The Securities and Exchange Commission (SEC) recently had a no-good, very bad day because of a district judge’s ruling in the SEC’s action against Ripple’s XRP token. Despite issuing a statement filled with bravado and the kind of detachment from reality that might make even Donald Trump think twice before pressing send, the SEC likely knows how serious of a rebuke its overall approach to crypto received in a federal court. If the ruling holds, we may be witnessing the beginning of the end of SEC Chair Gensler’s regulation-by-enforcement approach to crypto assets, and the end will be messy for those who oppose crypto.
Who could have seen that coming? It was entirely predictable to many, except for a tiny cauldron of activists in Washington, D.C. who adopted the view that “all tokens are securities” with a religious fervor. While the SEC will most assuredly appeal the district court’s decision, action in the courts will take months and are merely a sideshow to a larger reality, namely, the district court’s ruling. And what great timing as the policy debate in Congress is advancing their legislation to put a regulatory framework around crypto assets.
John Rizzo is senior vice president for public affairs at Clyde Group and a former spokesperson for the U.S. Department of the Treasury.
To understand why the policy debate has changed and its import on what rules tokens will be required to abide by, one must consider the long, winding road that crypto policy has traveled.
The desire to bring crypto assets into a regulatory perimeter has long been supported by many Republicans and Democrats in Washington. The thinking, which I observed when I served as a senior spokesperson at the U.S. Department of the Treasury and before that as a senior aide on Capitol Hill, was that crypto assets – love them or hate them – were here to stay and required regulatory frameworks that would mitigate risks, such as fraud perpetrated against consumers, illicit finance and destabilizing runs.
The realist strategy of regulating rather than attempting to ban crypto ran headlong into a desire by some in D.C. to achieve a policy outcome of eradicating crypto. These forces sought to throw sand in the gears of any legislation bringing a comprehensive crypto regulatory framework into law by asserting…
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