Regulatory Policy Shift in the USA: Why the SEC's About-Face Still Fails to Energize the Crypto Market

Regulatory Policy Shift in the USA: Why the SEC's About-Face Still Fails to Energize the Crypto Market

The U.S. Securities and Exchange Commission is executing a remarkable about-face: After years of aggressively pursuing crypto companies, proceedings are being terminated and lawsuits withdrawn. The latest case involves Gemini, the exchange founded by the Winklevoss twins. Yet the hoped-for market euphoria remains absent. Bitcoin lingers just below $90,000, while uncertainty about the actual shape of the new regulatory framework paralyzes investors. A paradox that offers deeper insights into the current market condition.

The situation reveals a fundamental contradiction: While the regulatory direction is clearly improving, concrete implementation is lacking – and it is precisely this uncertainty that inhibits the market more strongly than strict but clear regulation.

The Facts

The SEC has officially dropped its 2023 lawsuit against crypto exchange Gemini ^[1]. This emerges from a joint motion filed by the agency and the company with a federal court in New York. Originally, the securities regulator had accused Gemini of raising billions of dollars through unregistered securities via its lending program "Gemini Earn" ^[1].

As justification for the dismissal, the SEC cites a settlement between Gemini and the New York Department of Financial Services (NYDFS), as well as the fact that affected customers have now received 100 percent of their deposited crypto assets back ^[1]. The Gemini Earn program had enabled users to lend cryptocurrencies to the now-insolvent partner Genesis Global Capital and receive above-average interest rates in return ^[1].

This decision is part of a broader policy shift by the SEC under the Trump administration. In recent months, numerous proceedings against prominent crypto companies such as Coinbase and Binance have been terminated or paused ^[1]. The message is clear: The regulatory approach toward the crypto industry is becoming significantly more lenient – a strategic advantage for U.S. crypto firms in global competition ^[1].

Nevertheless, the crypto market appears almost unimpressed by these positive developments. Bitcoin was trading on January 24 exactly at the previous day's level of $89,519, Ethereum rose marginally by 0.4 percent to $2,955, while Solana lost 0.4 percent to $127 ^[2]. The Crypto Fear and Greed Index remains in the fear zone at 35 out of 100 points, while the Altcoin Season Index stands at merely 29 out of 100 points ^[2].

Gadi Chait, Investment Manager at Xapo Bank, identifies macroeconomic factors as the primary reason for the weak performance: "Macroeconomic pressure remains in focus. The divergent policies of central banks, including expectations regarding further tightening by the Bank of Japan and the ongoing reduction of liquidity by the U.S. Federal Reserve, continue to shape market behavior" ^[2]. Particularly relevant: The delayed Clarity Act does not contribute to improving sentiment. Chait adds: "This occurs against the backdrop of regulatory uncertainties, particularly in the USA, where progress in structuring the digital asset market remains inconsistent" ^[2].

Analysis & Context

The current situation demonstrates a remarkable phenomenon: The market is not responding to the direction of regulatory change, but to its incompleteness. The dismissal of SEC proceedings is undoubtedly positive – it ends years of legal uncertainty for established companies. However, the absence of a clear, comprehensive regulatory framework creates a vacuum that forces investors to exercise restraint.

Historically, phases of regulatory clarification have always been catalysts for market movements – both upward and downward. The MiCA regulation in Europe, for example, created planning certainty despite its partially restrictive nature, which was appreciated by institutional actors. The current U.S. situation, however, finds itself in a state of limbo: The old, repressive stance is being dismantled without a new, constructive framework yet being in place. The delayed Clarity Act symbolizes this transitional dilemma.

In the medium term, this situation is likely to prove an opportunity. U.S. companies are regaining room to maneuver while simultaneously facing the prospect of appropriate regulation. For Bitcoin investors, this means: The current sideways movement reflects less fundamental weakness than a revaluation phase. Once concrete regulatory structures emerge, this is likely to trigger – coupled with an improved macroeconomic environment – substantial market movements. The question is not whether, but when this clarity will come.

Conclusion

• The SEC's about-face marks a fundamental shift in U.S. crypto policy, yet without concrete new regulatory frameworks, uncertainty persists – markets need clarity, not just deregulation

• The current market lethargy is primarily attributable to macroeconomic factors and regulatory incompleteness, not to negative fundamental developments in the Bitcoin ecosystem

• U.S. crypto companies gain a strategic advantage in global competition, while Europe has already created a clear, albeit more restrictive, framework with MiCA

• Investors should understand the current phase as a transitional situation: The delayed Clarity Act postpones movement but simultaneously creates accumulation opportunities ahead of the expected regulatory clarification

• The combination of a cautious monetary policy environment and regulatory limbo explains market dynamics better than either of these components alone – only when both resolve is substantial volatility likely to return