Original Source:tradingview、cnbc Original Author:Liz Napolitano
On August 1st of this year, the newly appointed Chairman of the U.S. SEC, Paul S. Atkins, launched the "Project Crypto" initiative, aiming to update securities rules and regulations to enable the U.S. financial market to be on-chain. At the time, this was considered a major positive development in regulatory shift, leading to rapid market growth.
On August 1st of this year, Paul S. Atkins, the new Chairman of the U.S. SEC, launched the "Project Crypto" initiative, which aims to update securities rules and regulations to enable the U.S. financial market to be on-chain.
... In the following three months, no further details were disclosed about the plan, and the initially overwhelming regulatory support waned to a slow and gradual decline. However, just recently, Paul S. Atkins provided a further overview of the plan in a new speech. Regarding the controversial issues of the Howe Test and token classification in cryptocurrencies, Atkins emphasized that the committee is about to consider establishing a "token taxonomy," a structured framework based on legal principles to distinguish between securities and commodities. He emphasized that adhering to the “restriction principle” in laws and regulations is crucial to ensure a consistent approach to the classification of crypto assets. Atkins praised Commissioner Hester Pierce’s efforts, particularly her work in providing a transparent and cost-effective treatment of crypto assets under federal securities laws. In his speech, the Chairman highlighted three key themes: the importance of a clear token classification, the application of the Howey test in identifying the temporary nature of investment contracts, and the practical impact on innovators, intermediaries, and investors in the evolving cryptocurrency space. Addressing the pervasive question of distinguishing between securities and non-securities in the cryptocurrency space, Atkins points out that while most tokens are not inherently securities, some may be sold as part of an investment contract during the issuance of a security. However, he refutes the notion that every token involved in an investment contract permanently retains its security status, emphasizing the importance of contextual analysis and recognizing the dynamic nature of investment contracts. On the other hand, Atkins also highlights the challenges faced by developers, exchanges, custodians, and investors in exploring the crypto ecosystem, where tokens function in various ways beyond traditional securities. He criticized the previous administration's approach of classifying all tokens as securities, emphasizing the need for a more nuanced and pragmatic regulatory approach to prevent stifling innovation and pushing it overseas. Atkins reiterated that the SEC's goal is to complement, not replace, existing cryptocurrency legislation, in line with ongoing legislative work. He stressed the SEC's commitment to combating fraud and developing clearer regulatory guidelines to ensure the safety of American investors. Finally, Atkins emphasized the importance of forward-looking regulatory practices and opposed stagnation driven by fear of change. He reiterated the SEC's commitment to setting clear boundaries and providing transparent guidance. The statement concludes: This is the significance of Project Crypto, and it's the goal the SEC should pursue. It also promises, "We will not let fear of the future trap us in the past; we will not forget that behind every token-related debate are real people—entrepreneurs striving to build solutions, workers investing in the future, and Americans striving to share in the fruits of this nation's prosperity. The SEC's role is to serve these three groups." In addition to the SEC Chairman's positive promises, the US has also taken new steps in more systematic regulatory legislation. On November 11, the Senate Agriculture Committee released its highly anticipated draft bill on the structure of digital asset markets—a key step in accelerating the adoption of cryptocurrencies by institutional and retail users. This bipartisan draft, unveiled Monday by Agriculture Committee Chairman, Republican Senator John Buzman of Arkansas, and Democratic Senator Cory Booker of New Jersey, lays the foundation for a regulatory framework for the cryptocurrency industry in the United States. It provides guidelines for institutions looking to engage in business with digital assets, from Bitcoin and Ethereum to tokenized financial instruments. “This is the most important roadmap for how institutions can integrate digital assets into their businesses,” said Cody Carbone, CEO of the Digital Chamber, a cryptocurrency industry association. “It’s like a best-in-class, step-by-step guide detailing the compliance rules that need to be followed to conduct cryptocurrency business.” In essence, the draft highlights five key points. One is granting certain cryptocurrencies preferential regulatory status. The draft law classifies the largest digital assets by market capitalization (such as Bitcoin