The Breakdown - SEC & CFTC Call a Truce on Crypto Regulation

Episode Date: October 1, 2025

After years of turf wars, the SEC and CFTC are finally signaling a new era of collaboration. At their first joint roundtable in 14 years, agency heads emphasized coordination over consolidation, while industry voices clashed over tokenization standards and compliance. We also break down the SEC’s first crypto no-action letter in five years, Binance’s new white-label push for TradFi, SWIFT’s blockchain integration plans, and the latest on Bitcoin’s September slide and October ETF outlook. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

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 Tuesday, September 30th, and today we have a big bucket of regulatory progress for crypto. 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. On Monday, the SEC and the CFTC held a joint roundtable on regulatory harmonization.

CFTC acting chair Carolyn Pham announced, it's a new day and the turf war is over. SEC Chair Paul Atkins made the point in his opening speech that collaboration, not consolidation, is the goal. He asserted that there are no plans to merge the two agencies, a decision that he said would be up to Congress and the president. Instead, Atkins argued that, quote, fanciful talk of reorganizing the government, risks distracting us from the monumental opportunity we have in front of us. Now, this was the first joint roundtable held by the two agencies in about 14 years, dating back

to the period when Dodd-Frank was first being implemented. Since then, the agencies have been working independently and, during the crypto era, sometimes it cross-purposes. The regulatory climate of the past administration was marked by a turf war where the two agencies could not see eye-to-eye. Enforcement actions were often brought against crypto projects, not because they were an example of the worst actors in the space, but purely as a jurisdictional land grab. The agencies have been signaling that a new era of collaboration was beginning, but this roundtable

laid out exactly what that will look like. Pham, for her part, seemed focused on presenting proof of life for the CFTC. She explained that the agency has taken 13 enforcement actions so far this year and 18 non-enforcement actions commenting, I think you will see that the CFTC is alive and well, and there needs to be no more fud about what's going on on the other side of town. Pham finds herself as the sole remaining CFTC commissioner after everyone else resigned following the transition of power in the White House. FAM also intends to leave once a new CFTC chair is appointed.

Brian Quintends seems increasingly unlikely to be moved forward as the nominee, and we have no real indication of a replacement from the administration. That context explains why FAMM was so insistent that the CFTC is and will continue to be a viable independent agency, rather than one that should be rolled up into the SEC. Instead, both agency heads were focused on discussing what a new collaborative regulatory structure could look like. Pham said, there's no question that because we both oversee related parts of the financial markets, the regulatory lanes for our two agencies aren't always clear or intuitive. At times,

this has led to unnecessary friction between the two agencies and avoidable headaches for the market participants who depend on us. One of the big initiatives at the moment is guidance that allows both CFTC and SEC registered exchanges to list spot crypto tokens. It's a bit of a workaround given that we don't have full clarity on which tokens are considered securities or commodities, but it's functional enough for the moment. Although the regulators were in a collaborative mood, there was a sharp divide between TradFi and crypto industry panelists. point CME group Terence Duffy flipped off polymarket founder Shane Copeland after he was called older, which was ultimately taken as a lighthearted joke, but the regulatory discussions were

far more serious. Consensus lawyer Bill Hughes noted, the chief concern of the TradFi platforms is special rules that make things easier for new crypto platforms, but which are otherwise inaccessible to those Tradfive firms, who themselves would very much like the regulatory hurdles to be lowered, something we've heard repeatedly and unsurprisingly. One of the big topics was the idea that all tokenized assets need to be fungible, for example, that all tokenized Tesla stock needs to be standardized and interchangeable. This isn't how the current market structure is shaping up and would introduce some big, hairy problems into the space. It would be very difficult to ensure that tokenized assets could be redeemed from any issuer, and it's not clear that full

interoperability is even possible. Some view this argument as disingenuous or simply an attempt to use compliance theater to stifle new products. Crypto lawyer Gabriel Shapiro suggested, The Old Guard Tradfai guys are throwing heavy shade at the innovation exemption and pushing for totalitarian solutions. Basically, it's clear there's still a long way to go before we figure out what a combined SEC and CFTC regulatory framework would look like, but at least the two agencies have called a truce and made a start on their collaborative effort. Alongside the joint roundtable, the SEC issued their first crypto no-action letter in five years. No action letters give a narrow carve-out to allow capital market activity that would otherwise live in a gray area. The entire

Gensler era had zero no-action letters, with the SEC preferring to fire off enforcement actions across the entire industry. Monday's letter addressed a firm called Double-Z and their distribution of the 2Z token. 2Z serves as the native utility token for the double zero's decentralized infrastructure or DIPPIN network. Participants can offer up capacity on private fiber optic networks in order to create fast data streams that operate outside of the public internet. 2Z tokens are used as a form of payment in exchange for this capacity, with payments handled programmatically on the blockchain. The blockchain itself functions on a proof of utility consensus mechanism using bandwidth supply rather than proof of work or proof of stake. While the official no action letter was boilerplate with no details,

Commissioner Purs added her own commentary writing, The economic reality of deep-pin projects differs fundamentally from the capital-raising transactions Congress charged this commission with regulating. Congress created the SEC to oversee the securities markets not to regulate all economic activity. In other words, utility tokens are not securities and the SEC has no jurisdiction. Double-zero co-founder Austin Federa tweeted, Today is a monumental day for crypto in America. The SEC confirmed that the double-zero network's native token flows to contributors of the network

are not subject to the registration requirements under the Securities Act. This No Action Letter adds further way to the understanding many of us have always believed that tokens are not inherently securities. He added, The SEC's recognition of 2Z's design extends far beyond Double Zero. It shows there's room in America for compliant tokens that are integral to the functioning of blockchain systems that deliver fundamental value. For the industry, this sets a new precedent.

