Author: Neil Humphrey

The Digital Chamber Continues its Efforts to Shine a Light on the SEC’s Unfair Practices Towards the Digital Asset Industry  

For over a decade, the SEC has imposed shifting, inconsistent, and often baseless regulatory roadblocks against digital asset innovation. Time and again, its actions have been driven not by clear legal standards but by subjective policy preferences, effectively acting as a merit regulator rather than an impartial enforcer of the law. 

Its resistance to digital assets has been met with mounting legal challenges, growing frustration from market participants, and, ultimately, a historic course correction, but only after investors were forced to miss out on significant opportunities. 

The Crypto Conundrum: A History of Unfair Bitcoin ETF Denials 

In 2022, The Digital Chamber published The Crypto Conundrum: Why Won’t the SEC Approve a Bitcoin ETF?, detailing how the SEC’s Division of Trading and Markets consistently denied applications for exchange-traded funds (ETFs) that applications that had sought to allow the listing and trading of exchange-traded funds (ETFs) that directly held bitcoin. 

The Crypto Conundrum argued that the continual denials were based not on objective and dispassionate application of law and precedent, but rather on policy judgments made by the SEC’s staff regarding digital assets. Put more concisely, the agency wasn’t just enforcing regulations: it was acting as a merit regulator, arbitrarily picking winners and losers in the marketplace. 

This position was resoundingly vindicated less than a year after the publication of The Crypto Conundrum when the D.C. Circuit Court of Appeals unanimously decided that the SEC’s denial of a Bitcoin ETF application constituted “arbitrary and capricious” behavior and a violation of the Administrative Procedures Act.   

The result? The opinion paved the way for the approval of eleven Bitcoin ETFs in 2024 in what would turn out to be the most successful ETF launch in history. 

Beyond Merit: The SEC’s Investment Management Division and Digital Assets 

While The Crypto Conundrum focused on the SEC’s Division of Trading and Markets, TDC’s latest report, Beyond Merit: How the SEC’s Division of Investment Management Blocked Permissible Investments in Digital Assets, shifts the spotlight to the Division of Investment Management, the division responsible for regulating investment companies and advisors. 

Based on interviews with numerous issuers, this report details the vast lengths to which the Division of Investment Management has gone to prevent registered investment companies from providing meaningful exposure to bitcoin and other digital assets. Instead of following clear legal guidance, the SEC imposed constantly shifting standards with no basis in rule, statute, or law: Once again, acting as a merit regulator rather than an unbiased enforcer. 

This isn’t a story about any one administration or SEC chair. The report explicitly rejects any notion that the SEC’s inappropriate treatment of digital assets can be laid at the feet of a particular political party, administration, or individual.  

Dating back nearly a decade, the first anecdote recounted in this report occurred in 2015 when Barack Obama was President and Mary Jo White was the SEC Chair. The Dalia Blass Letter cited in the report was issued during Jay Clayton’s term as SEC Chair during Donald Trump’s first administration, and it was the Gary Gensler-led SEC that unsuccessfully litigated seeking to prevent the issuance of Bitcoin ETFs.  

This is a story of how the Division of Investment Management, over nearly a decade, has consistently operated beyond its mandate. It is not the actions of any one individual, but a pattern of regulatory overreach embedded within the division itself. 

Why it Matters 

In recent years, the SEC has increasingly faced accusations that it has been wandering into the “unbounded, dangerous territory of merit regulation,” as SEC Chairman Hester Peirce artfully described in 2020, and is one of the most common refrains heard by TDC members. 

Accordingly, TDC set out to chronicle and highlight such instances with the hope that shining a light on such behavior might encourage the SEC to return to the authorized path on which it was initially set. 

The report made the problem clear: The agency overstepped its mandate—as it relates to a registered investment company’s exposure to digital assets. The SEC had never encountered an asset quite like bitcoin before—one that is purely digital in nature—and perhaps feared that the average investor was swept up in a speculative fever over an asset class lacking a clear investment rationale. As the agency sought to indulge its impulse to save investors from themselves, it found very few tools at its disposal to effectuate its aims. This was by design, as seeking to save investors from themselves, is explicitly not what Congress intended for the SEC when it created the agency. Congress had considered and actively pivoted away from merit-based regulation. 

