Former SEC Chair Jay Clayton Talks Rapidly Evolving Crypto Regulation Landscape

Former Securities and Exchange Commission (SEC) Chairman Jay Clayton’s stance on the government’s efforts to regulate crypto technologies has seemingly softened since his time as SEC chair, according to comments from the former securities regulator during a discussion with Grayscale Chief Legal Officer Craig Salm during the "Grayscale Convenes" livestream on LinkedIn Thursday.

The SEC can regulate many cryptocurrencies and classify them as securities because security laws regulate transactions in securities and not just the securities themselves, the ex-regulator said. He also noted that spot bitcoin exchange-traded funds (ETF) face market manipulation concerns and detailed how cryptocurrencies’ global reach means that products regularly span the jurisdictions of various regulators, which renders it difficult for regulators to apply regulations to cryptocurrencies.

Grayscale is a subsidiary of CoinDesk parent company Digital Currency Group.

“If you look at different products or different aspects of what I would call the overall crypto ecosystem, [you] have products that span the jurisdiction of various domestic regulators, '' said Clayton. “So you had these global products and you’re trying to apply domestic regulation to them and then in applying domestic regulation to them you had products that had overlapping jurisdiction, and that made applying regulations challenging”

Clayton, who now serves as an adviser for Fireblocks, a $2 billion crypto custody firm, also shared that he now believes government agencies should not take a one-size-fits-all approach to crypto regulation.

“​​I believe that regulation, to the extent possible, should be technology agnostic,” said Clayton.

The ex-regulator, who helmed the most influential governmental regulatory body for the crypto industry from 2017 until his resignation in 2020, has been criticized for his shifting stance on crypto regulations before.

Last year, some members of the crypto community criticized Clayton for writing a pro-blockchain op-ed for the Wall Street Journal, calling out the ex-regulator’s role in spearheading the SEC’s pursuit of high-profile crypto projects that were alleged by the government agency to sell unregistered securities offerings.

During Clayton’s tenure, the SEC aggressively pursued crypto projects, including Block.One, which reached a settlement with the SEC over its $4 billion ICO for the EOS blockchain in late 2019. In addition, the ex-regulator’s time at the SEC paved the way for the agency’s suit against Ripple Labs, alleging it sold XRP as an unregistered security. The digital asset’s price collapsed following the SEC lawsuit.