- SEC Chair Paul Atkins assured companies they would be given sufficient warnings before any enforcement action.
- The move marks a turnaround from his predecessor’s aggressive stance, especially across the crypto industry.
US Securities and Exchange Commission (SEC) Chair Paul Atkins continues their agency’s efforts to undo the damage purportedly committed by his predecessor, former chair Gary Gensler. In a significant departure from the commission’s “regulation by enforcement approach,” the chairman said they will issue a warning before taking aggressive enforcement actions against companies.
A Departure from a “Regulation by Enforcement” Approach
According to the Financial Times, Atkins declared they won’t go easy on “crooks” who cheat people and steal their money. However, he emphasized that there are instances when they should offer sufficient warnings to people unintentionally steering on the wrong path of regulations due to technicalities.
“If you lie, cheat, or steal your investors and steal their money like Bernie Madoff, we’ll leave you naked, homeless, and without wheels,” Atkins said, referencing the mastermind of the largest Ponzi scheme in history, worth $65 billion, in setting an example of the kind of people they are up against.
On the other hand, the SEC chair noted that there are “other gradations of that where you have to give people notice.”
“You can’t just suddenly come and bash down their door and say ‘uh-uh, we caught you, you’re doing something and it’s a technical violation,’” he clarified.
Atkin’s pronouncement broadly applies to financial institutions within the SEC’s jurisdiction. However, it mostly resonates with players in the crypto industry, who were heavily targeted by Gensler’s aggressive crusade in what they coined “Operation Chokepoint 2.0.”
Chairman Atkins’ new stance is a significant reversal of the “regulation by enforcement” approach that defined the SEC under his predecessor. Gensler’s regime had pursued a string of high-profile lawsuits against major cryptocurrency companies like Coinbase, Ripple, and Binance, arguing that many of their digital assets were unregistered securities and that the companies were operating as unlicensed exchanges.
The crypto industry widely criticized these actions for creating a climate of regulatory uncertainty, causing many digital asset-related firms to move their operations to areas with a friendly regulatory climate.
Aligned with the SEC’s Project Crypto
Atkins’ new policy under “Project Crypto” aims to provide clear, predictable rules for the industry. This initiative, which he announced in a speech on “DeFi and the American Spirit,” seeks to modernize securities laws and enable financial markets to move “on-chain.”
The Project Crypto initiative operates under the principle that the differing use cases and taxonomy of crypto assets do not automatically make them securities. The crypto community met this shift in policy with widespread optimism and relief.
Industry leaders like Hashdex have praised Atkins for his commitment to providing regulatory clarity and fostering innovation in the maturing crypto landscape.
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