The SEC Crypto Meeting That Never Happened: State of Crypto

• Hopes that regulators could step in if the Clarity Act failed to progress are also starting to fade.
• The U.S. Securities and Exchange Commission unexpectedly canceled an open meeting scheduled for last Friday. Commissioners were expected to discuss the proposed Reg Crypto framework and potentially unveil part of the long-delayed innovation exemption. The delay appears to be connected to uncertainty surrounding the Clarity Act.

Everything remains in limbo

• The SEC had announced earlier last week that commissioners would hold an open meeting to discuss Reg Crypto, a proposal intended to establish rules for companies raising capital through tokens and potentially allow issuers to move digital assets outside the SEC’s jurisdiction under certain conditions.
• Industry sources had also indicated that the agency planned to introduce at least part of its innovation exemption. The measure was expected to provide guidance on how issuers of security tokens could manage the underlying securities.
• Neither initiative moved forward as planned.

Why it matters

• Earlier this month, expectations grew that the Digital Asset Market Clarity Act would not receive a Senate vote before the August recess. That led some industry participants to argue that regulators could advance crypto policy if Congress failed to do so.
• Regulatory action, however, would not carry the same weight as legislation. SEC and CFTC rules could face legal challenges and could potentially be reversed by a future administration, while congressional legislation would generally be harder to unwind.

The timing problem

• That strategy depends on the SEC and CFTC having enough time to complete their proposed rules and establish regulatory frameworks before a future administration could reconsider them.
• That timeline is now uncertain. The SEC said late Thursday that it was postponing the scheduled meeting and would announce a new date later.
• CoinDesk and other reports also indicated that the SEC had indefinitely delayed the rollout of its innovation exemption.
• People familiar with the matter told CoinDesk that concerns surrounding the Clarity Act contributed to the decision. The White House and lawmakers reportedly worry that separate SEC action could complicate negotiations over the legislation ahead of the Senate’s planned initial vote next month.
• If that remains the case, the SEC may not take further action until lawmakers return from their next break in early October.
• Even then, the regulatory process could face significant timing constraints. Formal rulemaking requires the SEC to gather public comments, consider feedback, release revised proposals and eventually adopt final rules. Companies would then need additional time to implement the new requirements.
• One industry source estimated that the rulemaking process alone could take nearly a year, with implementation potentially requiring another year. That timeline could bring the process close to the arrival of a new presidential administration, which could make it easier for the next administration to reverse or modify the resulting regulatory framework.

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