US Crypto Regulations Shift Following Recent Actions by the SEC and the FSC

The regulatory environment for digital assets in the US is in flux, signaling a significantly less adversarial phase under the current leadership. Recent actions by the Securities and Exchange Commission (SEC), including the dismissal of some industry lawsuits and the formation of a dedicated Crypto Task Force (CTF) engaging in industry roundtables, highlight this change in approach. Specifically, the CTF will be responsible for tackling key issues like establishing legal definitions of crypto securities and developing appropriate regulations for trading and custody.

However, the softening of rules around crypto extends beyond the SEC. In another development, the Staff Accounting Bulletin 121 (SAB 121) has been repealed. The rule created hurdles for banks offering crypto custody. In addition, the Federal Deposit Insurance Corporation (FDIC) has rescinded prior guidance requiring notification of crypto activities, thus allowing banks to proceed with permissible activities if risks are managed in accordance with industry standards. Finally, the Department of Justice recently disbanded its crypto enforcement team, moving away from ‘regulation by prosecution’.

These efforts to foster domestic innovation and prevent the digital asset sector from moving offshore also extend to legislative efforts. For instance, the House Financial Services Committee advanced the STABLE Act (H.R. 2392), which aims to establish a federal framework for stablecoin transactions. While more legislation appears likely through 2025, debate continues around state versus federal oversight. Many questions remain, particularly around which digital assets actually constitute financial securities under the Howey test – a US legal framework designed to determine whether a transaction qualifies as an investment contract.

The need for proactive adaptation and risk management

While the perceived softening of regulations is good news to fintechs operating in the US crypto space, uncertainty remains a significant challenge. The adage ‘move fast and break things’ sounds tempting, but it’s also a recipe for disaster, especially when it comes to an industry that’s built on trust—such as finance.

Fintechs and financial services firms must engage proactively with regulators by taking advantage of SEC’s new CTF roundtables, participating in industry consultations, and providing valuable feedback. Demonstrating a commitment to compliance—and routinely going above and beyond regulations—remains as important as ever.

There are also some clear opportunities for fintechs to capitalize on, such as the new possibilities for banking relationships and custody solutions in the wake of the repeal of SAB 121 and updated FDIC guidance. It is likely that this will lead to a rise of lucrative partnerships between traditional financial services institutions and fintechs—potentially driving widespread innovation across the industry.