US hopeful for new regulations; UK defends ‘crypto’ approach

Getting your Trinity Audio player ready...

United States Rep. French Hill remains hopeful digital asset legislation will pass this year, despite lame-duck Congress, as the Securities and Exchange Commission (SEC) publishes its 2025 examination priorities. Meanwhile, across the Atlantic, the United Kingdom’s top finance watchdog felt the need to defend its stance on digital assets amid criticism of an overly strict approach.

Congressman Hill (R-AR) said he still believes two digital asset-related bills might progress before the end of the year despite the impeding lame-duck Congress. Speaking during a conference on Tuesday, the Arkansas Republican said he is “still optimistic” that a digital asset market structure bill and legislation to regulate stablecoins could be considered before the end of the year.

“I’m still optimistic that FIT21, which is the regulatory framework bill, and the stablecoin bill have possible consideration in the lame duck,” said Hill, in conversation with Dr. Christopher Brummer at the 8th Annual Washington DC Fintech Week. Brummer is the founder of DC Fintech Week and a professor of financial technology at Georgetown Law.

A “lame duck” session occurs when lawmakers meet after an election but before the beginning of the new Congress. With a potentially momentous election due to take place on November 5, the new Congress will not be seated until January next year.

“In all lame duck sessions, they take the direction from who wins the top of the ticket, so that will govern a bit of what we’re dealing with,” said Hill. It means that Vice President Kamala Harris or former President Donald Trump will determine how the lame duck will drift.

The digital asset-related bills Hill hopes to see progress are the Financial Innovation and Technology (FIT) for the 21st Century Act, which passed a full U.S. House of Representatives vote in May, and the Clarity for Payment Stablecoins Act of 2023, which passed Committee stage last July but has since been languishing in the House.

The latter seeks to create a regulatory framework for the issuance and oversight of payment stablecoins, including, amongst other measures, defining stablecoins, mandating stablecoin issuers to obtain licenses from state regulators, and requiring issuers to maintain reserves equal to the value of the stablecoins in circulation.

While lawmakers remain motivated to pass stablecoin legislation this year, FIT21 is perhaps the more significant bill. It aims to provide broader regulatory certainty for digital assets and eliminate some of the grey areas in oversight.

If passed, it would give the Commodity Futures Trading Commission (CFTC) power over digital commodities while clarifying the SEC’s mandate to oversee digital assets offered as part of an investment contract. The bill also outlines a process for firms to certify with the SEC that their projects are adequately decentralized, allowing them to register digital assets as digital commodities with the CFTC.

Rep. Hill leads the House Financial Services subcommittee focused on digital assets and has also put his hat in the ring to lead the full House Financial Services Committee if Republicans remain in control of the House next year. Current Chair Patrick McHenry (R-NC) announced his plans to retire at the beginning of 2025.

Hill said on Tuesday that if legislation doesn’t happen this year, it will be a “top priority” for next year. The comments came just a day after the SEC announced its priorities for 2025.

2025 regulatory goals

On Monday, the SEC Division of Examinations—responsible for conducting inspections and oversight of financial firms, such as investment advisors, broker-dealers and other regulated entities, to ensure compliance with securities laws and regulations—published its “examination priorities” for 2025, which included plans to focus on the “offer, sale, recommendation, advice, trading, and other activities involving crypto assets.”

According to the SEC, “given the volatility and activity involving the crypto asset markets, the Division will continue to monitor and, when appropriate, conduct examinations of registrants offering crypto asset-related services.”

It added that “the Division will assess registrant practices to address the technological risks associated with the use of blockchain and distributed ledger technology, including risks pertaining to the security of crypto assets.”

A notable addition to the 2025 examination priorities was the inclusion of spot BTC and ETH exchange-traded products (ETPs), after the SEC approved the former in January, followed by the latter in May. 

The SEC’s Acting Director of the Division of Examinations, Keith Cassidy, said on Monday that the list of priorities represented “key areas of potentially increased risks and related harm for investors,” while SEC Chair Gary Gensler said the division would be “working with registrants” to help them “understand the rules” and ensure that the markets “work for investors and issuers alike.”

The pair’s comments hinted that the SEC’s approach to digital assets in 2025 will be similar to its current—much criticized—approach, which some have described as excessively heavy-handed.

But it’s not just the U.S. regulator that has received criticism for its supposedly harsh stance on the digital asset space, as evidenced by the U.K.’s top finance watchdog this week feeling compelled to defend its own regulatory tact.

UK regulator unrepentant

On Monday, across the pond, the U.K. Financial Conduct Authority (FCA) publicly backed its approach to regulating the digital asset industry in response to criticism that its measures are too tough and risk stifling innovation.

In an October 21 post, Val Smith, the head of payments and digital assets in the FCA’s authorizations division, emphasized the importance of maintaining rigorous standards to protect consumers and preserve the integrity of financial markets.

“Relaxing our standards and creating a race to the bottom also won’t ensure people and our markets are protected or even work well,” said Smith, adding that innovations quickly built on “unsafe, unregulated and untrusted foundations” are prone to collapse.

The FCA has faced criticism for its high bar to entry for digital asset registrations, as well as for prolonged delays in processing registration applications. However, Smith argued that the agency’s approach is fair and proportionate to the risks posed.

“We never turn applications down out of hand. But we treat the risk of firms being used for money laundering extremely seriously,” said Smith. “Allowing illicit money to flow freely can destroy lives.” 

She emphasized that the FCA wants to collaborate with partners across government, industry and other jurisdictions to develop a digital asset sector “built on reliable, sturdy foundations.”

“By doing this, we can help enable safety, security and sustainable growth for years to come,” said Smith.

The FCA, along with the Bank of England (BoE)—the U.K.’s central bank—continue to advance the country’s long-established aim of becoming a global “crypto asset technology hub,” a goal not yet abandoned by the new Labour administration.

On October 1, the FCA and BoE jointly launched the digital securities sandbox (DSS) initiative to explore how distributed ledger technology (DLT) can be used in the notary, maintenance and settlement of financial securities.

“The aim of the DSS is that these securities should be capable of being used in broadly the same way as traditional securities. For example, firms should be able to use the securities issued in repurchase agreements or write derivative contracts based on securities in the DSS as they normally would any other security,” explained the FCA at the time.

The DSS will operate until December 2028, with the ultimate goal of providing firms the opportunity to explore the potential of DLT “safely.”

Watch: Breaking down solutions to blockchain regulation hurdles