Republican commissioner says SEC should consider proposing rules to regulate crypto

SEC Commissioner Mark Uyeda calls for the development of clear regulations for cryptocurrencies, critiquing the SEC’s current enforcement-focused approach as inadequate for legal precedent and market stability.

In comments made on Nov. 6, SEC Commissioner Mark Uyeda highlighted a pressing need for the Securities and Exchange Commission to pivot towards proposing definitive rules or guidance for the cryptocurrency market, rather than relying predominantly on enforcement actions. According to Uyeda, this shift could provide the legal clarity needed for the burgeoning sector.

Addressing the issue in London, Uyeda expressed disappointment in the SEC’s reluctance to assist in crafting cryptocurrency regulations, noting that the current enforcement-led strategy is likely to result in protracted legal battles before any clear precedents are established. This method, he argues, could potentially take years as cases slowly ascend through the court system to the appeals level.

The remarks from Uyeda come amid a period of heightened SEC activity in the cryptocurrency space, with high-profile cases involving major players like Binance and Coinbase. Uyeda’s remarks follow SEC Chairman Gary Gensler’s own, where Gensler maintained that most cryptocurrencies, with the exception of Bitcoin (BTC), are securities and thus companies dealing with them should register with the agency.

These cases have thrust judges into the position of deciphering how existing laws apply to the novel crypto industry—a sector that claims it struggles to remain compliant and competitive without a transparent regulatory framework in the U.S.

In doing so, the SEC frequently references the Howey Test, stemming from a 1946 Supreme Court case, to determine whether a transaction qualifies as an investment contract and therefore falls under securities regulation.

Uyeda acknowledges the complexity inherent in defining what constitutes a security and critiques the SEC’s current approach as obscure and unpredictable, comparing it to the “sorting hat” from the Harry Potter series.

His call to action urges for a regulatory landscape that is clearly delineated, allowing participants to navigate the market without fear of unintentional transgressions due to vague or yet-to-be-interpreted rules.