SEC Chair Pledges Advance Warning Prior to Enforcement Measures

The chair of the US Securities and Exchange Commission (SEC) is steering the agency in a new direction, moving away from its prior enforcement-first policy towards the crypto industry.

In an interview published by the Financial Times on Monday, SEC Chair Paul Atkins indicated that the agency is moving away from the aggressive enforcement actions typical under former President Joe Biden and former SEC Chair Gary Gensler.

According to Atkins, US cryptocurrency firms can now expect preliminary notices for minor violations prior to any enforcement actions by the agency.

“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,” Atkins stated, emphasizing that businesses will now be notified before further steps are taken.

These remarks signify a notable shift from the enforcement-centric agenda of his predecessor, Gensler, who faced criticism for implementing a “regulation by enforcement” strategy regarding crypto.

Under Gensler’s guidance, the SEC filed lawsuits against major companies in the sector, including Ripple Labs in 2020, Terraform Labs in 2022, and cryptocurrency exchanges Binance, Coinbase, and Kraken in 2023. These legal battles resulted in billions lost by the industry.

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Previous SEC enforcement actions were not “grounded in precedent,” Atkins asserted

Reflecting on Gensler’s enforcement strategies, Atkins acknowledged that many “rightly criticised the SEC” in recent years for decisions that were “not grounded in precedent” or “predictability.”

“It would shoot first and then ask questions later,” Atkins remarked, suggesting that the regulator’s approach should allow for a potential six-month period before any enforcement actions are taken against companies.

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Atkins also distanced himself from Gensler’s earlier statements suggesting that most cryptocurrencies should be classified as securities. He argued that most tokens do not fall under securities laws, and he aims to facilitate trading of tokenized versions of stocks and bonds with the same legal rights as the underlying assets.

Atkins was confirmed as the new chair of the SEC by a 52–44 vote in the US Senate on April 9, Cointelegraph reported.

Since then, the SEC has established a Crypto Task Force to engage with the industry on regulation and has halted several investigations and enforcement actions initiated during Gensler’s tenure.