SEC Commissioner Details Planned Crypto Regulation Changes

TLDR

• Hester Peirce outlines three major reforms for SEC’s crypto approach under potential Trump leadership
• Calls for end to regulatory suppression and blocking of crypto access to custody services
• Documents reveal FDIC’s role in restricting banking services to crypto businesses in 2022
• David Sacks, incoming Crypto Czar, signals possible investigation into Operation Chokepoint 2.0
• SEC Commissioner advocates for clearer guidelines and public collaboration with crypto industry

SEC Commissioner Hester Peirce has unveiled a comprehensive plan to reform the agency’s approach to cryptocurrency regulation, addressing long-standing industry concerns about regulatory clarity and banking access. The announcement comes amid revelations about previous restrictions on crypto banking services and calls for increased collaboration between regulators and industry stakeholders.

In a recent Fox Business interview, Peirce outlined three main priorities that would reshape the SEC’s regulatory framework under Donald Trump’s leadership. The commissioner emphasized the need to end what she termed “regulatory suppression” of the crypto industry, particularly regarding access to essential services like custody.

🚨NEW: @SECGov Commissioner @HesterPeirce just alluded to “Operation Chokepoint 2.0” in her interview with @LizClaman on @FoxBusiness and also outlined the 3 things she thinks need to be done under @realDonaldTrump’s new SEC to help give the #crypto industry some clarity.

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— Eleanor Terrett (@EleanorTerrett) December 9, 2024

The timing of Peirce’s announcement coincides with new information about past regulatory actions affecting the crypto industry. Recently released FDIC “pause letters,” obtained through a Freedom of Information Act (FOIA) request by Coinbase, show that the agency instructed banks to halt crypto-related activities for additional review in 2022.

Paul Grewal, Coinbase’s Chief Legal Officer, pointed to these documents as evidence of coordinated efforts to restrict crypto companies’ access to banking services. The letters provide concrete documentation of regulatory actions that limited the industry’s ability to operate within the traditional banking system.

The issue of banking access gained additional attention following revelations from Chris Lane, former CTO of Silvergate Bank. Lane attributed the bank’s closure not to the FTX collapse but to regulatory pressures that severely limited their ability to hold deposits from digital asset clients.

David Sacks, who has been named as the incoming Crypto Czar, has responded to these developments by suggesting the need for an investigation into what has been dubbed Operation Chokepoint 2.0. This refers to alleged coordinated regulatory efforts to limit crypto companies’ access to banking services.

Peirce’s reform agenda includes establishing clearer guidelines about which activities and assets fall under SEC jurisdiction. This clarity would help crypto businesses understand their regulatory obligations and reduce uncertainty in their operations.

The commissioner stressed that crypto businesses need precise definitions of what qualifies as a security. This understanding would allow companies to operate with greater confidence and reduce the risk of inadvertent regulatory violations.

In her proposal, Peirce advocated for a more collaborative approach between the SEC and industry participants. She suggested implementing a public process where stakeholders can contribute to discussions about how existing rules should apply to crypto businesses.

The commissioner’s plan addresses the practical needs of crypto companies while maintaining regulatory oversight. Her approach aims to balance industry growth with necessary consumer protections and market stability.

Recent documents have shown that regulatory actions in 2022 had direct impacts on crypto banking relationships. The FDIC letters revealed specific instructions to banks regarding their crypto-related activities, demonstrating the extent of regulatory influence on banking services.

Banking access remains a critical issue for crypto companies, with many firms reporting difficulties maintaining stable banking relationships. Peirce’s proposed reforms directly address these challenges by calling for an end to service restrictions.

The commissioner emphasized that essential services like custody are fundamental to the proper functioning of crypto businesses. Without access to these services, companies face substantial obstacles in their operations and growth.

Details from the Coinbase FOIA request have provided new context about past regulatory actions. These documents show that banking restrictions were part of a broader regulatory approach that Peirce seeks to reform.

The most recent development in this ongoing situation is the release of the FDIC pause letters, which has prompted calls for investigation from incoming officials and renewed focus on regulatory reform in the crypto sector.