It is hoped that the US Securities and Exchange Commission’s lawsuits in the US against cryptocurrency exchanges Binance and Coinbase may provide some clarity, but with those potentially dragging on for months, or even years, the question is what does the future of digital assets hold? And why should those giving financial advice take note?
Regulatory clarity has been a recurring issue for the crypto and decentralised finance space, as some regulated entities remain concerned about the legal classification of crypto assets. But this may be changing.
The recent case between the SEC and Ripple Labs offered a glimmer of hope in the search for regulatory clarity.
In July Ripple scored a partial victory when a US District Court ruled that the sale of Ripple’s XRP token on exchanges and through algorithms did not constitute investment contracts. However, the institutional sale of the tokens did violate federal securities laws, the court said.
Recently, crypto asset manager Grayscale Investments scored a major victory against the SEC in its efforts to convert its over-the-counter Grayscale Bitcoin Trust (GBTC) into a listed bitcoin exchange-traded fund.
A tactical stalemate with the SEC seems to be the strategy for many within the crypto industry.
The US Court of Appeals circuit judge Rao ordered Grayscale’s petition for review be granted and the SEC’s order to deny the GBTC listing application be vacated. Previously, Rao said that the SEC did not “offer any explanation” as to why Grayscale was in the wrong.
These encouraging signs appear to have sparked action within the traditional finance world.
Established traditional finance players appear to be finally embracing digital assets, with BlackRock, Fidelity, Schwab and Citadel all recently announcing applications for ETFs in the crypto space.
In addition, the London Stock Exchange is now drawing up plans for blockchain-based digital assets business.
Four bills that will shape the digital future
For traditional finance to fully embrace digital assets, clear regulation will be required.
Since 2022, there have been at least 50 digital asset bills reportedly introduced to US Congress, aiming to govern everything from stablecoins to the jurisdictions of US regulators.
However, at least four of them are seen as potentially having a major impact on the industry if they pass into law.
Digital asset market structure bill
Introduced on June 1 in the US, the DAMS bill is aiming to define the crypto-related roles of the SEC and Commodity Futures Trading Commission, and set a framework for regulators to make determinations about whether certain or not cryptocurrencies are securities or commodities.
Under the proposed bill, a crypto token would have to undergo certification with the SEC to prove it is adequately decentralised before it can be given commodity status.
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