Original title: (Gary Gensler "abdicates"? What changes will occur in the SEC's crypto regulation under Trump 2.0)
Wish source: BitpushNews
introduction:
On November 14, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler spoke at the Bar Association’s 56th Annual Conference on Securities Regulation, reflecting on his experience leading the agency’s team.
“I am deeply honored to work with them, to serve our people and to ensure that our capital markets continue to be the best in the world,” he said. “I am proud to work day in and day out with my colleagues at the SEC to protect American families in the financial markets.”
It was very much a farewell public speech. Some sources said Gensler might resign, as other SEC leaders have done in the past. However, he could also decide to remain as commissioner.
text:
Given that Donald Trump campaigned on a promise to create a pro-crypto government, his election as president could have a significant impact on the cryptocurrency industry.
Trump will be able to appoint a new SEC chairman who may decide to take a different approach to cryptocurrencies than the one under current chairman Gary Gensler. Under Gensler, the SEC has brought multiple enforcement actions against members of the crypto industry alleging violations of federal securities laws, including actions solely for failing to register as a broker-dealer, clearing agency, or national securities exchange under the Securities Exchange Act of 1934 (the Exchange Act). However, the SEC has not proposed rules specific to crypto assets, but rather has suggested that current statutory and regulatory requirements could be applied to crypto assets.
Crypto industry practitioners disagree and report that their attempts to engage with the SEC on crypto-related issues have been unsuccessful. However, with the upcoming appointment of a new SEC chairman, this approach may change, so members of the crypto industry should begin preparing to engage with the SEC once the new leadership is confirmed.
Under new leadership, the SEC could take a number of different approaches, including:
Suspension of Enforcement Actions Based Only on Registration Violations: The SEC has brought multiple enforcement actions against cryptocurrency companies solely for violations of the registration provisions of the Securities Act or the Exchange Act without allegations of fraud or other misconduct. The new SEC leadership may suspend further enforcement actions based solely on registration violations until a clear framework is developed for regulating crypto assets and crypto asset trading intermediaries.
Release updated guidance on determining when a crypto asset is sold as a security: It has been more than five years since the SEC staff issued its “Framework for the ‘Investment Contract’ Analysis of Digital Assets,” which described situations in which a digital asset is offered and sold as an “investment contract” (and therefore a security). Since then, the crypto industry has changed significantly. For example, many crypto projects have matured and become more decentralized, and proof-of-stake consensus has become prevalent. However, the SEC has not yet issued additional guidance. The SEC could update the framework to take into account changes in the industry over the past five years and explain why certain crypto assets, such as Bitcoin and Ethereum, are not offered and sold as securities. New guidance could also address asset-backed stablecoins, which are now one of the most prominent uses of crypto assets.
Proposing Crypto Rules: The SEC could propose tailored rules that take into account the differences between crypto assets and traditional securities. To date, the SEC has largely refused to acknowledge the differences between crypto and traditional securities in its rulemaking, despite dissent from industry members and legal challenges. Instead, the SEC has broadly pursued securities rules and stated in proposed and adopted versions that they would also apply to “crypto-asset securities.” In some cases, these rules were finalized because industry members had concerns about the application of the rules to crypto assets and whether the SEC was complying (Administrative Procedure Act).
Using its exemptions: The SEC can use the general exemptions Congress granted under Section 28(13) of the Securities Act and Section 36(14) of the Exchange Act to provide tailored relief from requirements of those acts that may present challenges to crypto market participants due to the differences between crypto assets and traditional securities. The SEC can also issue additional no-action positions, declining to bring enforcement actions against companies engaging in certain crypto asset activities, as a temporary stopgap measure until crypto-specific rules can be proposed or adopted.
Update Special Purpose Broker-Dealer Statement: The SEC could update its 2020 temporary no-action position to enable “special purpose broker-dealers” to perform trading and custody functions for “digital asset securities” to make it more applicable to today’s crypto industry and extend the February 2026 deadline. Currently, there are only two registered special purpose broker-dealers, and the scope of the activities they are permitted to conduct and the assets they are permitted to conduct those activities with remains unclear due to the SEC’s lack of guidance on key issues, such as when crypto assets are offered and sold as securities. An update could make that guidance more effective.
Congress may also have a chance to pass cryptocurrency legislation now that Republicans control both the Senate and the House of Representatives. However, even so, the SEC is likely to have a role to play in cryptocurrency regulation. The 21st Century Financial Innovation and Technology Act and the Lummis-Gillibrand Responsible Financial Innovation Act, which recently passed the House of Representatives with bipartisan support, both open up space for the SEC and the Commodity Futures Trading Commission to play a role in digital asset regulation.
Therefore, it is of utmost importance that cryptocurrency market participants consider discussing these related topics with the new SEC administration. Given that Trump’s campaign has made cryptocurrency a priority, the SEC may take a different approach to cryptocurrency, and market participants should be prepared to engage with the new SEC leadership so that the industry’s perspectives can be considered.
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