In its efforts to limit exposure to bitcoin and digital assets, the SEC took positions that lacked legal justification, fueling widespread disillusionment and accusations of regulatory bias. Yet, despite the agency’s attempts to stifle the market, bitcoin’s adoption and value only grew. In trying to “protect” investors, the SEC instead deprived them of missing out on the large gains such investors would have otherwise experienced. 

Time for Change 

As we enter 2025 and with the SEC set to enter a new chapter in its history, our report seeks to play a very small part in encouraging the SEC to return to the authorized path on which it was initially set. There will always be a new asset or company that inspires wonder on the part of investors and skepticism on the part of the SEC. It is our hope the SEC will learn from its experience with digital assets, and in the future, resist the siren song of merit regulation. 

What is S.J.Res.3?  

S.J.Res.3 is a joint resolution introduced by Sen. Cruz (R-TX) and Rep. Mike Carey (R-OH). The resolution provides for congressional disapproval under chapter 8 of title 5, (5 U.S.C. § 8) of the rule submitted by the Internal Revenue Service (IRS) relating to “Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales”. The rule was finalized December 30th, 2024.  

Why does 5 U.S.C. § 8 Matter? 

• This harmful rule/regulation broadens the definition of a “broker” to encompass operators of custodial digital asset trading platforms, certain providers of hosted digital asset wallets, processors handling digital asset payments, and individuals who act as vendors in transactions with customers.
  • This would include owners of digital asset kiosks, brokers accepting digital assets as commission payments, brokers dealing in digital assets, and issuers of digital assets who regularly offer redemption services for those assets. 

• This rule also defines decentralized financial (DeFi) participants as “brokers,” subjecting them to stringent and overly burdensome requirements that DeFi technology does not have the technical capability to meet.
  • In adopting this standard, the Treasury Department and IRS rejected numerous comments from the public that various types of trading front-end service providers do not have sufficient visibility to be able to know the nature of these transactions.  

This rule undermines the purpose of DeFi technology: to allow individuals to freely buy, sell, and exchange digital assets. 

The Digital Chamber encourages regulators and lawmakers to support market freedom for the buying and selling of digital assets, as well as simplicity and privacy in rulemakings for their tax-filing process. 

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Advancing Digital Assets with Over 70 Industry Leaders on Capitol Hill 

The Digital Chamber (TDC) proudly kicked off the 119th Congress with a fly-in and welcome event, bringing together over 70 digital asset companies to engage with policymakers on Capitol Hill. This event set the stage for a transformative legislative session focused on advancing pro-crypto initiatives. 

This Congress marks a historic turning point for digital assets, as it represents the first “pro-crypto” majority Congress, alongside the first pro-Bitcoin and digital asset President. The evolving political landscape provides a significant opportunity to establish clear, forward-thinking digital asset policies, and TDC is committed to ensuring that the United States leads the global blockchain revolution.

A Day of Advocacy on Capitol Hill 

On January 22nd, TDC and its members met with Congressional leaders from both parties, sharing a clear and unified message: the United States must act decisively to foster innovation and establish itself as a global leader in digital asset technology. 

The discussions focused on three critical priorities: 

• Implementing clear and thoughtful digital asset regulations. 
• Encouraging collaboration between lawmakers, industry leaders, and regulators. 
• Promoting proactive policymaking and education to drive innovation. 

Freshman members of Congress demonstrated an impressive understanding of digital asset technology, underscoring that this is the most crypto-educated Congress in history. Both new and veteran members expressed enthusiasm about working with TDC and industry stakeholders to advance policies that will shape the future of the digital asset economy. 

Key Highlights from the Day 

• Freshman Representation: The 119th Congress includes 63 freshman Representatives (33 Democrats, 30 Republicans) and 12 freshman Senators (4 Democrats, 8 Republicans). Many are pro-crypto, reflecting the growing bipartisan recognition of the importance of blockchain technology. 
• New Senate Subcommittee on Digital Assets: The Senate Banking Committee has established a subcommittee on digital assets, chaired by Senator Cynthia Lummis. This signals that digital asset legislation will be a priority in the months ahead. 
• Bipartisan Momentum: A strong bipartisan effort is underway to drive legislation that promotes the growth of the U.S. digital asset economy. Discussions moved beyond the security vs. commodity debate, with lawmakers expressing interest in addressing stablecoin, NFT, custody, and blockchain-enabled AI legislation. 

