May 10, 2025

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Can a Republican Trifecta Lead to More Defined Crypto Regulation? | The Regulatory Review

The Regulatory Review

The Trump Administration may enhance cryptocurrency regulation through expanded power granted to the Commodity Futures Trading Commission (CFTC). This move aligns with the Administration’s goal of reducing oversight authority held by the U.S. Securities and Exchange Commission (SEC), potentially resolving the jurisdictional conflict between the two agencies.

As it stands, the SEC and CFTC have differing definitions of cryptocurrencies. The SEC views digital assets as securities under the Howey Test, while the CFTC classifies them as commodities like gold or oil. This discrepancy has led to challenges in regulating cryptocurrencies, which often exhibit characteristics of both securities and commodities.

The House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (FIT 21) in May 2024 to clarify jurisdiction between the SEC and CFTC. FIT 21 categorizes cryptocurrencies into distinct groups, expanding the CFTC’s authority over spot markets while limiting the SEC’s jurisdiction to assets without decentralized blockchains.

However, FIT 21 lacks clarity for cryptocurrencies with hybrid structures that could be classified as either securities or commodities. The proposed legislation aims to provide regulatory clarity but may require further guidelines for assets that straddle the line between securities and commodities.

In the Senate, various bills have been introduced to regulate stablecoins, with differing approaches to oversight between state and federal regulators. The passage of stablecoin legislation could provide a more cohesive regulatory framework for digital currencies pegged to traditional assets such as the U.S. dollar.

Crypto industry experts anticipate swift progress on cryptocurrency legislation under the Trump Administration, but the true level of priority remains uncertain amidst other policy issues. One option could involve a joint statement from the SEC and CFTC to clarify regulatory authority while Congress addresses additional legislative priorities.

The United States would benefit from a clear regulatory framework for cryptocurrencies, prioritizing consumer protection and economic policy. Passing FIT 21 and stablecoin legislation could help establish a solid foundation for regulating digital assets, ensuring the U.S. remains competitive in the evolving financial landscape.

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