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Crypto Assets: From Off The Grid To A Seat At The Table

March 16, 2022

by Erin Bryan

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The Beginning

Crypto assets were initially “off the grid,” and many early proponents celebrated the promise of their regulatory independence. While conventional assets were governed by a virtual alphabet soup of federal and state regulations, the new crypto assets were different. Tied to a new technology called blockchain, crypto assets offered a different approach to making profits and selling interests. The allure lay in part in the simplicity. Skip the Securities and Exchange Commission (SEC) registration process and all that complex paperwork; use a simple, brief “White Paper”; raise the necessary capital; use a smart contract instead of a complex agreement. All new; all simple; all linked to new technology.

Interest exploded and the public was fascinated, even if they did not quite understand. It seemed everyone wanted to get on the bandwagon. Headlines were everywhere. Values gyrated up and down at light speed, occasionally making massive winners and losers in mere moments. It was only a matter of time before the U.S. regulators would step in to regulate this new class of assets.

The Regulators

Regulators were drawn to speculate about the new asset class from the early days, noting concerns such as consumer protection, market stability, and safety and soundness. The Federal Deposit Insurance Corporation (FDIC), Department of Treasury (Treasury), SEC, Commodity Futures Trading Commission (CFTC) and Financial Crimes Enforcement Network (FinCEN) expressed interest to varying degrees in recent years.1 For example,

  • The SEC investigated, declaring some crypto assets to be unregistered securities;2
  • The CFTC concluded crypto coins were a commodity subject to its jurisdiction;3 and
  • FinCEN determined that there were AML questions.4

In response, the industry players developing and investing in crypto assets frequently asserted that the traditional regulatory schemes did not apply.5 While those working in the new space often lost suits brought by regulators such as the SEC, it failed to dull the public’s keen interest and crypto holdings experienced exponential growth.

Today the debate continues about the use, risks, and validity of crypto assets, but key regulators have recently begun to signal an intent to regulate these assets. Virtually every federal regulator is discussing crypto as a new asset class. For example:

  • The Federal Reserve recently released research examining the possible benefits of a digital currency;6
  • Treasury has issued statements regarding the risks involved with this asset class;7
  • FinCEN is issuing new AML regulations;8
  • SEC Chair Gensler has discussed the need for new legislation;9 and
  • A number of states have pending legislation regarding crypto assets.10

However, a unified approach had failed to emerge from the fray, leaving many to wonder which agencies would ultimately be empowered to regulate the crypto market and how eventual rulemaking could help or hurt the industry.

A New Sheriff

Now a new sheriff has emerged – President Biden.  On March 9, 2022, he signed an executive order to ensure the responsible development of digital assets (the “Order”).11 The Order, for the first time, outlines a “whole-of-government” approach to address the risks and benefits of digital assets. As outlined in the Order, the basic building blocks are:

  • consumer and investor protection;
  • financial stability;
  • responsible finance and inclusion;
  • U.S. leadership in global finance; and
  • responsible innovation.

The Order calls for measures to:1) develop policy recommendations; 2) protect U.S. global financial stability and mitigate risk; 3) mitigate illicit finance; 4) promote U.S. leadership in tech and economic competitiveness with the Commerce Department working  across the government to drive services; 5) promote equitable access to safe and affordable financial services; 6) direct the Treasury Secretary, working with others, to develop a report to support tech advances and ensure responsible development and use of this new asset class; and 7) explore a U.S. central bank digital currency. The Biden administration will align U.S. and international interests, according to the Order.

The Future

President Biden’s landmark Order adds a new and urgent momentum to the previously measured and deliberate exploration of crypto assets by the regulators. Now crypto is being given a seat at the table and viewed as a partner to help drive U.S. international economic leadership. While there have always been issues and challenges from others, the U.S. has long been an international economic leader and its currency is the reserve currency of the world. President Biden’s Executive Order is designed to help maintain that leadership and navigate the constant challenges to that position. No doubt the outcome of this battle will have a huge international impact.

