Oct. 23, 2023
The SEC does face some limitations in regulating cryptocurrencies due to Tenth Amendment principles reserving powers to the states. A few reasons why this creates challenges: Cryptocurrency activities like exchanges may fall under state money transmitter laws, clashing with SEC treatment. States have their own securities and banking regulations that may take different approaches than SEC rules. Conflicting compliance. Areas like consumer protection and fraud have historically been regulated by states, so SEC rules in these areas are scrutinized. Hard to determine if a digital asset should be a security (SEC jurisdiction) or commodity (CFTC jurisdiction). Regulatory overlap. Courts could deem some SEC crypto rules overly broad intrusions into state authority over banking/finance sectors and strike them down. Difficult for SEC to pursue broad nationwide regulations given state power over localized activities. Overall, the SEC has to be cautious in asserting authority over cryptocurrencies to avoid violating constitutional federalism principles. This can hamper their ability to enact comprehensive regulations, leading to a patchwork of state and federal policies. Consultation with states can help mitigate this concern. But the novel nature of crypto does create Tenth Amendment uncertainty. Sent with Proton Mail secure email.