US SEC crypto task force roundtable shows significant daylight compared to Gensler's reign

The U.S. Securities and Exchange Commission is weighing its options on how to regulate the trading of digital assets, diverging significantly from the agency's previous approach.

One way could be to provide a temporary fix, acting SEC Chair Mark Uyeda suggested on Friday at a roundtable with several industry participants. The SEC held its second of five roundtables on Friday titled "Between a Block and a Hard Place: Tailoring Regulation for Crypto Trading," including participation from Uniswap Labs, FalconX, Coinbase and investor-focused groups as well as executives from the New York Stock Exchange.

"While the Commission works to develop a long-term solution to address these issues, a time-limited, conditional exemptive relief framework for registrants and non-registrants could allow for greater innovation with blockchain technology within the United States in the near term," Uyeda said.

Friday marks the SEC's second roundtable hosted by the SEC's crypto task force, a group led by Republican Commissioner Hester Peirce created shortly after President Donald Trump took office. The creation of the task force and holding roundtables shows a marked contrast from the agency's previous approach to crypto under previous SEC Chair Gary Gensler, who viewed that vast majority of crypto activities as falling under the agency's remit.

Gensler had been more wary of the industry, calling most cryptocurrencies securities and bringing a number of charges against big crypto players — though much of that legal activity is now suspended. The new SEC Chair Paul Atkins is expected to be friendlier toward the crypto industry. Atkins, confirmed by the Senate this week, has said he would make creating a regulatory framework for digital assets a "top priority."

Commissioner Caroline Crenshaw, now the sole Democrat on the commission, raised concerns on Friday over crypto exchange platforms performing multiple functions that are typically highly regulated in traditional finance. These roles, including operating as a brokerage, clearing house and custodian, are typically separated due to concerns around risk and conflicts of interest, Crenshaw said. 

"In some instances, we have seen some of those risks materialize in a way that has caused significant market disruption and harm to investors," Crenshaw said. 

During Friday's roundtable the panelists also discussed what aspects of the crypto industry would be in the SEC's purview, or not. For instance, Uniswap Labs Chief Legal Officer Katherine Minarik argued peer-to-peer transactions should not be within the SEC's authority. Intermediaries present certain risks that decentralized platforms do not, Minarik added.

"Many of those risks substantially or entirely disappear when, for example, a participant in a transaction retains custody or control of their own assets," Minarik said. 

Dave Lauer, co-founder of Urvin Finance and We the Investors, pointed to jurisdictional questions on which agency — the SEC or the Commodity Futures Trading Commission — should regulate crypto. Over the past few years, some have pointed to a "turf war" between the two agencies on regulating crypto.

"I have found that the turf warfare, the infighting, the constant question of who should be regulating what has caused investor harm directly," Lauer said.