A prominent cryptocurrency advocacy organization is urging the U.S. Securities and Exchange Commission (SEC) to reassess its crypto-related policies in the wake of the incoming leadership. In order to reestablish trust between the regulator and the crypto industry, the group has suggested a comprehensive evaluation of all ongoing investigations, enforcement actions, and lawsuits.
The advocacy group underscored the necessity of mutual trust and collaboration in a recent statement. “The digital asset industry needs confidence in the SECâ€TMs intentions, while the SEC must recognize that most participants strive to operate responsibly,” according to the report.
The SEC’s enforcement-heavy approach has led to ongoing legal disputes with significant crypto participants, such as Binance, Coinbase, and Ripple. The Wells notices issued to enterprises like Uniswap and Immutable have further questioned the agency’s regulatory strategy.
Eliminating regulation through enforcementOne critical suggestion is that the SEC transition from enforcement as its primary regulatory instrument. Rather, the organization promotes the establishment of explicit guidelines to encourage innovation and compliance.
The group also advocated for the revocation of the SEC’s 2019 framework, which applies the Howey test to digital assets, arguing that it establishes an unequal playing field. They additionally criticized the interpretation of the controversial Hinman speech, which has impacted regulatory decisions.
Another issue is the Staff Accounting Bulletin 121 (SAB 121), which mandates that crypto custodians classify their holdings as liabilities. Critics contend that this regulation imposes an undue burden on the industry and may encourage U.S. investors to pursue riskier investments abroad.
A new chapter in the leadership of the Securities and Exchange CommissionThe prospective leadership presents an opportunity for change, as SEC Chair Gary Gensler is preparing to retire. We anticipate Paul Atkins, a former SEC commissioner and advisory board member, to assume the leadership of the advocacy organization.
The group has also proposed revisiting Rule 3b-16 to expand the definition of “exchanges” to include decentralized finance (DeFi) protocols. Opponents contend that this could stifle innovation by excessively regulating emergent technologies.
In a recent meeting with SEC commissioners, representatives from the advocacy group presented their recommendations, underscoring the necessity of balanced policies that promote industry development while safeguarding investors.
The clamor for reform reflects a growing demand for a regulatory framework that supports innovation without compromising investor protection.
