For over 200 years, the United States has been a proud beacon of innovation, a place where dreams are made and future is created. Recently, that beacon has been flickering like a bad bulb, particularly in the crypto world. The SEC’s previous, heavy-handed, enforcement-first approach under the previous administration has unnecessarily stymied progress. It’s forced innovation abroad, endangering America’s long-term competitive standing as well. There's hope. The incoming SEC leadership will be making a historic and crucially important pivot. With leaders such as Paul Atkins and Hester Peirce in charge, we might be at the tipping point we’ve all been longing for. Why? Let's get into it.
Clear Rules Attract Investments Back
Imagine a vast ocean, turbulent and unpredictable. Would you hazard navigating your invaluable cargo through it without an accurate chart? Of course not. Unfortunately, that’s exactly what the SEC’s past regulatory confusion has forced the crypto industry to do. With standards difficult to navigate and always with the sword of potential enforcement actions overhead, companies have looked for safer harbors outside this sector. Remember when BlockFi, a promising crypto lender, was essentially forced to pay a hefty fine and alter its business model? That sent a chill through the entire industry.
A “simple, rational fit-for-purpose framework,” as Atkins has committed to, is that dependable roadmap. It is exactly what is needed to give businesses the clarity to confidently navigate the regulatory landscape. What happens when businesses feel confident? They invest, they hire, they innovate. We’re not just discussing attracting foreign investment back to the US, creating 200,000+, high-paying jobs and fueling economic growth by $20 billion. Think of it this way: it's not just about crypto; it's about American jobs and American competitiveness. Think about what that means for states such as Texas and Florida, which have carved out themselves as havens for crypto development. Smooth, predictable rules of the road would draw their entrepreneurial potential, drawing talent and investment from all corners of the earth.
Innovation Thrives With Rational Oversight
Unfortunately, the Biden administration’s SEC essentially attempted to jam a square peg (crypto) into a round hole (traditional finance regulations). The result? An industry hamstrung by regulatory overreach, where innovation is second priority to regulatory compliance. The new SEC leadership needs to realize that innovation cannot flourish under a microscope—it can only flourish under appropriate guardrails.
So, as many in the industry have been arguing for, a principles-based approach is essential. What we need are regulations that focus on the ends, like protecting investors. Let’s get away from some of this technology because that’s shifting constantly. This gives businesses room to test, pivot and create in new ways without being perpetually fearful of violating yesterday’s regulations. We need to encourage a culture of innovation with ethical responsibility. Instead, let’s require that these companies produce safe and reliable products—not encourage them to find ways to skirt regulations. This isn’t to say we want an anything-goes, Wild West type of chaos. Rather, we hope to strike a balance that spurs innovation and provides for responsible guardrails.
Secure Custody Is Investor Trust Foundation
Let's be honest, the idea of keeping your digital assets on some shady exchange in the middle of nowhere isn't exactly comforting. Just as important, secure custody is the bedrock of investor trust in the crypto space. If people don't feel safe holding their digital assets, they simply won't invest. It's that simple.
The SEC’s roundtable discussions on crypto custody, and the SEC and industry’s clear willingness to recognize the challenges, and explore potential solutions were a positive sign. Now, it’s their discussions that need to be translated into action. We have to make it easier for them to develop private custody solutions that are purpose-built for digital assets. We can’t retrofit traditional finance infrastructure, as Seamus Rocca of Xapo Bank noted.
Yet, we can transfer money around the globe in mere seconds. The ability to securely store those assets is a considerable barrier. To avoid such a chilling effect, the SEC should work with the industry to establish a framework that would foster innovation in new custody solutions. In this manner, investors can sleep at night, sure that their wealth is protected. What we actually need is purpose-built infrastructure, not a half-baked adaptation of antiquated transit systems. It’s not just about one transaction, it’s about creating trust, one secure transaction at a time.
US Competitiveness Is At Stake
The world isn't standing still. The US has not fared well under the mantle of regulatory uncertainty. Other countries have succeeded in luring crypto businesses by providing clear and open regulations. In its place, Singapore, Switzerland and even some jurisdictions within the EU have become havens for crypto entrepreneurs. If the United States does not move quickly, we will put ourselves in peril of losing out on the next wave of technological innovation.
Baylor Myers of BitGo voiced frustration from feeling “hamstrung” within the United States. This case is a cautionary tale indeed considering that he has already been granted approvals in several countries abroad. We can't afford to let talented entrepreneurs and innovative companies flee to other countries simply because they can't navigate our regulatory quagmire.
This is not solely a matter of pride, but economic necessity. The crypto industry has the potential to create countless jobs, generate billions in revenue, and transform entire sectors of the economy. To continue being the global leader that we are, we need to be on the front lines adopting this technology. Let’s work together to ensure that it continues to flourish! We all need to recognize that regulatory clarity is not a luxury – it is a competitive imperative.
Collaboration is Key to a Bright Future
The SEC can't do this alone. Striking the right regulatory framework that fosters and protects responsible crypto innovation can only happen through an open dialogue between industry actors, the SEC, and lawmakers. What we’ll require instead are constant conversations, transparent communication over private interests, and a flexibility to pivot as new innovations emerge within a dynamically changing crypto environment.
The SEC needs to listen to the industry, understand its challenges, and work together to find solutions that protect investors without stifling innovation. For all of these reasons, industry stakeholders must themselves be transparent, accountable, and genuinely focused on creating a safe and sustainable ecosystem. To get this right, lawmakers must be educated, thoughtful, and open to crafting legislation that favors responsible innovation in the crypto space.
This is not Democrats versus Republicans, or regulators versus industry. This is fundamentally about maintaining America’s future as the preeminent global leader in innovation. Creating a more equitable, inclusive, and prosperous future for us all requires the engagement of each of us. It requires a shared vision and a genuine commitment to working together. So, let’s all call upon our representatives to ensure that this spirit of collaboration is at the forefront. The future of US innovation may well be riding on it.
