The Securities and Exchange Commission’s sole remaining Democratic Commissioner, Caroline Crenshaw, has issued a stark warning about the agency’s recent approach to crypto regulation. She compares it to a dangerous game of “regulatory Jenga” that risks destabilizing market safeguards carefully built over decades. Regulatory Rollbacks Raise Alarm Bells In her

• SEC lost 15% of its staff under the new administration, weakening regulatory oversight.
• Retail investors and small businesses face the greatest risk from deregulation.

The Securities and Exchange Commission’s sole remaining Democratic Commissioner, Caroline Crenshaw, has issued a stark warning about the agency’s recent approach to crypto regulation. She compares it to a dangerous game of “regulatory Jenga” that risks destabilizing market safeguards carefully built over decades.

Regulatory Rollbacks Raise Alarm Bells

In her May 19 remarks at the annual SEC Speaks event, Crenshaw voiced deep concern over what she described as a systematic dismantling of regulatory protections. She highlighted the impact of this trend on enforcement actions, particularly in cryptocurrency markets. She cautioned that removing these “discrete but interrelated rules” threatens the stability of the entire financial system.

“Our proverbial Jenga tower is made up of a set of discrete but interrelated rules and laws, deeply and carefully developed over the years,” Crenshaw stated. “How many blocks can you pull before the tower gives way?”

The commissioner highlighted several troubling developments under the new administration, including significant staff departures, with nearly 15% of SEC personnel leaving their positions. This effectively reverses the rules through staff guidance without proper analysis or public comment, and abandons key enforcement actions.

Crenshaw mentioned that she is not happy with the SEC’s actions toward crypto. She explained that the recent guidance is similar to a wink and a nod, meaning we will not strictly enforce our laws in specific cases. She stated that the SEC’s approach of not enforcing regulations reduces its credibility and ignores what happened during the 2022 FTX collapse.

Her comments are very different from what Republican commissioners said at the same occasion. Paul Atkins, the former SEC Chair, stated that the crypto markets had been stalled in SEC review for years. Furthermore, Hester Peirce, who is in charge of the Crypto Task Force, stated that most cryptocurrencies available today are not classified as securities.

Crenshaw drew parallels to regulatory failures preceding the 2008 financial crisis, noting that “before a crisis happens, everyone demands that regulators get out of their way.” She concluded that continued deregulation would ultimately harm small businesses and retail investors while potentially setting the stage for a new financial crisis.

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