SEC Commissioner Warns Regulatory Weakening Could Heighten Crypto Market Risks Amid Internal Policy Debate

SEC Commissioner Caroline Crenshaw, the agency’s only Democratic member, has strongly criticized recent changes in the SEC’s approach to crypto regulation, calling it a destabilizing shift similar to a risky game of ’regulatory Jenga.’ Crenshaw highlighted that the SEC is quietly removing key regulatory safeguards without comprehensive public review, reducing enforcement and oversight at a time when the SEC’s staff has fallen by nearly 15% in four months. She raised concerns over the agency’s use of informal guidance for issues like memecoins and crypto mining, believing this weakens legal clarity and exposes markets to new risks. Crenshaw warned that abandoning established regulatory procedures could repeat past mistakes, especially as crypto and traditional finance become increasingly intertwined, referencing the FTX collapse as a cautionary example. In contrast, SEC Chairman Paul Atkins advocates a more accommodating regulatory stance to foster crypto innovation, emphasizing transparent communication rather than aggressive enforcement. The internal debate reflects a broader divide within the SEC between strict enforcement and market-friendly oversight as the agency drafts new crypto rules. For crypto traders, these regulatory uncertainties could affect market stability, compliance, and sentiment, particularly during periods of volatility.