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Sujha Sundararajan
Author
Sujha Sundararajan
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The US Securities and Exchange Commission (SEC) is reportedly downsizing its crypto enforcement unit of over 50 lawyers and staff. Per a New York Times report, the members are reassigned to other departments in the SEC, sources noted.
The unnamed sources added that one of the top lawyers moved out of the crypto enforcement team. Some members described the shake-up as “an unfair demotion.”
The special unit had been dedicated to address the challenge posed by the criminal misuse of cryptocurrencies. The team is comprised of attorneys from across the Department, including prosecutors with backgrounds in cryptocurrency, cybercrime, and money laundering.
The scale back marks a significant shift on the crypto regulation under President Trump’s administration. It arrives after the President’s executive order to eliminate “regulatory overreach” of crypto assets.
The current acting chair of the SEC, Mark Uyeda, made several appointments, establishing a task force to create crypto guidelines. The task force is led by an S.E.C. commissioner and pro-crypto Hester Peirce. Further, the team brought together skilled personnel from across the agency to collaborate with SEC staff and the public.
Hester Peirce Outlines Initial Priority List of SEC Crypto Task Force
The SEC’s scaling down comes hours after Commissioner Hester Peirce laid-out a set of regulator’s initial plans to crypto regulation. This includes evaluating crypto’s status as security or commodity and providing “temporary prospective and retroactive relief” for token offerings.
“The crypto road trip on which the newly announced Crypto Task Force has embarked likewise should be more enjoyable and less risky than the crypto road trip the Commission has taken the industry on for the last decade,” said Peirce.
Additionally, the Congress officially formed its first-ever joint Congressional Crypto Working Group led by Senate Banking Committee Chairman Tim Scott.
Further, a stablecoin bill proposed Tuesday by Sen. Bill Hagery is likely to advance first, said Scott. Dubbed the GENIUS Act, the bill would create ways to legality for issuers of USD-backed stablecoins.
Given these developments, it is still unclear what effects would the downsizing of the S.E.C.’s crypto enforcement unit have on pending enforcement actions including the longstanding SEC vs Ripple case.
“What the new S.E.C. leadership proposes to do for crypto is remove the speed limits and guardrails that have made our capital markets the strongest in the world,” said former senior adviser to Gensler on crypto issues, Corey Frayer, who recently left the SEC.
In May 2022, the agency’s crypto enforcement team nearly doubled the unit’s size to 50 dedicated positions, under former SEC Chair Gary Gensler.
