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The Securities and Exchange Commission (SEC) has emerged as a big savior of the crypto industry in recent weeks— a shift that seemed unimaginable just a few years ago under Gary Gensler’s leadership.
Today, Trump’s SEC dismissed its case against crypto exchange Kraken, which was accused of combining the roles of an exchange, broker, dealer, and clearing agency without registering securities. This decision is part of a broader trend of case dismissals involving Coinbase, Robinhood, and other crypto firms previously accused of selling unregistered securities, signaling a significant shift in cryptocurrency regulation.
Last week, the financial watchdog shared its opinion on memecoins, such as Dogecoin and Shiba Inu, as well, saying they are not securities under U.S. federal law. The financial watchdog explained that memecoins have limited or no functionality and are “more akin to collectibles.”
The SEC’s lenient approach was anticipated in the Trump 2.0 era, signaling a regulatory shift that could have far-reaching consequences for the crypto industry. In the long run, this stance may foster innovation and market expansion, but it also raises concerns about investor protection and financial stability.
Deregulation under Trump
During his election campaign, President Trump highlighted the need for deregulation to alleviate regulatory burdens on businesses. This strategy was anticipated to significantly impact various industries, particularly the cryptocurrency sector.
Jeff Le, managing principal at 100 Mile Strategies, a public sector navigation and emerging tech consultancy, told Quartz via email that “personnel is policy,” and the Trump administration has upheld its campaign promises to the crypto industry by taking a broadly deregulatory approach.
“This extends beyond the SEC to the CFTC and Treasury,” he added, noting that President Trump’s crypto czar, David Sacks, views crypto as both an innovation driver and an economic accelerant.
“The actions are consistent with the President’s executive order outlining guidance and recommendations for a regulatory framework for crypto — a sharp departure from the Biden Administration’s more hostile and litigious approach,” Le said.
Better crypto regulation
Cryptocurrency is decentralized, meaning it operates without control from any central authority, such as a government or bank. So, who regulates crypto? And is crypto an asset like stocks, a commodity like gold, or a currency like the dollar? These are questions with no clear answers — but the U.S. legal system is determined to find out. Under the leadership of Hester Peirce, the SEC is working to establish a more robust regulatory framework for the crypto industry.
Le is optimistic that the bipartisan support for the crypto industry in both chambers of Congress, particularly among key committees of jurisdiction, presents a valuable opportunity to establish a regulatory framework that benefits the industry and ushers in a new set of rules and legal commitments for cryptocurrency.
Concerns remain
There is hope for a better environment for the crypto industry, but fears of corruption and hacks remain, especially with the FTX collapse and recent breaches still fresh in people’s minds. The sharp decline in Bitcoin’s value last week was largely attributed to the hack of Bybit, a Dubai-based crypto exchange, and the memecoin scandal involving Argentina’s president.
Read more: The rise and fall of Sam Bankman-Fried, from cryptocurrency fame to prison sentence
Le believes the Trump 2.0 administration is moving away from heavy-handed enforcement and instead focusing on a more collaborative approach. This could lead to clearer guidance that benefits both lawmakers and the industry, ultimately enhancing consumer protection.
Additionally, Congress has raised concerns about cybersecurity in the crypto space, with expectations of more hearings from the Financial Services committees. “A path for stronger cyber standards and requirements is very possible in this Congress,” Le added.