Washington Finally Stopped Treating Crypto Like a Crime, But That’s Not Enough

By Nish Chari, General Counsel at Alchemy

The Past 

Just a few years ago, the crypto industry had begrudgingly accepted that launching crypto products in the U.S. would inevitably result in receiving a Wells notice from the SEC, kicking off a long and costly investigation process. Indeed, this was precisely the unfortunate rite of passage that many of the industry’s largest and most established companies had endured, including Coinbase, Ripple, Robinhood, Uniswap Labs, and many others. These companies all found themselves facing investigations, enforcement actions, or years of litigation while awaiting commonsense guidance regarding how digital assets would be handled from a legal and regulatory standpoint, given that the existing rules applicable to traditional financial instruments often made for an odd fit. At a high level, most financial laws and regulations assume the existence of an intermediary such as a bank, exchange, or clearing house, and blockchain technology enables peer-to-peer exchange of value without an intermediary.   

Some may argue that, in the wake of the FTX collapse, it was entirely appropriate for regulators to take a harder look at an industry that had suffered a significant loss of public trust. However, a closer review of the facts reveals that the conduct at FTX consisted of garden variety fraud and misuse of customer funds, albeit on a massive scale, that merely happened to occur at an offshore cryptocurrency exchange. There was nothing unique to crypto about what occurred.