SEC edges closer to key approvals

As noted frequently of late, the regulatory climate for U.S. crypto product approvals was widely expected to improve with the installation of a certain new administration.

Now, with that executive in place, signs continue to suggest those expectations were well-founded.

With the odd wrinkle, here and there...

Unconfirmed

Like a puzzling silence on confirmation hearings for Trump's SEC chair nominee, Paul Atkins. A hearing had not been scheduled at the time of writing. The former commissioner was nominated on December 4th.

It's fair to assume material regulatory decisions require a chair to be in place, so the delay is a source of some disquiet.

On the other hand, this gap may be par for the course. Hearings for 9 cabinet members - were still on the docket by February 11th, with six still to outstanding on February 14th. Prior SEC chair Gensler was nominated in January 2021 but wasn't confirmed till that April. Before him, Jay Clayton was nominated in January 2017 and went unconfirmed till that May.

Meanwhile, despite the interregnum, there are indications the SEC is moving. This might be attributable to the 'Crypto Task Force' announced on January 21st, led by Commissioner Hester Peirce. Peirce is widely recognised as a longstanding (often lone) voice of reason on crypto regulation at the SEC.

Since the task force was announced, the Commission has acknowledged two proposed rule changes generally identified as potential regulatory 'pinch points'.

'Acknowledgement' has a weightier significance in this idiosyncratic SEC context. Protocol dictates the review process doesn't begin till a proposed rule change is published in the Federal Register.

A common suspicion is that such trivial-seeming administrative niceties become delaying tactics at times.

Either way, it's significant when a rule change contrary to prior SEC decisions is acknowledged, and the date this occurred is worth noting.

• The filing by Nasdaq for BlackRock's iShares Bitcoin Trust ETF (IBIT) to switch to in-kind creation and redemption is dated February 12th in the Register.
  • As covered previously, this could possibly be the most significant filing among the barrage that landed on Commissioners' desks in recent weeks, because if approved, it would implicitly apply to all crypto ETFs.
• NYSE's application to list Grayscale Solana Trust 'Commodity based-Trust Shares' is dated February 6th.
  • The SEC previously signalled it regarded Solana as an unregistered security: SOL is one of the tokens cited among Commission prosecutions of crypto exchanges.
  • Additionally, there is no Designated Contract Market (DCM) in SOL - AKA the CME hasn't listed SOL futures at the time of writing. Such conditions argued against SOL ETF approval - till now.
  • Approval of the Grayscale SOL filing would therefore be far-reaching. Not only could it open the floodgates to SOL ETFs by other issuers, it could indicate potential approval of ETFs based on other previously 'circumscribed' crypto assets.

SEC x Binance

Then there's the curious case of co-operation between Binance and its arch nemesis, the SEC.

A joint motion for a 60-day stay of the Commission's prosecution notes the Crypto Task force "may impact and facilitate the potential resolution of this case."

That could have wider implications. Chiefly for the SEC's appeal of the Ripple Labs court decision to fine the XRP issuer just $125 million, whilst stating XRP sales were only partially illegal securities offerings.

The SEC's case hangs over several XRP ETF filings, including from Grayscale, Bitwise, 21shares, Canary Capital, and Wisdomtree.

In short, crypto's much anticipated regulatory reset appears to be underway - while a hiatus in pivotal ETF approvals could be drawing to a close.

Stay up to date with key developments in crypto's regulatory outlook.