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Republicans Peirce and Uyeda to kick off crypto changes

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Pair are weighing freezing some enforcement actions

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Expected to call for feedback on potential new regulations

By Hannah Lang and Chris Prentice

WASHINGTON, Jan 15 (Reuters) - Top Republican officials

at the U.S. Securities and Exchange Commission are poised to

begin overhauling the agency's cryptocurrency policies

potentially as early as next week when President-elect Donald

Trump takes power, said three people briefed on the matter.

Among the measures commissioners Hester Peirce and Mark

Uyeda are weighing are initiating the process that would

ultimately lead to guidance or rules clarifying when the agency

considers a cryptocurrency to be a security, and reviewing some

crypto enforcement cases pending in the courts, two of the

people said.

Paul Atkins, Trump's crypto-friendly pick for SEC chair and

former agency commissioner, is widely expected to end a crypto

crackdown led by President Biden's Democratic SEC chair Gary

Gensler, but it is unclear when the Senate will confirm him.

Gensler has said he will step down on Jan. 20 when Trump is

sworn in.

As of next week, Peirce and Uyeda will hold the majority

among the agency's politically-appointed commissioners and are

poised to get the ball rolling in the interim, the people said.

Like Atkins, the pair are crypto enthusiasts who have

criticized Gensler's tough stance on the industry and have in

the past floated alternative crypto-friendly initiatives.

Peirce and Uyeda were aides to Atkins when he was at the SEC

from 2002 to 2008 and the three have a good relationship,

according to one of the sources and several other former SEC

officials. The three have discussed potential crypto policy

changes, said the sources who declined to be identified

discussing private policy plans.

Peirce, Atkins and their representatives did not respond to

requests for comment. A spokesperson for Uyeda did not respond

to a request for comment.

Worried about fraud and market manipulation, Gensler's SEC

brought at least 83 crypto-related enforcement actions, suing

multiple prominent companies like Coinbase and Kraken,

agency data shows. In many cases, the SEC argued crypto tokens

behave like securities and that the companies and their products

should comply with SEC rules, although some allege fraud.

In the first few days of the new administration, the SEC is

expected to begin a review of those court cases and potentially

freeze some litigation that does not involve allegations of

fraud, said two of the sources. Some of those cases could

eventually be withdrawn.

Many of those defendants argue cryptocurrencies are more

like commodities than securities and that it is not clear when

SEC rules apply. They have called for the SEC to write new

regulations which would clarify when a token is a security.

Peirce and Uyeda are expected to kick off the early stages

of that rule-writing process, likely with a call for industry

and public feedback, the two sources said.

Reuters and others have previously reported that the SEC is

also likely to quickly rescind accounting guidance that has made

it prohibitively costly for some listed companies to hold crypto

tokens on behalf of third parties.

Trump, who courted crypto campaign cash with pledges to be a

"crypto president," is also expected to issue executive orders

urging regulators to review their crypto policies, Reuters

reported.

Bitcoin soared past $100,000 for the first time in December

on excitement over the new crypto-friendly administration.

'HELD ACCOUNTABLE'

Still, even with a head start, reaching an agreement on

crypto regulations could take months or longer, as could

resolving complex enforcement actions that hinge on the

definition of a security.

Dismissing dozens of enforcement actions would be

unprecedented, and could set a risky precedent by politicizing

the enforcement process, said Philip Moustakis, partner at

Seward & Kissel and former SEC attorney.

In some cases, the court may object, said other lawyers.

One option for the agency would be to re-open settlement

negotiations, said Robert Cohen, a partner at Davis Polk who

previously worked in the SEC's enforcement division.

Settlement talks, aimed at averting lengthy and public

litigation, are the norm, but crypto companies say the SEC under

Gensler has been unwilling to engage in substantive discussions.

Cohen added the new SEC leadership would likely continue to

take a tough line on crypto fraud.

"I think the industry wants to see fraudsters or wrongdoers

held accountable," he added.

(Additional reporting and writing by Michelle Price; Editing by

Nick Zieminski)