Tensions over crypto regulation at the U.S. Securities and Exchange Commission (SEC) reached a boiling point as its sole Democratic Commissioner, Caroline Crenshaw, criticized the agency’s current regulatory strategy, warning it is dismantling decades of market safeguards.
At the SEC Speaks event on May 19, Crenshaw likened the agency’s approach to “regulatory Jenga,” where crucial yet interdependent rules are being pulled out without consideration for long-term market stability.
Crenshaw voiced deep concern over what she described as a deliberate retreat from enforcement, particularly in cryptocurrency, under the direction of the Trump-era appointed leadership still shaping the agency. She alleged that staff guidance had been used to circumvent formal rulemaking processes, bypassing analysis and public input in critical areas like crypto regulation.
The commissioner, known for her dissent in the SEC’s settlement with Ripple, argued that the agency’s withdrawal from enforcement undermines its legal credibility and threatens the foundation of long-standing case law. She warned that recent inaction ignores the enduring risks posed by crypto, using the 2022 collapse of FTX as a grim reminder.
“Those risks have not gone away, but the calls for serious regulatory scrutiny are quieter these days,”
Crenshaw said.
“Failing to appreciate and address these risks and complexities destines us to repeat hard lessons with high stakes as crypto becomes increasingly entangled with traditional finance.”
In sharp contrast, Republican commissioners struck an optimistic tone. Commissioner Paul Atkins decried “years of SEC-imposed limbo” on the crypto industry and praised recent moves to ease restrictions, arguing that innovation should not be stifled.
Hester Peirce, head of the SEC’s Crypto Task Force and a vocal crypto advocate, said regulatory clarity has long been evaded under the Biden administration’s approach.
“We need to reverse course,” Peirce stated, adding that most existing crypto assets no longer qualify as securities.
Commissioner Mark Uyeda also joined the chorus, urging the agency to move away from what he called “regulation by enforcement,” and instead offer clear policy direction.
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