Potential Resurgence of Crypto in the US as Courts Exercise Greater Oversight over the SEC, Says Attorney – Australian Regulation Lagging

Jeremy McLaughlin, an attorney specialising in cryptocurrencies, has highlighted the potential for a revival in the U.S. digital asset sector due to recent setbacks faced by the nation’s securities regulatory body.

Anticipation is building that the United States might experience a fresh surge of interest in cryptocurrencies, prompted by a series of court decisions that have curbed the powers of the Securities and Exchange Commission (SEC), as stated by a legal expert specialising in digital assets at K&L Gates.

During an address on August 31 at the Intersekt23 event held in Melbourne, Jeremy McLaughlin, a partner at the global legal firm, pointed out that various court cases in the U.S. have rejected assertions made by Gary Gensler, the Chair of the Securities and Exchange Commission, who has contended that nearly all digital assets should be classified as securities.

Speaking on a panel alongside Effie Dimitropoulos, the head of payment services firm Novatti, and King Leung, the fintech lead at Invest Hong Kong, McLaughlin remarked that the initial regulatory landscape for cryptocurrencies was primarily at the state level and the requirements were relatively straightforward. However, he noted that with the involvement of the SEC and the Commodity Futures Trading Commission, many segments of the market began to close off.

“People delisted tokens, some companies pulled out of the U.S. because they saw how aggressive the SEC was being, and continues to be,” McLaughlin said.

“Now that the courts are starting to rein in the SEC a bit, I think there’s some hope that the industry is kind of igniting again in the U.S.”

Over the past few months, the SEC has encountered defeats in both a lawsuit it initiated against a cryptocurrency company and a lawsuit filed by a cryptocurrency company against it.

On August 29, a judge in a U.S. District Court ruled against the SEC in a case involving Grayscale Investments. The judge’s decision pertained to the denial of Grayscale’s request to transform its primary Bitcoin fund into an exchange-traded fund.

In the month of July, the SEC faced a partial setback in its legal dispute with Ripple Labs regarding the sale of XRP. This occurred as a judge determined that the cryptocurrency did not qualify as a security when it was sold to retail traders.

We did an article on that here. 

“To be a lawyer in the space, it’s quite difficult to advise clients,” McLaughlin commented. He expressed his frustration about being unable to offer unequivocal answers to his clients.

Nevertheless, he does hold an optimistic view that regulations for cryptocurrencies are beginning to emerge from the state of uncertainty.

“Finally, there are cases that are being filed and the decisions have been going strongly in the favour of the digital asset industry, ”McLaughlin further noted.

During a different segment of the conversation, the participants were questioned about their opinions regarding the status of Australia’s cryptocurrency regulations in comparison to those of other countries. Effie Dimitropoulos from Novatti had a succinct response: “Lagging”. 

Dimitropoulos highlighted the introduction of fresh regulatory structures in Hong Kong and the European Union, using them as evidence to support her view that Australia’s crypto regulations were trailing behind.

“It’s very clear to say that Australia is lagging. What that means […] Is how that affects on-the-ground businesses that are operating with digital assets.”

She emphasised the significant resources required by local cryptocurrency companies to seek legal guidance “that could be defunct in three minutes’ time.”

“We hear the Treasurer is going to come out with regulation, [the Australian Securities and Investments Commission] is going to do something, Senator Bragg’s bill in play,” she said.

“There are so many pieces that are still in play with no clear resolution as to when it’s going to happen. So that supports my word: ‘Lagging.’”