US SEC Scales Down its Crypto Enforcement Unit Under Trump Administration

Highlights:

• The SEC is downsizing its Crypto Assets and Cyber Unit, reassigning staff elsewhere.
• The crypto sector still seeks clarity on securities classification amid shifting regulations.
• SEC’s new task force aims to classify crypto assets and explore legal offerings.

The United States Securities and Exchange Commission (SEC) is downsizing its Crypto Assets and Cyber Unit, which had expanded to more than 50 lawyers and staff under former Chair Gary Gensler’s leadership, The New York Times reported, citing five sources familiar with the matter. Some crypto enforcement team members are being moved to other SEC divisions. A well-known lawyer was moved from enforcement, which some see as an unfair demotion, suggesting internal disagreements over crypto regulation.

According to The New York Times, the U.S. SEC is scaling back a specialized unit of over 50 lawyers and staff members responsible for cryptocurrency enforcement, marking the first concrete action taken by the Trump administration on the regulation of cryptocurrencies and digital…

— Wu Blockchain (@WuBlockchain) February 4, 2025

The staff reassignment has sparked questions about the future of the SEC’s high-profile cases, including its ongoing lawsuit against Ripple. While the lawsuit was recently removed from the SEC’s website, it has not been officially dismissed, leaving room for speculation. 

SEC’s Regulatory Approach Shifts as Crypto Sector Demands Clarity

The crypto sector has long called for clarity on the securities classification of certain cryptocurrencies. However, the SEC did not sufficiently address this issue under former Chair Gary Gensler’s leadership. Gensler, who led a “regulation by enforcement” approach against major U.S. crypto players, left the agency after crypto supporter Donald Trump’s reelection as president.

According to Cornerstone Research, the SEC initiated 33 cryptocurrency-related enforcement actions against 90 defendants and respondents last year.

The decision has sparked mixed reactions. Corey Frayer, former senior advisor to Gensler on crypto, criticized it for removing crucial “speed limits and guardrails” from the market. On the other hand, crypto industry supporters view it as a positive move towards a more balanced regulatory framework.

Trump Administration Moves to Ease Crypto Regulations

The restructuring is part of the Trump administration’s continued effort to lessen regulatory oversight of the crypto industry. Last month, Donald Trump signed an executive order to promote the crypto industry’s growth and reduce excessive regulations on digital assets. Recently, Acting SEC Chair Mark Uyeda formed a team to reassess the SEC’s approach to digital assets, with SEC Commissioner Hester Peirce, a strong supporter of the industry, leading the task force.

SEC Crypto Task Force Signals Major Shift

Earlier today, the SEC reportedly launched a new website for its crypto task force, welcoming feedback from both the industry and the public. In a statement on Tuesday, Hester Peirce said the task force will work to classify different crypto assets and activities. The goal is to determine which ones fall under financial securities regulations.

She added:

“The Task Force also is thinking about the possibility of recommending Commission action to provide temporary prospective and retroactive relief for coin or token offerings for which the issuing entity or some other entity willing to take responsibility provides certain specified information.”

Her message signals a shift in the SEC’s stance on digital assets, moving away from Gary Gensler’s approach. Under Gensler, the SEC intensified crypto enforcement, imposing record fines and prosecuting figures like Sam Bankman-Fried and Changpeng Zhao.