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As the regulation of crypto assets continues to evolve, Dorsey attorneys are available to assist in obtaining clarifications from U.S. regulators for our clients. If you have any questions regarding this eUpdate, please contact the attorneys profiled below.

To read crypto-related articles that Tom Gorman has written, please see below.

1 See, e.g., FinCEN’s Application of FinCEN’s Regulations to Certain Business Models 
Involving Convertible Virtual Currencies (FIN-2019-G001) (May 9, 2019) (available at: https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf) (last accessed Mar. 15, 2022); FDIC’s Request for Information and Comment on Digital Assets (RIN 3064-ZA25), 86 Fed. Reg. 97 (May 21, 2021); Office of Foreign Assets Control’s Sanctions Compliance Guidance for the Virtual Currency Industry (Oct. 2021) (available at: https://home.treasury.gov/system/files/126/virtual_currency_guidance_brochure.pdf) (last accessed Mar. 15, 2022); Joint Agency Statement, Leaders of CFTC, FinCEN, and SEC Issue Joint Statement on Activities Involving Digital Assets (Oct. 11, 2019) (available at: https://www.sec.gov/news/public-statement/cftc-fincen-secjointstatementdigitalassets) (last accessed Mar. 15, 2022); Press Release, Treasury, Treasury Continues Campaign to Combat Ransomware as Part of Whole-of-Government Effort (Oct. 15, 2021) (available at: https://home.treasury.gov/news/press-releases/jy0410) (last accessed Mar. 15, 2022) (addressing sanctions compliance issues for the virtual currency industry).
2 See, e.g., Press Release, SEC, SEC Sanctions Operator of Bitcoin-Related Stock Exchange for Registration 
Violations (Dec. 8, 2014) (available at: https://www.sec.gov/news/press-release/2014-273) (last accessed Mar. 15, 2022); Press Release, SEC, SEC Obtains Emergency Order Halting Alleged Diamond-Related ICO Scheme Targeting Hundreds of Investors (May 21, 2019) (available at: https://www.sec.gov/news/press-release/2019-72) (last accessed Mar. 15, 2022); Press Release, SEC, SEC Charges Promoter with Conducting Cryptocurrency Investment Scams (Nov. 18, 2021) (available at: https://www.sec.gov/news/press-release/2021-237) (last accessed Mar. 15, 2022).
3 CFTC’s Written Statement to the CFTC Global Markets Advisory Committee (Oct. 9, 2014) (available at: https://www.cftc.gov/sites/default/files/idc/groups/public/@aboutcftc/documents/file/gmac_100914_bitcoin.pdf) (last accessed Mar. 15, 2022).
4 FinCEN’s Advisory on Illicit Activity Involving Convertible Virtual Currency (FIN-2019-A003) (May 9, 2019) (available at: https://www.fincen.gov/sites/default/files/advisory/2019-05-10/FinCEN%20Advisory%20CVC%20FINAL%20508.pdf) (last accessed Mar. 15, 2022).
5 See, e.g., Emma Newberry, Do We Need More Crypto Regulation? Two Sides of the Story, The Ascent (Oct. 21, 2021) (available at: https://www.fool.com/the-ascent/cryptocurrency/articles/do-we-need-more-crypto-regulation-two-sides-of-the-story/) (last accessed Mar. 15, 2022) (briefly summarizing arguments for and against regulation).
6 Press Release, Federal Reserve, Federal Reserve Board releases discussion paper that examines pros and cons of a potential U.S. central bank digital currency (CBDC) (Jan. 20, 2022) (available at: https://www.federalreserve.gov/newsevents/pressreleases/other20220120a.htm) (last accessed Mar. 15, 2022).
7 See, e.g., Press Release, Treasury, Remarks by Deputy Secretary of the Treasury Wally Adeyemo at LINKS Conference Presented by Chainalysis (available at: https://home.treasury.gov/news/press-releases/jy0466) (last accessed Mar. 15, 2022); Press Release, Treasury, Treasury Publishes National Risk Assessments for Money Laundering, Terrorist Financing, and Proliferation Financing (Mar. 1, 2022) (available at: https://home.treasury.gov/news/press-releases/jy0619) (last accessed: Mar. 15, 2022).
8 FinCEN Notice of Proposed Rulemaking, Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets (RIN 1506-AB47) 85 Fed. Reg. 247 (Dec. 23, 2020).
9 See, e.g., Katanga Johnson, U.S. SEC Chair Gensler calls on Congress to help rein in crypto 'Wild West', Reuters (Aug. 3, 2021) (available at: https://www.reuters.com/technology/us-sec-chair-gensler-calls-congress-help-rein-crypto-wild-west-2021-08-03/) (last accessed: Mar. 15, 2022).
10 Heather Morton, Cryptocurrrency 2022 Legislation, National Conference of State Legislatures (Feb. 8, 2022) (available at: https://www.ncsl.org/research/financial-services-and-commerce/cryptocurrency-2022-legislation.aspx) (last accessed: Mar. 15, 2022) (summarizing legislation pending in 31 states and Puerto Rico as of Feb. 2022).
11 See Executive Order 14067 of Mar. 9, 2022, Executive Order on Ensuring Responsible Development of Digital Assets (available at: https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/09/executive-order-on-ensuring-responsible-development-of-digital-assets/) (last accessed Mar. 15, 2022).

