Cryptocurrency Regulatory Update: SEC Challenges and Global Developments for November 2024

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

SEC Developments and Legal Issues

The Securities and Exchange Commission (SEC) has been at the center of several pivotal decisions. Gary Gensler, the 33rd Chairman of the SEC, announced his resignation, effective January 20, 2025. Meanwhile, a federal judge ruled that the SEC exceeded its authority under the Securities Exchange Act of 1934 by expanding the definition of “dealer” to potentially include decentralized finance. DeFi) participants. The ruling highlights the ongoing legal challenges the SEC faces as it applies its regulatory framework to the evolving cryptocurrency industry.

Additionally, 18 Republican attorneys general have challenged the SEC’s policies regarding digital assets. They argue that the agency’s approach to treating secondary transactions as investment contracts violates the Administrative Procedure Act.

Commodity Futures Trading Commission and Consumer Financial Protection Bureau

The Commodity Futures Trading Commission (CFTC) has recommended leveraging distributed ledger technology to expand the use of non-cash collateral. Meanwhile, the Consumer Financial Protection Bureau (CFPB) finalized a rule that expands oversight of non-bank digital payment service providers, although it excludes digital asset transactions.

Congressional Investigation and DOJ Action

Members of the U.S. Congress have been actively raising concerns and inquiries related to cryptocurrency regulation. Representative French Hill urged federal regulators to stop continuing rulemaking, and Representative Sean Casten questioned the Treasury Department about the use of cryptocurrency mixers like Tornado Cash. Judicial action was also announced, with the Department of Justice (DOJ) sentencing individuals involved in major cryptocurrency-related crimes, including the Bitfinex hack and operating an illegal cryptocurrency mixer.

International regulatory developments

Internationally, various regulatory bodies have taken significant steps. The Hong Kong Monetary Authority has issued warnings against unlicensed offshore cryptocurrency companies, and the UK’s Financial Conduct Authority has secured convictions for individuals involved in cryptocurrency investment fraud. Additionally, the Bank for International Settlements explored the role of decentralized exchange participants in a new research report.

State level and other regulatory actions

At the state level, California revoked BlockFi Lending LLC’s financial license, reflecting heavy regulatory scrutiny. These actions highlight regulatory issues and changes underway at the federal and state levels in the United States.

These developments demonstrate the dynamic and often contentious relationship between regulators and the rapidly evolving cryptocurrency industry. The cryptocurrency sector is in a state of flux, with ongoing debates over jurisdiction, compliance, and innovation as regulators and entities continue to adapt to technological advancements.

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