Building Momentum for 2025

The day concluded with a bipartisan celebration hosted by TDC and Constellation Network, where policymakers and industry leaders reflected on the progress made and discussed the exciting opportunities ahead. The event highlighted a shared commitment to advancing digital asset innovation and positioning the United States as the crypto capital of the world. 

As we look to 2025, TDC remains dedicated to fostering collaboration across the public and private sectors to drive meaningful progress in the digital asset ecosystem. We extend our gratitude to Constellation Network for sponsoring this milestone event and look forward to the work ahead. 

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Congratulations to Caroline Pham on Being Named Acting Chair of the U.S. Commodity Futures Trading Commission

Caroline Pham has been a thoughtful leader on digital asset issues, working diligently to advance policy impacting our industry. I’ve had the privilege of collaborating with her through the Global Markets Advisory Committee (GMAC), which she sponsors. 

As President Trump strives to position the United States as the global leader in digital assets, the CFTC will play a pivotal role in shaping this vision. Caroline’s deep expertise and proven leadership make her exceptionally well-suited to guide the Commission during this critical time. 

– Perianne Boring, Founder and CEO, The Digital Chamber 

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January 9, 2025 – The Digital Chamber today filed an amicus brief in the U.S. Court of Appeals for the Fifth Circuit in U.S. SECURITIES AND EXCHANGE COMMISSION v. IAN BALINA, in support of BALINA’s appeal seeking reversal of the district court’s judgment against him.

Why is this Case Important?

The SEC’s overreaching enforcement campaign against the digital assets industry under its current Chair, Gary Gensler, reinforces the need for lasting judicial guardrails to prevent federal government agencies, including the SEC—regardless of changes from administration to administration—from crippling innovation through actions that exceed statutory authority. 

One of the critical checks against regulatory overreach is the presumption recognized by the U.S. Supreme Court in Morrison v. National Australia Bank Ltd. against applying U.S. securities laws to extraterritorial  transactions (whether in cryptographically secured digital assets or traditional financial instruments). In the BALINA case, however, the district court misapplied Morrison in ways that pose existential harm to the blossoming global digital assets economy and America’s place in it. 

For the U.S. digital assets market to flourish—and for the United States to enjoy the resulting jobs, investments, and other economic benefits —it is critical to establish clear, bright-line rules to guide global market participants on when U.S. securities laws apply—and when they do not—in the context of digital asset transactions. 

The SEC’s arbitrary and capricious approach to enforcement against digital assets activity has achieved the opposite result. Indeed, the SEC’s unpredictable lawsuits enforcing the securities laws against digital asset participants have further compounded confusion in the market by generating court decisions that are often ambiguous, inconsistent with one another, and contrary to long-standing principles of United States securities laws, such as limits on extraterritorial application. 

The district court’s fatally flawed ruling—which improperly applied U.S. securities laws to transactions that are legally and factually extraterritorial—is emblematic of these issues. 

Our amicus brief provides the Fifth Circuit with essential context about the importance  of Morrison and related  caselaw, and explains how proper application of Morrison’s  requirements would protect the global digital asset industry from inappropriate extraterritorial overreach by the SEC. 

“Today, TDC directed its advocacy efforts to push back on the SEC’s efforts to exceed its jurisdictional powers. Digital asset market participants around the world need to have a clear idea of when a transaction is subject to U.S. regulation and when it is not in order to continue their important and innovative work in a lawful manner,” said Perianne Boring, Founder and CEO of The Digital Commerce. “We are hopeful that the Fifth Circuit will consider the arguments set forth in our brief, and we will continue to support  the fair and equivalent application of laws for the global digital asset industry.”

