The U.S. Securities and Exchange Commission (S.E.C.) is downsizing its crypto enforcement unit, marking a significant policy shift under the Trump administration. The decision reflects a broader push to ease regulatory oversight on digital assets, a stark contrast to the agency’s previous aggressive stance.

Crypto Unit Reassigned as S.E.C. Reshuffles Priorities

More than 50 lawyers and staff members from the S.E.C.’s dedicated crypto enforcement team are being reassigned to other divisions. One of the top lawyers in the unit has been moved out of the enforcement division, a move some insiders describe as an unfair demotion. This restructuring aligns with President Trump’s executive order aimed at fostering crypto innovation by reducing regulatory barriers.

Mark T. Uyeda

The decision is part of a broader shake-up led by acting S.E.C. Chair Mark T. Uyeda, a Republican known for his industry-friendly approach. Uyeda has appointed a task force, headed by Commissioner Hester Peirce, to reassess the agency’s crypto policies. Peirce has long been a vocal advocate for a more permissive regulatory environment, emphasizing the need for legal clarity and commercial practicality.

Regulatory Shift Favors Crypto Industry

Trump’s administration has embraced digital assets, a notable shift from his earlier skepticism toward cryptocurrencies. His campaign courted the crypto community, which had strongly opposed former S.E.C. Chair Gary Gensler’s regulatory crackdown. Under Gensler’s leadership, the agency expanded its crypto unit and pursued over 100 enforcement actions against digital asset firms.

Hester Peirce

Peirce, in a recent position paper, criticized the S.E.C.’s previous approach, likening it to a “car careening down the road” due to legal imprecision. She emphasized the need for a regulatory framework that encourages innovation while maintaining safeguards against fraud.

Impact on Pending Enforcement Cases

It remains unclear how this policy shift will affect ongoing legal battles, including the high-profile case against Coinbase. The S.E.C. had accused the crypto exchange of violating securities laws by operating as an unregistered exchange—a position Coinbase and much of the industry vehemently reject.

Critics argue that weakening enforcement could undermine market integrity. Corey Frayer, a former senior adviser to Gensler, warned that the new approach could strip away crucial protections that have upheld U.S. capital markets.

New Leadership and Industry Response

Trump has nominated Paul Atkins, a pro-crypto lawyer and former S.E.C. commissioner, to replace Gensler. Atkins has historically favored a lighter regulatory approach, though his confirmation hearing date is yet to be scheduled.

The crypto industry is reacting swiftly. Brian Armstrong, CEO of Coinbase, announced that his firm would boycott law firms hiring ex-S.E.C. officials involved in past crackdowns. Meanwhile, Gemini co-founder Tyler Winklevoss took a more extreme stance, declaring his company would not even hire M.I.T. graduates following Gensler’s return to the institution.

Related Posts