(Bloomberg) -- The US Securities and Exchange Commission has kicked off the new year with a makeover, wiping clean its slate of crypto enforcement actions and turning what was once a hostile landscape for digital assets into a potential haven.
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In the last month alone, the securities watchdog has dismissed or paused at least eight cases against crypto companies, including those that targeted some of the sector’s most prominent faces. The running tally includes high-profile lawsuits against crypto exchanges Coinbase Global Inc and Binance Holdings Ltd. — who were sued within one day of each other in mid-2023 — as well as threats of legal action against Robinhood Markets Inc., Uniswap Labs and OpenSea.
“It’s a multifaceted demolition of the most successful SEC enforcement program in history,” said John Reed Stark, a former SEC enforcement attorney and now consultant. Following the election of President Donald Trump, Stark said the agency’s message to the world has been: “We’re going to grind to a screeching halt every single aspect of the SEC crypto enforcement program in a manner that’s not just unprecedented and unusual, it’s beyond imagination.”
The watchdog’s about-face came swiftly after the departure of former chair Gary Gensler, who stepped away in late January. He is expected to be replaced by former SEC commissioner Paul Atkins, with Mark Uyeda acting in the role while Atkins awaits confirmation. A SEC spokesperson declined to comment.
On the campaign trail, Trump pledged to fire Gensler on his first day in office due to his unpopularity in crypto circles — one of many promises made to the industry that bankrolled the Republican Party’s return to majority power. His support buoyed Bitcoin, crypto’s most valuable asset, to an all-time high on his inauguration day, though subsequent policy decisions on tariffs has sent it down 25% off the peak.
As the list of abandoned cases grows, executives, analysts and crypto-friendly regulators expect innovation to flourish.
“There are, we think, reasons to be long-term cheerful,” Alex Saunders, research strategist at Citigroup, said in a note on Friday. “Clarity on regulation should deliver more opportunities to innovate, build trust, and improve the user experience in crypto.”
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Under the Biden administration, the US market was considered by crypto executives to be a wasted opportunity. Many spoke openly against Gensler and his approach to regulating the space, which the industry viewed as tyrannical in its enforcement of securities laws against the sector.
Companies like Coinbase and Ripple rapidly increased hiring efforts overseas as a result, viewing other jurisdictions like Europe, the Middle East and Asia as much friendlier toward their business strategies. Now some of those decisions are being reversed, with Ripple advertising 75% of its open roles on US soil in January.
“It seemed like the SEC on a whim could wake up on the wrong side of the bed and decide to bring in enforcement action or to file a Wells notice, or subpoena for information. That fear seems to have gone away, especially in light of these dismissals,” said Cathy Yoon, general counsel at Wormhole Foundation, an organization that supports blockchain development.
Since taking over the agency on Jan. 21, the changes under Uyeda have been immediate. In the space of a month, the SEC fully replaced its crypto division with a new Cyber and Emerging Technologies Unit, and launched a “crypto taskforce” dedicated to developing rules for the sector alongside industry advisers. The taskforce’s future conclusions are already proving integral to how the agency operates, being used as the basis for the SEC’s request to stay its case against Binance last month.
Meanwhile, the intensity of arguments over whether cryptoassets are a security or a commodity in the eyes of US law has reduced as the threat of enforcement faded. Exchanges like Robinhood, which had previously delisted tokens like Solana and Cardano in the wake of SEC lawsuits naming them as potential securities, quickly reactivated trading for US clients after Trump’s win. The agency has also been more open to applications for exchange-traded funds tied to such digital assets.
On Thursday, the SEC clarified that memecoins — tokens that personify an internet joke or viral moment with no promise of utility — are not considered securities in the eyes of its staff. Trump himself launched a memecoin in January, its circulating value spiking close to $15 billion before crashing more than 80%. His family are also heavily tied to unlaunched crypto platform World Liberty Financial, which has sold over $1 billion in tokens.
Those who were major supporters of Trump and his businesses have also seen their cases offloaded by the SEC. Lawyers for the agency and Justin Sun, a crypto entrepreneur who invested $75 million in World Liberty Financial, jointly sought a stay in the regulatory proceedings against him on Thursday. Crypto exchange Gemini Trust Co, whose billionaire owners attempted to donate $1 million in Bitcoin to Trump’s campaign last year, said a day earlier that the SEC had closed its case against the business with no action.
The SEC’s new approach to crypto regulation doesn’t mean it’s a market free-for-all. The SEC’s cyber and emerging technologies enforcement units includes making sure retail investors don’t get ensnared in crypto scams, said Joe Castelluccio, partner at Mayer Brown.
“They’re looking for the industry to return to a more traditional American ethos of the Internet, which is to build things and break things, and don’t ask permission, ask forgiveness,” said J. Christopher Giancarlo, a former chair of the Commodity Futures Trading Commission who now advises several crypto businesses. “There’s one major caveat to that, and that is don’t cheat people.”
The CFTC — which has long been crypto’s preferred regulator — may step up activity in this new environment, he added. “When it comes to fraud, manipulation and market misconduct, you’ll continue to see a very strong enforcement activity,” he said. “Perhaps even more strong because it’ll be less distracted by going after firms for technical violations.”
Trouble has continued to proliferate in crypto, most recently with the Feb. 21 theft of almost $1.5 billion in digital assets from crypto exchange Bybit. Last month, Argentine President Javier Milei found himself at the center of a crypto scandal, after a memecoin he’d touted resulted in an estimated $251 million in losses for investors.
“Say what you will about Gary — he may have stood in the way of progress, but he also stood in the way of crime season,” said Dan Hughes, founder of blockchain Radix DLT Ltd. “Just be careful what you wish for, I suppose.”
--With assistance from Nicola M White and Olga Kharif.
(Adds that SEC declined to comment in the fourth paragraph.)
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