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- With Congress away, federal agencies play at crypto rulemaking
America’s federal authorities appear ready and more than willing to make life easier for crypto operators, whether or not Congress wants them to.
Compared with the frenzied activity that has surrounded the Senate’s digital asset market structure legislation (the CLARITY Act) in recent months, D.C. has been effectively mute on this subject since the Senate left town for its traditional summer holiday last weekend.
This silence extends to the White House, which has yet to offer any public comment regarding the most recent bipartisan proposal to revise CLARITY’s ‘ethics’ language aimed at reining in President Trump’s ability to profit off crypto ventures.
On August 10, White House crypto adviser Patrick Witt tweeted that “the administration remains fully committed to getting the Clarity Act across the finish line in September. Durable rules, the kind only legislation can provide, are needed now more than ever. But we also can’t afford to wait forever.”
Witt was responding to a tweet referencing an open meeting that the Securities and Exchange Commission (SEC) has scheduled for Friday, August 14. The meeting’s agenda is “to consider whether to issue a release proposing new rules to create a tailored offering regime for certain investment contracts involving crypto assets.”
(The SEC also scheduled a closed meeting for August 13 to discuss injunctive actions, administrative proceedings, resolution of litigation claims, and “other matters relating to examinations and enforcement proceedings.”)
On August 11, Bloomberg reported that Friday’s meeting could see the SEC release further details on its ‘innovation exemptions,’ including plans to allow the tokenization of publicly traded stock and 24/7 trading of blockchain-based shares.
The SEC paused its tokenization plans in May, but that was when confidence in CLARITY’s passage was much higher. Concerns were also voiced at the time over the SEC’s willingness to allow third-party trading of tokenized equities even if the issuers of those stocks weren’t on board with their shares being traded in this fashion.
Bloomberg’s sources claimed the SEC’s revised plan could include an opt-out for share issuers. Other potential revisions could include tighter controls on international access to tokenized equities, as well as “additional anti-money laundering protections such as requiring that platforms that trade digital tokens are U.S. entities.”
Democrats are already crying foul over this attempt to do an end-around Congress. Sen. Chris Van Hollen (D-MD) told Politico that if the administration chooses to “go down this path—putting the crypto industry before everyday investors and consumers—you can be sure we’ll fight back.”
Van Hollen added that the financial sector needs “a level playing field—not special carveouts from the rulebook that gut investor protections and undermine the markets businesses rely on.”
Traditional securities platforms have previously complained that the SEC appears to offer crypto platforms greater regulatory leeway than to incumbents. While not all Wall Street firms oppose tokenization, those firms that do could inject sand into these gears by mounting legal challenges to any SEC moves.
Potentially worse, an anonymous Senate Democratic aide warned that any effort by the SEC to go it alone “could potentially poison the well,” aka convince Dem senators not already opposed to passing CLARITY to embrace a ‘no’ position.
Sen. Elizabeth Warren (D-MA), a reliably strident crypto opponent, expressed her own concerns over the SEC’s plans. Warren claimed Paul Atkins and Michael Selig, chairmen of the SEC and the Commodity Futures Trading Commission (CFTC), respectively, “have made clear that they’re in crypto’s pocket and want to do whatever they can to facilitate whatever it is that crypto wants to do.”
CFTC: Prediction markets aren’t betting, they just use betting lines
The CFTC has targeted August 20 for the inaugural meeting of its Innovation Advisory Committee (IAC), whose members include over a dozen crypto CEOs, alongside senior execs from tech-focused venture capital groups, prediction markets, and more traditional security/commodity trading platforms.
The IAC’s mandate is to offer advice “on complex issues at the intersection of technology, law, policy, and finance” and to “provide insights and recommendations to the Commission to help ensure its regulations keep pace with the rapid speed of innovation on the new frontier of finance.”
On August 6, Selig penned an op-ed for The Economist that claimed The New Era of Finance Needs Innovation More Than Consensus. Selig declared the death of the “assumption that regulatory priorities would emerge through broad consensus among global institutions and regulators from different countries. Instead, America is once again a hub of financial innovation.”
Selig listed some of the crypto regulatory guardrails he’s helped demolish during his brief time in office, arguing that “the future of financial markets will belong to those willing to push boundaries while preserving market integrity.”
Selig warned that access to the U.S. derivatives market “is a privilege” and other countries need to modernize their own regulatory regimes “to reflect evolving market structures and technology advances.” Selig didn’t add ‘or else,’ possibly because retaliation is now just accepted as a given.
