The only Democrat of the U.S. Securities and Exchange Commission said the agency is “playing a Jenga game of regulation” in its approach to crypto industry and market regulation under the Trump administration.
Speaking at the May 19 SEC Speaks event, Commissioner Caroline Crenshaw warned what he described as a dangerous dismantling of “discrete but interrelated rules” in Crypto and the wider market.
She likened the stability of the market to the “Jengga Tower,” where government regulations were “carefully developed over the years.”
In addition to the deplorable loss of staff, Crenshaw said the SEC used staff guidance to effectively reverse the rules without proper analysis or public comment, especially around Crypto.
“These statements on crypto-related issues correspond to Wink and nods intended to communicate that we are not going to strictly apply the law in certain specific circumstances.”
She added that regulators have waived enforcement measures, particularly in the crypto market, creating what they call “non-enforcement regulations.”
“I am deeply troubled by the committee’s abandonment of the belts of our enforcement program,” she said.
Crenshaw, the last remaining Democrat commissioner of the SEC, said the agency’s “face” is problematic for many reasons, including corroding its reputation in court and undermining reliability, and questioning the state of “long-standing basic case law.”
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Crenshaw, who also opposed the SEC settlement with Ripple, said in her latest remarks that the FTX collapse in 2022 is an example of what a “massive cryptographic crisis” might look like.
“These risks aren’t gone, but these days the call for serious regulations scrutiny has been much quieter,” she said.
“As Crypto is increasingly intertwined with traditional funding, if we can’t touch and address these risks and complexities, we’ll be repeating hard lessons and repeating hard lessons with high interests.”
In comparison, comments from the SEC Republican committee members welcomed the embrace of the crypto sector institutions.
Crypto “suffered with Sec Rimbo”
SEC Chairman Paul Atkins said at the event that the SEC “crypto Markets have been struggling with SEC Rimbo for many years,” adding that it should not be in businesses that are thwarted by innovation in crypto companies.
Commissioner Hester Perth, who leads the SEC’s Cryptographic Task Force, said the agency’s approach under the Biden administration “should avoid and modify sound regulatory practices.”
She also argued that cryptocurrencies are not within the scope of the securities law, as “the most existing cryptocurrency currently in the market” are not securities.
“If a wide range of crypto assets traded in the secondary market today were first offered and were covered by investment contracts, they were clearly no longer bought or sold in securities transactions. Many of these crypto assets are functional.”
Commissioner Mark Weda reiterated his colleagues’ sentiment, saying the SEC should “employment regulations should make an effort to provide assurance that enforcement regulations are not tools used in future policy making.”
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