As discussions continue in Washington regarding the regulation of digital assets, the Avalanche Policy Coalition has presented a compelling argument for a streamlined approach. They assert that U.S. regulators possess the necessary tools to regulate crypto spot markets effectively by extending existing market rules rather than creating an entirely new framework.
During a recent interview with TheStreet Roundtable, Lee Schneider, General Counsel at Ava Labs, elaborated on the coalition”s proposal. The primary focus is on empowering the SEC and CFTC to permit already regulated intermediaries to engage in spot crypto trading.
Schneider emphasized that while crypto has unique characteristics, it still operates within a framework familiar to regulators and market participants. “Crypto is different in many ways from existing financial instruments, but it still trades electronically and settles electronically,” Schneider stated.
The coalition”s plan unfolds in two distinct phases. The first phase involves exemptive relief, which would allow regulated entities to commence trading spot crypto after certifying that they have implemented adequate safeguards. “You now have exemptive relief,” Schneider explained. “If you want to start trading this stuff, you have to file a certification with us detailing your policies and procedures, along with customer protection measures.”
During this transitional phase, firms would still be subject to regulatory examinations, granting regulators the opportunity to observe crypto trading within the existing market infrastructure before finalizing formal rules.
The second phase focuses on formal rulemaking, where Schneider suggests that newly established rules should reflect both the distinctions and commonalities between crypto assets and traditional securities or commodities. “We need to do some rulemakings,” he noted. “Propose rules, gather comments, and ensure that these rules account for the unique aspects of blockchain and crypto while recognizing the similarities in electronic trading.”
A key theme of the proposal is the adaptability of the regulatory framework. Schneider pointed out that financial markets are constantly evolving, and the regulatory system has historically adapted to these changes. “There”s this adaptability built into the system,” he remarked. “That”s how we regulated new products before, and there”s no reason it can”t work here as well.” In essence, the coalition argues that crypto does not necessitate an entirely new regulatory regime but should be integrated into the existing one.
