SEC Scales Back Crypto Enforcement Unit Amidst Industry Push for Growth

The U.S. Securities and Exchange Commission (SEC) has reportedly begun scaling back its crypto enforcement unit, which was established under former Chair Gary Gensler's leadership. The unit, previously known as the Cyber Unit, had grown to over 50 lawyers and staff, but is now being reduced in size as part of efforts to promote crypto growth and reduce regulatory oversight.

According to sources familiar with the matter, lawyers from the SEC's dedicated crypto unit are being reassigned to other departments. At least one senior lawyer has been moved out of the enforcement division entirely, with some expressing dissatisfaction over perceived demotions. The unit's restructuring comes amidst broader reforms at the SEC, including a new policy requiring enforcement staff to secure approval from commissioners before initiating formal investigations.

The downsizing of the crypto enforcement unit is part of the Trump administration's ongoing effort to reduce regulatory oversight of the crypto industry. President Trump recently signed an executive order aimed at establishing a regulatory framework that fosters innovation and economic growth related to digital assets. The order also targets the creation of a working group to evaluate the potential establishment of a national digital asset reserve and to propose new regulations for the sector.

The SEC's acting chair, Mark Uyeda, has established a task force to review the agency's digital asset regulations, appointing Commissioner Hester Peirce to lead the initiative. Peirce has criticized the SEC's previous approach, describing it as "legal imprecision and commercial impracticality." The crypto task force focuses on clarifying digital assets' security status, easing certain token offerings, and simplifying crypto-related product registrations. Its goal is to tackle regulatory issues in crypto-lending, staking, and custodial services, while enhancing international regulatory collaboration.

The downsizing of the crypto enforcement unit raises questions about pending cases, including the SEC's lawsuit against Coinbase for allegedly operating as an unregistered securities exchange. The move has drawn mixed reactions, with former senior advisor to Gensler on crypto issues, Corey Frayer, criticizing the decision, arguing that it removes necessary "speed limits and guardrails" from the market. Conversely, crypto industry proponents see it as a welcome step towards a more balanced regulatory environment.