A New Cryptocurrency-Friendly Initiative from the New SEC Administration: They Are Considering Reversing What Gary Gensler Did!

The Vice Chairman of the SEC, Mark T. Uyeda, instructed agency staff to review a series of past statements regarding cryptocurrency risks and the application of securities laws to digital assets.

The review is being conducted under Executive Order 14192 titled "Release of Wealth through Deregulation" and follows the recommendations of the State Efficiency Department's (DOGE). Uyeda stated that the aim is to determine whether the existing guidelines need to be "modified or rescinded" to better align with the agency's current regulatory priorities.

Among the key documents under review is the 2019 staff framework summarizing how the SEC applies the Howey test to determine whether a digital asset is classified as a security. The Howey test, a legal standard for decades, assesses whether an investment involves an expectation of profits primarily from the efforts of others. The SEC's application of this test to digital assets has long been a contentious issue, especially amidst recent statements indicating that memecoins are largely exempt from securities regulations.

Another important document being re-evaluated is the 2021 statement from SEC staff warning investors about investment funds exposed to Bitcoin futures. The letter highlighted risks such as market manipulation, liquidity concerns, and volatility, raising doubts about the maturity of the Bitcoin futures market. However, since then, spot Bitcoin and Ethereum ETFs have been launched and rapidly grown, with assets under management reaching tens of billions of dollars.

Uyeda's directive also targets the end-of-2022 guidance published following several major crypto bankruptcies, which recommends companies to disclose the risks associated with digital assets, particularly concerning custody, liquidity, reputational damage, and increased regulatory scrutiny.