Now that Paul Atkins is taking over as SEC Chairman, the crypto world might be in for some big changes. The guy is expected to be more open to crypto ETFs, which could mean a less complicated regulatory environment. Still, there are some bumps in the road, like the potential for more restrictive measures, not to mention the operational nightmares that come with in-kind settlements.
What Does This Mean for Crypto?
With Atkins in charge of the SEC, we might see a shift away from the previous regime's “regulation by enforcement” approach. He and Commissioner Hester Peirce think the new SEC majority will allow for a better decision-making process. This could be a good thing for crypto ETFs and the industry overall. Expect more applications for Bitcoin and Ethereum ETFs to be approved, paving the way for new projects in the space.
The Financial Innovation and Technology for the 21st Century Act (FIT21) could also come into play. If passed, this legislation would create a framework for regulating digital assets, which would be a major change. Crypto fund managers might breathe a little easier with it.
The Pros and Cons of In-Kind and Cash Settlements
The discussion around in-kind settlements isn’t as straightforward as it seems, either. On one hand, in-kind settlements have benefits like tax efficiency and transparency. On the other hand, they can be an operational headache. Custodians must handle the physical assets, and many of them lack the infrastructure to do it well.
Cash settlements, the regulator's preferred choice, are more straightforward for banks and custodians. But they come with their own set of issues, like valuation disadvantages and settlement cycle mismatches.
What’s Going on with Operation Chokepoint 2.0?
Operation Chokepoint 2.0 is back, folks. The FDIC is reportedly pressuring banks to stop working with crypto companies. This has already led to the shutdown of Silvergate Bank and operational challenges for Custodia Bank. Charles Hoskinson, founder of Cardano, has criticized this operation for its potential to stifle innovation and consumer confidence.
What Should Fintech Startups Do?
In the wake of these regulatory changes, fintech startups should be ready to adapt. The SEC is likely going to clarify the rules, allowing them to operate with less uncertainty. They might also benefit from a more relaxed enforcement approach, which would let them focus on innovation instead of compliance.
Having a clear regulatory strategy will be key. Staying updated on compliance and risk management—especially when it comes to crypto compliance—will help navigate this evolving landscape. Diversifying their portfolios and learning about new technologies will also be crucial.
Summary
Atkins’ leadership could signal a new era for crypto ETFs, but there are still challenges ahead. The regulatory landscape is changing, and only time will tell how it all plays out.
