Regulatory Dispute: Challenges Facing the US Crypto Assets Industry

Recently, the American Crypto Assets industry is facing an increasingly complex regulatory environment. The two major regulatory agencies—the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC)—are competing for jurisdiction over the industry, resulting in businesses facing differing regulatory standards and potential legal risks.

On March 22, a large crypto assets trading platform received a warning notice from the SEC, stating that it was suspected of violating securities regulations. The SEC insists that crypto assets fall under the category of securities. However, just a few days later, another leading trading platform and its founder were accused by the CFTC of violating commodity trading regulations, as the CFTC believes that some popular crypto assets are classified as commodities.

This regulatory divergence highlights the complex operating environment faced by U.S. Crypto Assets companies. Since the collapse of a certain trading platform in November 2022, both regulatory bodies have adopted a more aggressive stance towards the Crypto Assets industry, vying for jurisdiction through enforcement actions.

A former government official stated: "If people want to know what the attitude was at the beginning of the year, now they know it is hostile. I believe the collapse of a certain platform is not the cause, but an excuse."

Since the beginning of this year, the SEC has initiated a series of lawsuits against cryptocurrency companies and individuals in the United States, involving multiple trading platforms and well-known figures. These actions have sparked dissatisfaction among industry insiders, with some believing that the SEC is trying to strengthen its dominance over the industry through enforcement actions.

Even within the SEC, there are differences on how to handle the issue of Crypto Assets. SEC Commissioner Hester Peirce publicly opposed several actions related to encryption, calling for clearer compliance pathways for the industry rather than relying solely on post-fact enforcement.

At the same time, the CFTC is actively seeking jurisdiction over the Crypto Assets industry. CFTC Chairman Rostin Benham warned that the agency will not tolerate any deliberate evasion of U.S. laws.

In the absence of clear regulatory guidance, Crypto Assets companies face the challenge of predicting and responding to potential complaints from two regulatory bodies. An industry executive stated: "It's like driving on a road without signs or lanes, trying to figure out the rules based on who gets pulled over. You're just guessing."

The Crypto Assets company expressed that they feel particularly frustrated by the fierce criticism from regulators, as they have been trying to communicate with regulatory bodies in hopes of establishing clearer and more comprehensive rules. However, these attempts seem to have been of little effect.

Industry insiders believe that a better solution would be comprehensive Crypto Assets legislation enacted by the U.S. Congress. Although the EU and some other countries are advancing related legislation, the U.S. seems to be lagging behind in this regard. Due to the impact of the 2024 presidential election, it is unlikely that comprehensive Crypto Assets legislation will be passed this year.

The uncertainty of the regulatory environment may lead Crypto Assets companies to withdraw from the United States. Some companies have already begun considering establishing operations overseas or halting their expansion plans in the U.S.

SEC Commissioner Peirce emphasized that the goal of regulatory agencies should be to help enable safe technological experimentation, rather than pushing the Crypto Assets industry overseas. She urged all parties to "talk like adults" and work together to find solutions.

As regulatory disputes continue, the future development path of the American Crypto Assets industry remains full of uncertainty. Industry participants and regulators need to strengthen dialogue and work together to establish a regulatory framework that both protects investor interests and promotes innovation.