Proof of utility provides a blueprint for how functional tokens can align with regulators, reopening the door for compliant innovation to thrive in America. D.0.0 General Counsel, Mary Tomanen, reinforced that the no-action letter underscores that there is a path to launch a token. When the value of the token comes from the other network participants work, Howey simply does not apply. A16Z Crypto General Counsel Miles Jennings tweeted, The SEC continues to address crypto-regulatory uncertainty. In the first Crypto-No Action relief letter in around five years, the SEC clarifies that programmatic blockchain incentives for network participation aren't securities offerings. More progress. Meanwhile, moving over to the intersection

of TradFi and crypto infrastructure, Binance is launching a new white label infrastructure service in an attempt to win partnership with Tradify institutions. Binance said the service will allow banks and brokerage firms to, quote, seamlessly offer crypto trading services to their clients. Institutions will be able to plug into Binance's backend infrastructure, enabling spot and futures trading, settlement, custody, and compliance. That means that third-party institutions will be able to tap into Binance's liquidity, avoiding the cold start problem of launching their own market. Binance noted, importantly, institutions retain full control over their front-end user experience, brand, and client relationships, while significantly reducing the time,

costs, and complexity of building crypto capabilities in-house. They expect the service to go live starting this month, with full features rolled out by the end of next year. Catherine Chen, the head of VIP and institutional at Binance said, the demand for digital assets is growing faster than ever, and traditional financial institutions can no longer afford to be on the sidelines. Now, until now, Coinbase has dominated the market for white-label crypto services. They provided custody for most of the ETFs that weren't using their own infrastructure, and are also in the early stages of partnering with multiple banks after launching their own broader white label services product in June. The following month, they signed a strategic partnership with J.P. Morgan.

Look, whether U.S. companies decide that they're comfortable working with finance or not remains to be seen, but when crypto regulation was coming together earlier in the year, some expected the banks to enter in a big way and out-compete the crypto-native firms. Instead, what we're seeing is crypto firms tapping into a whole new user base by partnering with TradFi. Speaking of which, Global Payments Network Swift has said it plans to integrate a blockchain-based ledger into its infrastructure stack. The initial focus will be on providing real-time 24-7 cross-border payments. Currently, the Swift system takes between three days and several weeks to clear.

In a press release, Swift said that the final design will be based on a conceptual prototype provided by consensus. They said the ledger will be capable of supporting interoperability across existing and emerging systems for various use cases. Presumably, that means it will be built on the Ethereum tech stack, but the press release didn't specify. The press release also set a consortium of 30 financial institutions spread across the globe will use the system as a shared ledger. And while Swift was always a global consortium of banks, this move would emphasize its nature as a credibly neutral party in global finance.

Nigel Dobson, Banking Services lead at ANZ Bank said, drawing on our own work with blockchain-based shared ledgers, we believe it can be a powerful infrastructure upgrade and a pivotal step towards global instant always-on cross-border transactions. It is our view that no single institution can achieve this alone. Swift's neutral role and global network uniquely positioned it to drive industry collaboration and adoption. Now, a couple quick seasonal updates to close us out. The final week of September has been a brutal one with Bitcoin retracing below 109,000. That drawdown came with $8 million worth of outflows for global crypto products for the week. That's the second largest outflow week since April,

and breaks the two-week trend of inflows above $1.8 billion. James Butterfield, the head of research for coin shares, looked for the bright side writing. Nonetheless, cumulative inflows remains substantial, with month-to-date inflows at $4 billion, and year-to-date inflows at $39.6 billion, maintaining momentum to potentially match last year's record of $48.6 billion. Interestingly, the outflows were largely a U.S.-focused phenomenon. Funds based in Switzerland, Canada, and Germany all saw strong net inflows. And while the outflows were strong, there was not a commensurate increase in flows to short Bitcoin funds.

Butterfield suggested that this means the negative sentiment was likely low conviction and will prove temporary. Still, with September coming to a close, there is reason that. to think this could be on October to remember. Seasonally, September is the worst month on the calendar for Bitcoin on average, and October is one of the best. And whether you believe in Bitcoin seasonality or not, the sentiment tends to feel a little brighter around this time of the year. A big catalyst to watch for is a new wave of ETFs set to boost all coin enthusiasm. The SEC will be forced to make a final decision on 16 different crypto ETFs over the coming

month, covering a wide range of tokens. The first decision is due this Thursday for the Canary Capital Lightcoin product, with multiple Solana ETFs looking for approval. next week. The SEC can fast-track approvals for any of these products at any moment, so it's plausible that a ton are listed all at once after a bulk approval. Most of the products qualify under the SEC's new generic listing standards, so it's pretty unlikely that we see rejections. In fact, Eleanor Territ of Crypto in America reported on Monday that the SEC had asked for applications to be withdrawn, so the products can go through the new generic listing process. Bloomberg, Zarok Balcuna said that this was something he was anticipating, but still isn't sure how the launch

schedule will work. Still, if we get all of those, even though supply doesn't create demand, as we've seen, just the sheer excitement of momentum plus the narrative power of October could be something to see. For now, 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.