The U.S. Securities and Exchange Commission stopped pursuing its law challenge against its expanded “dealer” definition because this regulation posed a threat to the decentralized financial industry.
The SEC elected to withdraw its Fifth Circuit Appeals Court appeal on February 19, 2019 without opposition from the other parties. The legal fight that started when the agency tried to regulate crypto market participants with more than $50 million came to its final conclusion.
Crypto advocates Blockchain Association and Crypto Freedom Alliance of Texas sued the SEC when it tried to increase its authority over DeFi platforms. The SEC’s plan called for crypto organizations to be labeled as “dealers” under this rule which would force them to register with SEC and meet standards for KYC and AML procedures.
Judge Rules SEC Overstepped Authority
DTFi projects face practical issues because they function without needing a central authority according to their opponents. Judge O’Connor from the Texas District Court determined that the SEC overstepped its authority when it sought to extend dealer regulations. SEC began their appeals to the court last month before Chair Gary Gensler left office.
The agency terminated its rulemaking attempts after its appeal against the requirement stopped. Blockchain Association CEO Kristin Smith praised the SEC’s decision through her Feb. 19 X post, labeling it a complete and total victory. She concluded with the news that crypto traders can now relax their tensions.
The Securities and Exchange Commission made this decision because its leadership changes under Gensler brought new approaches to cryptocurrency regulation. President Donald Trump replaced SEC commissioners with Mark Uyeda as acting chair and Paul Atkins has his nomination pending for SEC position.
Under Securities and Exchange Commission Chair Mark Uyeda the agency formed a Crypto Task Force to develop new regulations. Commissioner Hester Peirce leads this task force because she supports crypto businesses in her regulatory role. The task force works to create better rules that will define how digital assets should be regulated.
During his tenure the SEC started to review past enforcement actions against other crypto companies. The SEC now holds off on several legal cases and stops enforcement actions because the agency wants to adapt their crypto policy first.
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