Source: Cointelegraph
Original: “SEC's Crenshaw Says Agencies Are Playing 'Regulatory Jenga' with the Crypto Industry”

The only Democratic commissioner of the U.S. Securities and Exchange Commission (SEC) stated that the agency's approach to regulating the cryptocurrency industry and market under the Trump administration is akin to "playing a game of regulatory Jenga."

In a speech at the SEC Speaks event on May 19, Commissioner Caroline Crenshaw issued a stern warning about the dangerous dismantling of "independent but interconnected rules" (for cryptocurrencies and the broader market).

She likened market stability to a "tower of blocks," which is the "carefully constructed rule system" of the agency over the years, warning that if certain rules are removed, the entire structure could come crashing down.

In addition to the unfortunate issue of talent loss, Crenshaw pointed out that the SEC has effectively reversed rules using staff guidance without proper analysis or public commentary, particularly in the cryptocurrency sector.

"Our statements on these cryptocurrency-related issues are essentially equivalent to a wink, intended to convey that we do not intend to strictly enforce existing regulations in specific cases."

She further added that regulators have abandoned enforcement actions, especially in the cryptocurrency market, leading to what she termed "non-enforcement regulation."

"I am deeply concerned about the agency's abandonment of numerous enforcement plans," she stated.

Crenshaw, the last remaining Democratic commissioner at the SEC, indicated that the agency's "sudden shift" poses many problems, such as damaging its reputation in court, undermining its credibility, and calling into question the status of "long-standing fundamental case law."

Crenshaw opposed the SEC's settlement with Ripple and stated in her latest speech that the 2022 FTX collapse is a typical example of a "massive cryptocurrency crisis."

"These risks have not disappeared, but the calls for strict regulatory scrutiny have quieted significantly," she said.

"Failing to understand and address these risks and complexities will inevitably lead us to repeat past mistakes at a high cost as cryptocurrency increasingly intertwines with traditional finance."

In contrast, the SEC's Republican commissioners welcomed the agency's embrace of the cryptocurrency industry in their remarks.

SEC Chairman Paul Atkins stated at the SEC speaking event that "the crypto market has stagnated in the SEC's gray area for years," adding that the agency should not hinder innovation from crypto companies.

Commissioner Hester Peirce, currently the head of the SEC's cryptocurrency working group, stated in her speech that the agency's approach under the Biden administration "avoids sound regulatory practices and must be corrected."

She also claimed that cryptocurrencies do not fall under the jurisdiction of securities law because "most of the crypto assets currently in the market" are not securities.

"Even if most of the crypto assets traded today in the secondary market were initially offered and sold as investment contracts, they are clearly no longer being bought and sold through securities transactions. Many of these crypto assets have functional uses."

Commissioner Mark Uyeda echoed his colleagues' views, stating that the SEC "should strive to ensure that enforcement regulation does not become a tool for future policymaking."

Related: U.S. Credit Rating Downgrade Triggers Global Financial Market Turmoil

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