What Reforms Can We Expect from Paul Atkins at the SEC?

Key Takeaways:

Donald Trump recently nominated Paul Atkins to replace Gary Gensler as SEC Chair. The veteran lawyer is expected to create a clear set of rules to govern crypto assets. Analysts also expect Atkins to prioritize investor protection.

Donald Trump recently picked Paul Atkins as the next Chairman of the U.S. Securities and Exchange Commission (SEC), making good on his pre-election promise to fire incumbent Gary Gensler on his first day in office.

But Trump won’t have to fire Gensler at all. The 67-year-old, who has been on a warpath against crypto since taking over as SEC Chair in 2021, said he would resign from his position on Jan. 20, when Joe Biden leaves office.

Atkins, a veteran lawyer and businessman with prior SEC experience, has his work cut out. He is stepping into the shoes of a man who has become one of the crypto industry’s biggest nemesis.

Many people expect him to “clean the mess” created by Gensler, who is accused of trying to collapse the industry through “regulation by enforcement”.

Hester Peirce, a sitting SEC commissioner who is also known as “Crypto Mom” for her pro-crypto stance, said Atkins was the best man for the job.

“We have a lot of work to do at the SEC to advance free markets, capital formation, investor choice, and innovation,” she wrote on X. “I’m delighted that Paul Atkins will be returning to lead the effort.”

How Gensler Became ‘Crypto Enemy Number One’

For context, Gensler is a product of the indeterminacy of U.S. law on crypto. With the law vague, the SEC is empowered to decide which token is an investment contract. And it has notoriously pursued tokens and NFTs with real-world use cases outside speculation.

Under Gensler, the regulator has taken a record number of enforcement actions against crypto companies. In 2023, the Commission pursued 53% more actions against the industry than in the previous year.

Furthermore, during his three years in office, Gensler’s tenure has been responsible for 50% of the enforcement actions taken by the SEC against the crypto sector since 2015, according to crypto venture firm Paradigm.

The $238 million spent by the crypto lobby supporting pro-industry candidates in the November election still pales in comparison to the $429 million lost by the 100-member Blockchain Association fighting the SEC.

The moral of the story is that regulating cryptocurrency under the current laws is as much a matter of philosophy as it is of law.

By nominating Atkins, who is considered pro-Bitcoin, Trump is evidently paying back the support of the crypto community. The President-elect is confident he picked the right person for the job.

“Paul is a proven leader for common sense regulations,” Trump said when announcing the nomination earlier this December. “He believes in the promise of robust, innovative capital markets that are responsive to the needs of investors…”

‘Solid Pick’

Atkins is a George Bush-era SEC commissioner and has the progressive resume Trump could use at the regulatory body. Since stepping down at the end of Bush’s term, Atkins has leveled eloquent opposition to Dodd-Frank, a package of rules applied after the 2008 financial crisis meant to effect sweeping changes to the U.S. financial regulatory system.

Atkin’s SEC tenure also marked him as an ideal candidate in the Trump era, according to previous reports. The former commissioner opposed hefty fines for companies violating securities laws. In recent times, he has dabbled in crypto advocacy through the lobby group, Token Alliance.

Mason Jappa, CEO of U.S.-based Bitcoin mining company Blockware, described Trump’s nomination of Atkins as “a solid pick.”

“What cryptocurrency needs from the regulators in order to thrive in America is transparency and consistency – Atkins is known for both of these,” Jappa told Cryptonews, adding:

“At the very least, crypto will do well in a neutral regulatory environment, and Atkins, as a Libertarian, can bring that to the table even if he does not end up being radically pro-crypto.”

Jappa said he expects Atkins to create “a clear set of rules to play by for large capital allocators to begin taking the industry more seriously”.

He noted that the SEC’s approval of spot Bitcoin and Ethereum exchange-traded funds (ETFs) was “a huge step in that direction.”

Regulatory Clarity

Some critics appear to fear deregulation under Atkins’ tenure. However, George Georgiades, general counsel at stablecoin payments network Borderless.xyz, said the crypto industry has routinely called for regulatory clarity, not deregulation. It wants an orderly rule-making process, he said.

Speaking to Cryptonews, Georgiades said Atkins is joining the SEC at a “critical time [for] our industry”. He expects the 66-year-old to effect changes that will make America a leader in cryptocurrency adoption.

When asked about the changes Atkins could implement to facilitate the crypto industry, Georgiades said:

“It starts with returning to our traditional rule-making process and meaningful engagement between the SEC and market participants. [This is] to ensure there is regulatory clarity on how digital assets are characterized, defining the extent of the SEC’s jurisdiction versus other U.S. regulators and balancing consumer protection with the need to embrace innovation.”

Georgiades, a tech lawyer with experience in regulatory compliance, said there are “complex legal issues” regarding the characterization of some crypto assets that need to be reformed. It includes the design of staking products, stablecoin structures, and tokenized Real World Assets (RWA).

He said such issues require clarity “with respect to whether oversight lies within the jurisdiction of the SEC. If so, how to bring these products with our registration process or exemptions.”

Georgiades stated:

“The SEC’s mission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. Regulation by enforcement and ambiguity will not achieve those goals.”

Courage Kimber, an American crypto analyst and digital nomad, believes Atkins is Donald Trump’s “least controversial” pick because of his prior experience as SEC commissioner.

“Considering the fact he [Atkins] works as a lobbyist for crypto firms and has ties to the Chamber of Digital Commerce, there’s a strong likelihood he will develop a clear regulatory framework for the industry to follow,” Kimber told Cryptonews via LinkedIn.

Could Paul Atkins Go for Deregulation?

For Slava Demchuk, CEO of the compliance and blockchain forensics firm AMLBot, Atkins “could favor deregulation, potentially reducing the compliance burden for crypto companies.”

Demchuk highlights the multiple regulatory bodies and agencies that currently oversee the crypto industry, including the SEC, the Commodity Futures Trading Commission (CFTC), FinCEN, and IRS.

He said, “Without a unified regulatory framework or a clear understanding of each agency’s scope of authority, it becomes difficult for companies to navigate compliance requirements and operate effectively.”

Demchuk told Cryptonews that he expects Atkins “to broaden support for crypto services within national banks, simplifying integration with traditional finance infrastructure.” He added:

“The administration might champion the use of regulatory sandboxes, allowing banks to safely experiment with blockchain and digital asset innovations without the constraints of heavy regulatory burdens. He would likely advocate for minimal government intervention…”

Sid Powell, CEO and co-founder of crypto lending platform Maple, said Trump’s pick of Atkins “indicates that the new administration is not only looking for proponents of crypto but also those who have taken the time to develop relationships within the industry.”

“U.S. innovators and startups in crypto/blockchain are going to be happier under an Atikins regime,” Powell told Cryptonews. “There’s going to be a greater push for innovative laws and for regulators and key crypto players to work together rather than face regulatory adversity.”

But all the anticipated reforms depend on whether Atkins takes the job. The former commissioner is reluctant to leave his consulting firm, Patomak Global Partners, because of the amount of work needed to turn around the SEC, Coindesk reported, quoting sources close to the matter. Atkins believes Gensler “mismanaged” the agency, the sources say.

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