The Breakdown - New SEC Crypto Task Force Announces New Era of Crypto Policy

Episode Date: February 6, 2025

SEC Commissioner Hester Pierce, long a holdout stalwart for the crypto industry, is now empowered to lead policy via the SEC's new Crypto Task Force. In a recent speech, she laid out the group's specific priorities. Sponsored by: Ledger Ledger, the world leader in digital asset security, proudly sponsors The Breakdown podcast. Celebrating 10 years of protecting over 20% of the world’s crypto, Ledger ensures the security of your assets. For the best self-custody solution in the space, buy a LEDGER™ device and secure your crypto today.Buy now on Ledger.com. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the Big Picture Power Shifts remaking our world. What's going on, guys? It is Wednesday, February 5th, and today we are talking about some major changes in U.S. crypto policy. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, friends. Well, as you can hear from my voice, I finally succumbed to kid disease season, but we are going to power through because we have some very exciting things to talk about. For a couple months now, I've been talking about how we need to shift our framework from

all the good that could be to what actually happens. And boy, did we get a heck of a lot of that yesterday. SEC Commissioner Hester Purse has set out the roadmap for crypto policy during this administration. On Tuesday, Perce released her first official statement as head of the Crypto Task Force, entitled The Journey Begins. She used the analogy of setting off on a road trip, contrasting the analog days of the 1970s, to the much more enjoyable and less risky technology-enhanced road trips of today. Purs argued that the crypto road trip of last decade was steered by an SEC that, quote, refused to use regulatory tools at its disposal and incessantly slammed on the enforcement brakes as it lurched along a meandering route with a destination not discernible to anyone. Ouch.

Under the new SEC, Perse didn't promise that the road would be any less bumpy. Indeed, she wrote that, quote, this new journey towards regulatory clarity still presents dangers, and both the commission and the public need to stay alert and away. of the risks and opportunities that may lie ahead. But the agency has officially traded in Gensler's hand-drawn map to nowhere for a GPS and a team of experts with a clear idea of the destination. Purs wrote that the commission's handling of crypto has been marked by legal and precision and commercial impracticality and added that, the task force wants to travel to a destination where people have great freedom to experiment and build interesting things and which will not be a haven

for fraudsters. The statement laid out 10 priority areas of focus for the crypto task force. Many were common sense, including resolving securities classification for crypto tokens, defining areas of the industry outside the scope of financial regulation, creating a pathway to registered token offerings, providing clarity on crypto lending and staking, establishing an international sandbox, and providing guidance for broker-dealers, clearing agents, ETF issuers, and other financial infrastructure providers.

By far, the biggest point was that the SEC is now open to industry engagement. It has created its first ever crypto-specific contact point and is asking for suggestions across the entire crypto and tradfai sector. Consensus lawyer Bill Hughes put it, Come in and talk to us, but it's not a trap. Digging into some of the interesting details, Perce spelled out the SEC's thinking on how to deal with token launches in the short term. She wrote that the task force is considering a recommendation to provide temporary relief for token offerings. The relief would be retroactive, providing a safe harbor for tokens that are already live. Token issuers would need to provide disclosure information and agree to accept SEC's jurisdiction in fraud cases.

In exchange, the token would be deemed to non-security, making it unambiguously legal to trade on the secondary market without SEC registration. Burst made it clear that this would be a temporary measure to bridge the gap until more permanent regulations or laws can be enacted. She wrote, it would provide a pathway for existing tokens to find their way out of the fog of uncertainty that obscures a feasible path forward and would encourage the provision of greater disclosure. Crypto lawyer Gabriel Shapiro commented,

Very bullish idea here from Hester Perce. I happen to know a few hardcore crypto lawyers who have raised similar ideas and conversations with her in recent weeks, and it shows not only is the SEC listening, it's acting fast on what it hears. I'm glad that we're all excited here, but let's give credit where credit is due, as PERS has been talking about varieties of this sort of safe harbor idea for years and years and years. The value here is, in fact, that for the first time, there's actual alignment between these different parties. Buried and lengthy disclaimers about the SEC's role in this revamp of crypto enforcement was an interesting statement about the agency's view on tokens

