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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. 

By: Jean-Philippe Beaudet

February 12, 2025  

The Growing Risk of Quantum Computing 

Quantum computing is rapidly advancing, and while it offers incredible potential, it also creates a major cybersecurity risk. It introduces significant security risks across all sectors, particularly for systems relying on conventional cryptographic methods such as public-key cryptography. The U.S. relies on encryption to secure classified intelligence, nuclear command systems, and financial transactions – but quantum computers, once mature, could break these defenses in mere seconds. Without immediate action, any data storage, communication, or financial transactions that rely on existing encryption methods would be vulnerable. 

Blockchain as a Quantum-Resistant Solution 

Blockchain technology offers a promising defense against emerging quantum threats by leveraging its advanced encryption and decentralized nature. Here’s how it helps: 

1. Data Integrity with AES-Grade Encryption 

• Blockchain uses encryption similar to the Advanced Encryption Standard (AES) – the same method the U.S. government uses to protect the most sensitive information¹. 
• AES works by scrambling data into an unreadable format using secret keys of 128, 192, or 256 bits, making it difficult to crack. 
• Think of AES as a high-security vault that doesn’t just lock but scrambles its contents through multiple layers of transformation, making it nearly impossible to decipher without the correct key. The longer the key (128, 192, or 256 bits), the more layers of security are added, ensuring only authorized parties can unlock and access the original data.  
• Implementing blockchain technology across sectors not only fortifies existing security structures but also decentralizes control, reducing single points of vulnerability that quantum attacks could otherwise exploit. 

2. Quantum Key Distribution (QKD) for Secure Communication 

• QKD is an advanced encryption method that allows secure key exchanges. 
• Unlike traditional encryption, QKD can detect if someone tries to intercept the key, ensuring that only the intended parties can access the information. 
• When integrated with blockchain, QKD enhances security for transactions, identity verification, and sensitive data exchanges. QKD combined with blockchain technology is quantum-proof. 

3. Post-Quantum Cryptography for Future-Proof Security 

• Researchers have developed lattice-based cryptographic algorithms like CRYSTALS-Dilithium and FALCON, designed to withstand quantum attacks. 
• These methods are already recommended by the National Institute of Standards and Technology (NIST) to secure digital identities and financial transactions. 
• These algorithms allow blockchains to maintain signature security against quantum decryption threats, safeguarding digital identities and transaction records with high efficiency. 
• Implementing these quantum-resistant algorithms within blockchain ensures continued data security, even in a quantum-enabled world. 

4. Quantum Voting-Based Consensus for Secure, Scalable Transactions 

• Blockchain relies on consensus mechanisms to verify and approve transactions. 
• A new method, Quantum Delegated Proof of Stake (QDPoS), allows for secure voting-based validation without requiring excessive computing power. 
• This ensures blockchain networks remain efficient, transparent, and resilient – even as quantum technology evolves. 

Benefits and Policy Considerations 
Quantum-resistant blockchain technology isn’t just a security measure—it’s a strategic investment that aligns with U.S. national security priorities. Here’s what policymakers should do: 

1. Establish Blockchain as a Standard for Quantum-Safe Infrastructure 

• NIST has already identified blockchain as a viable quantum-resistant technology. 
• The U.S. government should formally integrate blockchain into all critical infrastructure, defense, and intelligence operations to strengthen its cybersecurity. 

2. Support Research & Development for Blockchain-Based Quantum Security 

• Department of Defense CIO for Cybersecurity David McKeown discussed the DoD’s intended post-quantum cryptography transition.² 
• Funding R&D efforts focused on blockchain-based quantum resistance will ensure the U.S. stays ahead in cybersecurity innovation. 

3. Build Public-Private Partnerships for Secure Systems 

• Collaboration between the government and the blockchain industry will accelerate the development of quantum-proof networks and applications. 
• Establishing clear and transparent opportunities for industry and government collaboration to develop new blockchain-based quantum-proof networks and applications is essential. 
• Historically, government support of emerging technologies has led to breakthroughs – blockchain as a quantum-resistant cybersecurity tool is the next frontier. 

Blockchain’s role in a quantum future is indispensable, making government action to harness its potential today crucial to protect critical systems tomorrow. Without blockchain’s decentralized security framework, our nation’s critical data remains at risk. 

Who we are: 

The Digital Chamber (TDC) advocates for national and international standards that leverage blockchain’s inherent strengths to mitigate the risks posed by disruptive military and dual-use technologies. TDC advocates smart, balanced policy, law, and regulation that promotes legal, ethical use of blockchain technologies to protect consumers, human rights, and freedom of speech, while allowing these nascent technologies to flourish in the U.S., grow our economy, and raise our standard of living. 

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. By integrating blockchain, the U.S. can maintain an unbreakable security posture in a post-quantum world. 

If you have any questions, please reach out to Policy@digitalchamber.org. 

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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Washington, DC – January 23, 2025

The Digital Chamber (TDC) celebrates the Securities and Exchange Commission’s (SEC) decision, under the leadership of Acting Chair Uyeda, to rescind Staff Accounting Bulletin (SAB) 121. This marks a critical victory for the digital asset industry and institutional custody solutions, and we are proud of the pivotal role we played in achieving this outcome.

