SEC’s Acting Chief Advocates for Abandoning Crypto Trading Regulations

Beverly Hills, California – At the 2023 Milken Institute Global Conference on May 2, U.S. Securities and Exchange Commission (SEC) Commissioner Mark Uyeda addressed pressing concerns surrounding the regulation of cryptocurrency firms. His comments have drawn significant attention, particularly in light of recent directives aimed at reevaluating the SEC’s approach to crypto trading regulations.

On March 10, Uyeda indicated that he has instructed SEC staff to explore ways to abandon a controversial plan proposed in 2022, which sought to expand the definition of alternative trading systems (ATS) to include certain cryptocurrency firms. This proposal sparked considerable backlash from the cryptocurrency sector, which argued that the increased regulatory scrutiny could stifle innovation and growth within the industry.

Criticism of the 2022 Proposal

Uyeda described the SEC’s previous attempt as a misstep, particularly its decision to intertwine the regulation of Treasury markets with an aggressive approach to the crypto market. “In my view, it was a mistake for the Commission to link together regulation of the Treasury markets with a heavy-handed attempt to tamp down the crypto market,” he stated, acknowledging the implications such a connection could have for both sectors.

The 2022 proposal was part of a broader initiative under the previous Democratic leadership of the SEC, aimed at enhancing investor protection in the rapidly evolving crypto landscape. However, Uyeda’s recent shift in focus reflects a desire to reconsider these regulatory strategies in light of the changing political climate and ongoing discussions regarding market efficacy.

Renewed Conversations with Key Financial Institutions

In addition to considering the abandonment of the proposed regulations, Uyeda also announced his intention to urge SEC staff to re-enter talks with key financial institutions, including the Treasury Department and the Federal Reserve. These discussions will aim to revisit the original regulatory changes pertaining to government securities alternative trading systems, separate from the controversial crypto regulations.

Transition Under New Leadership

Since January, the SEC has transitioned under Republican leadership, which has entered a new phase of reform concerning cryptocurrency. The agency has since launched a crypto task force aimed at overhauling its policies towards the digital currency market. Furthermore, the SEC has begun pausing or dismissing pending lawsuits against certain crypto firms, signaling a potential shift towards a more lenient regulatory environment.

As the SEC continues to navigate the complexities of cryptocurrency regulation, Uyeda’s recent statements underscore a significant reevaluation of strategies that aim to balance investor protection with the need for industry growth. The coming months are likely to reveal more about the SEC’s approach toward the emerging crypto landscape and its implications for market participants.

Reporting by Chris Prentice in Washington
Editing by Matthew Lewis
Source: Reuters