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Crypto, cyber unit at SEC braces for ‘exodus,’ Gasparino says

Crypto, cyber unit at SEC braces for ‘exodus,’ Gasparino says

Several seasoned enforcement attorneys are poised to leave their posts within the crypto assets and cyber division of the U.S. Securities and Exchange Commission (SEC).

That’s according to Fox Business correspondent Charles Gasparino who, on Feb. 9, warned that there had been an increased circulation of resumes from current SEC staff — a sign that many of them were looking to jump ship.

SCOOP: @SECGov bracing for major exodus among senior enforcement lawyers in its crypto assets and cyber unit, according to officials at major law firms who have seen several of the resumes. @FoxBusiness is withholding names to protect privacy; the moves suggest that the bleed of…

— Charles Gasparino (@CGasparino) February 9, 2024

The report comes as undercurrents of discontent continue to surface alongside assertions within the crypto industry that the agency chair, Gary Gensler, is overly restrictive with companies.

Fox Business journalist Eleanor Terrett recently reported that the SEC is seeking to move forward with a record funding request of $2.4 billion, intended to fortify the agency by adding 170 staff positions. A portion of that amount is earmarked for the very unit facing potential attrition.

Adding to this. We reached out to @SECGov and one of the senior officials at the Crypto Assets and Cyber Unit for comment and have not yet heard back. @GaryGensler requested a record $2.4 billion budget for the agency this year, in part to add an additional 170 staff positions,…

— Eleanor Terrett (@EleanorTerrett) February 10, 2024

These appointments are reportedly designed to enhance the SEC’s grip on the complex and evolving crypto market, despite industry backlash against what is perceived as an aggressive regulatory overreach by the agency—particularly within the decentralized finance (defi) space, where applying traditional securities laws has presented substantial challenges for players.

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Speculation rises about Gensler’s future

To compound the issue of losing seasoned staff members, the political landscape leading into the U.S. presidential election has added further uncertainty.

Analysts believe if President Joe Biden secures a second term after the 2024 presidential election, Gensler’s chairmanship could extend to 2026. A victory for Donald Trump, the GOP frontrunner, would likely sway the SEC’s direction anew.

The intertwining of political outcomes with the SEC’s command also poses additional questions about the future impartiality and effectiveness of the Commission’s regulatory strategies in the crypto industry.

Traditionally, SEC Chairs have resigned their posts with a change in the party of the presidency, as observed with Jay Clayton’s post-election departure in November 2020. Such a move is usually meant to facilitate the incoming president’s ability to appoint a new SEC Chair and ensure that the Commission maintains a majority reflecting the party in power.

Industry analyst MetaLawMan suggested that should a Republican candidate like former President Trump or an outlier such as Rober F. Kennedy Jr. win the upcoming election; the question becomes whether Gensler will adhere to this long-standing tradition.

If Trump wins, what happens to @GaryGensler?

SEC chairmen normally submit their resignations promptly after a Presidential election results in a change of party.

After the November 2020 election, Jay Clayton (a Trump appointee) promptly resigned both as SEC Chairman and as a…

— MetaLawMan (@MetaLawMan) February 4, 2024

MetaLawMan suggested that Gensler, whose term would naturally conclude in 2026, might resist resignation, breaking away from historical norms.

According to him, this hypothetical poses a unique challenge, as there is no established precedent for a president removing an SEC commissioner “for cause” during a transition of power.

The lawyer believes the outcome of this political chess game could have heavy implications for the cryptocurrency sector.

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