If any government body can regulate cryptocurrency, it is likely the United States Securities and Exchange Commission (SEC), and with trillions on the line, it seems only a matter of time before the feds put regulations in place.
How can the feds regulate crypto?
The SEC is charged with regulation of securities and protection of investors. Since it does not directly regulate currency, crypto advocates argue it cannot regulate digital currency like Bitcoin.
In some cases, the feds appear to agree. The SEC published guidance in 2017 that states certain digital currencies, like Bitcoin, are mostly exempt from federal regulation. However, the feds argue that other forms of crypto, like XRP, do not qualify as a currency.
What are the feds going to do about this discrepancy?
At this time the feds are moving forward with two lawsuits. In the first, they claim that Ripple Labs Inc., makers of digital coin XRP, illegally raised $1.4 billion when it sold XRP in violation of investor-protector rules. In the second, they target the co-founder and chief executive of Ripple, Brad Garlinghouse, for making hundreds of millions in gains through these allegedly illegal practices.
What does this mean for the future of crypto regulation?
These cases are not the first to tackle this issue of whether crypto falls under SEC regulations or not, but previous attempts have ended with settlements. This means the courts have yet to really address the matter. If this case moves forward through litigation and ends with a holding, it could provide important precedent for future cases. However, even if the courts rule in favor of cryptocurrency it could still trigger change by fueling Congress to write laws that provide clear guidance on acceptable regulatory actions.