Crypto’s Regulatory Tug-of-War Reaches Court of Appeals: Are More Crackdowns Coming?

While regulatory compliance has always been a challenge for the crypto industry, it now seems to be its biggest bane. As “regulation by enforcement” becomes the law of the land, the need for clear rules seems to be dominating the discussion in the crypto space. Now, the debate has gone all the way to the Third Circuit Court of Appeals.

Some weeks ago, Coinbase filed an Administrative Procedure Act claim asking the court to force the SEC to provide “regulatory clarity” on which assets and services must be registered with the regulator. The claim follows the SEC’s unwillingness to respond to Coinbase’s 2022 rulemaking petition despite its continued enforcement actions. On May 4th, the court ordered the SEC to provide legal arguments to justify the lack of a response. 

The U.S. Securities and Exchange Commission (SEC) has been at the forefront of regulatory crackdowns on crypto, performing 20 crypto-related enforcement actions back in 2021. The regulator increased its efforts in 2022 by bringing 30 enforcement actions, a 50% increase compared to the previous year.

Having grown from a technology limited to hardcore technophiles and privacy advocates to one that over 57% of the global population knows about, crypto is now too big for any regulator to ignore. While American regulators are not the only ones cracking down on crypto, their position on this matter is sure to have a global impact. A lack of regulatory clarity in the country could also lead other companies to consider following Coinbase’s plans to move elsewhere.

With regulatory pressure increasing each day, the crypto industry is now actively taking action to force regulators to take a stance. This has been demonstrated by events like Consensus Festival, which this year saw the need for a clear regulatory framework in the industry take the spotlight. Republican lawmakers have also joined the chorus accusing thee SEC of “hampering innovation” and urging the agency to establish “clear rules.”

Despite the criticism and calls for clarification, SEC’s Chair Gary Gensler’s position has not changed. In fact, he has doubled down by stating that there is no lack of regulatory clarity at all but a problem of markets not wanting to comply with existing regulations. Many analysts have seen these remarks as an indication that more crackdowns are yet to come for the crypto space.

To better understand the current regulatory climate and what the future might look like, this year’s edition of Grit Daily House at Consensus hosted the “Crypto Investors Brace for More Crackdowns from Regulators” panel. Moderated by TechCrunch’s Senior Cryptocurrency Reporter Jacquelyn Melinek, the panel also featured former CFTC Commissioner Dan Berkovitz, Unchained Podcast Host Laura Shin, and former SEC Crypto Assets and Cyber Unit Chief Kristy Littman.

To learn more about what the increasing tensions between the crypto industry and regulators might mean for you and the markets, make sure to watch the video on Grit Daily’s official YouTube channel or below.