Former SEC Enforcement Director: Cryptocurrency will not disappear, and enforcement regulation is not the solution

"Some of the cryptocurrency cases that the SEC has initiated are legitimate fraud cases, and I hope they continue, and I hope we'll find more of them, and there are also a lot of cryptocurrency cases that are just registration cases, and when they can't be registered, they're fault cases," said J.W.Verret, a professor at the Antonin Scalia Law School at George Mason University in Arlington, Virginia. Analysis points out that the next SEC chairman is expected to push for new regulations to amend existing securities laws or enable digital asset companies to comply with the rules that Gary Gensler has long warned them to violate. This will also help control enforcement, and bipartisan cryptocurrency legislation that supports this goal now has a brighter future because the Senate is now firmly controlled by the Republicans. "We expect the Trump administration and the new Congress to be more constructive about cryptocurrency regulation," said Jack Inglis, CEO of the Alternative Investment Management Association, a London trade group that represents hedge funds and private equity firms. That means policy “recognizes the need to embed cryptocurrencies into a broader financial services framework while taking into account the technological differences from traditional finance, leading to a more customized approach in many areas,” he said. The SEC’s enforcement cases against crypto companies have focused primarily on whether their products meet the decades-old definition of securities, as laid out by the U.S. Supreme Court in SEC v. W.J. Howey Co. That’s not a good approach, according to William McLucas, a former SEC enforcement chief and current partner at WilmerHale. “That can’t be the solution because whether you like cryptocurrencies or not, it’s not going away,” McLucas said. “That’s the enforcement cases that have been filed, but they keep filing them and we keep seeing crypto products.” The SEC’s inspector general said in a recent report that digital assets were the focus of 18% of all reports, complaints and enforcement referrals to the agency in fiscal 2024. The inspector general said the agency’s Office of Investor Education and Advocacy received nearly 6,000 such complaints during the same period, more than double the number of other types of complaints. While Trump has vowed to remove Gensler immediately, the final outcome may depend on whether he resigns on Inauguration Day. Some of Gensler’s fiercest critics in the financial services sector have called for his immediate resignation. “Last night, the people voted to take the country in a new direction, and Chairman Gensler should respect that vote and resign immediately,” said Chris Iacovella, president and CEO of the American Securities Association, which represents regional brokerages and other financial services firms. If Gensler follows Washington tradition and leaves, the agency would be split 2-2 along party lines until a new chairman is confirmed. That would hamper further aggressive enforcement, especially with Hester Peirce, known as “Crypto Mom,” still serving as a commissioner. (Bloomberg)