In February, the Department of Government Efficiency (DOGE) began soliciting public input pertaining to the U.S. Securities and Exchange Commission (SEC) — a move suggesting reform at the agency is imminent.

Since then, the SEC, in line with President Trump, has taken a far less adversarial stance towards the cryptocurrency industry, as evidenced by the appointment of crypto-friendly personnel and the abandonment of numerous lawsuits and investigations into crypto companies. But DOGE has the potential to implement further change, and interest in the SEC signals growing pressure towards regulators to reassess their approach to digital assets.

In response to the request for public input, Paul Grewal, Chief Legal Officer at Coinbase — one of the companies no longer facing a lawsuit from the SEC — proposed a policy requiring the SEC to reimburse legal costs for companies that successfully challenge enforcement efforts. The motivation for his suggestion is obvious, but the impact of DOGE on crypto will likely be a bit broader.

As Joel Khalili summarized in Wired, the SEC’s recent retreat from lawsuits represents “an early signal of the agency’s intent to work arm in arm with the industry to come up with a set of rules to govern crypto transactions and products.”

As things currently stand, the SEC’s lack of proactive guidance makes it difficult for businesses to plan long-term compliance strategies, and their enforcement actions often come after years of operation, leaving companies and their investors exposed to unforeseen legal risks. Going forward, this will likely change.

Clear Compliance Over Reactive Enforcement

Relying on enforcement instead of proactive guidance has forced companies like Coinbase, Ripple, and Celsius to spend millions in litigation to clarify their regulatory standing. But in one case against Debt Box, the SEC admitted to inaccuracies in its statements, leading a court to order the SEC to cover the company’s legal expenses — a preview of Coinbase’s suggestion. The ruling cast doubt on the agency’s credibility and highlighted concerns over its enforcement practices.

In the future, expect to see regulatory agencies – including the SEC – under increased pressure to align with the U.S. Treasury’s approach, which prioritizes clear compliance pathways over reactive enforcement. The Treasury’s digital asset guidelines are far more structured and address key areas like tax reporting, compliance and AML measures. Standardized definitions of what constitutes a security in the crypto space are essential for helping companies structure their products appropriately from the outset.

A Balancing Act

In addition to taking notes from the Treasury, the SEC can also look to the IRS for inspiration. A “safe harbor” provision for early-stage projects could encourage innovation while ensuring compliance over time, similar to proposals previously discussed by SEC Commissioner Hester Peirce. The IRS already embraced this approach, issuing temporary transitional relief for crypto taxpayers in January 2025.

The IRS historically relied on voluntary disclosure programs to bring taxpayers into compliance rather than imposing punitive actions upfront. A similar model should be applied to crypto regulation as well.

While some people assume regulation inherently hinders innovation, the opposite can be true. This is because clearly defined guardrails will entice more risk-averse entities to enter the ecosystem and help it grow. A light regulatory touch requires robust backend enforcement and can lead to unnecessary friction between regulators and businesses.

Altogether, 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 digital asset guidelines already offer a strong foundation for this type of cross-agency alignment. The current regulatory uncertainty and the SEC’s reactive enforcement approach stifles growth, while a clearer, more coordinated framework would benefit the entire ecosystem.

The Bottom Line

Between the DOGE’s request for input, the new administration’s broader commitment to digital asset reform, and Coinbase’s proposal, the stage is set for reforms aiming to make regulatory oversight more predictable. While we are in the early stages of the new administration, changes are already occurring at a staggering pace. It’s clear that DOGE’s influence on SEC policies will make an impact – especially with public discourse on these issues further strengthening the case for clearer guidelines rather than regulation by enforcement.

Of course, it’s worth noting that DOGE’s plans for the SEC will likely extend beyond crypto, just as efforts to regulate the industry extend beyond the SEC. Ultimately, it would be beneficial for the new administration, in conjunction with Congress, to create a legislative framework for the industry, so enterprises and individual taxpayers alike understand what constitutes a commodity, security, and digital asset. In other words, we must learn to walk before we run. In the meantime, the SEC should adopt a strategy that can foster growth while maintaining investor protections.

This week, bitcoin climbed steadily to reach nearly $100K, amid hopes for a China-U.S. trade and better macroeconomic conditions ahead.

Institutions like Mastercard and BlackRock made important digital asset announcements.

An historic stablecoin bill neared completion in the U.S. Congress. (A former prime-mover in the House said to expect a “wicked hot summer” of legislation.)

And the Trump Family continued to dominate the crypto news cycle, raising serious conflict-of-interest questions.

At CoinDesk, however, the biggest story concerned Movement, a once-hot startup that now seems deeply troubled.

Deputy managing editor Sam Kessler published an eye-opening scoop showing that Movement Labs may have been misled into signing a market-making agreement that granted a middleman control over 66 million MOVE tokens. That deal was said to have triggered a $38 million selloff, which dumped on retail investors who had faithfully bought in. The story was especially resonant as Movement is backed by World Liberty Financial, a company tied closely to the Trump Family.

Following the story Wednesday, Coinbase suspended listing MOVE, Nik De reported, and Binance banned the market-marker Web3Port. By Thursday evening Movement Labs had suspended flamboyant co-founder Rushi Manche (Sam Reynolds reported) amid ongoing investigations into the project’s “organizational governance.”

It was quite a fall from grace for a startup that had been hotter-than-Miami Beach a few weeks ago.

In other significant news, Sam Altman’s blockchain project, World announced plans to deploy 7,500 eye-scanning orbs in U.S. cities by the end of the year and add crypto-backed loans, prediction markets, and a Visa debit card for spending WLD tokens to its product offerings. Cheyenne Ligon and Margaux Nijkerk had that news.

