Market Analysis: US SEC Eases Up on Regulatory Witch-Hunt Against Crypto
This year the US Securities and Exchange Commission (SEC) seems to be radically changing its stance on cryptocurrency regulation, which promises a potential big turning point for the crypto space.
Under the leadership of the SEC former chairman Gary Gensler, the agency took an aggressive approach to regulation and often filed lawsuits against various, big and small, cryptocurrency companies. However, Gensler’s time has passed and now under Mark T. Uyeda taking up the position of the acting SEC chairman, there are signs hinting that perhaps the SEC is likely to ease up on its former strict measures of enforcement.
SEC Changing Its Regulatory Approach
Gensler’s last action as the SEC chairman before he left was to make sure the regulator continues its legal war against blockchain company Ripple and filed an appeal against it to the court. In December 2020, before Gensler was appointed to be the head of the SEC, the agency filed a lawsuit against Ripple, accusing it of issuing and selling unregistered securities – the XRP token – and making billions of US dollars on those retail and institutional sales. That put Ripple at the center of the loudest crypto-related legal process in the short history of the cryptocurrency industry.
However, two court rulings – in 2023 and 2024 – were made in favor of Ripple. The first one stated that XRP sales to retail customers did not qualify as securities and the second one reduced the $2 billion fine demanded from Ripple by the SEC to just $125 million. Now, the SEC is trying to appeal both decisions of the judge in court.
That Ripple win was significant not only for Ripple but for the whole crypto and blockchain space and it marked a major milestone. However, as mentioned above, before stepping down, Gensler ordered an appeal to be filed questioning the recent decision of the federal judge. Thus, the SEC has displayed a determination to maintain its regulatory pressure over the digital asset space even as the agency’s leader was about to change.
Now that the SEC has a new leader, the agency is undergoing an internal transformation of how it is going to handle crypto regulation in the future. Uyeda has previously already expressed concerns about the excessive crypto regulation under Gensler and stated that as the new leader has arrived, the SEC intends to focus on bringing clarity into regulation and step away from using aggressive legal action against crypto businesses. Thus it intends to solve one of the biggest problems US crypto firms, including Ripple, have been complaining about – the lack of clearly explained rules of running a crypto business in the USA.
Aside from that, the SEC’s Crypto and Cyber unit is now getting restructured and reports have been emerging that hard enforcement actions against crypto companies may be heavily reduced.
SEC’s Crypto Task Force
This large shift comes at a pivotal time for the crypto industry in the US. Things have begun to change after Donald Trump won the election in November and he is now fulfilling one of his biggest promises given during the election campaign – to let the US embrace crypto, turn the US into a global crypto hub, and also to create a Strategic Bitcoin Reserve.
He also promised to release the Silk Founder Ross Ulbricht from his double life-time prison sentence and recently that one came true – the controversial Bitcoin pioneer walked out of jail as a free man.
Now, Trump’s administration has expressed a friendlier stance towards crypto assets. They also intend to establish a clear regulatory framework for cryptocurrencies to help crypto businesses feel secure and confident in the US and also to attract crypto entrepreneurs from abroad. Gary Gensler’s tenure is likely to be cancelled, recent developments are hinting.
The first step taken in this direction is the formation of a Crypto Task Force spearheaded by SEC Commissioner Hester Peirce, who is frequently referred to as “Crypto Mom” due to her strong pro-crypto stance. The mission of the aforesaid task force is to create comprehensive guidelines so far and not proactive regulation. This would strike a balance between innovation and investor protection. Crypto industry leaders have approved this initiative as they hope that it will eventually cause a regulatory environment that will be much more predictable and easy to work with.
Challenges for Crypto Companies Not Gone Yet
Still, despite the recent positive regulatory developments, challenges for crypto companies remain where they are so far. There are still ongoing legal battles initiated by the SEC, including the long-lasting one against Ripple.
The appeal made by the SEC against Ripple could take months or perhaps even years to resolve and that would keep regulatory uncertainty around for a long time in the future. Another thing is that Uyeda is just an acting chairman of the SEC. Once a real chairman is appointed, it will be them who will have a final say in the SEC’s long-term strategy regarding cryptocurrency regulation.
