Crypto Deregulation? Not Quite – The SEC’s New Strategy Explained

By Fizza Khan, CEO, Benny Armstrong, Senior Director, and Josh Burton, Director, at Silver Regulatory Associates 

The crypto industry is at a crossroads. For years, crypto/digital asset managers have navigated an unpredictable regulatory minefield, with the SEC employing a “Regulation by Enforcement” approach that relied heavily on enforcement actions rather than clear guidance. But change is here. Under the new administration, the SEC is taking a markedly different approach—one that shifts away from regulation by enforcement and toward meaningful collaboration and clarity. The goal? To bring transparency and coherence to the crypto/digital asset industry and create a regulatory framework that fosters innovation while protecting retail investors from fraud and harm. Understanding this shift is critical for industry leaders who want to stay compliant while positioning themselves for future growth.

SEC: Less Enforcement to More Engagement

Previously, the SEC’s stance on crypto and digital assets fell under a “Regulation by Enforcement” approach, which was characterized by stringent and broad sweeping enforcement actions against crypto and digital asset industry participants that created uncertainty about compliance expectations due to a lack of clarity about the guidelines safeguarding the space.  Former SEC Chair, Gary Gensler, led a regulatory regime that relied heavily on enforcement to define crypto and digital asset compliance, often bringing lawsuits against crypto and digital asset firms rather than setting explicit guidelines. The current administration, however, appears to be easing away from this enforcement-centric model in an effort, it seems, to provide some level of clarity about crypto and digital assets being considered securities. 

Several notable actions have reinforced this new direction:

1. The Creation of a Crypto Task Force – Led by Commissioner Hester Peirce, the establishment of this task force is a clear signal that the new leadership at the SEC is focused on developing a clear regulatory framework for crypto and digital assets. The Crypto Task Force aims to provide clarity on the application of federal securities laws to the crypto asset market and recommend practical policy measures that foster innovation while protecting investors. The move illustrates an intent to engage with market participants rather than regulate through harsh and public litigations, which can have significant implications for the companies involved and often result in steep fines against digital asset firms and/or crypto managers.
2.  Dismissal of Enforcement Actions – One of the most significant indicators of this shift is the SEC’s decision to drop multiple enforcement cases against crypto firms such as Coinbase, Uniswap, Robinhood and Kraken. These dismissals suggest the agency is reevaluating its prior stance on enforcement-driven regulation and is instead prioritizing clearer rulemaking.
3. Clarification on Security Status – The SEC recently clarified that meme coins are generally not considered securities, likening them to unregulated collectibles rather than financial instruments. They also announced an upcoming series of roundtables, which will be hosted by the Crypto Task Force, to engage with the public to further refine how other crypto assets should be classified and provide a workable regulatory framework for the industry. These developments are providing much-needed guidance to market participants and underscores the administration’s goal of setting clearer parameters for digital assets.

Prioritizing Retail Investor Protection

While adopting a more industry-friendly approach, the SEC maintains a strong focus on protecting retail investors. The agency has consistently expressed concerns over bad actors exploiting individual investors in the crypto space, and this remains a core enforcement priority. 

Silver notes the following key actions by the SEC over the past several months that underscore this development: 

1. Establishment of the Cyber and Emerging Technologies Unit – The formation of the Cyber and Emerging Technologies Unit within the SEC is a direct response to the growing risks in the digital asset market. This unit is tasked with investigating fraud and misconduct that disproportionately impact retail investors. Unlike the previous administration’s approach, which broadly targeted crypto firms, this unit’s focus is narrower, going after clear instances of harm rather than imposing sweeping restrictions on all market participants.
2. Enforcement Actions Against Retail Fraud – Despite the reduced reliance on enforcement actions against major crypto firms, the SEC remains active in pursuing fraud cases, particularly those affecting retail investors. Recent enforcement actions of note include:

• • One Oak Capital Management – Charged with breaching fiduciary duty and failing to disclose critical information to investors.
  • Never Alone Capital – Accused of fraudulent misrepresentation in managing client funds.
  • Justinas Butkus – A case involving the fraudulent sale of interests in mutual funds that did not exist to retail investors.

