As her term nears its end, U.S. Securities and Exchange Commissioner Caroline Crenshaw has used her final weeks to voice concerns regarding the agency's approach to digital assets and investor protection. Speaking at a Brookings Institution event on Thursday, Crenshaw criticized what she sees as an erosion of standards at the SEC and a move towards policies that disadvantage retail investors.
Crenshaw, who was sworn in as an SEC commissioner in August 2020, has been a vocal critic of the SEC's approach to crypto regulation. She has argued that the agency has leaned too heavily on a regulation-by-enforcement approach, creating an unpredictable environment that stifles innovation and undermines investor confidence. This approach, she contends, has resulted in inconsistent legal interpretations and a lack of clarity for the crypto industry.
A particular point of contention for Crenshaw has been the approval of spot Bitcoin ETFs. She publicly opposed the SEC's decision to approve these products, calling it "unsound and ahistorical" and arguing that it could sacrifice investor protection. Crenshaw maintained her stance even after a court ruling stated that the SEC's previous denial of such products was "arbitrary and capricious". She argued that the SEC's approval of spot Bitcoin ETFs was inconsistent with the agency's stance on other crypto assets, particularly regarding whether Ether (ETH) and Solana (SOL) should be classified as securities. She questioned how these assets could be considered not securities for registration requirements but conveniently be classified as securities when a registrant seeks to sell a new product.
Beyond crypto, Crenshaw has raised concerns about broader changes at the SEC that she believes weaken investor protections. These include moves to reduce the frequency of public company financial disclosures, allow retail investors to include private assets and crypto in retirement accounts, and increase barriers for investors to submit proposals for publicly traded companies' proxies. Crenshaw characterized these changes as showing "outright hostility to investor proxy proposals" and accused the current commission of "moving markets out of the light and into the darkness". She also criticized the SEC for implementing much of its new vision through staff statements, which she argues "flouts notice-and-comment rulemaking" and deprives the public of the opportunity to provide input on policymaking.
Crenshaw's criticism comes as she prepares to depart the SEC, along with fellow Democrat Commissioner Jaime Lizárraga. Their departure will leave Hester Peirce and Mark Uyeda, who are perceived as more crypto-friendly, as the remaining commissioners. The crypto industry has been critical of Crenshaw's tenure at the SEC. Some have even argued that she has been more "anti-crypto" than SEC Chair Gary Gensler. Critics point to her opposition to spot Bitcoin ETFs and her perceived reliance on outdated data and flawed arguments in her dissenting opinions. As Crenshaw prepares to leave the SEC, her parting words serve as a reminder of the ongoing debate surrounding crypto regulation and investor protection, and the challenges the agency faces in finding a balanced approach that fosters innovation while safeguarding investors.