 

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EPA Limits Title V Re-Litigation of NSR Permits

Overview On September 25, 2026, the U.S. Environmental Protection Agency (“EPA”) published a final rule that significantly limits the ability of third parties to use the Clean Air Act (“CAA”) Title V permitting process to revisit New Source Review (“NSR”) permitting decisions years after those decisions were made. The rule establishes that NSR permitting determinations generally must be challenged during the original permitting proceeding, thereby providing regulated sources with greater permitting certainty and finality for major capital projects. Published in the Federal Register titled Clarifying the Scope of “Applicable Requirements” Under State Operating Permit Programs and the Federal Operating Permit Program (Docket ID No. EPA-HQ-OAR-2023-0401), the rule amends 40 C.F.R. Parts 70 and 71 to codify EPA’s interpretation regarding when requirements established under other CAA programs may be reviewed, modified, or implemented through the Title V operating permit program. The rule becomes effective 30 days after publication. The rule addresses two principal issues: (1) the relationship between NSR preconstruction permitting and Title V operating permits, and (2) the treatment of the General Duty Clause under CAA section 112(r)(1). Most significantly, the rule provides greater certainty for sources navigating the NSR permitting process. EPA’s amendments are intended to ensure that NSR permitting decisions made through an approved public process are generally not revisited later through Title V permit proceedings. The rule responds to a circuit split between the U.S. Courts of Appeals for the Fifth and Tenth Circuits. In Environmental Integrity Project v. EPA, 969 F.3d 529 (5th Cir. 2020), the Fifth Circuit upheld EPA’s interpretation, concluding that it was consistent with the text, structure, and purpose of Title V. In contrast, the Tenth Circuit reached the opposite conclusion in Sierra Club v. 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Under this framework, Title V is not a vehicle for re-examining underlying NSR permitting decisions. EPA does not intend to use the Title V process to revisit applicability determinations, emissions calculations, control technology determinations, permit conditions, or other issues resolved through the NSR permitting process. This principle applies regardless of the stage of the Title V proceeding; whether the NSR permit was issued pursuant to a SIP or FIP; the type of NSR issue involved; or whether the NSR permit is incorporated into Title V sequentially or concurrently. Limited Exceptions EPA recognizes several circumstances in which NSR issues may still be reviewed through the Title V program: No NSR permit was issued at all; The permit was issued without public notice and an opportunity for comment and judicial review; or The issue involves substantive overlap between Title V and NSR requirements, such as the adequacy of monitoring provisions. As a result, the rule does not insulate unpermitted projects or foreclose review of matters that independently arise under Title V. Key Regulatory Amendments The rule revises the definition of “applicable requirement” in 40 C.F.R. §§ 70.2 and 71.2. Paragraph (1): Where an NSR permit is issued with public notice and an opportunity for comment and judicial review, the permit establishes and defines the applicable SIP or FIP requirements for Title V purposes. Paragraph (2): All NSR permit terms, including terms contained in minor NSR permits, constitute applicable requirements that must be incorporated into Title V permits. Paragraph (4): CAA section 112(r)(1) (the General Duty Clause) is expressly excluded from the definition of “applicable requirement,” while section 112(r)(7) Risk Management Program requirements remain included. EPA also amended 40 C.F.R. §§ 70.8 and 70.12 to clarify that alleged defects in requirements established outside the Title V process generally do not provide a basis for EPA objection to a Title V permit or for a Title V citizen petition. General