The U.S. Securities and Exchange Commission (SEC) finds itself in the spotlight as Commissioner Caroline Crenshaw, the sole Democrat on the panel, paints a vivid picture of its current regulatory strategy—or lack thereof—concerning the cryptocurrency sector. Crenshaw’s remarks, delivered on May 19 at the SEC Speaks event, likened the agency’s regulatory approach to a precarious game of “regulatory Jenga,” a metaphor that resonates with both critics and proponents of crypto regulation.
A Tower of Rules
Crenshaw’s analogy of a Jenga tower underscores her concerns: the SEC’s longstanding framework, meticulously constructed over the years, risks collapse if key regulatory blocks are removed without careful consideration. “Our statements on these crypto-related issues are the equivalent of a wink and nod,” Crenshaw lamented, suggesting that the SEC has been selectively enforcing laws, particularly in the volatile crypto markets. Her words carry weight, especially amidst a backdrop of waning enforcement actions and a troubling loss of staff at the agency.
This “regulation by non-enforcement,” as she terms it, not only threatens the SEC’s credibility but also casts shadows over “longstanding and fundamental case law.” The implications are significant, potentially eroding the Commission’s standing in court and undermining its authority. Crenshaw’s concern is palpable: “Failing to appreciate and address these risks and complexities destines us to repeat hard lessons with high stakes.”
Divergent Voices Within the SEC
While Crenshaw’s warnings reverberate, the SEC’s internal landscape reveals a spectrum of opinions. Republican commissioners, including Chair Paul Atkins, view the agency’s pivot towards crypto with optimism. Atkins remarked that the crypto markets have been “languishing in SEC limbo for years,” hinting at a bureaucratic inertia that stifles innovation. His call to action is clear: the SEC should not hinder the burgeoning crypto industry. This sentiment echoes the concerns of crypto advocates who argue that staking is an ‘essential good’ rather than a security.
Commissioner Hester Peirce, leading the SEC’s Crypto Task Force, adds a layer of complexity to the narrative. Peirce critiques the agency’s regulatory practices under the Biden administration, asserting that most crypto assets do not fall under securities laws. “Many of these crypto assets are functional,” she argued, suggesting that the SEC’s regulatory scope may be overextended. For a deeper dive into the regulatory implications, see our coverage of US crypto groups urging the SEC for clarity on staking.
Mark Uyeda, another Republican voice, emphasizes a need for clarity, advocating against using regulation by enforcement as a policy-making tool. This internal dichotomy within the SEC highlights the ongoing debate on how best to regulate an industry that defies traditional categorization.
Lessons from the Past, Eyes on the Future
Crenshaw’s reflections are not merely theoretical. The 2022 collapse of FTX, a high-profile crypto exchange, serves as a stark reminder of the sector’s inherent risks. “Those risks have not gone away,” she noted, urging for vigilance as crypto intertwines more deeply with conventional finance.
Looking ahead, the SEC’s path remains fraught with challenges. Balancing innovation with regulation, maintaining market stability, and ensuring investor protection are no small feats. The crypto sector’s rapid evolution necessitates a regulatory approach that is both nimble and robust.
As the debate continues, one thing remains clear: the stakes are high. The SEC’s decisions in the coming months will not only shape the U.S. crypto landscape but also signal to global markets how traditional financial regulators can adapt to the digital age. The question is, will the tower stand firm, or will it crumble under the weight of its own complexity? Time will tell.
Source
This article is based on: SEC’s Crenshaw says agency playing ‘regulatory Jenga’ with crypto
Further Reading
Deepen your understanding with these related articles:
- UK’s FCA Seeks Public and Industry Views on Crypto Regulation
- U.S. Congress Braces for Intense Debate Over Crypto Legislation This Summer (openai)
- The SEC Can Learn From the IRS in Making Regulation Simpler for Crypto
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
