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Reports Suggest Cryptocurrency Unit at SEC Could See Attorney Exodus

A Feb. 9, 2024, report by Charles Gasparino, a Fox Business contributor, has hinted at the imminent departure of experienced legal professionals from the United States Securities and Exchange Commission’s (SEC) digital assets and cyber unit. According to Gasparino, there has been a rise in resumes circulating among current SEC employees, suggesting a desire to explore other opportunities.

This comes amid growing dissatisfaction within the cryptocurrency industry regarding the perceived stringent approach of Gary Gensler, the commission’s chair, toward companies operating in the sector.

Eleanor Terrett, a journalist at Fox Business, recently disclosed that the commission is pursuing a record-breaking $2.4 billion in funding, aimed at bolstering its operations by creating 170 new job posts. A fraction of this allocation is intended for the digital assets and cyber unit. Reportedly, the goal of the new hires is to strengthen the SEC’s control over the complex and dynamic cryptocurrency sector, despite industry resistance against what it views as onerous regulations by the commission, especially within decentralized finance (DeFi), where conventional securities laws pose significant challenges.

In addition to the imminent departure of experienced staff, further unpredictability is brought about by the political atmosphere surrounding the presidential election. Analysts predict that Gensler’s term may last until 2026 if President Joe Biden is re-elected in 2024. On the other hand, Donald Trump’s victory could have a different effect on the SEC’s course.

The entwining of the SEC’s authority with political outcomes further raises concerns about the future objectivity and efficacy of the agency’s regulatory tactics in the cryptocurrency sector.

Historically, when the party affiliation of the president changes, SEC chairs resign, allowing the incoming president to name a new chair who supports the current party’s position. This custom guarantees a commission majority that reflects the governing party, as evidenced by Jay Clayton’s retirement following the 2020 election.

Industry expert MetaLawMan speculated on potential deviations from this tradition, noting that it was uncertain whether Gensler would resign if a Republican such as Donald Trump or an outsider like Robert F. Kennedy Jr. won the election. Given that Gensler’s term would expire in 2026, MetaLawMan speculated that he would refuse to step down, defying precedent.

One particular difficulty, according to MetaLawMan, is that there is no prior precedence for a president to remove a commissioner “with cause” during a change of administration. He noted that the way this political situation plays out will have a significant impact on the future of the crypto industry.

Needless to say, crypto industry companies such as Stronghold Digital Mining Inc. (NASDAQ: SDIG) will keep an eye on the developments at the SEC because any personnel shakeups there have potential for significant ramifications on the way the regulatory agency regards the crypto industry.

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