The US Securities and Exchange Commission (SEC) has reportedly taken a significant step toward ending its previous “regulation by enforcement” approach by downsizing its special unit for crypto enforcement actions. This move follows the new US administration’s actions to eliminate regulatory overreach on digital assets.
US SEC Downsizes Special Crypto Enforcement Unit
On Tuesday, The New York Times reported that the US SEC is moving to scale back a special unit working on crypto enforcement efforts. The special division, created in 2017 during the first Trump administration, comprised lawyers and staff dedicated to bringing industry-related enforcement actions.
Under Gary Gensler’s supervision, the crypto enforcement unit expanded significantly, nearly doubling its size to 50 dedicated positions in May 2022. The special unit brought over 100 crypto-related actions during the Biden administration, allegedly “related to fraudulent and unregistered crypto asset offerings and platforms.”
According to five sources, the special unit’s members are being reassigned to other SEC departments. The report also notes that one of the top lawyers in the unit was moved out of the enforcement division, which the sources allegedly considered an “unfair demotion.”
The SEC’s new measure received a positive reception from the crypto community, with several members praising the agency’s new era. However, other members expressed concern over the potential implications of these changes.
The effects of scaling back the unit remain unclear, especially on pending enforcement actions like the SEC’s 2023 lawsuit against Coinbase, but some suggest that it could benefit these cases.
A New Regulatory Era
The SEC’s latest move follows the Trump administration’s actions to stop the “regulation by enforcement” approach of the previous administration. President Trump’s recent executive order aims to halt “aggressive enforcement actions,” eliminate “regulatory overreach” on digital assets, and promote the crypto industry’s growth.
Two weeks ago, the US regulator under acting Chair Mark Uyeda created a Crypto Task Force to review the agency’s approach to dealing with digital assets. The task force, led by Commissioner Hester Peirce, is expected to take a “more enjoyable and less risky” approach than the one from the Commission in the last decade.
In a recent statement, Peirce shared a list of 10 priorities for the task force, including the security status of digital assets, and pledged to create a regulatory framework that protects investors and “preserves the industry’s ability to offer products and service.”
Additionally, the SEC has reportedly taken action to stop what some consider “rogue attacks” on the industry. A Reuters report claims that lawyers at the US agency have been told they must seek top-level approval to launch investigations.
According to two sources, probes must be approved by the politically appointed leadership before launching. The report noted that approval for all formal investigation orders is required to issue subpoenas for testimony or documents, which could slow down investigations. Previously, this authority was relegated to lower-level staff, while the Commission had the right of refusal.
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