Acting SEC chair Uyeda directs staff to review statements on crypto risks, security laws

Acting Securities and Exchange Commission (SEC) Chair Mark T. Uyeda directed agency staff on Saturday to review several previously issued staff statements regarding cryptocurrency investment and the application of securities laws to digital assets.

The directive, issued in accordance with Executive Order 14192—titled "Unleashing Prosperity Through Deregulation"—follows recommendations from the Department of Government Efficiency (DOGE). Uyeda noted that the staff statements will be examined to determine if they should be "modified or rescinded" to align with the current priorities of the agency.

Among the key documents slated for review, originally published in 2019, provides detailed guidance for assessing whether a digital asset is considered a security under the Howey test, which determines whether an investment involves an expectation of profits based primarily on the efforts of others. The application of Howey with respect to digital assets is a hotly-debated legal matter, though the SEC has made some recent clarifications, noting that memecoins are largely exempt from securities laws. 

Another significant staff statement under review is a 2021 SEC staff statement that strongly advises investors to exercise caution when investing in mutual funds with exposure to the Bitcoin futures market. This statement highlighted the speculative nature of Bitcoin futures, stressing the risk of market manipulation, liquidity constraints, and volatility, particularly for mutual funds. The SEC had expressed reservations about whether the Bitcoin futures market was sufficiently mature to support exchange-traded funds (ETFs) and other investment products without compromising investor protections, though in the time since the letter, spot Bitcoin and Ethereum ETFs have amassed tens of billions in value. 

Uyeda's directive also includes reviewing guidance issued in late 2022 following high-profile cryptocurrency bankruptcies. That guidance urged companies with exposure to crypto markets to transparently disclose potential impacts to investors, highlighting risks related to custody, liquidity, reputational damage, and regulatory scrutiny. 

Uyeda also flagged a Risk Alert from February 2021, warning of "unique risks to investors" from digital asset trading, and a 2020 statement from the staff of the Division of Investment Management inviting industry feedback on Wyoming's statement allowing state-chartered trust companies to custody digital assets. Uyeda also directed staff to review two statements regarding COVID-19. 

The SEC is currently experiencing a staff "exodus" as hundreds of staffers take buyout offers, Reuters recently reported. More than 600 people have accepted voluntary buyout offers and agreed to leave the SEC, according to the report, more than 12% of the agency's staff. A spokesperson for the SEC declined to give an additional comment beyond Uyeda's statement. 

Updated 9:07 pm EST to include the SEC's response.