US Crypto Reform Stalls as SEC and CFTC Move to Shape Digital Asset Rules

The risks of such a scenario were illustrated by the Trump administration itself, which repealed or revised dozens of SEC and consumer protection policies adopted under President Joe Biden.

Some crypto business executives fear that a future administration could restore a tough approach similar to the policies of former SEC Chair Gary Gensler. Under Biden, the SEC filed lawsuits against dozens of crypto companies, arguing that their tokens were securities and that the companies themselves should have registered with the agency.

Josh Riezman, chief legal and strategy officer at crypto trading company GSR, expects the SEC and CFTC to quickly introduce sweeping rules that will benefit the industry in the short term.

But then, depending on what happens with the next administration, we could end up with a scenario very similar to a potential Gensler 2.0.

– Josh Riezman

Gary Gensler previously justified aggressive enforcement by pointing to the widespread prevalence of fraud in the crypto sector. He did not respond to a request for comment.

A CFTC representative said the Clarity Act is important for preserving U.S. competitiveness and that Congress should seize the opportunity to introduce “durable” rules.

If that does not happen, the CFTC is ready to defend America’s leadership in financial markets and ensure that we remain the cryptocurrency capital of the world.

– CFTC representative

Democrats’ Position on Crypto Regulation

Donald Trump, who drew funding from the crypto industry during his campaign, made reforming digital asset regulation one of the priorities of his second administration. His appointees to the SEC and CFTC quickly changed the Biden-era approach, supported the industry, and withdrew some enforcement actions.

SEC Chair Paul Atkins presented a broad plan to adapt capital market rules to cryptocurrencies. CFTC Chair Michael Selig approved perpetual bitcoin futures this year – highly leveraged derivatives. Crypto company executives expect the CFTC may allow similar perpetual futures for other assets as well.

Many Democrats also support creating a regulatory framework for cryptocurrencies, but insist on stricter safeguards against money laundering, fraud, and conflicts of interest than Republicans do.

This could complicate the work of the SEC and CFTC from the outset. Polls indicate that the Democratic Party has a chance to regain control of the House of Representatives in the November midterm elections. In that case, Democrats would have greater ability to oversee regulators’ decisions.

Lawsuits Could Slow New Cryptocurrency Rules

Traditional Wall Street firms that oppose certain cryptocurrency initiatives by the SEC and CFTC could also create obstacles to reform.

For example, CME Group filed a lawsuit against the CFTC in June over its decision to approve perpetual cryptocurrency futures. Meanwhile, the Securities Industry and Financial Markets Association urged the SEC to consider restrictions as part of a plan involving blockchain-based stock trading.

Legal proceedings could block the implementation of new rules for a long time. This could give the next administration an opportunity to delay, rewrite, or completely abandon the initiatives – just as Trump’s regulators reviewed Biden-era financial rules challenged by business representatives.

Despite these risks, a significant part of the crypto industry believes that even regulatory decisions without legislation would be better than complete uncertainty.

The agencies moving forward simply demonstrates an understanding that we cannot just stand by and do nothing. It will be very helpful, and we welcome their work. But we need something permanent.

– Summer Mersinger, CEO of the Blockchain Association

Therefore, the SEC and CFTC could significantly influence the U.S. crypto market in the near term, but without a decision from Congress, the industry will have no guarantees that the new rules will remain in place after a change in political power.