Revamping US Crypto Regulation: A Call to Action

At the core of every blockchain lies a consensus mechanism. Occasionally, modifications to these rules, known as a 'hard fork,' are necessary. With the upcoming change in administration, the SEC has the opportunity to implement its own hard fork in crypto regulation, shifting from a regulation-by-enforcement approach to a pro-innovation framework. Four key areas require attention: issuance, staking, custody, and trading. The current regulatory landscape poses significant challenges for crypto asset issuers, with unclear definitions and onerous registration processes. The SEC can clarify that crypto assets sold as part of an investment contract are not subject to registration requirements if they do not independently qualify as securities. Additionally, reforms to the registration process and exemptions for crypto-native distribution methods are necessary. A 'safe harbor' for airdrops would also provide clarity. Regarding staking, the SEC should establish a registration exemption for staking services that constitute securities. For custody, the SEC can remove barriers by withdrawing certain guidelines and lawsuits, and proposing amendments to the custody rule. In trading, the SEC should provide clarity on the status of crypto assets and modify exchange registration requirements to accommodate crypto trading venues. By addressing these pain points, the SEC can create a more innovation-friendly regulatory environment for crypto assets.