Meanwhile, Ligon also reported on the trial of Avraham Eisenberg, who was convicted last year on charges of wire fraud, commodities fraud and commodities manipulation charges related to the $110 million hack of Mango Markets. The new conviction relates to Eisenberg possessing child sexual abuse material in 2024.

Earnings season brought mixed results for major exchanges and facilitators. Robinhood said it expected a Q1 pullback in crypto-related revenue (Helene Braun reported). Kraken said its revenue was up 29% in the same period (Francisco Rodrigues). Strategy reported a first-quarter loss of $4.2 billion on declining bitcoin prices. But it’s still planning to raise more than $50 billion for bitcoin-buying over the next 32 months (James Van Straten).

Where do we go from here? Market signals look promising, especially if tariff fears wane. But Movement may have some crisis management to look into.

As the Dubai Token2049 conference concludes, one of the key takeaways is that the narrative around bitcoin (BTC) is swiftly expanding beyond its traditional role as a store of value to a potential DeFi asset competing with Ethereum and Solana.

Prominent industry players like Franklin Templeton view this development as a positive step, confident it will enhance bitcoin’s utility without diluting its core appeal as a store of value as purists or maximalists fear.

«I don’t think focusing on Bitcoin DeFi will dilute or complicate Bitcoin’s core narrative,» Kevin Farrelly, managing principal of blockchain venture capital at Franklin Templeton and VP of Digital Assets, explained during his keynote speech at the Bitlayer side event this week. «Instead, it expands Bitcoin’s utility for a specific type of investor — one with enough technical sophistication to optimize for yield, security, or custom portfolio needs.»

«These users aren’t replacing the ‘store of value’ thesis; they’re building on it,» Ferally added. «It’s not narrative dilution, it’s infrastructure evolution.»

Franklin Templeton is an investor in Bitlayer, a BitVM that serves as Bitcoin’s computational layer while preserving the mainnet’s security. It offers features such as faster transaction processing, lower fees, and new functionalities like smart contracts or advanced DeFi integrations, areas that base-layer Bitcoin alone doesn’t natively support.

Franklin Templeton’s bitcoin ETF (EZBC) has registered net inflows of $260 million since its debut on Jan. 11 last year. As of May 1, the fund held 5,213 BTC, more than $500 million in assets under management at bitcoin’s current price just above $97,000.

Expanding beyond the store of value appeal

Satoshi Nakamoto’s original vision for the Bitcoin blockchain was driven by creating a decentralized financial system that promotes financial sovereignty and privacy, eliminating the need for transaction intermediaries. Over a decade since its inception, however, the blockchain’s native cryptocurrency, bitcoin, has quickly garnered a reputation as digital gold — a reliable store of value — and this narrative has served it well.

Bbitcoin’s market cap today exceeds $1.9 trillion, accounting for nearly 60% of the total digital asset market value of $3.12 trillion, per CoinDesk data. It’s the most liquid cryptocurrency, averaging several billion dollars in daily trading volumes worldwide, and several publicly listed companies have adopted it as a reserve asset.

Moreover, several regulated alternative investment vehicles tied to BTC have emerged over the years, allowing traditional market participants to take exposure to the cryptocurrency.

For instance, according to data source Farside Investors, the 11 spot ETFs listed in the U.S. have amassed nearly $40 billion in investor money since their debut in January last year. Meanwhile, ether ETFs have seen net inflows of just under $3 billion.

The strong institutional uptake for BTC has been widely attributed to its simple, compelling narrative as digital gold —a n asset that’s easy to understand relative to complex platforms like Ethereum or Solana, which support a wider array of decentralized finance (DeFi) applications and use cases, helping their native token holders earn additional yields on top of their spot market holdings.

«At its core, it’s seen as a digital store of value,» Farrelly told CoinDesk. «Unlike more complex crypto projects, Bitcoin doesn’t require deep technical explanation — it has a clear, focused purpose. That clarity may be part of what makes it easier to understand, easier to model, and with the ETF, easier to allocate.»»In a landscape full of complexity and speculative narratives, Bitcoin offers a kind of signal — and that, increasingly, seems to resonate,» he continued..

As a result, many purists resist the idea of introducing features similar to DeFi directly on the Bitcoin blockchain, fearing it could dilute bitcoin’s core appeal.

The buzz around Bitcoin DeFi at the Bitlayer event and the main Token2049 conference was tangible, highlighting the growing demand among BTC holders for additional yield opportunities.

“Bitcoin DeFi with trust minimized bridge, sustainable yield products for onchain Bitcoin holders is becoming very important for Bitcoin asset holders and the network maintainers,” Charlie Yechuan Hu, co-founder of Bitlayer told CoinDesk.

“At Bitlayer we are building important infrastructures which can empower the Bitcoin DeFi with our BitVM technologies,» Hu added. «A lot of interesting Bitcoin DeFi use cases can make Bitcoin assets more valuable, give users more reason to hold and use in the future”

This BTC DeFi trend could also benefit miners, who are rewarded for mining blocks. While the per-block reward is halved every four years, increased on-chain activity driven by DeFi applications could help offset this reduction through higher transaction fees, supporting the network’s security and sustainability.

«Importantly, Bitcoin DeFi also introduces new transaction fees — a critical component for the network’s long-term sustainability and security as block rewards continue to decline,» Farrelly said.

Hu voiced a similar opinion, saying the rising network hashrate means miners need more activities — like Bitcoin DeFi — to remain profitable.

“We would need to build good Bitcoin Rollup with security verification capacity which can contribute fees back to Bitcoin,” Hu noted.