Duty Clause Exclusion The rule also codifies EPA’s longstanding position that the General Duty Clause in CAA section 112(r)(1) is not an “applicable requirement” for Title V purposes. EPA points to several considerations supporting that conclusion, including the distinction between the General Duty Clause and Title V permit terms, the provision’s origins in the Occupational Safety and Health Act’s general duty clause, and the different enforcement structures applicable to the General Duty Clause and Title V permit requirements. Importantly, excluding section 112(r)(1) from the definition of “applicable requirement” does not eliminate EPA’s authority to enforce the General Duty Clause independently of the Title V program. The final rule instead clarifies that the General Duty Clause need not—and should not—be incorporated into Title V permits as an applicable requirement. Practical Implications for Regulated Sources Greater Finality for NSR Permits  For projects requiring PSD, nonattainment NSR, or minor NSR permits, the permitting process becomes the primary forum for resolving disputes regarding applicability determinations, emissions calculations, control technology requirements, offsets, and permit conditions. Once an NSR permit is issued through a qualifying public process, regulated sources should face substantially reduced risk that those same issues will be challenged years later through Title V permit proceedings. Reduced Risk of Collateral Permit Challenges Stakeholders have sometimes sought to use Title V permit issuance, renewal, revision, or citizen-petition proceedings to challenge underlying NSR determinations. The final rule makes clear that Title V is not the appropriate vehicle for challenging whether an applicable requirement was correctly established in the first instance. This should reduce the risk of permit delays and uncertainty associated with collateral challenges to previously issued NSR permits. The rule does not, however, eliminate all Title V challenges relating to an NSR permit. Challenges concerning the Title V permit itself—including whether it appropriately incorporates applicable requirements or contains adequate compliance provisions—remain possible. Increased Importance of the Initial NSR Proceeding Because Title V generally will not provide a second opportunity to challenge the substantive validity of an NSR determination, the administrative record developed during the NSR process becomes increasingly important. Permit applicants should ensure that applicability analyses, emissions calculations, control technology evaluations, modeling demonstrations, and supporting technical documentation are thoroughly developed during the original permitting proceeding. For significant projects, applicants may therefore have an additional incentive to identify and resolve potential permitting issues before the NSR permit is issued rather than assuming that unresolved issues can be addressed during a subsequent Title V proceeding. Potential Incentive for Broader Public Participation EPA also notes that permitting authorities may choose to provide public notice and an opportunity for comment for a broader range of NSR permits because permits issued through a qualifying public process receive the benefit of the finality framework established by the rule. Some permitting authorities may conclude that greater public participation at the NSR stage is preferable to uncertainty during subsequent Title V proceedings. Conclusion The final rule is principally a permitting-certainty measure. For sources that obtain NSR permits through a public process, EPA has substantially limited the ability of third parties to revisit underlying NSR determinations through the Title V program. As a result, regulated entities should benefit from greater finality regarding key permitting decisions, reduced risk of collateral permit challenges, and increased certainty when planning and implementing capital projects.

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The Supreme Court Update - October 8, 2026

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