SEC Commissioner Mark Uyeda has slammed the agency’s disaster of handling the crypto industry, calling it a debacle. The comments are part of crypto’s growing legal challenge to the SEC, which last month faced a blow in a lawsuit from Crypto.com.
With frustration growing among parts of the industry over the SEC’s reliance on enforcement actions that provide little or no regulatory guidance for the industry, Uyeda’s remarks offer an example of that ill feeling.
Recently, Crypto.com filed a lawsuit against the SEC, accusing that agency of overreach. The situation occurred after Crypto.com allegedly violated securities laws by functioning as an unregistered broker-dealer, and the SEC followed up with a Wells notice. Crypto.com stated that the SEC should clearly provide regulatory guidance, which is why it seeks to enforce the rules through legal action.
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Crypto.com’s lawsuit is just one of many legal battles the crypto industry has faced with the SEC. It comes after the agency lost a high-profile case against Ripple Labs regarding XRP tokens and drew conflicting court rulings. Some of these cases have been stalled, but the SEC hasn’t given up on appeals, and the cases still throw the crypto world into legal uncertainty.
SEC’s Regulatory Approach Leaves Firms Uncertain
According to Uyeda, the SEC mainly regulates crypto through enforcement. He said that companies have been guessing how to follow existing securities laws without clear rules. However, the courts, not the SEC, have drawn the lines in the legal sand, leading to uneven rulings.
In addition, the SEC’s enforcement actions have brought more confusion than clarity, leaving tens of millions of firms unsure precisely how to stand legally. This strategy has created a fractured regulatory environment, as different courts have determined contradictory decisions.
Uyeda’s comments highlight the growing divide between the SEC and the industry it seeks to regulate, with both sides expressing frustration over the current state of affairs.
Uyeda Criticizes SEC Focus on ESG Mandates
Uyeda also criticized the SEC’s handling of cryptocurrency regulation and the agency’s focus on Environmental, Social, and Governance (ESG) mandates. These efforts, he said, usually veer away from the SEC’s core financial oversight responsibilities. Uyeda said financial regulators should focus on making markets transparent and fair instead of imposing social or environmental goals.
Uyeda believes that this broader criticism reflects his view that the SEC should stay within its primary job of financial regulation and not overreach.
The agency’s emphasis on issues other than finances, he said, could divert attention from its core responsibilities. His position on ESG issues indicates Uyeda is worried the SEC may stray beyond its boundaries as a traditional regulator.
Uyeda’s comments emphasize an even more pressing issue: regulatory guidance for cryptocurrencies. He said that the SEC still needs to provide interpretive guidance explaining what companies are allowed and not allowed to do. The lack of clarity has meant crypto firms are at legal risk and don’t know if they follow federal security laws.
