2022 marked a pivotal year in U.S. crypto regulation. From high-profile fraud cases and lawsuits against major players to the bipartisan introduction of new legislation, the digital asset industry faced intensifying scrutiny. For fintech companies—especially blockchain startups—and investors navigating this space, the year offered both cautionary tales and a clearer path forward.
Below is a recap of the major regulatory developments in 2022, including enforcement trends, the Ripple and Terraform cases, and the proposed Digital Commodities Consumer Protection Act (DCCPA)—along with a forward-looking perspective on what these mean for compliance, investment, and innovation.
Ripple Labs and the High-Stakes Battle Over Crypto as Securities
Since Chair Gary Gensler took office, the U.S. Securities and Exchange Commission (SEC) has amplified its scrutiny of the cryptocurrency space. In 2022 alone, the SEC initiated at least 30 crypto-related enforcement actions—a 50% increase from 2021.
At the heart of this regulatory surge is the ongoing lawsuit against Ripple Labs, where the SEC alleges that Ripple’s sale of its native token XRP constituted an unregistered securities offering, violating the Securities Act of 1933. The case has raised fundamental questions about whether digital assets should be classified as securities under the long-standing Howey Test.
What happens if the SEC prevails?
- Many tokens could be reclassified as securities, placing them squarely under SEC jurisdiction.
- Crypto startups and platforms would face increased compliance obligations, such as SEC registration, detailed disclosures, and investor protection mechanisms.
- Fintechs might shift away from token-based fundraising entirely, opting for more traditional venture capital strategies.
- A broad SEC victory could reshape the business models of exchanges, wallets, and DeFi platforms operating in the U.S. market.
Ultimately, the Ripple case serves as a test case for the SEC's enforcement theory. The ruling can create a legal precedent for token classification, affecting thousands of crypto projects globally.
For a look at how a very different regulatory approach has shaped market behavior, see our blog on China’s 2021 Crypto Ban and What Cross-Border Fintechs Need to Know.
Terraform Labs: A Collapse and a Case of Fraud
The dramatic fall of Terraform Labs in mid-2022 exposed the fragility of algorithmic stablecoins and deepened concerns about fraud in crypto markets. Terraform’s ecosystem centered on TerraUSD (UST), an algorithmic stablecoin designed to maintain a 1:1 peg with the U.S. dollar through a relationship with its sister token, LUNA.
That design failed spectacularly. In May, UST lost its peg and crashed, resulting in over $40 billion in losses across the ecosystem. Investors were left holding near-worthless tokens, and several DeFi platforms suffered cascading failures.
In February, the SEC charged both Terraform Labs and its founder Do Kwon with orchestrating a multi-billion-dollar crypto asset securities fraud. According to the complaint:
- Terraform falsely claimed that UST had a built-in mechanism ensuring price stability.
- They misrepresented the extent of real-world adoption, including fictitious claims about payment platform partnerships.
- Do Kwon and his company promoted UST and LUNA as safe investments while concealing critical design flaws.
The case served as a stark warning that token design alone does not eliminate regulatory risk—especially when investor protection and truthful marketing are lacking.
Legislative Momentum: The Digital Commodities Consumer Protection Act (DCCPA)
Introduced in August 2022, the Digital Commodities Consumer Protection Act (DCCPA) represents the most significant legislative effort to date to regulate U.S. crypto markets in a comprehensive, bipartisan fashion.
What is the DCCPA?
The DCCPA proposes to amend the Commodity Exchange Act to give the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over spot markets for digital commodities—a category that includes Bitcoin, Ether, and potentially others that are not deemed securities.
Key Provisions
- Mandatory registration of all digital commodity platforms, including brokers, dealers, custodians, and trading facilities.
- Platforms must meet core regulatory standards, including:
- Prevention of abusive trading practices.
- Risk and cybersecurity programs.
- Protection and segregation of customer assets.
- Transparent pricing and disclosures to users.
- Reporting of suspicious transactions under AML laws.
- Federal preemption of state-level licensing laws related to money transmission and virtual currencies—streamlining compliance for nationwide operators.
- Imposes disclosure and advertising standards similar to those applied to traditional financial institutions.
- Authorizes the CFTC to collect user fees to fund oversight and requires attention to demographic equity in participation and outreach.
Implications for the Industry
- Clearer Rules of the Road: A federal framework would provide long-awaited clarity on how digital commodities are regulated.
- Dual-Agency Model: The SEC would retain oversight of crypto assets deemed securities, while the CFTC regulates digital commodities.
- Compliance Readiness: Crypto platforms will need to implement internal systems akin to broker-dealer standards.
- Enhanced Institutional Confidence: Regulatory certainty may unlock broader institutional participation and investment.
Read our blog on El Salvador’s Bitcoin Experiment: A Bold Step in the Evolution of Digital Currency, where we examine how the country became the first in the world to grant Bitcoin legal tender status.
Looking Ahead: Five Trends to Watch in 2023
As 2022 comes to a close, crypto founders, investors, and legal advisors should prepare for a more tightly regulated U.S. market in the coming years.
Heading into 2023, the following trends are worth watching:
- Ripple Decision: A court ruling could set a precedent that either limits or expands the SEC’s authority in crypto—particularly in token classification.
- CFTC’s Expanded Role: Should the DCCPA gain momentum, the CFTC may emerge as the lead regulator for non-security digital assets.
- Increased Regulatory Coordination: U.S. regulators will likely move toward more coordinated action, including collaboration with international counterparts.
- Stablecoin Oversight: Following Terra’s collapse, lawmakers are expected to introduce specific legislation governing stablecoins and their reserve backing.
- Crypto AML and KYC: Platforms will face stricter expectations for anti-money laundering (AML) and know-your-customer (KYC) compliance, especially in light of pending Treasury regulations.
Final Thoughts for Crypto Founders, VCs, and Legal Teams
The key message from 2022 is clear: a more structured and enforceable regulatory framework for crypto is on the horizon. Whether it comes through continued SEC enforcement, new laws like the DCCPA, or both, compliance is becoming mission-critical.
To stay competitive in the U.S. market, fintech leaders should:
- Track how courts and regulators define securities vs. commodities.
- Prepare for dual compliance regimes under the SEC and CFTC.
- Develop internal controls aligned with the DCCPA’s core principles.
- Rethink fundraising, marketing, and token issuance strategies with legal advice at the forefront.
While the rules are still evolving, the trajectory is clear: regulatory clarity is coming, and it will reward those who prepare.