Gary Gensler, the head of the United States Securities and Exchange Commission (SEC), has expressed concerns about the current state of the crypto and blockchain industry. However, not all U.S. lawmakers share Gensler’s views and some have pushed back on the SEC’s regulation of crypto assets. This conflicting sentiment within the U.S. government has created an uncertain environment for crypto projects looking to operate in the country.
One of the challenges is the SEC’s ever-changing and undefined process for determining what is considered a security. Many in the crypto industry believe that the SEC’s use of the outdated Howey test is problematic. However, the U.S. government’s approach to creating laws differs from that of other countries.
The SEC has its limitations, but what are they and how can it be determined if the agency has overstepped its powers? Two pending cases before the Supreme Court of the United States (SCOTUS) could have a significant impact on the SEC’s authority and provide more clarity for the crypto industry. These cases are Loper vs. Raimondo and Relentless, Inc. vs. the U.S. Dept of Commerce.
According to the SCOTUS blog, both cases seek to clarify the extent to which U.S. federal agencies can use their own discretion and interpretation of the law, rather than strictly following what Congress has explicitly stated. The Loper case, in particular, highlights the practical consequences of the Chevron deference, which allows federal agencies to interpret and enforce laws as long as their actions are not unreasonable and Congress has not directly addressed that specific aspect of the law.
The concept of Chevron deference is important because it allows federal agencies to interpret and enforce laws in a rational and reasonable manner. However, many in the crypto industry argue that the SEC’s regulations on crypto assets have been far from rational or reasonable.
Coinbase CEO Brian Armstrong has been vocal about how unclear regulations are driving the crypto industry to operate offshore and has expressed hope that the U.S. will eventually find the right regulatory outcome for crypto. Limiting or removing the Chevron deference as a precedent would give the people of the U.S. more influence over creating clearer laws for the digital asset sector.
The recent ruling that Ripple’s XRP token is not a security when sold on retail digital asset exchanges was a significant milestone for the crypto industry. The Loper vs. Relentless, Inc. case currently before the Supreme Court challenges the use of the Chevron deference by federal agencies. If these cases result in a removal or limitation of the SEC’s power, it would require the agency to closely follow the direction set by Congress regarding the regulation of cryptocurrency, blockchain, and the entire industry.
Although these cases are not directly related to cryptocurrencies, the opening remarks did mention the crypto industry. It remains to be seen if the court will address it directly, but if the ruling does mention the crypto space, it could provide important ammunition for Coinbase and other crypto exchanges and companies fighting the SEC in court.
As the blockchain and crypto industry continues to mature, it will intersect with other sectors and their regulations. Crypto firms seeking a better regulatory environment can find opportunities in cases like these to support their cause. Paying attention to how the law is being interpreted and being proactive in advocating for favorable interpretations can make a difference in the industry’s growth and success in the U.S.