Expectations that regulators could move forward with crypto rules if the Clarity Act stalls are now also being called into question.
The U.S. Securities and Exchange Commission unexpectedly scrapped an open meeting scheduled for last Friday. Commissioners were expected to discuss the proposed Reg Crypto framework and potentially introduce part of the long-delayed innovation exemption. The postponement appears to be linked to the Clarity Act.
Crypto regulation remains in limbo
The SEC announced earlier last week that commissioners would hold an open meeting to consider Reg Crypto, a proposed framework covering how companies could raise capital through token offerings and potentially move certain digital assets outside the agency’s jurisdiction.
Industry sources had also said the SEC was preparing to release at least part of its innovation exemption. The measure was expected to address how issuers of tokenized securities could manage the underlying assets.
Neither initiative was presented as scheduled.
Why the delay matters
Earlier this month, it became increasingly likely that the Digital Asset Market Clarity Act would not receive a Senate vote before the August recess. Some industry participants consequently argued that regulators could take action themselves if Congress failed to advance the legislation.
Regulatory rules would not carry the same permanence as congressional legislation. SEC or CFTC actions could face court challenges and could be reversed by a future administration, while laws passed by Congress would generally be more difficult to repeal or substantially change.
A lengthy rulemaking process
The regulatory approach also depends on agencies having enough time to finalize their rules and allow them to take effect before a new SEC leadership team could reconsider them.
That timeline is now less certain. The SEC announced late Thursday that it had canceled the meeting and would reschedule it at a later date.
Reports also indicated that the agency had indefinitely postponed the innovation exemption.
People familiar with the matter told CoinDesk that concerns over the Clarity Act contributed to the decision. The White House and lawmakers reportedly want to avoid SEC action that could complicate negotiations over the legislation ahead of the Senate’s expected first vote next month.
As a result, the SEC may not resume significant action until lawmakers return from their next break in early October.
Even if work resumes then, completing the regulatory process could take considerable time. The SEC would need to collect public comments, review the feedback, issue revised proposals and ultimately adopt final rules. Businesses would then require an additional period to comply with the new requirements.
One industry source estimated that developing and finalizing the rules could take nearly a year, followed by another year for implementation. That schedule could push the process close to the next presidential administration, potentially giving a new administration an opportunity to reverse or modify the regulatory framework.
