Blockchain Bi-Weekly: Key Moments In Web3 Law From The Past Fortnight | March 27, 2025

The past two weeks brought some notable progress for the industry, with developments touching various aspects of the cryptocurrency landscape. The Securities and Exchange Commission (SEC) clarified that most proof-of-work mining activities do not qualify as securities transactions, providing a sense of relief for miners. Meanwhile, Ripple announced a potential settlement, indicating a possible end to the SEC’s appeal in a case that has been ongoing since 2020. On Capitol Hill, the Senate moved forward with its stablecoin act, showcasing progress while also highlighting the challenges of reaching consensus on key issues. Additionally, both chambers of Congress overwhelmingly passed legislation overturning the IRS’s crypto broker reporting rules, demonstrating bipartisan alignment on certain regulatory matters.

These recent developments and other key highlights are discussed below.

SEC Clarifies That Most Proof-of-Work Mining Activities Are Not Securities Transactions: March 20, 2025

The SEC’s Division of Corporation Finance released a statement clarifying its position on most proof-of-work (“PoW”) mining activities, stating that they generally do not constitute securities transactions under federal securities laws. The SEC’s clarification specifically applies to “Protocol Mining” activities involving “Covered Crypto Assets” linked to public, permissionless PoW networks. The statement emphasizes that rewards from PoW mining are typically derived from the computational power contributed by miners themselves, rather than external managerial efforts, thus falling outside the realm of federal securities laws.

Analysis: While such statements do not establish binding legal precedent and outcomes may vary based on specific circumstances, the SEC’s guidance provides a level of certainty for participants engaging in PoW mining activities. This clarity may encourage greater participation in these operations, fostering network resilience and efficiency.

Ripple CEO Announces Pending Settlement With SEC: March 19, 2025

Ripple disclosed that the SEC plans to drop its appeal in part of the ongoing legal dispute, potentially signaling a resolution to a case that has spanned years. While the details of the settlement are yet to be finalized, the announcement indicates progress and a possible shift in the SEC’s stance on non-fraud crypto cases. Ripple’s decision to pursue resolution showcases the complexities of navigating regulatory uncertainties in the cryptocurrency space.

Analysis: Despite the prolonged legal battle, Ripple’s efforts to challenge the SEC’s accusations demonstrate the company’s commitment to defending its position. The lack of definitive precedent on how the Howey test applies to digital assets underscores the ongoing evolution of regulatory frameworks in the crypto industry.

Stablecoin Senate Markup Developments: March 13, 2025

The Senate Banking Committee advanced the GENIUS Act, its version of a stablecoin bill, following bipartisan negotiations to address concerns regarding stablecoin registration and monitoring in the U.S. Despite some political divisions, the bill garnered support from both Democrats and Republicans, indicating progress in shaping legislative frameworks for stablecoins.

Analysis: Efforts to pass stablecoin legislation reflect the growing recognition of stablecoins’ significance in the financial landscape. Ongoing discussions and amendments highlight the complexities of regulating digital assets and underscore the need for bipartisan collaboration to address key concerns.

House Votes to Overturn IRS Crypto Broker Reporting Rules: March 11, 2025

The House overwhelmingly voted to repeal the IRS broker rule changes, aimed at expanding reporting requirements for various crypto entities. The bipartisan support for overturning the rule signals a shift in regulatory approach toward crypto reporting and taxation, emphasizing the importance of clear and balanced regulatory frameworks for the industry.

Analysis: The reversal of the IRS broker rule reflects industry concerns about the rule’s broad scope and potential impact on crypto businesses. The move underscores the significance of legislative intervention to ensure fair and effective regulation in the digital asset space.

Briefly Noted:

Recent industry developments, such as the SEC’s reconsideration of proposed rule changes for crypto exchanges and Dragonfly’s report on geofenced airdrop implications, offer insights into the evolving regulatory landscape. Leadership changes in crypto policy organizations and updates on OFAC’s removal of Tornado Cash designations signal ongoing shifts in the regulatory environment. Noteworthy developments, including the SEC’s crypto roundtable and updates on stablecoin legislation, underscore the dynamic nature of regulatory discussions in the crypto sector.

Conclusion:

While recent regulatory developments provide some clarity on certain aspects of the cryptocurrency industry, ongoing uncertainties persist, necessitating further regulatory guidance and legislative action. The evolving landscape of crypto regulation calls for continued dialogue and collaboration among stakeholders to ensure a balanced and effective regulatory framework that supports innovation while safeguarding investor interests.

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