The United States Securities and Exchange Commission (SEC) is on the cusp of a new era, with the forthcoming Trump administration presenting an opportunity for the agency to reset its relationship with the digital asset industry. In a recent statement, the Digital Chamber’s Token Alliance called for the SEC to initiate an immediate review of all existing crypto-related investigations, Wells notices, and ongoing lawsuits from ‘day one’ of the new administration.
A New Approach to Regulation
The Digital Chamber’s proposal aims to foster a culture of mutual trust between the digital asset industry and the SEC. This, in turn, would allow market participants to operate with confidence, knowing that the SEC recognizes their efforts to conduct business responsibly. The organization emphasized the need for a reset in the regulator’s approach, citing its "historically troubled relationship" with the industry.
"We need to foster a culture of mutual trust — where the digital asset industry can have confidence in the SEC’s intentions, and the SEC can recognize that most digital asset participants are striving to operate responsibly," said the Digital Chamber in a statement dated December 18th.
Ongoing Litigation: A Call for Review
The SEC is still engaged in high-profile lawsuits with industry heavyweights, including Binance, Coinbase, Consensys, and Ripple. Moreover, the agency has sent Wells notices to Uniswap and Immutable, which could have significant implications for tokens and the broader industry. In light of this, the Digital Chamber recommends that the SEC review all existing investigations from ‘day one’ of the new administration.
A Call for Stays in Ongoing Litigation
Another key aspect of the Digital Chamber’s proposal is its call for the SEC to seek stays in ongoing litigation cases that do not involve fraud, investor loss, or risk of imminent harm. This would allow time for the regulator to finalize its approach and ensure a more efficient use of resources.
Rescinding Outdated Frameworks
The Digital Chamber also advocates for the rescission of the 2019 framework on how the Howey test’s investment contract argument applies to digital assets. Furthermore, it recommends that the SEC declare it no longer refers to the Hinman speech as a basis for conducting such analyses.
"The speech by William Hinman, former SEC director in the division of corporate finance, has improperly created a winner and loser dynamic," said the Digital Chamber. "This approach has led to uncertainty and inconsistency in how regulators apply the law."
SAB 121: A Burdensome Rule
The organization also wants the SEC’s Staff Accounting Bulletin 121 (SAB 121) rule to be rescinded. SAB 121 requires SEC-reporting entities that custody cryptocurrencies to record those holdings as liabilities on their balance sheets.
"This rule is burdensome on market participants, while House Representative Wiley Nickel has said it may push US investors offshore to ‘riskier’ custodial solutions," stated the Digital Chamber.
Bipartisan Support for SAB 121 Repeal
Before being vetoed by President Joe Biden, a bill to repeal SAB 121 received bipartisan support in both the House and Senate. The new SEC may consider revisiting this issue, given its implications for market participants.
A New Era for Crypto Regulation: Implications for Rule 3b-16
The Digital Chamber’s proposal also touches on proposed Rule 3b-16, which would expand the definition of ‘exchanges’ to include decentralized finance protocols. The new SEC may consider withdrawing from this rule, given its potential impact on market participants.
A New Dawn for Crypto Regulation: The Atkins Nomination
The Digital Chamber’s proposal may hold some weight, considering that Paul Atkins, Trump’s nominee for SEC chair, serves as an advisory board member and Token Alliance leadership committee member. Furthermore, Token Alliance leadership committee members met with SEC commissioners Hester Peirce and Mark Uyeda to present their policy priorities.
What’s Next?
As the new administration prepares to take over, the Digital Chamber’s proposal presents a timely opportunity for the SEC to reset its approach to crypto regulation. With the agency set to step down on January 20th, Paul Atkins’ nomination as SEC chair could bring about significant changes in how regulators interact with the digital asset industry.
The Digital Chamber’s call for an immediate review of all existing investigations, rescission of outdated frameworks, and a more streamlined regulatory approach may be just what the industry needs. As the new administration begins its tenure, one thing is clear: a new era for crypto regulation has dawned, and it will be interesting to see how this plays out in the coming months.
About the Digital Chamber
The Digital Chamber is a non-profit organization dedicated to promoting responsible innovation in the digital asset industry. Its Token Alliance focuses on fostering collaboration between regulators, market participants, and industry stakeholders to create a more conducive regulatory environment for crypto growth.
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