SEC Urged by Coin Center to Adopt Comprehensive Rulemaking Instead of Case-by-Case Letters
A nonprofit cryptocurrency policy organization based in Washington D.C. contends that issuing no-action letters for individual crypto cases results in regulatory fragmentation and inconsistent enforcement.
Cryptocurrency advocacy organization Coin Center has called on the United States Securities and Exchange Commission to shift away from responding to crypto matters on an individual basis and instead establish comprehensive regulatory frameworks.
"While individualized relief may offer clarity in the short term, it creates risks of fragmentation, implicit merit regulation, and inconsistent treatment among different projects," Coin Center stated in correspondence directed to the SEC, calling on the agency to "prioritize rulemaking wherever possible."
"The genuine value of cryptocurrency networks is found in their nature as utility-like public goods rather than services run by private corporations or associations," the correspondence stated.
The correspondence, which became publicly available on Tuesday, bore a date of March 5.
Following that time, the SEC published a notice interpreting how "non-security crypto assets" are classified under federal securities laws and offers a "coherent token taxonomy for digital commodities, digital collectibles, digital tools, stablecoins, and digital securities."
The SEC and CFTC additionally executed a memorandum of understanding on Mar. 12 aimed at improving coordination of financial market oversight, bringing an end to decades of "regulatory turf wars" between the two agencies.
Selective relief creates an unfair environment: Coin Center
No-action letters targeting the cryptocurrency sector have continued to emerge steadily, with the most recent being a no-action letter directed to cryptocurrency wallet provider Phantom Technologies by the Commodity Futures and Trading Commission's Market Participants Division.
The CFTC notice, which became public on Tuesday, indicated that the no-action letter would, under specific circumstances, prevent the division from recommending that the regulator pursue an enforcement action against Phantom or its personnel for failure to register as a broker.
Recent months have additionally witnessed the SEC issuing two no-action letters to decentralized physical infrastructure network (DePIN) cryptocurrency projects.
In late September, the SEC additionally issued a no-action letter that opened the door for investment advisers to utilize state trust companies as cryptocurrency custodians.
Nevertheless, Coin Center contended that depending on these individualized rulings generates uncertainty for the broader cryptocurrency market.
"When relief is granted on a selective basis, the regulator unavoidably puts its thumb on the scale in favor of networks or intermediaries that possess the resources and incentives to seek it," the organization stated.
In the meantime, United States lawmakers are tackling the issue through their own approach.
The CLARITY Act, which seeks to establish clearer regulatory oversight for the cryptocurrency industry, is progressing through Congress.
The legislation, if enacted, would provide the SEC and CFTC with clearer guidance on which digital assets fall under their respective jurisdiction, contributing to reduced ambiguity and ensuring more consistent treatment throughout the cryptocurrency industry.