An ongoing battle between the Securities and Exchange Commission and the digital asset sector has come to an end with the commission’s approval of Bitcoin spot exchange-trade. The announcement has been heralded as a big win over the adversary. But there’s not much evidence to suggest that this represents a significant shift in SEC Chair Gary Gensler’s stance on the cryptocurrency space.
Gensler will continue to support regulation by enforcement as his preferred method of regulating digital assets. Much to the dismay of industry, the chair has shown little sign of pursuing a notice-and-comment rulemaking. Rather, there is going to be an increase in enforcement actions and legal actions. Gensler stated that his opinion of cryptocurrency has not changed in a series of posts on X earlier this week. He still advises potential investors to exercise caution while funding these ventures.
The SEC won the most recent judgment on token status, despite the fact that the cryptocurrency industry still points to the agency’s defeat in court in the agency’s lawsuit against Ripple Labs last year. The judge determined last month in the agency’s action against Terraform Labs that the business had marketed securities that were not registered. Interestingly, Terra was listed among the securities by the judge. The decision was decided because, even though Terraform provided a yield program with the token, the two together constituted an investment contract and, so, security. As long as they stay away from comparable incentive schemes, stablecoin issuers can benefit from this ruling and avoid SEC supervision.
Oral arguments about Coinbase and Binance’s requests to dismiss are set for next week in the agency’s lawsuits against the companies. The purpose of these hearings is to ascertain whether the judges supervising these other cases are biased in favor of the agency or the companies, given the discrepancy in the verdicts in the Ripple and Terra cases. Although they won’t necessarily determine the result, these hearings will influence how things continue moving forward. But it will probably take years to resolve either issue, especially considering the possibilities of appeals.
The move may provide an additional push for legislation in Congress, even if the SEC’s stance on cryptocurrencies remains unchanged in light of the new ETFs. Advocate for cryptocurrencies, House Financial Services Committee Chair Patrick McHenry (R-N.C.), will probably try to use the news to justify Congress passing legislation as soon as possible to guarantee that the necessary protections are in place. Following the release, McHenry called this “a historic milestone” and said that the decision represents “a significant improvement over the SEC’s track record of regulation by enforcement.”
It’s unclear if some additional skeptics will find this message compelling, even though it might be meaningful to other industry advocates. Securing support from Democratic leaders of the House Financial Services Committee is McHenry’s greatest chance of getting his stablecoin or market structure bill passed into law. Still, this announcement might not be enough on its own. In any case, success is likely to be shown by McHenry’s likely endeavor to get the legislation passed in the House before the August recess and the intensifying campaign season. He could probably win this vote mostly along party lines.