“We are optimistic that the incoming administration will take a more constructive approach to regulating the crypto sector in America, but we are grateful to The Digital Chamber for fighting to ensure that judicial guardrails like Morrison remain intact to prevent government overreach for all administrations to come, ” said Samson Enzer, Partner at Cahill Gordon & Reindel LLP. The Chamber is represented in this matter by Samson Enzer, Landis Best, Lewis Cohen, Miles Wiley, and Victoria Yuhas of Cahill Gordon & Reindel LLP. We appreciate the contributions to this initiative by the Cahill Gordon team and other members of The Digital Chamber.

**TDC experts are available for comment. Contact press@digitalchamber.org to schedule an interview**

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The Digital Chamber (TDC) applauds Congressman Timmons for his leadership in introducing the groundbreaking New Frontiers in Technology (NFT) Act, the first bill in U.S. Congress to directly address the legal and regulatory treatment of non-fungible tokens (NFTs). We also greatly appreciate that Congressmen Torres has co-sponsored this legislation making it bipartisan. 

Considering recent securities lawsuits and Wells Notices targeting actors in the NFT space, this critical legislation ensures that certain covered NFTs, and their evolving use cases, are correctly defined in law, and are clarified to not be securities.  

TDC Efforts 

While we anticipate a less hostile SEC in the next administration, it is imperative that Congress act now. Passing NFT and other digital asset legislation is essential to establish permanent laws and provide much-needed clarity for the industry. That’s why TDC has been advocating for appropriate NFT legislation for years. We are proud to see the NFT Act include language developed in the CFTC Global Markets Advisory Committee’s working group on NFTs, led by TDC’s Founder and CEO Perianne Boring. We also synthesized these policy recommendations in our Pixels to Policy Report released in July 2023. 

So what exactly does this bill do to protect NFTs? Below is a breakdown of its key provisions: 

1. Defines Non-Fungible Tokens: 

• The bill defines NFTs as any asset that has limited production or uniqueness so that it can be assessed or identified by its unique digital identifier on a on a public distributed ledger; is the digital equivalent of a tangible or intangible good; has inherent function beyond the fact of being on chain; and can be exclusively possessed and transferred from person to person, without reliance on intermediaries. 

• The definition of NFTs in this bill explicitly excludes a comprehensive list of traditional securities, commodities futures, derivatives, and other investment contracts. The list of exclusions was expanded significantly from the discussion draft. TDC and our members greatly appreciate this clarity. 

2. Defines and Creates Protections for “Covered” Non-Fungible Tokens 

• “Covered non-fungible tokens,” per the text, are not investment contracts, and the sale of a covered NFT is not a transaction in a security. This means covered NFTs—that is, most NFTs—are not securities, and the SEC has no claim to regulate them.  
• Covered NFTs are described as those which are primarily for personal, family, or household consumption, listing specific categories. Those include NFTs created as: 
• Works of art, musical compositions, literary works, or other intellectual property 
• Collectibles, merchandise, virtual land, or video game assets 
• Digital identifiers or other certificates or credentials (a new category in this version of the text that TDC applauds the inclusion of) 
• Affinities, rewards, or loyalty points 
• Rights, licenses, or tickets 
• Exclusions apply, however. Even if they fall into one of the categories above, NFTs are excluded from protective coverage under this bill if they are marketed by an issuer or promoter primarily as an investment opportunity, or with promises of future actions designed explicitly for the purpose of increasing the NFT’s value. 

3. NFT and Digital Asset Study 

• The final provision directs the Comptroller General of the Government Accountability Office—and not, importantly, a financial regulatory body like the SEC—to carry out a study of non-fungible tokens and other digital assets, including payment stablecoins, within one year. The report would cover topics, spanning from token minting and custody, to interoperability, to market risks and opportunities, and beyond. 

Your Support is Crucial    

Help the digital asset industry flourish responsibly without the hindrance of misapplied securities regulation.  Contact your Representatives in Congress and voice your support for this important bill. By supporting this Act, you can ensure continued technological innovation, greater consumer protection, and a true home within the United States for blockchain technology. 

