Born to run: US federal regulators race to relax crypto enforcement

In light of the clear intention by the Trump Administration to pivot away from crypto “regulation by enforcement,” particularly in the absence of allegations of fraud or actual harm, the race is on for US federal regulators – including the SEC – to change course. We report on a number of key developments at the SEC and CFPB, which underscore the rapid changes impacting the digital assets industry as well as the regulatory environment that governs it.

Weeks of significant regulatory moves

The latest developments follow weeks of significant crypto regulatory moves, including at the US Securities and Exchange Commission (SEC). Key SEC changes include President Trump’s nomination of Paul Atkins (who previously served as an SEC Commissioner under the Bush Administration) to succeed Gary Gensler as SEC Chair, the appointment of SEC Commissioner Mark Uyeda as Acting SEC Chair, and the launch of the SEC’s agency-wide Crypto Task Force led by SEC Commissioner Hester Peirce. 

Notably, Atkins has criticized prior US crypto regulation for being un-accommodating of new technology and reportedly favors a lighter touch regulatory approach. Atkins, Uyeda and Peirce are widely regarded as being “crypto-friendly”. 

On February 1, 2025, following the Consumer Financial Protection Bureau’s (CFPB) publication of proposed rules that would affect crypto payments (including stablecoins) and in-game purchases prior to the change in administration, Rohit Chopra, CFPB Director under the Biden Administration, stepped down. 

As CFPB Director, Chopra had touted a tough-on-industry approach, with a focus on limiting overdraft fees and credit card late fees and oversaw multiple enforcement actions against industry participants in the digital payments sector. In his place, President Trump appointed pro-crypto Treasury Secretary Scott Bessent as Acting Director of the CFPB. Bessent, in turn, swiftly halted many of the CFPB’s activities to “promote consistency” with the new Trump Administration’s agenda. 

Change of course for the SEC and CFPB

• Scaling back the SEC’s Crypto Assets and Cyber Unit: The SEC is shrinking its Crypto Assets and Cyber Unit (the Unit) within the Division of Enforcement, marking a major change to the SEC’s crypto regulatory and enforcement approach. Although the Unit was created in 2017 during the first Trump Administration, it was greatly expanded during Gary Gensler’s tenure as SEC Chair and has led multiple enforcement actions against a wide variety of cryptocurrency participants. 
   
• Changes to legal staff: On February 5, 2025 the New York Times and other outlets reported on the reassignment of the SEC’s chief litigation counsel, who oversaw the SEC’s enforcement actions against crypto industry participants including SEC v. Ripple Labs, and SEC v. Coinbase. In addition, a lawyer who oversaw the release of the controversial Staff Accounting Bulletin No. 121 was reportedly transferred from her previous role in the Chief Accountant’s Office. These moves follow the resignation of the SEC’s Chief Accountant, who retired effective January 24, 2025, shortly after Inauguration Day. Notably, such roles are not filled by political appointees and do not typically change hands upon a change in presidential administration.
   
• On-going SEC enforcement actions expected to wind down: Under the Biden Administration, the SEC increased its enforcement efforts concerning the digital assets industry, focusing on fraud allegations and compliance with SEC registration requirements, and in 2024, the SEC reached a $4.55 billion settlement with Terraform Labs. In light of the SEC’s new approach to crypto, many expect that a number of its ongoing high-profile litigation cases, such as those against prominent digital asset trading platforms, are now expected to be settled or dismissed outright. While the outcome of any particular ongoing crypto-related enforcement action remains uncertain, we and most observers believe the era of the SEC’s crypto “regulation by enforcement” appears to have ended.  
   
• The CFPB stops work: On February 4, 2025, a CFPB agency-wide email instructed CFPB staff members to immediately cease much of their work, "unless expressly approved by the Acting Director or required by law". As a result, the CFPB has currently halted all issuance, proposals, or adoption of any final rules or guidance, commencement or settlement of any enforcement actions, or issuance of any public communications of any type, including any research papers. Additionally, Acting Director Bessent has suspended the effective dates of all CFPB final rules that have been issued but have not yet become effective. In the past, the CFPB has taken a variety of steps to strengthen consumer protections in the digital payments sector. These developments suggest CFPB’s regulatory role is likely to be reduced, and perhaps eliminated, going forward. 

Looking ahead

Shifts in enforcement priorities and crypto regulatory approach, coupled with leadership transitions at both the SEC and the CFPB, are highly likely to have a material impact on such agencies’ future regulatory frameworks and guidance. 

The Trump Administration has been fast out of the blocks with key impacts for the digital assets industry - where it is likely that we will see more favorable treatment of digital assets at the US federal level. However it remains to be seen what comes next for other US federal and state regulators, as well as Congress. We will continue to monitor and report on these changes as they develop.