In 2024, TDC led legislative efforts to nullify SAB 121, championing H.R. Res. 109 – the first piece of digital asset legislation to pass both the U.S. House of Representatives and the Senate. While the resolution was ultimately vetoed by President Biden last year, the overwhelming bipartisan support underscored the urgency and importance of creating a balanced and partial regulatory environment for digital assets. Today’s announcement is a testament to the momentum and the progress achievable through industry collaboration and advocacy.

The repeal of SAB 121 was a cornerstone of TDC’s 2025 SEC Digital Asset Policy Priorities, and we are encouraged to see progress being made so early in the year. This action marks a significant step forward in removing barriers to digital asset adoption, while providing much-needed clarity and opportunity for institutional investors to confidently engage in the digital asset space.

We commend Acting Chair Uyeda, Commissioner Hester Peirce, and the newly created SEC Crypto Task Force for their commitment to driving responsible digital asset innovation. TDC looks forward to continuing our collaboration with these leaders to ensure that the United States remains at the forefront of digital asset policy and innovation.

For more details, visit the SEC’s announcement here.

Today is a historic moment for the United States and the future of financial innovation. President Trump’s executive order establishes the principles that will define America’s leadership in the digital asset economy, ensuring access to open public blockchain networks without persecution, supporting the development of groundbreaking software like smart contracts, and protecting vital public infrastructure. It reaffirms the rights of individuals and businesses to participate in mining and validating, transact peer-to-peer without unlawful censorship, and maintain self-custody of digital assets through unhosted wallets.

This executive order sets a bold and clear course for U.S. leadership. The Digital Chamber stands ready to work hand in hand with David Sacks and the President’s Working Group on Digital Asset Markets to ensure this transformative vision becomes reality. This is more than a policy moment—it’s the foundation of a brighter, freer, and more innovative economic future.

– Founder & CEO, Perianne Boring

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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The Digital Chamber expresses heartfelt gratitude to Paul Atkins for his service as a member of our advisory board and co-chair of the Token Alliance. Paul has been a leader at TDC, offering expertise and a steady voice of reason, helping shape our advocacy strategies, and clarifying complex regulatory matters.  

As Paul steps down to pursue a new chapter in public service, we celebrate his dedication to advancing the blockchain and digital asset industry. His contributions have left a lasting impact, and we wish him great success in this next endeavor. 

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The Digital Chamber commends Representative Amo (D-RI-1) and Representative Kim (R-CA-40) for their bipartisan leadership in introducing H. Res. 1622, highlighting the transformative role of Distributed Ledger Technologies (DLT) in strengthening democracy, protecting human rights, and advancing global transparency. This resolution urges the U.S. Government to support the use of DLT to promote democratic values and internet freedom, serving as a formal expression of legislative priorities without carrying the force of law.  

At a time when democratic values face unprecedented challenges worldwide, this resolution demonstrates the United States’ commitment to harnessing cutting-edge technology to reinforce institutions that uphold freedom, accountability, and resilience. 

A Vision for DLT/Blockchains and Democratic Empowerment 

DLT offers tamper-resistant, transparent, and decentralized platforms for recording and verifying data, addressing critical issues of corruption, misinformation, and inefficiencies that sap democratic apparatuses of their efficacy. From securing digitized government documents to facilitating transparent financial transfers and combating censorship, blockchains have the power to create more accountable and equitable systems of governance. 

Key applications outlined in H. Res. 1622 include: 

• Identity Management: Establishing secure and portable digital identities, fighting fraud and identity theft, and securing borders. 

• Citizen Representation: Enabling secure, transparent voting systems, reducing electoral fraud, and empowering citizens to participate in fair elections. 

• Land Registration: Preventing fraud while increasing transparency and accessibility of real estate for consumers. 

• Aid Distribution: Enhancing efficiency, reducing costs, and lowering reliance on intermediaries for individuals coping with humanitarian crises. 

• Censorship Resistance: Empowering free expression by enabling decentralized platforms that protect access to information. 

Why H. Res. 1622 Matters 

By promoting the use of DLT in critical areas such as governance and sustainability, this resolution positions the United States as a global leader in ethical innovation. Key provisions include: 

• Government Engagement: Encouraging agencies like the Department of State and USAID to support blockchain applications in democratic governance, diplomacy, and aid delivery. 

• Combating Censorship: Recognizing blockchains as tools for securing internet freedom and supporting freedom of speech. 

• Responsible Leadership: Urging U.S. policymakers to create frameworks that ensure ethical and sustainable uses of blockchain technology. 

TDC Efforts 

For years, TDC has advocated for integrating blockchain into public policy frameworks. We believe this technology holds immense potential to advance human rights and support democratic values, and we welcome legislative recognition to that effect. H. Res. 1622 aligns closely with these objectives, providing a roadmap for government agencies, private sector innovators, and civil society to explore the possibilities of DLT while addressing concerns about misuse and accessibility. 

What’s Next? 

The resolution will need to be re-introduced in the 119^th Congress. TDC invites all stakeholders to support this critical legislation and encourages the House to act swiftly in its passage. By championing H. Res. 1622, Congress can reaffirm its commitment to technological innovation that upholds democratic values, strengthens institutions, and promotes global human rights in the 119^th Congress. 

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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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