In a move that has sent ripples through the financial landscape, the Department of Government Efficiency (DOGE) initiated a call for public input in February regarding the U.S. Securities and Exchange Commission (SEC). This action signals potential imminent reforms within the agency, particularly in its approach to cryptocurrency. Since then, the SEC, in alignment with President Trump’s administration, has adopted a less confrontational stance toward the burgeoning crypto industry, marked by the appointment of crypto-friendly officials and the cessation of numerous legal proceedings against crypto enterprises.
Clear Compliance Over Reactive Enforcement
Historically, the SEC’s preference for enforcement over proactive guidance has compelled companies such as Coinbase, Ripple, and Celsius to expend substantial resources in litigation to ascertain their regulatory status. A notable instance involved Debt Box, where a court mandated the SEC to cover legal expenses after acknowledging inaccuracies in its claims. This case highlights the urgent need for regulatory bodies to prioritize clarity and consistency over reactive measures—a sentiment echoed by Paul Grewal, Chief Legal Officer at Coinbase. Grewal suggests that the SEC should reimburse legal costs for firms that successfully contest enforcement actions, emphasizing the necessity of a more transparent regulatory framework.
Pressure is mounting on regulatory bodies, including the SEC, to align with the U.S. Treasury’s approach, which emphasizes structured compliance pathways. The Treasury’s digital asset guidelines, offering clarity on tax reporting and anti-money laundering (AML) measures, serve as a viable model for the SEC. Standardized definitions of securities in the crypto realm would empower companies to appropriately structure their offerings from the outset, thereby minimizing unforeseen legal challenges.
A Balancing Act
Drawing inspiration from the Internal Revenue Service (IRS) could further revolutionize the SEC’s regulatory paradigm. The IRS’s implementation of a “safe harbor” provision for early-stage projects—a concept previously advocated by SEC Commissioner Hester Peirce—illustrates a potential path forward. By fostering innovation while ensuring compliance, this approach could invigorate the crypto space. The IRS’s historical reliance on voluntary disclosure programs to encourage compliance, rather than imposing punitive measures, offers a compelling blueprint for crypto regulation.
Contrary to the belief that regulation stifles innovation, a well-defined regulatory framework could attract risk-averse players into the crypto ecosystem, thereby accelerating its growth. A balanced regulatory touch necessitates robust backend enforcement to avoid unnecessary friction between businesses and regulators. Enhanced coordination between the SEC, Treasury, and IRS would mitigate regulatory discrepancies and streamline compliance for digital asset stakeholders. The Treasury’s digital asset guidelines already lay a solid foundation for such cross-agency cooperation.
The Bottom Line
Amidst DOGE’s solicitation for input, the current administration’s commitment to digital asset reform, and Coinbase’s proposal, the crypto industry is on the brink of transformative regulatory changes. Although the reforms are in nascent stages, the pace at which they are unfolding is remarkable. DOGE’s influence is likely to extend beyond the SEC, impacting broader regulatory frameworks. It is imperative for the administration, alongside Congress, to establish a legislative framework that clarifies the distinctions between commodities, securities, and digital assets. Only then can the industry truly thrive—by learning to walk before running.
In the interim, the SEC’s adoption of a strategy that encourages growth while safeguarding investors could serve as a catalyst for a more robust and resilient cryptocurrency ecosystem. As the dialogue around regulatory clarity intensifies, the call for a collaborative and transparent approach becomes increasingly urgent, raising questions about how swiftly these changes can be implemented and their long-term implications for the crypto industry.
Source
This article is based on: The SEC Can Learn From the IRS in Making Regulation Simpler for Crypto
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