more generally, after explaining that there is no such thing as an SEC seal of approval or an endorsement of individual investments, purse added, Spitting up coins and tokens is easy. If people want to buy a token or product that lacks a clear long-term value proposition, they should feel free to but should not be surprised if someday the price drops. In this country, people generally have a right to make decisions for themselves. But the counterpart to that wonderful American liberty is the equally wonderful American expectation that people must decide for themselves,

not look to mama government to tell them what to do or not to do, nor to bail them out when they do something that turns out badly. Analyst Will Clemente summed up, New SEC statement basically says F around and find out if you want to buy meme coins. Actually insane. Funny, this probably has the opposite effect. If rugs are effectively legal, then it commoditizes the behavior, and there's no regulatory ARB value for token creators. Some other brief points from the statement, the SEC will look to use exemptive relief

appropriately but thoroughly. Expect to see a wave of no action letters in the near future. Purse warned the agency would be resource constrained in their ability to issue them quickly. Unwinding current litigation will take time, but it's on the agenda. Purse wrote, it took us a long time to get into this mess and it's going to take us some time to get out of it. Please be patient. Zooming back out to the overall statement, many crypto lawyers had pinch themselves after reading the first comprehensive view out of the SEC after over a decade of obfuscation. Alexander Greve, the VP of Government Affairs at Paradigm wrote, surreal to see,

Complete 180. Alex Thorne of Galaxy Digital called it a sea change. Nate Garassi, the president of the ETS store commented, the SEC now has a crypto email address, never thought I'd see the day. What's more, even more seems to be going on behind the scenes at the SEC. On Monday, Reuters reported that SEC lawyers would now be required to seek permission from the commission before launching probes. These investigations allowed the agency to subpoena firms, and were previously signed off by the director of enforcement or lower-ranking senior staff. Jake Trevinsky, the chief legal officer of variant fund, wrote, huge change at the SEC.

Gensler's harassment campaign only worked because crypto companies felt obligated to respond to request for information since refusal meant to subpoena. Now no subpoenas without a vote by commissioners who are majority opposed to regulation by enforcement. Yesterday, the New York Times reported that the Cryptoenforcement Unit would be scaled back. The division was established in 2017 but grew massively during the Gensler era. In 2022, its size was doubled to 50 dedicated lawyers and support staff. Many of these staff have already been reassigned to other departments within the SEC, according to the New York Times sources. The newspaper wrote that one of the unit's top lawyers had been moved out of the enforcement

division entirely and that, quote, some of the people briefed on the shakeup described that move as an unfair demotion. Forgive me if I don't shed a tear. Hello, friends. I am thrilled to share that Ledger is once again partnering and sponsoring with the breakdown. Many of you know, but for those of you who don't, Ledger is the most secure hardware wallet for your crypto and logins. It's trusted by 7 million users and secures 20% of the world's digital assets. What's more, Ledger is a lot more than wallets. Over the recent years, they've built a comprehensive ecosystem of products and services, all of which are designed to make digital ownership more secure and accessible. You can buy your Bitcoin with Ledger and Ledger Live

and so much more. Basically, not only did they want to keep your assets secure, they want you to be able to do more with them. Ledger's newest devices, the Ledger Stacks, and Ledger Flex, introduced the world's secure touchscreens, making it easier and safer to manage your transactions and assets. Alongside Ledger Stacks and Ledger Flex, the company also launched the Ledger Security Key app, offering a safer alternative to traditional passwords and enhancing your digital security. If you are in this space, you owe it to yourself to at least check out Ledger and their ecosystem what they have available to you. So thanks once again to Ledger for sponsoring the show. Finally, former CoinCenter Policy Director Landon Zinda has joined the SEC.

He will serve as counsel to acting chairman Mark Yueda and senior advisor to the Crypto Task Force. Prior to joining CoinCenter, Zinda worked for Congressman Pat Toomey and Tom Emmer. Judging from his work at CoinCenter, he will be a keen advocate for self-custody and privacy tools with a view to ensuring constitutional protections. Still mostly, it's a strong sign that the SEC is not only listening to the crypto industry, but hiring its policy thinkers. For as amazing as all that is, that wasn't actually the news that dominated the headlines yesterday. Crypto-Zar David Sacks held his first press conference to announce the U.S. crypto strategy.