A More Business-Friendly Regulatory Environment

Another key theme in the SEC’s evolving approach is the creation of a more business-friendly regulatory environment. We have seen several recent developments that support this change:

1. Extensions and Exemptions on Regulatory Filings – The SEC has granted extensions and exemptions on certain regulatory filing requirements, including Form PF, Form 13F-2 and Form SHO. These changes reflect a regulatory shift that aims to ease the compliance burden on fund managers and crypto and digital asset firms while ensuring appropriate oversight.
2. Pullback on Mandatory Climate Disclosures – The SEC has also paused its defense of the mandatory climate-related disclosures rule, which would require public companies to disclose certain climate-related business risks and information in their public filings. This has been a controversial regulation among industry participants, with critics arguing that the rule is outside the SEC’s statutory authority and that existing SEC regulations already require disclosure of material business risks, including those related to climate. This move indicates that the agency is reevaluating its priorities and focusing regulatory resources where they are most needed. 

Implications for Crypto Firms and Fund Advisors

The evolving regulatory landscape presents both opportunities and responsibilities for crypto and digital asset firms and fund managers:

• Engagement Opportunities – In Commissioner Hester Pierce’s statement regarding the formation of the Crypto Task Force, crypto and digital asset industry participants were invited to engage with the Task Force to help shape a more predictable crypto and digital asset regulatory environment. With the SEC signaling a willingness to work with industry participants, firms now have the chance to engage with regulators to help shape forthcoming policies.
• Continued Vigilance – Although enforcement has been dialed back, compliance obligations remain very much in place. Therefore, firms must maintain robust compliance programs, as future regulatory reversals could lead to renewed scrutiny. Furthermore, remember, the examination period for private fund managers, including crypto managers or managers that employ a digital asset strategy, can be three years, therefore if a reversal were to occur back to the period of the original construction, the examination will be much more challenging and onerous. 
• Adaptation to New Guidelines – As clearer rules emerge, crypto and digital asset managers must be prepared to adapt their operations accordingly to remain competitive and compliant. Be sure to work closely with your Chief Compliance Officer or your third-party compliance consultant to ensure that your compliance program is buttoned up and erring on the side of caution. 

The Road Ahead: What to Expect Next

The pending confirmation of Paul Atkins as SEC Chair will be a pivotal moment for the regulatory landscape. His views on crypto regulation align with the principles of market-driven oversight, reducing unnecessary enforcement while ensuring that investor protection measures remain intact. If confirmed, Atkins’ leadership is expected to reinforce the current trend toward rule-based guidance rather than enforcement crackdowns.

Moreover, President Trump’s recent Executive Order directing agencies to review existing regulations may also have significant implications for the SEC. Under this directive, agencies must assess whether current rules align with their original legislative mandates. This could lead to the rescinding or revision of certain SEC regulations that were viewed as regulatory overreach.

Silver’s Recommendation: Stay the Course Amidst Regulatory Shifts

The transition from an enforcement-heavy approach to one of clarity and collaboration marks a pivotal moment for the crypto and digital asset industry. Crypto and digital asset firms should not interpret this as deregulation. Instead, this is a recalibration toward a more structured regulatory framework that fosters industry growth while maintaining investor protection.

For crypto firms and private fund managers that employ a digital asset strategy, the key takeaway is clear: stay the course. Maintain compliance, work in lockstep with regulatory compliance experts in order stay abreast of key developments as they occur and prepare for more defined regulatory guidelines in the near future. The market remains governed by existing securities laws and firms must continue to operate within these boundaries even as new rules take shape.

While things continue to change at a rapid pace and there is much uncertainty in the air still, this significant shift in the SEC’s approach to regulating crypto and digital assets presents a unique opportunity for industry participants to help create a framework that balances innovation and investor protection—a necessary step for the sustainable growth of crypto and digital assets in the financial ecosystem.

This article was originally posted in the April 2025 issue of Uncorrelated magazine. To access the original article, please see here.