Crypto Regulation Updates: SEC Challenges and Global Developments in November 2024

As November 2024 draws to a close, the cryptocurrency landscape continues to navigate through complex regulatory developments. According to a16z crypto, significant legal and regulatory actions have shaped the industry, impacting various stakeholders globally.

SEC Developments and Legal Challenges

The Securities and Exchange Commission (SEC) has been at the center of several pivotal decisions. Gary Gensler, the SEC's 33rd Chair, announced his resignation effective January 20, 2025. Meanwhile, a federal judge ruled that the SEC overstepped its authority by expanding the definition of “dealer” under the Securities Exchange Act of 1934, potentially including decentralized finance (DeFi) participants. This ruling underscores ongoing legal challenges faced by the SEC in adapting its regulatory framework to the evolving crypto industry.

Additionally, the SEC's policy regarding digital assets has been contested by eighteen Republican attorneys general. They argue that the agency's approach to treating secondary transactions as investment contracts violates the Administrative Procedures Act.

Commodity Futures Trading Commission and Consumer Financial Protection Bureau

The Commodity Futures Trading Commission (CFTC) has advanced recommendations to utilize distributed ledger technology for expanding non-cash collateral usage. Meanwhile, the Consumer Financial Protection Bureau (CFPB) has finalized a rule expanding oversight over nonbank digital payment providers, though excluding digital asset transactions.

Congressional Inquiries and DOJ Actions

US Congress members have been active in voicing concerns and inquiries related to cryptocurrency regulation. Representative French Hill urged federal regulators to halt ongoing rulemaking, while Representative Sean Casten questioned the Treasury about the use of crypto mixers like Tornado Cash. Judicial actions have also been pronounced, with the Department of Justice (DOJ) sentencing individuals linked to major crypto-related crimes, including the Bitfinex hack and the operation of illegal crypto mixers.

International Regulatory Developments

Internationally, various regulatory bodies have taken significant steps. The Hong Kong Monetary Authority issued warnings against unlicensed overseas crypto firms, while the UK's Financial Conduct Authority secured convictions for individuals involved in crypto investment fraud. Furthermore, the Bank for International Settlements explored the role of participants in decentralized exchanges through a new working paper.

State-Level and Other Regulatory Actions

At the state level, California revoked BlockFi Lending LLC's financial license, reflecting stringent regulatory scrutiny. Such actions highlight the ongoing regulatory challenges and changes at both federal and state levels in the United States.

These developments illustrate the dynamic and often contentious relationship between regulatory bodies and the rapidly evolving crypto industry. As regulators and legal entities continue to adapt to technological advancements, the crypto sector remains in a state of flux, with ongoing debates over jurisdiction, compliance, and innovation.