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As the U.S. gears up for President-elect Donald Trump’s incoming, crypto-friendly administration, the Securities and Exchange Commission (SEC) has the opportunity to reset its historically troubled relationship with the global digital asset industry and launch an era of transparency, cooperation, and well-reasoned regulation to bring much-needed clarity to digital asset market participants.  We need to foster a culture of mutual trust – where the digital asset industry can have confidence in the SEC’s intentions, and the SEC can recognize that most digital asset participants are striving to operate responsibly. 

President-elect Trump’s nominee for SEC Chair, Paul Atkins — a seasoned SEC veteran and member of The Digital Chamber’s advisory board — alongside Commissioners Peirce and Uyeda, both outspoken critics of the SEC’s anti-digital asset agenda in recent years, are ideally positioned to assess the agency’s actions across it’s divisions and offices. Together, we’re confident they can identify the problematic practices that have stymied the growth and innovation of digital asset market participants in so many ways.

It is not just time to end the “policy” of regulation by enforcement, but also to clear the decks of outdated and confusing former director and staff level speeches, letters and other informal and non-binding “guidance” that make it nearly impossible for current market participants to understand how to comply with the SEC’s rules and regulations. Finally, it is time for sensible and clear Commission statements, no-action letters, and bespoke rulemaking for the digital asset industry. 

What’s Happening

TDC’s Token Alliance Leadership Committee is taking a proactive role in framing out an agenda for the SEC’s new Chair and Commission majority by offering a list of policy priorities designed to start the process of rebuilding trust with the global digital asset community. This week, members of the Token Alliance Leadership Committee met with the staff of SEC Commissioners Hester Peirce and Mark Uyeda to present our 2025 SEC Digital Asset Policy Priorities, which include:

• A timeline for action beginning on Day 1 to Day 90 of the new administration;
• A detailed list of critical and important policy priorities set out by division that should be addressed along that timeline.

We were very pleased by the openness of the dialogue during this meeting and a willingness for ongoing input and look forward to continuing to inform and engage with the SEC on these priorities.

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The Digital Chamber proudly congratulates Congressman French Hill on his appointment as Chairman of the House Financial Services Committee for the 119th Congress. 

Chairman-elect Hill’s leadership and vision have been pivotal in shaping the future of digital assets and financial services. As the author of the Financial Innovation and Technology for the 21st Century Act (FIT21)—a historic, bipartisan achievement—he has demonstrated mastery of complex financial policy and the ability to forge consensus on critical issues. Further, Chairman-elect Hill has been a relentless advocate for fair banking access, fighting to end discriminatory practices that exclude lawful digital asset businesses from essential financial services. As the current chairman of the House Financial Services Subcommittee on Digital Assets, Financial Technology, and Inclusion, as the former Republican lead on the Committee’s FinTech Task Force, and as an engaged member of the Congressional Blockchain Caucus, Chairman-elect Hill’s leadership and track record on digital assets policy is nothing short of exemplary. 

We look forward to continuing our collaboration with Chairman-elect Hill as he leads the Committee toward policies that secure America’s leadership in blockchain and digital assets. His commitment, expertise, and proven results are exactly what this transformative era in financial services demands. 

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The Problem: 

U.S. critical infrastructure—like transportation, communication, health, water, and energy—is the backbone of the country’s economy. Yet, it remains increasingly vulnerable to cybersecurity disruptions from adversaries. 

Furthermore, FBI Director Christopher Wray warned earlier this year that “China’s hackers are targeting American civilian critical infrastructure, pre-positioning to cause real-world harm to American citizens and communities in the event of conflict.”¹ China is only one of several nation-states undermining U.S. cyber defenses, but Chinese advanced persistent threats (APTs) consistently rank among the most capable and intrusive. In December 2023, U.S. investigators discovered that hackers known as Volt Typhoon, affiliated with the Chinese People’s Liberation Army, had launched cyberattacks against government offices and infrastructure. These attacks aimed to gather intelligence, monitor citizens, and prepare to disable or degrade systems’ performance in future operations targeting the U.S. and its partners. Evidence suggests these APTs may have been active within U.S. networks since 2019. 

