Crypto Trading Regulations on the Agenda

The upcoming roundtable will be the second in the five-session series of “Spring Sprint Toward Crypto Clarity” hosted by the SEC’s Crypto Task Force, which was created in recent months. This session will focus on discussing what kind of regulatory framework should be adopted for crypto asset trading.

SEC Roundtable Participants Are Not a Surprise

The roundtable will feature executives from leading crypto companies. These include:

• Uniswap Labs Chief Legal Officer Katherine Minarik

• Coinbase Vice President of Institutional Products Gregory Tusar

• Cumberland DRW Associate General Counsel Chelsea Pizzola

What’s notable is that these three companies have previously come under the SEC’s radar. During the Biden administration, Coinbase and Cumberland DRW were sued, and in 2024, an investigation was launched into Uniswap Labs. However, under the Trump administration, these processes were dropped, and no further actions were taken.

Traditional Finance and Academia at the Table

The roundtable won’t only feature crypto companies, but also notable figures from traditional finance. These include:

• New York Stock Exchange Product Head Jon Herrick

• FalconX Business Development Lead Austin Reid

• Texture Capital CEO Richard Johnson

• University of California, Berkeley Finance Chair Prof. Christine Parlour

Additionally, investor rights advocate Dave Lauer and Healthy Markets Association CEO Tyler Gellasch will also contribute to the discussions. The session will be moderated by Nicholas Losurdo from the law firm Goodwin Procter.

SEC to Review Crypto Statements

These roundtable discussions are especially significant as the SEC, under Trump’s pro-crypto approach, has started reshaping its stance toward the crypto industry. Recent reports indicate that SEC Acting Chair Mark Uyeda has decided to review seven previous statements issued by the SEC related to crypto. Five of these directly concern crypto assets.

Among the documents to be reviewed:

• A 2019 analysis that referred to crypto sales as potential investment contracts under the Howey Test

• A 2021 warning regarding funds exposed to Bitcoin futures

• A 2020 feedback request on whether state-chartered banks meet standards to be qualified custodians

• A late 2022 call for companies to disclose if bankruptcies or collapses of crypto firms impacted their business

• A 2021 examination note highlighting risks related to digital asset trading and sales

Uyeda emphasized that these statements will be re-evaluated in line with Trump’s deregulatory executive orders and recommendations from the Department of Government Efficiency (DOGE), led by Elon Musk.

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SEC to Dismiss Case Against Coinbase After Approval Process

The U.S. Securities and Exchange Commission (SEC) has decided to end its lawsuit against Coinbase after the approval process. The case, seen as a significant legal battle in the crypto industry, signals a potential reduction in regulatory pressure and marks a major turning point. Coinbase’s Chief Legal Officer, Paul Grewal, declared, “The war against crypto is over,” announcing the company’s legal victory.

Coinbase Global announced its plan to withdraw the lawsuit filed by the SEC, signaling the end of a prolonged legal battle that had posed a threat to the company and the broader sector. This decision marks the final retreat from former SEC Chairman Gary Gensler’s efforts to impose stricter regulations on the crypto industry.

Last week, the SEC requested a temporary pause in its lawsuit against Binance while it awaited the development of a regulatory framework for digital assets. In an interview, Grewal stated, “The war against crypto, at least for Coinbase, is over.”

In 2023, the SEC filed lawsuits against Coinbase, the largest crypto exchange in the U.S., and its competitor Binance.

SEC’s Defeat in the Crypto Market

Additionally, the SEC recently withdrew its appeal in the case challenging the dealer rule, delivering a significant victory for the Blockchain Association (BA) and the Texas Crypto Freedom Alliance (CFAT). This decision ended claims that the SEC had overstepped its regulatory authority, paving the way for a clearer and more supportive regulatory environment for the crypto sector.

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The U.S. Securities and Exchange Commission (SEC) has accepted CoinShares’ Spot XRP ETF application. This development signals growing institutional interest in Ripple while also indicating a progressively more favorable regulatory stance toward spot crypto ETFs in the U.S.

Is the SEC Easing Its Crypto ETF Policy?

Recent developments are being interpreted as a sign of a shift in the SEC’s stance on cryptocurrencies. As a reminder, the SEC filed a lawsuit against Ripple in 2020, alleging that XRP was issued as an unregistered security. However, in August 2023, a court ruled that XRP could not be classified as a security in all cases but could be considered as such under specific circumstances.

