Senate Clashes Over SEC's Crypto Enforcement Shift and New Rules

SEC Chairman Paul S. Atkins on Thursday defended a pivot away from what Republicans described as "regulation by enforcement" under the previous administration and towards clearer statutory guardrails for digital assets.

Senate Banking Committee Chairman Tim Scott said digital asset innovation "will happen here at home", arguing that Congress must establish "clear rules of the road for digital assets" to protect investors and ensure American competitiveness.

Scott said the earlier approach "took the form of regulation by enforcement instead of clear rules," leaving "businesses, builders and investors" with "confusion, subpoenas and lawsuits".

Atkins backed legislative efforts to define responsibilities between the SEC and the Commodity Futures Trading Commission (CFTC), saying innovators had been caught between competing regulators.

He compared the past system to "two fortresses on either side of a no man's land" where innovators were "bogged down in that no man's land with a crossfire" and "never really coming to market".

"The real issue that is so important about this legislation is to future-proof things so that there's clarity to innovators as between the SEC and the CFTC," Atkins said.

He added that the SEC had previously "stayed mum" and did not "alter and accommodate its filings and its forms and rules to accommodate this new innovative technology," creating uncertainty.

But Democrats sharply challenged the agency's enforcement record.

Ranking Member Elizabeth Warren accused Atkins of scaling back oversight, saying the SEC under his leadership was "unleashing a golden age of fraud". She alleged that enforcement actions had declined and questioned decisions to drop certain cases involving crypto firms and executives.

Atkins rejected the characterisation, saying, "Fraud is fraud, whether it be in the crypto area or not." He maintained the agency was "returning its enforcement programme to first principles of rooting out fraud and remedying investor harm."

He told lawmakers the SEC had brought crypto-related enforcement cases under the current administration and emphasised that investor protection remains central.

Beyond crypto, the hearing also touched on artificial intelligence in financial markets, China-linked listings on US exchanges, and whether enforcement staffing had been reduced.

Atkins said the SEC's broader focus is to "recommit the agency to our core mission of protecting investors, maintaining fair, orderly and efficient markets and facilitating capital formation".

He also argued that excessive disclosure requirements were burdening companies, noting that "public companies spend $ 2.7 billion a year to file their annual reports", and said the agency must "modernise, rationalise and streamline reports."

The debate comes as Congress advances digital asset market structure legislation, including a Senate version of the Clarity Act, which aims to define regulatory jurisdiction and establish a federal framework for crypto markets.

The SEC, created in 1934 after the stock market crash, plays a central role in overseeing US capital markets. In recent years, rapid growth in digital assets and decentralised finance has intensified pressure on lawmakers and regulators to craft a comprehensive framework that balances innovation with investor protection -- a debate now taking centre stage in Washington.

- IANS