DC Crypto Policy Developments: Tornado Cash and SEC Bulletin Updates

Recent
developments
in
the
crypto
policy
landscape
have
sparked
significant
interest,
particularly
around
the
ongoing
legal
proceedings
involving
Tornado
Cash
and
the
changes
to
the
SEC’s
accounting
guidelines
for
crypto
custodians,
according
to

a16z
crypto.

Tornado
Cash:
Legal
Proceedings
Update

In
a
significant
update
from
the
U.S.
District
Court
for
the
Western
District
of
Texas,
procedural
actions
have
been
noted
in
the
ongoing
case
against
Tornado
Cash.
Initially
sanctioned
by
the
U.S.
Treasury
in
2022
for
alleged
money
laundering
activities,
including
proceeds
from
North
Korean
cyber
hacks,
the
case
has
seen
various
developments.
In
November
2024,
the
Court
of
Appeals
for
the
5th
Circuit
ruled
that
the
Treasury
had
exceeded
its
authority,
remanding
the
case
back
to
the
district
court
to
determine
remedies.

The
district
court
in
Texas
is
now
preparing
to
reopen
legal
proceedings.
Despite
media
reports
suggesting
a
reversal
of
sanctions,
the
sanctions
remain
in
effect
until
a
new
court
order
is
issued.
The
outcome
of
this
case
could
have
far-reaching
implications,
especially
considering
similar
ongoing
litigation
and
the
potential
for
the
case
to
reach
the
Supreme
Court.

SEC
Rescinds
Staff
Accounting
Bulletin
121

In
another
major
policy
change,
the
SEC
has
rescinded
Staff
Accounting
Bulletin
No.
121,
which
previously
required
entities
safeguarding
customers’
crypto
assets
to
report
them
as
liabilities.
This
directive,
effective
since
April
2022,
faced
significant
opposition
from
policymakers
who
argued
that
it
was
an
overreach.

With
the
issuance
of
Staff
Accounting
Bulletin
No.
122,
custodians
are
now
able
to
apply
standard
accounting
principles,
reflecting
the
true
nature
of
custodial
arrangements
rather
than
presuming
liabilities.
This
change
is
expected
to
make
it
more
financially
viable
for
banks
to
engage
in
crypto
custody
without
the
burden
of
additional
liabilities.

The
repeal
of
SAB
No.
121
follows
a
bipartisan
Congressional
effort
to
overturn
the
bulletin,
which
had
been
vetoed
by
President
Biden
in
May
2024.
The
new
guidance
aligns
with
industry
calls
for
more
fitting
regulations
that
do
not
hinder
innovation.

Executive
Order
on
Digital
Financial
Technology

President
Trump
recently
issued
an
executive
order
aimed
at
bolstering
American
leadership
in
digital
financial
technology.
The
order
emphasizes
the
importance
of
digital
assets
and
blockchain
technology
in
driving
innovation
and
economic
growth.
It
also
proposes
the
establishment
of
a
national
digital
asset
stockpile,
potentially
sourced
from
cryptocurrencies
seized
through
law
enforcement
efforts.

The
executive
order
underscores
the
administration’s
commitment
to
supporting
the
responsible
development
and
use
of
digital
technologies,
setting
the
stage
for
further
regulatory
adjustments.

These
policy
updates
mark
crucial
steps
in
the
evolving
regulatory
environment
for
cryptocurrencies,
with
significant
implications
for
the
industry
at
large.
Stakeholders
are
advised
to
stay
informed
as
these
developments
unfold.

Image
source:
Shutterstock