The crypto market this week we've seen up and down price action, but the industry is celebrating new guidance from the SEC as the agency says that most crypto tokens are not securities.
Now Paul Atkins addressed the digital chambers blockchain summit this week where the SEC announced 5 new buckets that crypto falls into and also at that summit, Senator Cynthia said that the clarity Act will pass this year.
She expects that banking language.
To be removed from the bill and says terms like yields and APR will be used to describe stable coin rewards and that is because the banking industry hasn't budged in the ongoing debate with crypto exchanges while joining me here at the New York Stock Exchange to break all of this down is Kristin Smith, President of the Solana Policy Institute.
Kristin, good morning and joining me to be here while we've heard a lot when it comes to the SEC with the CFTC so.
The latest interpretive guidance, the guidance that came out this week is actually a huge deal, and I think with everything going on with the legislation and all the other momentum, it got lost in the shuffle, but we should not undersell the importance of this guidance.
It's a very substantive document.
It lays out different categories.
It talks about the Howie test, which has been the source of litigation for many years and how that should apply, and it really does provide a framework for thinking.
About these digital assets, I think the other thing that was interesting this week is that both the Chair Atkins and Chair Selig talked about wanting to do follow on rule making in addition to this guidance.
So this is the type of work product we've been wanting to see out of these agencies for many years.
They do have a lot of authority and it just shows when you have the right people in place that are willing to use the power they have, we can get a lot of help.
And so I think it really complements the work that is.
Going on on the hill with the legislation but certainly provides some certainty in the short term for those operating and building in the crypto space.
Yes and Kristin, as you mentioned, certainty is the key word here because when we're talking about digital assets or even other asset classes as well, uncertainty is not a word that the market likes to hear.
So when it comes to the next steps, what are your expectations?
Yes, well, I think one, I think there's sort of two paths, right?
We're going to see the agency.
Put these rulemakings forward.
The rule making process is a very involved process.
It takes years sometimes, but at minimum many, many months, and there are comment periods.
There are public input into the process.
And once rules are on the books, you can't just simply undo them at the snap of a finger.
You have to do that same process again to undo them.
So once they're there, there is some certainty, at least for a short amount of time.
The legislation that is like the gold standard to actually have this in law that can't be undone without passing another law it would be incredibly incredibly helpful and I think you know the folks on Capitol Hill, the White House are working really, really hard right now, really hard to get this done.
Burning the candle at both ends, and I think it's a critical moment.
But you know, every day there seems to be progress on the outstanding issues and the negotiations I think are going well and so I think we're close and we could see a very, very busy spring in the Senate Banking Committee on the Senate floor on crypto.
Yeah, and here we are at the end of Q1 looking ahead to the rest of 2026, and as you mentioned, legislation does actually take time and we are in a midterm election year.
So there are key dates that are on the calendar, and we do have the digital asset summit taking place here in New York.
I understand that you will be speaking with Mike Selig as well.
So what are the key dates that are on your diary?
I think we would love to see the bill get out of the committee before the end of April.
You know, if you have to back up through the year, the Congress is here through the end of December, and it's very uncertain whether or not you're going to have December time for legislating.
It depends a lot on the midterm elections.
Sometimes Congress just shuts down.
You have to realize the Congress goes home at the beginning of October.
So if you don't have something through the House or the Senate and again the House floor, whatever the Senate does is going to have to go back to the House.
You need that fall for the House.
So really it's like the August recess before the members go home that we need to get something completely through the Senate and the Senate floor.
The Senate floor can take weeks.
It took 4 weeks for the Genius Act.
So it's one of the reasons why it's really important that we get this deal done on the yield. the bill can get through the Senate Banking Committee and onto the next phase of the process.
And speaking of which, it does seem as though it should be later in 2026 given everything that has happened so far this year.
But as you mentioned, we are about to head into Q2 and there is a timeline for what happens at the nation's capital.
So when it comes to the Senate Banking Committee, they are eyeing in April markup.
So what do you expect to see?
Yes, I mean, I think that, you know, I think one. to look for is when they do get the markup scheduled and and that's when they vote on the bill and the amendments is this going to be a partisan markup or a bipartisan markup?
One of the reasons right now that the legislation hasn't gone to the committee stage yet is they're not certain they have all the Republican votes, notably Senator Tillis, who's retiring, who represents North Carolina very close with the banks.
He's the one that's leading the negotiations on the yield issue for the Republican side and so if they can get him.
On board, I think the question will be, is it all Republicans that get that through the committee, or are they able to pull some some Democrats over?
I think if they get Democrats on the bill that will make the process a lot smoother and so I'm really hopeful that they're able to do this in a bipartisan way.
Yes, and Kristen, you and I have had many conversations over the past year, and I know that builder innovation and builder protections is an important issue that you've been paying attention to.
So the fact that the CFTC just handed Phantom tech a no action letter, what does this tell you?
I think that Phantom no action letter was a really important step that it's one of many we've seen this year where we have government officials talking about the importance of self custody and being able to hold your own assets and having those digital wallets in place, and I think that you know whether it be things like this no act no action letters or if you're looking at the.
Legislation.
There are actual protections for software developers.
I think the key is we want to be able to encourage the ability of individual software developers to create software products that allow people to have privacy, allow them to hold their own assets, and allow them to interact on a direct basis.
I think that's sort of the revolution that brought many people to crypto and we want to be able to protect that core ability.
And so anytime we see a federal agency that doubles down on.
Wanting to have you know allowing permissible uses of self custody and within this financial system is is a welcome welcome and finally before I let you go, you and I are here at the New York Stock Exchange and we have been hearing about tokenization announcements from both of the exchanges, the NSA and the NYSC so what do you expect progress to look like and.
Actually mean for both the institutional retail I think tokenization and we could sit here and talk about this for hours, but it's really going to lead to an explosion of capital markets activity because it lowers the cost of being being able to issue shares or go public or manage these kinds of assets.
It lowers the required investment thresholds and so it's going to expand the market to a whole new class of mid-sized companies that.
Don't have access to these kinds of capital markets today, so I think it's a huge opportunity.
It's incredibly exciting and there's work going on in Washington DC at the SEC and CFTC that will facilitate this transition that you know we at the Policy Institute think is inevitable in the years ahead.
Kristen, always great talking to you.
Thank you so much for joining us this morning and as always, thank you so much for all of your insights.
Thank you.
