Pending Supreme Court Cases Could Reshape US Cryptocurrency Regulation
Summary:
The current state of cryptocurrency and blockchain regulation in the US is creating uncertainties due to varying views within the government officials, especially with the SEC. The application of the Chevron deference, which allows federal agencies to interpret and enforce laws, has caused criticism in the crypto industry. Two pending cases in the Supreme Court could shape the future handling of crypto and blockchain regulation by potentially limiting the SEC's authority. The outcome of these cases could redefine the cryptocurrency market's growth and development in the US. Although these changes might not be immediate, their potential impact signifies the necessity for vigilance and adaptability in an evolving industry.
The CEO of the US Securities and Exchange Commission (SEC), Gary Gensler, has expressed his concerns about the current state of the cryptocurrency and blockchain sector. However, his viewpoint isn't universally shared among other US officials, leading to confusion and controversy regarding the SEC's regulation of digital assets. Notably, the SEC's determination of what is and isn't a security is seen as a grey area, with industry insiders labeling the SEC’s reliance on the Howey test — a standard criterion — as archaic.
The method of law enforcement by the US government deviates distinctly from its global counterparts. While the SEC has certain boundaries, their precise limits and their potential overreach is raising questions. Two cases currently under consideration by the Supreme Court of the United States (SCOTUS) may dramatically alter these definitions relating to cryptocurrencies, possibly revitalizing the sector on American soil. The cases in question are Loper vs. Raimondo and Relentless, Inc. vs the U.S. Dept of Commerce.
According to the SCOTUS blog, both cases could redefine how much autonomy US federal agencies have in devising their interpretation of the law, rather than adhering to the explicit instructions of Congress. The Loper case exemplifies this issue, as an age-old fisheries conservation law was interpreted to obligate fishing vessel owners to shoulder the cost of onboard monitors. Critics consider this interpretation to be random and to result in unbearable costs for smaller businesses, potentially driving them under.
The first significant application of the Chevron deference — the principle giving federal agencies scaling scope to interpret and enforce laws — was the Chevron vs. Natural Resources Defense Council case in 1984, which heavily influences many sectors, including cryptocurrencies.
At the heart of the cryptocurrency space is a complaint about ambiguous regulations. Brian Armstrong, CEO of Coinbase, has frequently discussed how vague regulations push the industry offshore and how the US should ultimately find a more conducive solution for cryptos.
If the Chevron deference is eliminated or narrowed as a guiding principle, this means clearer laws can be created that directly influence sectors such as digital assets. Currently, the SEC can apply the Chevron deference to interpret and enforce cryptos as sovereignly as it sees fit, since Congress has not defined a clear rulebook for this asset class.
One key example was the determination in July 2023 that Ripple‘s XRP token isn't a security when sold on retail digital asset exchanges. This outcome provided a crucial guideline for the industry. Additionally, the cases Loper vs. Relentless, Inc. in the Supreme Court challenge the SEC's power and put pressure on the agency to align more closely with Congress's decrees on the handling of cryptocurrency and blockchain development moving forward.
However, the outcomes of these cases may not bring significant, immediate changes to the blockchain and cryptocurrency industry. This is because the SEC's authority primarily depends on the Howey test to regulate digital assets, not specific rules.
Although the current cases before SCOTUS are not directly related to cryptocurrencies, the industry was mentioned during initial discussions. This gives hope that cryptos may receive a more explicit framework soon.
As the cryptocurrency market grows, the need for a more suitable regulatory atmosphere increases. Some believe there is potential for the Supreme Court to tie up loose ends regarding crypto regulations. Regardless of the outcome, these cases highlight the necessity to stay updated with ongoing legal interpretations. As the crypto, blockchain, and related industries continue to evolve, it may be the difference between a flourishing or stagnant US market.
Published At
3/5/2024 5:30:00 PM
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