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Recent reports say that Better Markets is ridiculing how the SEC, the U.S. financial watchdog, manages crypto regulation. The group has raised concerns about how oversight of the growing digital asset market is handled.
They warn that the industry could erode public confidence if the regulator avoids formal rulemaking. They argue that relying on informal guidance and behind-the-scenes actions creates uncertainty and instability in crypto.
A Watchdog Rings the Alarm
Better Markets’ concern is that the SEC has lifted the veil on how it has administered crypto policy in the last few years. There is just an increasing trend to circumvent traditional regulation-making.
These would include things like open drafts, comment periods, and revisions based on public input. Instead, the SEC has chosen to guide the industry through enforcement actions and internal staff memos.
This means that the industry and investors understand these alleged rules as too high or too low. Even worse, they may not even know when those rules change. According to the watchdog, this approach may render the legitimacy of the SEC’s rulemaking authority over Crypto open to question.
Why the SEC Must Return to Formal Rulemaking
In traditional contexts, regulators follow a set process whenever they wish to introduce new rules or amend existing ones. Proposals are published, the public is invited to comment, and changes are made accordingly.
These help ensure transparency and legal durability. However, in the crypto space, the SEC is doing away with just that.
Caroline Crenshaw, the SEC commissioner, raised this issue in a recent speech. In it, she compared the present-day process to an exercise in pulling bricks from a Jenga tower, one that destabilizes the very structure that was meant to protect investors and companies alike.
When no proper foundation of rulemaking exists, enforcing anything feels like an arbitrary exercise.
Industry Uncertainty Grows
The crypto industry faces many challenges due to the lack of public rulemaking. New projects will hesitate to launch in the U.S. because of the unclear legal rules. Investors are stepping back, suspecting they are not dealing with a compliant product.
Exchanges and DeFi players live under the threat of enforcement without necessarily knowing what is wrong with them.
Some people have even realized that the SEC regulates by force rather than law. While the agency asserts that it protects investors, critics argue this because it creates confusion and pushes innovation offshore.
Changes in Leadership, Shifts in Strategy
New changes in the Securities and Exchange Commission may lead to new policies. Commissioner Hester Peirce and incoming leadership figures, such as Paul Atkins, were keen to see improvement in the regulatory approach to Crypto.
A special Crypto Task Force now operates inside the agency with a mandate to review how rules are applied.
However, Better Markets cautions that new rules must undergo the legal process. Building internal groups is not enough; the process must be public and inclusive. At this point, the watchdog believes that the SEC’s approach undermines its credibility.
Public Pressure May Shape the Future
There will likely be some congressional action. Bipartisan lawmakers have clamored for more clarity on Crypto’s regulation. If the SEC doesn’t move toward public rulemaking, pressure will build for legislative changes to define the agency’s authority more strictly.
Advocacy groups, developers, and investors are working together to improve open dialogue. This could create a more defined roadmap, allowing innovation to return to the U.S. and comfort users knowing they are playing under fair and stable rules.
Conclusion
Regulators also play an essential role in shaping markets. Because those new and fast-moving regulators are making them. But when rules are written behind closed doors, trust slips away.
The SEC finds itself today at that crossroads, partly pursuing an informal tool of action that avoids public input and promotes transparency, stability, and fairness.
The public deserves transparent and open standards for growth and investor protection. These standards are crucial for the future of U.S. Crypto regulation.
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FAQs
1. What is Better Markets?
Better Markets is a nonprofit watchdog that monitors financial regulation and investor protection with transparency and accountability.
2. Why is the SEC under scrutiny?
Critics say that the SEC has avoided public rulemaking processes and issued obscure private memos and enforcement actions, leading to confusion in the Crypto sector.
3. How does it affect Crypto companies?
Without these straightforward rules, companies can struggle to comply with laws, suddenly become enforcement targets, or have to pick up and relocate elsewhere outside the U.S.
4. What should change?
Experts and the more general interest of watchdogs want to see the SEC adopt its formal procedures, including notice-and-comment rulemaking, which allows for public participation and clarity.
Glossary of Key Terms
SEC: U.S. Securities and Exchange Commission, the principal financial regulator.
Crypto: Digital assets based on blockchain technology.
Rulemaking: The formal process of making or amending laws and regulations.
Enforcement action: Legal actions taken against companies or individuals who violate regulations.
Public comment: Input from citizens, companies, or experts during the rulemaking.
