In a significant move to address regulatory clarity in the cryptocurrency space, Coin Center, a prominent crypto advocacy group, has called on the U.S. Securities and Exchange Commission (SEC) to prioritize comprehensive rulemaking over issuing individual no-action letters.
In a letter dated March 5, Coin Center emphasized that while individualized relief can provide short-term clarity, it risks creating fragmentation, implicit merit regulation, and uneven treatment across crypto projects.
Clear Rules Over Ad Hoc Decisions
“The true value of crypto networks lies in their character as utility-like public goods rather than as services operated by private corporations or associations,” the letter stated. Coin Center argues that relying on case-by-case rulings can create an unfair environment, favoring those with the resources and incentives to pursue regulatory relief.
The SEC has recently taken steps to provide more clarity, including a notice that interprets how non-security crypto assets fall under federal securities laws and offers a coherent taxonomy for digital commodities, collectibles, tools, stablecoins, and securities. Additionally, the SEC and the Commodity Futures Trading Commission (CFTC) signed a memorandum of understanding on March 12 to better coordinate oversight of the financial markets, ending decades of regulatory turf wars.
No-Action Letters: A Double-Edged Sword
No-action letters, which provide regulatory relief to specific entities under certain conditions, have continued to be issued. The latest example is a no-action letter from the CFTC’s Market Participants Division to crypto wallet provider Phantom Technologies, which exempts the company from enforcement actions for failing to register as a broker under specific circumstances.
The SEC has also issued no-action letters to decentralized physical infrastructure network (DePIN) crypto projects and cleared the way for investment advisers to use state trust companies as crypto custodians. However, Coin Center contends that this approach can lead to selective relief, which may not benefit the broader crypto market.
Legislative Efforts to Clarify Regulation
While the SEC and CFTC work to provide clarity through rulemaking and no-action letters, U.S. lawmakers are also taking action. The CLARITY Act, currently moving through Congress, aims to provide clearer regulatory oversight for the crypto industry. If passed, the bill would give the SEC and CFTC clearer guidance on which digital assets fall under their jurisdiction, helping to reduce ambiguity and ensure more consistent treatment across the industry.
“If relief is granted selectively, the regulator inevitably puts its thumb on the scale in favor of networks or intermediaries that have the resources and incentives to pursue it,” Coin Center said. This selective approach can stifle innovation and create an uneven playing field, hindering the growth and adoption of crypto technologies.
Looking Forward
As the crypto industry continues to evolve, the need for clear and consistent regulatory frameworks becomes increasingly urgent. Coin Center’s call for the SEC to focus on comprehensive rulemaking aligns with the broader industry’s desire for a stable and predictable regulatory environment. This approach not only benefits individual projects but also supports the overall health and innovation of the crypto ecosystem.
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