CoinShares’ Crypto ETF Application: XRP Approved, Litecoin Decision Pending

CoinShares, a long-established company in the crypto investment space, had submitted ETF applications for Litecoin (LTC) and XRP in partnership with Nasdaq. Today, the SEC approved CoinShares’ Spot XRP ETF application. While this is a significant milestone for Ripple investors, the fate of the Litecoin ETF application remains uncertain.

The approval of the Ripple ETF could attract more institutional investors to the market by offering a regulated and secure investment vehicle. Given the SEC’s past legal actions against Ripple, this approval is also seen as a potential softening of the regulator’s stance on the crypto market.

Will the Litecoin ETF Be Approved?

The Litecoin ETF application is still under review by the SEC. Despite Litecoin being a well-established digital asset known for its faster transaction speeds and lower costs compared to Bitcoin, the SEC’s position on the application remains unclear. If approved, it would mark a significant step toward mainstream adoption of crypto investment products.

As the crypto market closely watches the SEC’s decision on CoinShares’ Litecoin ETF application, the impact of the Ripple ETF approval on the sector remains highly anticipated.

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Under the Exchange Act of 1934, the SEC has worked to widen the definition of an exchange to include DeFi crypto market players starting in April 2023 Uniswap has often resisted this action.

Impact of the Chevron Decision

Following its comment letter from last month, Uniswap offered further reasons in a July 9 letter asking the SEC to revoke its planned changes. On June 28 the corporation cited the Chevron ruling from the Loper Bright Enterprises v. Raimondo Supreme Court case. This decision suggests that courts no longer have to follow government agencies’ interpretation of unclear statutes.

Uniswap contends that the SEC’s attempts to redefine “exchange” would squander “limited resources” and encounter strong legal challenges. Uniswap said the SEC’s reading of the Exchange Act stretched the legislative language too far even before the Chevron ruling.

Uniswap said, “if the Commission moves forward with its proposed amendments, a reviewing court […] is certain to conclude that the Commission’s interpretation of the Exchange Act stretches the statutory text too far.”

Broad and Ambiguous Amendments

Uniswap further argues that the proposed amendment has vague limits, which would cause possible contradictions and inadequate direction. This would need constant case-by- case litigation.

“For all these reasons, the Commission should not adopt the proposed amendments,” Uniswap stated. “The Commission developed the suggested changes against a legal environment that no longer exists.”

Should the SEC continue with the changes, Uniswap advises opening the comment period to provide public review of the most recent Chevron ruling.

SEC’s Enforcement Action

The Securities and Exchange Commission (SEC) sent Uniswap a Wells notice in April suggesting agency recommendation of enforcement action. A month later, Uniswap responded in a blog post, calling the SEC’s legal claims “weak” and stating ready to challenge the case in court should required.

The recent claims of Uniswap and the wider consequences of the Chevron ruling draw attention to the continuous conflict between regulatory authorities and the changing DeFi scene.

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You might like: Hong Kong and Spot Bitcoin ETF

Confirming the date for final amendments to all S-1s by Friday the 29th. The @SECGov has told issuers that applications that are fully finished and filed by Friday will be considered in the first wave. Anyone who is not will not be considered. In addition, the filings cannot… https://t.co/syyINu1BEI

— Eleanor Terrett (@EleanorTerrett) December 24, 2023

She said that applications that are complete and filed by Friday will be considered in the first wave. Otherwise, they will not be considered. Also, the applications cannot mention physical creation; otherwise, they will be denied.

Applying Companies

• BlackRock
• Grayscale
• ARK Investments
• 21Shares
• At least seven other companies have submitted proposals for a spot Bitcoin ETF in the U.S.

This development came immediately after a meeting between representatives of the companies.

SEC Expected to Approve Bitcoin ETFs in Q1 2024

Based on the rhetoric coming out of the meeting, it looks like the SEC is likely to approve Bitcoin ETFs in the first quarter of 2024.

The SEC is currently reviewing the joint proposal from ARK and 21Shares. However, it will make a final decision by January 10, 2024. It has instructed firms to make final changes to their applications by December 29th. Also, it warned that those who do not meet the December 29th deadline will not be considered in the first potential approval wave, which is scheduled to take place in early January 2024.

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