As the U.S. Securities and Exchange Commission (SEC) considers reforms to regulate cryptocurrencies, a similar approach to the IRS’s voluntary disclosure programs may bring more compliance, rather than relying on punitive actions upfront.
Simpler Regulation for Crypto: Lessons from the IRS
The U.S. Securities and Exchange Commission (SEC) is under increasing pressure to reform its approach to regulating cryptocurrencies. A similar model to the IRS‘s voluntary disclosure programs could bring more compliance, rather than relying on punitive actions upfront.
The Securities and Exchange Commission (SEC) is a US government agency responsible for regulating the securities industry.
Established in 1934, its primary goal is to protect investors by ensuring fair, efficient, and transparent markets.
The SEC oversees companies' financial reporting, enforces federal securities laws, and maintains records of corporate actions.
The Shift in SEC Approach
In February, the Department of Government Efficiency (DOGE) solicited public input on the SEC, hinting at imminent reforms. Since then, the agency has taken a less adversarial stance towards the cryptocurrency industry, as seen in its appointment of crypto-friendly personnel and abandonment of lawsuits against crypto companies.
Clear Compliance Over Reactive Enforcement
The current approach forces companies to spend millions on litigation to clarify their regulatory standing, leaving them exposed to unforeseen legal risks. However, with increased pressure from the Treasury‘s digital asset guidelines and growing public discourse, the SEC is likely to shift towards clearer compliance pathways over reactive enforcement.
A Balancing Act
A ‘safe harbor’ provision for early-stage projects could encourage innovation while ensuring compliance over time. The IRS has already adopted a similar approach, issuing temporary transitional relief for crypto taxpayers in January 2025. By looking to the IRS‘s model, the SEC can create a more structured framework for regulating digital assets.
The Internal Revenue Service (IRS) is a bureau of the US Department of the Treasury responsible for collecting taxes and enforcing tax laws.
Established in 1862, the IRS has a rich history dating back to the Civil War era.
With over 80,000 employees, it processes over 140 million tax returns annually, generating approximately $3.5 trillion in revenue for the federal government each year.
Benefits of Coordination
Better coordination between the SEC, Treasury, and IRS would help prevent regulatory conflicts and streamline compliance obligations for digital asset companies and stakeholders. The Treasury‘s guidelines already offer a strong foundation for this type of cross-agency alignment.
The Bottom Line
The stage is set for reforms aiming to make regulatory oversight more predictable. As DOGE‘s influence on SEC policies continues, clearer guidelines will benefit the entire ecosystem. Ultimately, creating a legislative framework for the industry will be crucial in ensuring investor protections and fostering growth.
