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

Odaily News JW Verret, a professor at the Antonin Scalia Law School at George Mason University in Arlington, Virginia, said: "Some of the cryptocurrency cases initiated by the SEC are legitimate fraud cases. I hope these cases will continue. I hope we can find more of them. In addition, there are many cryptocurrency cases that are just registration cases. When they cannot be registered, they are fault cases." The analysis pointed out that the next SEC chairman is expected to promote 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 law 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 in their attitude towards cryptocurrency regulation," said Jack Inglis, CEO of the Alternative Investment Management Association, a London trade group representing hedge funds and private equity firms. That means policies that “recognize 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 cryptocurrency companies have focused primarily on whether their products meet the decades-old definition of a security, 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, the SEC’s former 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. “The enforcement cases that have been filed are just that, but they keep getting filed 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 the agency’s reports, complaints and enforcement referrals in fiscal 2024. 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, the inspector general said. While Trump has vowed to remove Gensler immediately, the outcome may depend on whether he resigns on Inauguration Day. Some of Gensler’s fiercest critics in the financial services world have called for his immediate resignation. “Last night, the people voted to take this 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 in leaving, the agency would be divided 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)