Dear President Elect Trump,
As the co-head of a major law firm’s digital assets practice, I am hopeful that your nominee to chair the Securities Exchange Commission (SEC) will make much-needed (and long-overdue) reforms to the way the SEC approaches crypto market regulation in the United States.
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However, as you know, it will take some time for your nominee to be confirmed as SEC chair, and for him to formulate new SEC guidance and rules for the crypto industry. Bearing that in mind, I write respectfully to propose an Executive Order that you can issue — on Day One of your Presidency — to help restore American leadership in the burgeoning crypto financial system.
While other countries have raced to create regulatory clarity for crypto entrepreneurship to thrive, U.S. lawmakers and regulators have thus far refused to mold and modernize decades-old rules that were never meant to apply to this groundbreaking technology, leaving U.S. market participants adrift in a sea of regulatory ambiguity. All the while, the SEC under its current chair, Gary Gensler, has teed up case-after-case against crypto companies, projects and founders based on allegations that they violated these outmoded and anachronistic requirements, even where there are no allegations of fraud or actual harm to investors.
It should be no surprise that this regulation-by-enforcement approach has chased many of the leading innovators and businesses in the digital assets sector offshore, jeopardizing America’s leadership position in the global economy.
The good news is that it’s not too late to turn things around. The current moment presents a once-in-a-generation opportunity to make America the crypto capital of the world, and harness the transformative promise that digital assets and blockchain technology hold for our country. While there are many legislative, regulatory and tax reforms that will be needed to seize this opportunity, there is one immediate action you can take — on Day One of your Presidency — to pave the way for the crypto sector’s resurgence in America.
You can issue an Executive Order on January 20 directing all federal agencies to:
1. Immediately stay all investigations, enforcement actions and prosecutions of crypto companies, projects and founders unless they involve credible allegations of (a) acts of fraud or other intentional misconduct that harms investors or other victims, or (b) conduct that threatens our national security.
2. Provide a written report to the Office of the President within 180 days detailing why the relevant agency should not immediately terminate such proceedings.
3. Promptly terminate all investigations, enforcement actions, or prosecutions of crypto companies, projects or founders that do not warrant continued prosecution.
This proposed Executive Order would be vitally important to undo the chilling effect on the digital assets industry that has been caused by the explosion in recent years of government enforcement litigation, including actions brought against good actors who at most did not follow outdated and inapplicable rules without causing harm to a single investor. The SEC, most notably, has extracted billions of dollars in disgorgement — a financial penalty which, several courts have held, should be used only in cases where an alleged violation of law caused pecuniary harm to victims—in victimless crypto enforcement lawsuits.
Many of these lawsuits have sought to impose draconian sanctions against legitimate crypto market participants that are providing the digital infrastructure needed for these markets to flourish in the United States. The time has come to rethink this blunderbuss approach to enforcement. The proposed Executive Order can achieve this on Day One of your Presidency.
To be clear, you have ample authority to do this. Article II of the Constitution gives the President the power to unilaterally issue such Executive Orders without legislation or regulatory rulemaking. The Justice Department’s own Office of Legal Counsel has opined that Article II empowers the President to compel all federal agencies — including independent regulatory agencies such as the SEC—to comply with executive orders, such as the one proposed here, that would apply generally to all Executive Branch agencies.
You can make America the center of the global crypto economy. The proposed Executive Order can be your first step, on Day One of your Presidency, towards achieving that goal.
