Crypto Sector’s Shift in Regulatory Landscape

While the crypto sector’s eyes are drawn to the policy fireworks in the White House and Congress, financial agencies have been making significant changes to the Biden Administration’s stance on digital assets.

Policy Changes

The acting chiefs of banking and securities regulators are gradually unwinding policies that previously restricted the digital assets industry. A U.S. Securities and Exchange Commission (SEC) roundtable is set to explore the complex legal definition of crypto securities, potentially paving a way forward.

Despite the awaited Senate confirmations for permanent leaders at the SEC, the Commodity Futures Trading Commission (CFTC), and banking agencies, these entities are actively revising policies. Attention is also focused on President Donald Trump’s initiatives regarding a U.S. Bitcoin reserve, and Congress is progressing on U.S. crypto laws, albeit slowly.

Adam Pollet, a securities lawyer at Eversheds Sutherland, describes this as a moment of reset in the regulatory framework. The SEC seems to indicate a willingness to let the crypto industry innovate without stringent oversight.

SEC’s Withdrawal

The SEC has retraced its steps on various issues previously seen as threats to the industry. High-profile cases, like the accusations against Ripple, have been dropped, leading to perceptions of a policy vacuum that allows for further development in the crypto space.

The SEC’s dismissal of Staff Accounting Bulletin No. 121 and other proposed regulations signals a new, more permissive climate for crypto operations. This rapid alteration in policy, noted Pollet, appears unprecedented.

While the SEC warns investors about unregulated assets (like memecoins), it is also seen as leaning towards a more supportive regulatory environment. Similarly, the CFTC is developing a pilot program for stablecoin-backed tokenization, allowing companies to experiment without the typical regulatory pressures.

Banking Sector Relaxation

Banking regulators, including the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corp. (FDIC), have revised their stances. The OCC recently rescinded guidance that required banks to obtain approval before engaging in crypto activities, thus enabling banks to issue stablecoins and venture into digital assets more freely.

The FDIC leadership is also reassessing its approach to crypto-related activities, indicating a shift towards a clearer crypto mandate across agencies.

Remaining Uncertainties

Despite these changes, uncertainty persists. Federal guidance on crypto remains inconsistent, relying on state regulations and ambiguous federal court rulings regarding crypto classifications under the Howey test. Congressional action will ultimately be necessary to establish definitive standards.

As the SEC appears to adopt a more open dialogue with industry firms, the upcoming roundtable aims to tackle the complexities of defining crypto assets as securities—a central question for future regulation.

The new SEC nominee, Paul Atkins, is viewed as a more traditional leader likely to maintain stability rather than initiate dramatic changes. Observers expect that his approach will reflect a recognition of crypto’s permanence and a desire for thoughtful federal regulation.

Read More: Crypto’s IRS Victory Reveals Reach in Congress That Demands Less Compromise