptocurrency classification and regulatory frameworks; and suspending and withdrawing lawsuits against crypto mining company Geosyn Mining, trading platform Robinhood Crypto, NFT platform OpenSea, DEX UniSwap, and other project entities.
In this broader context, the approval of ETFs is also accelerating, with rapid progress even in ETF staking. On February 20, Fox reporter Eleanor Terrett reported that according to sources who recently spoke with the SEC, the agency is "very, very interested" in staking, and the cryptocurrency working group met with representatives from Jito Labs and Multicoin Capital on February 5, with main topics including the possibility of including staking characteristics in exchange-traded products (ETPs) and potential models for equity staking in crypto asset ETPs.
Behind these frequent actions, the newly established SEC cryptocurrency group in February this year has played an important role. This working group aims to systematically address the legal uncertainties faced by the industry and enhance the transparency and predictability of regulation. As the leader of this working group, Peirce stated in the cryptocurrency group's work plan that the primary task of the group is to address the status of crypto assets under securities law, clarify the securities classification of crypto assets, and develop corresponding regulatory frameworks based on this, while providing a temporary exemption path for compliant projects.
In this section, Pierce summarized several core work points:
Clarifying Boundaries: The working group operates strictly within the SEC's statutory authority while actively collaborating with other regulatory agencies to build a comprehensive and coordinated regulatory system. Among these, promoting the implementation of a cross-border sandbox is a key initiative. Within this sandbox, projects can conduct limited experiments based on different countries' regulatory frameworks within a defined scale and time frame.
Steady Progress: Due to the high complexity of cryptocurrency regulation, reform cannot be achieved overnight; it requires significant time and effort to advance gradually. The working group will adhere to orderly and legal principles, proceeding methodically.
Efficient Processing: To better meet the needs of industry development, the working group will strive to accelerate the processing speed of exemption applications, no-action letters, and registration statements, improving work efficiency and reducing unnecessary time costs.
It is encouraging to see that from the SEC's perspective, Pierce and her team have become a stabilizing force in advancing regulation in the cryptocurrency sector. In previous interviews, she stated: "I hope we can tell people that the U.S. SEC is open to innovators from anywhere. We want people to come here and build things, just as people come from all over the world to invest in our capital markets because our market is a very good market. I hope the quality of our market becomes the reason people decide to come here."
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