Most recently, hackers breached the networks of the largest water utility company in the U.S. that provides drinking and wastewater services to more than 14 million people in 14 states and 18 military installations.² One can only imagine how our adversaries could exacerbate national emergencies and disasters by degrading these critical systems in times of greatest need and vulnerability. 

The Solution: 

Blockchain technology can help mitigate some of these risks; they are inherently secure, and offer several key advantages that can bolster American cybersecurity capabilities: 

• Decentralization – Unlike traditionally centralized databases, blockchains operate on a distributed network of nodes. This decentralized architecture eliminates single points of failure, making it significantly more challenging for attackers to disrupt or compromise the entire network. 
• Immutable Ledgers – Blockchain employs cryptographic hash functions to secure transactions. Each block in the chain contains a hash of the previous block, creating a cryptographic linkage that ensures immutability. This property ensures a permanent, auditable record that is highly resistant to tampering. This is especially important in cybersecurity, where edges and nodes in a network can hold and communicate threat profiles and defensive resources more efficiently than regular, distributed updates pushed out by centralized entities.
• Enhanced Transparency and Trust – A blockchain is a distributed, shared ledger where all participants can observe and verify transactions, fostering trust and facilitating identification and mitigation of anomalies or fraudulent activity. 
   

What is to be done? 

U.S. allies and adversaries have either developed or are currently developing robust and progressive national blockchain strategies to leverage the high security, high fidelity, and low latency the technology offers. The U.S. government has consistently acknowledged the importance of blockchain technology and the need for policy development to support its secure deployment. For instance, the National Institute of Standards and Technology (NIST) Cybersecurity Framework highlights the importance of incorporating blockchain into cybersecurity strategies.³ Additionally, Executive Order 14028, Improving the Nation’s Cybersecurity, underscores the need for enhanced cybersecurity measures and encourages the exploration of blockchain technologies to strengthen the nation’s cybersecurity posture. 

However, many U.S. policymakers have ignored the seriousness of the threat posed in cyberspace and the possibilities of blockchain to mitigate those threats.  

The Digital Chamber (TDC) recommends that the U.S. government engage the blockchain industry and support its holistic development via an increase in strategic investment and research through agencies like the National Science Foundation, In-Q-Tel, Defense Advanced Research Projects Agency (DARPA), NIST, the Department of Homeland Security, the Department of Defense, and others. 

It is vital for U.S. national security interests to lead in advanced computing and blockchain innovation, to ensure networks are safe, information remains secure, and the U.S. can respond effectively to emerging threats. 

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The Digital Chamber is excited to announce its strategic partnership with Stablecoin Standard, an organization renowned for its international leadership in promoting transparency, stability, and innovation in the stablecoin ecosystem.  This partnership promotes joint efforts to shape a robust regulatory framework for stablecoins and enhance their adoption across global financial systems. 

The partnership between The Digital Chamber and Stablecoin Standard will focus on several key areas: 

• Amplifying the Stablecoin Standard’s best practices and frameworks for stablecoin issuance and management. 
• Engaging with policymakers in the U.S. and abroad to create a balanced regulatory environment. 
• Educating global stakeholders on the benefits and risks associated with stablecoin use. 

Cody Carbone, President of The Digital Chamber, expressed his enthusiasm about the collaboration: 

“Stablecoins are inherently global, and to drive worldwide adoption of payment stablecoins, we need partners with a deep understanding of international markets. Stablecoin Standard’s proven excellence in navigating complex regulatory landscapes abroad is an invaluable asset. Together, we can ensure that USD-backed stablecoins thrive not just in the U.S. but across global financial systems, bringing stability and efficiency to cross-border transactions.” 

Stablecoin Standard’s leadership also highlighted the importance of this partnership in driving forward-thinking solutions for the stablecoin industry. 

“Stablecoin Standard is thrilled to announce this partnership as we advance our mission to promote responsible innovation. Our collaboration with the Digital Chamber, including active participation in the Stablecoin Working Group, marks a strategic step toward building a resilient and transparent global stablecoin market.” – Beth Haddock, Global Policy Lead for Stablecoin Standard. 

This collaboration underscores The Digital Chamber’s commitment to advancing blockchain technology and digital asset innovation, providing a platform for dialogue between the private sector and regulators.   

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