As digital assets made strides toward mainstream status in 2020, the guardians of the incumbent financial system have been working hard to minimize disruption caused by their integration. In the U.S., regulatory and law enforcement interventions throughout the year have left some projects out of business, empowered traditional players to take a closer look at crypto, and sent some unequivocal messages to cryptocurrency service providers globally. Naturally, the steady legitimization and expansion of the crypto space led regulators to get more involved than ever before. Below are the biggest cases of U.S. watchdog and law enforcement agencies’ involvement that have arguably been the most consequential in shaping the relationship between the crypto industry and state power in 2020.

SEC vs. Telegram

While the Securities and Exchange Commission first squared off with Telegram over its token sale in October 2019, it wasn’t until the summer of 2020 that the landmark case was settled. The Telegram Open Network was initially set to draw hundreds of millions of Telegram’s messenger users into a global blockhain-based financial ecosystem.

Throughout 2018, TON raised some $1.7 billion by selling contracts associated with Gram, the system’s native token, to qualified investors. Mindful of the potential collision with the U.S securities regulator, Telegram bosses followed a framework known as the Simple Agreement for Future Tokens (SAFT). The first stage of the process entailed the sale of contractual rights to buy tokens if and when the network goes live. While those legal rights are sold as securities — in this case, under exemption Reg. D — the resultant tokens are, theoretically, not.

In the case of Telegram, the SEC disagreed. The commission’s response was to initiate an emergency action against Telegram and the Telegram Open Network in federal court. The watchdog argued that the two-stage token distribution plan still constituted the sale of unregistered securities, a position that the court ultimately upheld. The resulting settlement included an $18.5-million penalty, as well as an obligation to return more than $1.2 billion to investors. TON never ended up going live, while its struggle with the SEC went down is history as maybe the final act of the ICO era.

OCC crypto custody authorization

The Office of the Comptroller of the Currency is an independent bureau within the United States Department of the Treasury. The OCC’s job is to charter and supervise national banks and savings associations. U.S. financial institutions that seek to operate nationwide must undergo an extensive review process with the OCC.

On Jul. 22, 2020, the OCC published an interpretive letter authorizing federally chartered banks to provide cryptocurrency custody services. The agency has never prohibited organizations operating within its purview to hold digital assets on behalf of their clients, but the sheer lack of guidance and legal clarity held back the expansion of many credit organizations’ services into the digital asset space. To clients interested in their banks providing custody services, those banks could say ‘it’s just too risky right now.’

The letter equated encryption key escrow service with physical safekeeping of assets.

The regulator’s forward-thinking approach to digital currencies could be related to the fact that Brian P. Brooks, Acting Comptroller of the Currency, spent two years as the chief legal officer of Coinbase prior to the present appointment.