In recent discussions surrounding cryptocurrency regulations, the importance of proper governance has become increasingly evident. The Securities and Exchange Commission (SEC) has found itself under scrutiny regarding its processes, particularly the legitimacy and accountability of its Crypto Task Force. A critical aspect of this conversation focuses on the necessity for the SEC to utilize notice-and-comment rulemaking as a proper standard for its policy pronouncements.
As highlighted in a recent statement released by Benjamin Schiffrin, Director of Securities Policy at Better Markets, there is a growing concern regarding the protection of everyday Americans—especially older adults—from the rampant threats posed by crypto scams. The FBI’s 2024 report reveals a staggering $2.9 billion loss among Americans aged 60 and above due to cryptocurrency fraud. The implications of this statistic are severe. They underline not only a pressing concern about the safety of investable assets but also the necessity for regulatory bodies to act decisively.
The SEC recently hosted a webinar aimed at raising awareness about relationship investment scams, coinciding with World Elder Abuse Awareness Day. These scams, often orchestrated through social media and online platforms, leverage cryptocurrencies to exploit vulnerable populations, further emphasizing the need for enhanced vigilance and protective measures.
While the SEC’s intentions to address these issues are commendable, it is essential that the agency operates under legitimate frameworks. Schiffrin’s statement argues that the Crypto Task Force’s reliance on staff guidance rather than formal rulemaking deprives their actions of legitimacy. In fact, the absence of public input during the policy-making process weakens the foundation upon which these policies stand. The public deserves to have a voice in regulations that significantly impact their financial security, especially regarding new and complex assets like cryptocurrencies.
Critics, including SEC Commissioner Caroline Crenshaw, have voiced similar concerns. She argues that the SEC has shifted toward a stance of permissiveness, prioritizing rapid decision-making over accountability. This approach is alarming. It suggests a potential pathway whereby the agency may sidestep essential legislative processes, ultimately leaving the public in the dark regarding upcoming changes and policies.
The calls for change are not without precedent. Notably, both SEC Chair Gary Gensler and Commissioner Hester Peirce have previously criticized the reliance on informal guidelines. Yet, under their leadership, the Crypto Task Force has continued this trend. Such a contradiction raises serious questions about the commitment of the SEC to uphold standards that protect the public from financial risks.
One major flaw in the current approach to policy-making within the crypto space is the absence of a formalized notice-and-comment rulemaking process. This process mandates a public disclosure of proposed regulations and allows for community feedback—ensuring that stakeholders can voice their opinions and opponents can challenge the policies before they take effect. This level of transparency is crucial, particularly in a landscape where fraud is prevalent and the implications of regulation can be drastic.
Moreover, the SEC’s failure to operate transparently could have damaging long-term effects, eroding trust between the regulatory agency and the public. In an age where confidence in financial institutions is paramount, such a gap could foster an environment of skepticism, making it more challenging for the agency to enact effective regulatory measures in the future.
Better Markets, the organization spearheading the recent call for changes in the SEC’s approach, asserts that a robust regulatory framework can only be established through active engagement with the public and industry stakeholders. This engagement is not only a best practice but an essential component of responsible governance. It is particularly important to protect the most vulnerable groups within our population, such as older Americans who are increasingly targeted by scammers in the cryptocurrency space.
In essence, the SEC’s Crypto Task Force must reevaluate its current framework and prioritize legitimacy in its policy-making process. The reliance on staff guidance over participatory decision-making undermines public trust and does not fulfill the agency’s mandate to protect investors. By embracing notice-and-comment rulemaking, the SEC can enhance both the transparency and accountability of its actions—ultimately creating a safer and more secure environment for all investors.
In conclusion, as the cryptocurrency landscape continues to evolve, so too must the regulatory frameworks that govern it. A commitment to legitimate and participatory policy-making is essential. The SEC can inspire confidence among investors, particularly the older demographic most vulnerable to scams, by taking these necessary steps. It is time for the SEC to prioritize more inclusive governance and solidify its role as a protector of American financial well-being.
