The “war on crypto” has backfired.

A pair of big wins in Washington for the industry underscores what went wrong with the SEC’s post-FTX crackdown

Peter A. McKay
3 min readMay 26, 2024
The U.S. Capitol at night
Photo by Heidi Kaden via Unsplash

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For a change, crypto world has been getting nothing but welcome news from America’s government.

  • On Monday, the Securities and Exchange Commission gave its approval for public exchanges in the U.S. to list funds holding ether on investors’ behalf. To be sure, the SEC still has to issue a second approval for issuers of exchange-traded funds (ETFs) holding ether to sell shares to the public. But a path now seems clear for investors to begin using such vehicles sometime this year to bet on the second-most popular cryto token via their accounts with traditional stockbrokers.
  • On Wednesday, the U.S. House passed the Financial Innovation and Technology for the 21st Century Act in a bipartisan 279–136 vote. The bill, nicknamed FIT21, seeks to clarify rules for U.S. crypto trading and the enforcement powers delegated to different financial agencies.

Why it matters: The week signaled a major shift in the U.S. political establishment’s posture toward crypto since the immediate post-FTX period.

At the time, the SEC unleashed a wave of enforcement actions against crypto companies, even in the absence of new laws tailored specifically to the crypto economy.

Industry insiders complained the agency was practicing “rulemaking by enforcement.” That is to say, it would bring legal actions against crypto entities under decades-old securities laws written for Wall Street, see what it could get to stick in federal court, and thus set precedent governing the industry going forward.

In retrospect, that approach garnered a mixed record in the courtroom and now seems to have dwindling political support on Capitol Hill as well. That means a lot of policy issues — and new market opportunities — are going to be up for grabs in 2024 and beyond.

Another major lesson that jumps out for me: Ultimately, the SEC’s post-FTX “war on crypto” seems to have inadvertently strengthened crypto’s dominant duopoly of Bitcoin and Ethereum.

The top two tokens’ combined share of the global crypto market was just under 60% in early November 2022, right before FTX went under, according to CoinMarketCap data.

Now, after all the SEC prosecutions and civil actions since, that figure has risen above 70%, and both tokens are probably going to have ETFs listed in the same Wall Street venues where the public goes to buy shares in General Motors.

Translation: This is what a policy utterly backfiring looks like in Washington.

Looking closer, it does make a perverse sort of sense that we would end up here. After all, many of the SEC’s actions against the crypto industry have either directly targeted, or at least had a chilling effect on, smaller token projects.

Some of them, no doubt, richly deserved it. But the crackdown has also led to a wave of token de-listings on crypto exchanges, including some projects that perhaps deserved to survive and could have offered legitimate innovation.

Meanwhile, the token market’s two biggies just keep chugging along. And the market’s “long tail” gets hollowed out.

Frankly, I used to find this a bit depressing. I used to think a truly flourishing token economy would comprise many different projects blooming at once, not such a concentration behind just two.

I’ve since made my peace with with the two-headed Bitcoin/Ethereum beast, considering both networks are legitimately public, transparent, and open source. These are traditionally the foundations upon which innovators can build a lot of cool stuff.

It’s also more than we can say for all the disasters that Big Tech’s proprietary apps and platforms hath wrought. And that’s not nothing.



Peter A. McKay

Storyteller, thought leader, and marketer focused on blockchain/web3. I publish #w3w, a newsletter about decentralization. Ex-reporter for the Wall St Journal.