Education 5 min read

‘Crypto Mom’: Trump’s New SEC Crypto Task Force Explained

On Tuesday 21 January, the US Securities and Exchange Commission (SEC) announced its Crypto 2.0 initiative, a dedicated crypto task to establish regulatory clarity for the industry. 

This marks the first significant move by President Donald Trump’s administration to reshape crypto policy. Trump, who has branded himself as a “crypto president” throughout his campaign, pledged to reverse the previous administration’s enforcement-focused approach.

Under Joe Biden, the SEC had pursued legal actions against several cryptocurrency firms, including Coinbase and Kraken, accusing them of violating securities laws.

The companies have rejected these claims, arguing that existing SEC regulations are unsuitable for digital assets and that the criteria for classifying crypto tokens as securities remain unclear. For years, industry leaders have called for transparent and consistent crypto regulations. Now, it’s becoming a reality.

Here’s everything you need to know about the SEC’s new crypto task force.

Who will lead the crypto task force?

Republican Commissioner Mark Uyeda, appointed as acting SEC chair by Trump on Monday, and Commissioner Hester Peirce announced the initiative. According to Uyeda’s office, the task force will focus on:

  • Defining regulatory boundaries
  • Developing practical registration processes for crypto businesses
  • Designing clear disclosure requirements
  • Prioritize targeted enforcement efforts.

Commissioner Hester Peirce will lead the task force’s efforts. Peirce earned the nickname “Crypto Mom” due to her supportive stance on digital assets and her advocacy for clear regulatory guidelines. Appointed to the SEC in 2018, she has consistently promoted innovation within the cryptocurrency sector.

She has often dissented from the SEC’s enforcement actions against crypto companies, arguing that the agency’s approach can stifle technological advancement.

This is a meaningful step toward achieving real policy solutions and moving beyond the previous era of regulation through enforcement. The SEC stated that the task force would also support lawmakers drafting cryptocurrency legislation and work with other federal agencies, including the Commodity Futures Trading Commission, as well as state and international regulatory bodies.

Clear rules for what classifies as a security

The current regulations are unclear about when a cryptocurrency is considered a security or a commodity. This uncertainty creates confusion for companies and investors, leading to compliance challenges.

The SEC’s lawsuits against major players like Coinbase and Ripple have highlighted the lack of clear rules. Companies argue that they cannot follow guidelines that do not exist, while the SEC insists that many tokens fall under existing securities laws.

Without clarity, investors may unknowingly participate in offerings that could later be deemed illegal, exposing them to financial and legal risks.

The new crypto task force at the SEC aims to establish clear rules to determine when a digital asset is classified as a security. This involves:

  1. Defining clear criteria: The task force will create guidelines to identify which crypto assets meet the legal definition of a security under US laws, specifically the Howey Test. This test considers whether an asset involves an investment of money in a common enterprise with an expectation of profits derived from the efforts of others.
  2. Developing registration paths: For assets deemed securities, the task force will outline practical steps for crypto companies to register and comply with SEC regulations.
  3. Creating disclosure requirements: The task force will propose frameworks for companies to provide clear, standardized information to investors about their crypto assets, ensuring transparency.
  4. Limiting enforcement-first approaches: Instead of pursuing legal actions first, the task force will focus on proactive rule-making to provide the industry with clear expectations.

What’s next for the SEC?

After the crypto task force, the next major step expected from the SEC is to overturn the SAB 121 bulletin. Trump was rumored to sign an executive order on the first day related to this policy. However, it’s yet to come.

The SEC introduced Staff Accounting Bulletin No. 121 (SAB 121) in March 2022 to provide guidance on accounting for entities responsible for safeguarding crypto assets held for their platform users.

SAB 121 requires entities that hold crypto-assets on behalf of customers to recognize:

  • Liability: Reflecting the obligation to safeguard these assets.
  • Corresponding asset: Representing the entity’s claim against the crypto-assets held.

This policy makes it extremely difficult and risky for banks to custody Bitcoin and other cryptocurrencies. As part of the task force’s initiative, the SEC may consider overturning SAB 121.

Overturning SAB 121 could have several benefits for the crypto industry:

  1. Reduced financial burden: Entities would no longer need to report custodied crypto-assets as liabilities, potentially lowering capital reserve requirements and freeing up resources for other operations.
  2. Encouragement of custodial services: Easing these accounting requirements may incentivize more financial institutions to offer crypto custody services, enhancing the infrastructure and security of the crypto market.
  3. Regulatory clarity: Revisiting SAB 121 could lead to clearer guidelines that balance the need for transparency with the operational realities of crypto firms, creating a more supportive environment for innovation.

Final thoughts

The SEC’s efforts to establish a crypto task force, clarify asset classification, and potentially revisit policies like SAB 121 signal a shift towards a more supportive regulatory environment for the US crypto industry.

These initiatives aim to provide clear rules, reduce compliance ambiguity, and drive innovation by addressing long-standing challenges such as unclear securities definitions and burdensome accounting requirements.

Easing regulatory pressures and encouraging institutional participation could increase investment, enhance market confidence, and position the US as a global leader in digital asset innovation. This will create a strong foundation for sustained industry growth.

Mohammad Shahid @ CryptoManiaks
Mohammad Shahid

Mohammad is an experienced crypto writer with a specialisation in cybersecurity. He covers a wide variety of topics spanning everything from blockchain and Web3 to the retail crypto space. He has also worked for several start-ups and ICOs, gaining insight into the mindset and motivation of the founders behind the projects.

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