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The U.S. Supreme Court’s recent decision to overturn the Chevron doctrine, which previously allowed federal agencies to interpret laws as they saw fit, has introduced new challenges for legislative efforts, particularly in the crypto industry, according to investment bank TD Cowen. The court voted 6-3 on Friday to reverse the 40-year-old ruling, a move seen by some in the crypto sector as advantageous.
The Chevron doctrine has been a cornerstone of administrative law, giving agencies like the Securities and Exchange Commission (SEC) significant leeway in interpreting statutes. With its overturning, agencies will now need to proceed with greater caution, which some believe could benefit the crypto industry. “The conventional wisdom after the Supreme Court acted is that the decision benefits the crypto sector,” noted Jaret Seiberg of the TD Cowen Washington Research Group. “This will help future crypto challenges to SEC rules and enforcement. Yet it does not change any past rulings or open prior decisions to reconsideration.”
However, the decision also complicates legislative efforts to regulate the industry, particularly concerning stablecoins and broader crypto regulation. In May, the U.S. House passed the Financial Innovation and Technology for the 21st Century Act (FIT21), a Republican-led initiative with some Democratic support. Concurrently, lawmakers in both the House and Senate are considering bills to regulate stablecoins.
Seiberg highlighted a significant issue: the removal of the tactic of keeping legislative language ambiguous to achieve bipartisan compromise, which allowed regulators to interpret the specifics. “This offers political benefits as lawmakers can later criticize the regulator for not following the intent of Congress, even if Congress failed to clearly articulate what should happen,” Seiberg explained.
The Chevron decision will force lawmakers to be more specific about details that were previously left to regulatory interpretation. This includes defining when a token transitions from being a security to a commodity, among other complex issues. Seiberg pointed out that legislators will need to address specific scenarios, such as the participation of retail investors in staking programs on trading platforms or the application of AML/BSA controls to tokens that have been mixed to conceal their origins.
“No longer will either side be comfortable deferring to the regulator as the courts are now likely to second guess those decisions,” Seiberg added, indicating that the Chevron decision will necessitate more detailed and precise legislative language moving forward.
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