SEC Commissioners Debate New Approach to Innovation, Rulemaking and Crypto
Commentary by Gage Raju-Salicki and Steven Lofchie
SEC Chair Paul Atkins and Commissioners Hester Peirce, Caroline Crenshaw, and Mark Uyeda offered differing views on the agency's changing regulatory posture on crypto, enforcement and financial innovation.
At the annual "SEC Speaks" conference, Chair Atkins emphasized a pro-innovation stance, calling for a shift in the SEC's posture toward the crypto industry. He criticized what he described as the SEC's historic "shoot-first-and-ask-questions-later" enforcement strategy and outlined steps to improve staff transparency and engagement with industry participants. He supported the development of rules to enable SEC registrants to custody and trade both securities and non-securities under one roof, potentially advancing toward a future "super-app" for financial services. Mr. Atkins also proposed reintegrating the SEC's FinHub into agency operations, stating that it had become viewed as more of an enforcement mechanism than an innovation facilitator.
Commissioner Crenshaw warned that the SEC's recent deregulatory shifts resemble a "reckless game of regulatory Jenga." Citing a 15% staff attrition rate and a series of actions rescinding or diluting prior rules and enforcement efforts, she argued the agency is jeopardizing its institutional integrity and investor protections. She criticized recent staff guidance on stablecoins and meme coins as undercutting decades of case law and failing to address systemic risks.
Commissioner Uyeda defended the SEC's withdrawal from rules he characterized as political overreach—particularly the climate-related disclosure rule. He highlighted the creation of the Crypto Task Force, rescission of Staff Accounting Bulletin No. 121 and the open roundtables on crypto regulation as efforts to course-correct. Mr. Uyeda also raised concerns about asset manager influence on corporate governance and emphasized the need for clearer Schedule 13G eligibility standards. On enforcement, he proposed reforms to the SEC's administrative law judge process.
Commissioner Peirce described a "new paradigm" at the SEC. She argued that most crypto assets are not securities under existing law and criticized the SEC's past reliance on enforcement actions and complex guidance to regulate the space. She advocated for a "time-limited, conditional safe harbor" for certain crypto asset transactions, clear rules distinguishing investment contracts from functional tokens, and SEC guidance on when secondary trading of crypto assets falls outside securities law.
Commentary
Crypto is, understandably, a centerpiece of much of this debate—particularly with a focus on innovation. New technologies inevitably strain pre-existing regulatory structures, just as crypto is doing now.
Looking at the crypto regulatory landscape at present, there’s a balance to be struck between enforcement, rulemaking, and innovation. This appears to be the position of Chair Atkins who promotes a more pro-innovation posture without abdicating core responsibilities of the Commission’s antifraud arm. With Congress poised to pass stablecoin legislation, it’s likely that issuers can focus more on creating innovative products and worry less about potentially innovation-stifling actions from the SEC.
Commentary
The argument that the new Administration is diminishing the reputation of the SEC is tough to make when the former Administration suffered an unprecedented run of defeats in court for exceeding its legislative authority and for failing to comply with procedural requirements.