Sachs stressed the need for clear rules, stating that crypto founders have told him repeatedly that, quote, the number one thing they need is regulatory clarity. They just want to know what the rules of the road are so they can abide by them. We're coming off four years of arbitrary prosecution and persecution of crypto companies where the SEC wouldn't tell founders what the rules were. The press conference overall served to reinforce the priorities laid out in Trump's crypto executive order. Sacks noted that financial markets are, quote, destined to become digital and that this administration wants the, quote, value creation to happen in the United States. He claimed an onshore industry

would also be good for consumer protection by making it easier for regulators to supervise. We also learned that while market structure legislation is on the agenda, the short-term focuses on stable coins. Sacks said, stable coins have the potential to ensure U.S. dollar dominance internationally, to increase the usage of the dollar digitally as the world's reserve currency, and in the process create potentially trillions of dollars in demand for U.S. treasuries, which could lower long-term interest rates. Those comments weren't written by Nick Carter, but they might as well have been. Sacks closed his comments by stating that he was excited to create a golden age in digital assets, and while the words were all great, overall,

the crypto community was underwhelmed. Scott Melka wrote, is this entire presser an announcement of an announcement? Gwark commented, God, he's good. Sacks basically just held a press conference to say, let's circle back in six months. Notably absent from the main statement was a discussion of the Bitcoin Strategic Reserve. Sacks returned to the podium right at the end of the press conference to address the issue stating, One of the things the president instructed us to do was evaluate the idea of a Bitcoin Reserve. It's one of the first things we're going to look at

as part of an internal working group of the administration, the feasibility of a Bitcoin Reserve. He noted that a few members of the working group are still awaiting Senate confirmations, so the process is still in the early stages. Sacks also noted that the concept of a sovereign wealth fund is a separate idea that would be handled by incoming Commerce Secretary Howard Lutnik.

Watching Bitcoin plummet as the press conference came to a close, David Bailey, the CEO of Bitcoin Magazine, tweeted, Strategic Bitcoin Reserve is happening. It's a top priority directly from DJT. They're assembling the top officials in the country to formulate a plan in the next 80 days. Half the working group is Bitcoiners. SBR is happening. Polymarket, though, currently has the odds of a Bitcoin reserve within the first 100 days at an all-time low of 13%. Then again, odds of it happening this year rose slightly to 48%. Venture artists lampooned the response from crypto-twitter

posting, y'all acting like you expected David Sacks to whip out his phone and launch pumped-out funcoin live on stream. Melker also circled back to his comments saying, absolutely incredible that we're in a place where we have the luxury of being disappointed when our government is doing a full press conference on crypto. Amazing how far we've come and how bullish it is when you zoom out. The other half of the press conference and arguably the more important part was the announcement of a joint congressional working group on crypto. The chairs of the House Ag and Financial Services Committee, as well as their counterparts on the Senate Agriculture and banking committees, were all present. It's pretty rare for Congress

to form a bicameral cross-committee working group to hash out the details of legislation. It certainly suggests a level of seriousness about passing crypto bills that we haven't seen before. Regarding specific legislation, as we heard, first on deck is a stablecoin bill. Senator Bill Haggerty introduced a new bill yesterday morning with sponsorship from Senators Lummus, Jillabrand, and Scott. Martin Carricka, the founder of Stablecoin Issuer Mountain Protocol, looked over the bill, commenting, let me say this is really well drafted to ensure we actually get stable coins in the U.S. It internalized checks and balances, learned from the hostile regulatory environment faced during recent years. The real unlock for this bill is it gives regulatory

certainty to institutions. Hope we can support this bill as an industry and make sure we address the pitfalls to make this an industry with trillions of dollars. The bill includes a path of state regulatory oversight and generally represents an evolution of the McHenry Waters bill. Jake Chavinsky again writes, the key takeaway from today's press conference, Congress is serious about passing stable coin legislation. About time. Now, when it comes to the market structure bill, House Financial Services Chair, French Hill, said that he plans to stick pretty close to last year's bill fit 21. That bill, he said, had the basics for the exact bill that will propose to introduce again in the 119th Congress. There may be some modest changes, but it had by part

and support. Ultimately, I'll reiterate what Melker said, that it is a privilege to be as bored as people were. Aubrey Shravelle summed up the general feeling on crypto-twinter posting. This press conference could have been an email, but boy, is that a lot better than one of those pesky open letters from Elizabeth Warren. That's going to do it for today's breakdown. Appreciate you listening, as always, and until next time, be safe and take care of each other. Peace.