Lawyer explains what’s next in US crypto regulation

Blockchain Association policy head Jake Chervinsky has outlined the necessary steps the US crypto industry could take to nip the regulators’ enforcement action approach towards regulating the US Web3 space. He argued that neither the SEC nor the CFTC has the authority to regulate crypto comprehensively.

Choke point 2.0 is not as easy as it seems

The recent enforcement actions taken by Gary Gensler’s Securities and Exchange Commission (SEC) against crypto market participants like Kraken and Paxos have brought renewed fears that U.S. regulators could orchestrate a widespread crackdown on the digital assets space.

Operation Choke Point 2.0 Is Underway, And Crypto Is In Its Crosshairs https://t.co/gRzTwgCisf

— zerohedge (@zerohedge) February 10, 2023

In a lengthy Twitter thread posted on Feb. 14, Jake Chervinsky, head of policy at the Blockchain Association, a nonprofit organization that claims to be dedicated to promoting a pro-innovation policy environment for crypto, sheds light on the current state of cryptocurrency regulation in the U.S. and the necessary actions proponents need to take to advance amenable policies.

Chervinsky noted that the several multi-billion dollar bankruptcies and scandals, such as the FTX case that happened in 2022, have done immense damage to the Web3 industry and brought increased regulatory scrutiny on crypto, with both the regulators of the U.S. banking sector (Fed, FDIC, and OCC) and that of the financial markets (SEC and CFTC) now making “bad policies,’” in a bid to ensure such scenarios never occur.

10/ That’s bad policy: technology discrimination that limits consumer choice and restricts competition with zero public process.

But, there's no evidence to suggest it's "Chokepoint 2.0," a worst case scenario in which banks are forced to close accounts for all crypto companies.

— Jake Chervinsky (@jchervinsky) February 14, 2023

Chervinsky added that despite the draconian measures being put in place by the Fed and others, it’s still early to conclude that US regulators have officially launched “Chokepoint 2.0,” a dark operation where banks could be forced to close the accounts of all crypto companies.

SEC and CFTC have zero authority to regulate crypto

Furthermore, Chervinsky condemned the SEC’s recent enforcement actions, stating that both the former and its counterpart, the CFTC, have no authority to regulate crypto comprehensively.

13/ The SEC's main tactic is regulation by enforcement, and it struck again last week by labeling Kraken’s staking service a security.

That's frustrating, but it doesn't change much for anyone else. Settlements aren't the law, and every set of facts is unique. Others will fight.

— Jake Chervinsky (@jchervinsky) February 14, 2023

To deter these regulators from carrying out further attacks on crypto and ultimately advance amenable policies in the future, Chervinsky has suggested five key measures that could be taken by industry players, including active participation in the public process when regulators request feedback on proposed policies, filing lawsuits against regulators that fail to observe the rule of law, enlightening Congress on crypto, and more.