and Ethereum) as "digital commodities," placing them under the jurisdiction of the Commodity Futures Trading Commission (CFTC). Juan, an analyst at Bitwise, a cryptocurrency-focused asset management firm, stated that this regulation removes a major barrier to institutional trustees' adoption of digital assets. Leon stated, "Compliance and risk departments can finally make decisions based on federal regulations. This will change the direction of internal discussions and provide the legal certainty needed for formal strategic asset allocation." It will also create a "clearly polarized market" consisting of regulated and unregulated tokens, with the former receiving "a significant influx of institutional capital, ample liquidity, and a robust derivatives ecosystem." Secondly, the draft requires cryptocurrency companies to segregate funds and manage conflicts of interest. It mandates that cryptocurrency companies “establish separation of governance, personnel, and financial resources between related entities performing different regulated functions.” Bitwise’s Leon interprets this provision as a challenge to the “integrated” business model common in cryptocurrency exchanges, where exchanges, brokers, custodians, and proprietary trading platforms are all integrated into a single entity. In other words, digital asset companies may need to manage their various businesses separately, similar to traditional financial companies, achieving separation of ownership and checks and balances. This change will become a “cornerstone of institutional adoption.” Thirdly, the draft grants the Commodity Futures Trading Commission (CFTC) greater power to regulate digital assets. The draft gives the CFTC greater power, enabling it to work with the Securities and Exchange Commission (SEC) to issue joint rules on cryptocurrency-related matters. Kabone stated, "The CFTC has been given greater power or authority to govern the industry." Previously, the SEC had been the primary regulator of digital assets for many years; it has now surpassed the CFTC to gain regulatory authority over the industry. Fourth, the draft allows the U.S. Commodity Futures Trading Commission (CFTC) to collect fees. The draft requires regulated entities to pay fees to the CFTC. These fees will be used to register digital commodity exchanges, brokers, and dealers, as well as to supervise and educate regulated entities. Fifth, the draft establishes standards for token listings, requiring cryptocurrency exchanges to only allow trading of digital commodities that are "not easily manipulated." This provision could reduce the number of "runaway" scams and other frauds that are still common in certain areas of the cryptocurrency industry, with the goal of establishing standards and boosting market confidence. Of course, as it stands, the draft is far from finalized, but it does provide important insights into the direction of U.S. efforts to pass regulations favorable to cryptocurrencies. "This is not finalized and is not yet complete, but it reflects well on where Congress is headed and what the final rule might be," Carbone said. He added that the committee is likely to gather feedback on the draft in the coming weeks, meaning that "it is virtually impossible to finalize (this part of the bill) by the end of the year." However, this period will allow lawmakers time to provide more specific guidance on several issues that are not yet finalized or are only enclosed in parentheses in the discussion draft. These issues include anti-money laundering rules and specific provisions for decentralized finance participants. According to Carbone, this discussion draft is just one part of a broader legislative effort aimed at comprehensively reforming the regulation of the cryptocurrency industry. Ultimately, this draft will be merged with the Senate Banking Committee's draft on the structure of the digital asset market to form a comprehensive bill. Craig Salm, Chief Legal Officer of Grayscale Investments, explained that while lawmakers are far from completing this process, cryptocurrency companies are exploring other ways to work with regulators and other authorities to substantially advance their industry. Salm stated, "Despite the lack of comprehensive legislation, we have still seen significant progress on the regulatory front." He added that the Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS), and the Treasury Department have recently issued guidance on staking for cryptocurrency exchange-traded products. "Even so, well-thought-out legislation is crucial to solidifying the foundation of the U.S. digital asset industry and unlocking greater value for investors and consumers." Overall, while the stimulus from regulatory benefits is gradually diminishing with the industry downturn, more far-reaching rulemaking is still underway. Both the SEC's plans and bipartisan structural bills indicate that the crypto market is maturing, and this maturation will inevitably mean an accelerated return to traditional systems. Whether this change is positive or negative remains to be seen.