“In the midst of winter, I found there was, within me, an invincible summer.”
Albert Camus’ words capture the resilience of the human spirit—but they just as well describe the last few weeks in crypto policy. From bitcoin ETF filings and Ripple’s court victory to legislative progress in both the House and the Senate, signs of life are emerging in the digital asset ecosystem. Indeed, there is mounting evidence that crypto winter, at least from a regulatory standpoint, has started to thaw.
From its inception, the digital asset industry has weathered multiple “crypto winters.” Crypto winter describes the bust that follows the boom of each market cycle. These depression periods are marked by premature bitcoin obituaries, low trade volume, and flatlining public interest in the space.
What sets the current winter apart, however, is the brutal regulatory blizzard that began after the blowup of crypto exchange FTX.
Crypto’s Existential Crisis
With his bold “regulation-by-enforcement” approach, Securities and Exchange Commission Chair Gary Gensler sought to corral crypto by asserting in February that every digital asset other than bitcoin was a security and should thus fall under the SEC’s control. According to CoinbaseCOIN CEO Brian Armstrong, the SEC later ordered the crypto exchange to delist all tokens but bitcoin. That would have been 261 tokens in total.
But Armstrong refused to comply with the order because, as he suggested in an interview with Financial Times, it would have led to “the end of the crypto industry in the U.S.” His resistance only emboldened the SEC further. The agency followed through on its charge by filing lawsuits against both Coinbase and Binance for allegedly selling unregistered securities.
While June was full of blue skies and blooming flowers in the real world, it was a bleak month for crypto. Between the SEC’s lawsuits and an increasingly vocal anti-crypto faction in Congress, the threats to the industry bordered on existential.
But Old Man Winter’s grip on crypto regulation has since appeared to loosen. Today, the industry’s prospects are remarkably sunnier than they were just a few weeks ago.
So what happened?
Consider three signs that crypto’s regulatory winter may be giving way to a bipartisan spring:
1. The Return Of ‘Smart Money’
BlackRock and Vanguard are the two largest asset managers in the world. Between them, they manage more than $17 trillion dollars of global wealth. And they both just placed big bets on crypto’s future.
The vibe shift in crypto policy began when news broke in June that BlackRock had filed for a spot Bitcoin ETF with the SEC. Speculation that major financial institutions would begin investing massive sums into the crypto space was the narrative that fueled the last bull run. Those institutions are now on the doorstep. Whether the SEC ultimately approves BlackRock’s ETF is almost irrelevant—because the filing alone signals Wall Street’s acceptance of crypto as an asset class.
Vanguard, for its part, answered BlackRock’s move a few weeks later by announcing that it had bought millions of shares in the two largest bitcoin mining companies in the United States—Riot Blockchain and Marathon Digital. Vanguard now owns a 10% stake in Riot alone, making clear that the firm expects another crypto bull cycle in the near future.
While this development didn’t move the policy needle, it offered market participants hope that the asset class would survive its existential crisis. That hope was validated days later when Judge Analisa Torres announced her decision in the SEC’s lawsuit against Ripple.
2. Ripple Effects From XRP Decision
The SEC’s claim that all digital assets other than bitcoin are securities sent a chill across crypto markets earlier this year. But Judge Torres’ historic decision directly challenged the agency’s claim.
In late 2020, the SEC sued Ripple for allegedly issuing an unregistered security in its native cryptocurrency, XRP. But Torres rebuked the SEC in her ruling, writing that “XRP, as a digital token, is not in and of itself a ‘contract, transaction or scheme’ that embodies the Howey requirements of an investment contract.”
Translation: XRP is not a security.
The ruling has significant implications for almost all digital assets. Why? Because if it holds, the ruling could vindicate not only XRP but other tokens singled out by the SEC for allegedly being unregistered securities. These include SOLSOL, ADAADA, NEARNEAR, MATICMATIC, and more.
3. A Resurgence Of Bipartisanship In Congress
Just when it appeared that crypto was starting to split along party lines—with Republicans being for it and Democrats being against it—a bipartisan duo in the Senate defied expectations. In July, Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) reintroduced the Responsible Financial Innovation Act, the most comprehensive crypto bill ever to come before the US Senate.
The bipartisan momentum rolled into legislative efforts in the House of Representatives, where a half dozen Democrats joined their Republican colleagues on the House Financial Services Committee to advance a comprehensive regulatory framework for crypto assets. A handful of Democrats also voted to advance a bill regulating payment stablecoins, proving that neither bipartisanship nor crypto are dead.
Looking Ahead
These three developments taken on their own represent significant victories for the crypto industry. Taken together, they are a sign that the worst of the regulatory storm may have passed.
I reached out to Haun Ventures Chief Policy Officer Tomicah Tilleman to help make sense of the last few weeks. Tilleman has weathered multiple crypto winters, so he brings a seasoned perspective to the questions at hand.
“The most recent crypto winter was accompanied by a mini-ice age in the world of crypto policy,” said Tilleman. “Fortunately, diverse coalitions of bipartisan lawmakers are now moving forward with serious legislation that would protect American consumers and the country’s capacity for innovation in an increasingly competitive global environment.”
As Tilleman is keen to point out, a receding mini-ice age in the world of policy doesn’t mean the end of crypto winter. There could be plenty more pain ahead—both in terms of regulation and price action. But regulatory clarity from Congress could free the industry from its frozen state. And bipartisan support for clear regulation is growing stronger.
As Capitol Hill’s “crypto queen,” Senator Lummis gave me a 30,000-foot view of the policy landscape. “The past few weeks have made it abundantly clear that there is an appetite in Congress to pass crypto asset legislation,” said Senator Lummis.
Indeed, some of this legislation has already passed. Lummis explained that “just two weeks after reintroducing the Lummis-Gillibrand Responsible Financial Innovation Act, sections of the illicit finance title of the bill were included in the National Defense Authorization Act that the Senate passed.”
Senator Lummis also gave a nod to the House’s legislative efforts on crypto: “I’m encouraged by movement on crypto asset legislation in the House as well, and look forward to the Senate continuing work on this important issue.”
Whether it’s bipartisan action in the House or the Senate, the fact that there is any action at all is a testament to crypto’s durability as an asset class. It seems only to get stronger with each crypto winter. That bodes well for the industry’s long-term prospects—and for the next crypto spring.
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