Potential Crypto Regulatory Shift Looms: Former SEC Official’s Insights

In a surprising turn of events, the direction of crypto assets regulation in the United States could dramatically shift depending on the outcome of the 2024 presidential election, as noted by former SEC official John Reed Stark.

Stark, the former head of the SEC Office of Internet Enforcement, took to Twitter on August 13 to share his prediction that a Republican President could significantly transform crypto-regulatory policies. A potential outcome could involve replacing Gary Gensler with crypto-friendly Commissioner Hester Peirce as the agency’s new chairman.

Will the SEC Approve Any Of The Recent Bitcoin Spot ETF Applications?

People often ask for my opinion on whether the SEC will approve any of the recent spate of bitcoin spot ETF applications, which is an interesting and important question.

My take is that the current SEC will… pic.twitter.com/lPXebl03Y4

— John Reed Stark (@JohnReedStark) August 13, 2023

With several Republican contenders vying for the presidency, including former President Donald Trump, Florida Governor Ron de Santis, and South Carolina Senator Tim Scott, Stark highlighted the possibility of Commissioner Peirce, commonly referred to as “Crypto Mom,” taking the reins of the SEC under a new administration.

Stark emphasized Peirce’s history of dissent and opposition to various crypto-related enforcement actions. He asserted that under Peirce’s leadership, there might be a notable slowdown in U.S. SEC crypto-related enforcement efforts and disruptions in the crypto sector.

Stark further illuminated the growing polarization within the SEC and U.S. political circles regarding cryptocurrency regulation. He contrasted the past united anti-crypto stance among politicians like Trump, Clinton, and Waters with today’s divisive landscape.

Stark noted that Republican candidate Ron de Santis intends to safeguard Bitcoin while promising to prohibit CBDCs if elected. On the contrary, Democratic Senator Elizabeth Warren is actively campaigning against all forms of crypto. Moreover, she even formed an “anti-crypto army” in her Senate re-election campaign.

SEC’s Crypto ETF Hurdles

Stark cautioned that unless a Republican assumes the presidency, the SEC’s stance on crypto is unlikely to shift favorably. He anticipated that the regulator might reject ongoing proposals for spot Bitcoin exchange-traded funds (ETFs) for many compelling reasons.

Citing a Better Markets SEC Comment letter from August 8, Stark highlighted concerns about artificially inflated trading volumes in spot Bitcoin markets, the concentration of ownership among a few entities, and dependency on select actors to maintain the Bitcoin network. These issues, Stark argued, leave investors susceptible to manipulation by malicious actors.

Despite heavyweight financial institutions such as BlackRock and Fidelity seeking approval for spot Bitcoin ETFs, Stark posited that the SEC could eventually reject all these applications.

The fate of cryptocurrency regulation in the United States hangs in the balance as the political landscape evolves and the 2024 presidential election draws near. Stakeholders and investors are eagerly watching for potential shifts in the regulatory tides.