The US Securities and Exchange Commission's (SEC) aggressive enforcement approach to crypto regulation under Chair Gary Gensler is stifling innovation and driving American digital asset companies away from developing in the US. This approach creates uncertainty and pushes jobs, investment, and innovation overseas. The SEC needs to shift from "regulation by enforcement" to a transparent rulemaking process informed by public input in order to restore confidence and keep the US competitive in the crypto sector. American digital asset firms have spent over $400 million defending against SEC enforcement actions, highlighting the significant opportunity costs of delayed innovation, job losses, and diverted capital. The SEC's strategy is seen as anti-innovation and must be changed. The commission's reliance on enforcement actions instead of clear rulemaking bypasses public input and creates a misalignment between regulatory means and ends. The industry has continuously urged the SEC to establish clear rules, but instead, the commission has stonewalled and followed up with enforcement actions. Predictably, voters believe the US has taken the wrong approach to crypto regulation, preferring clear rules over enforcement, and the SEC should wait for clearer guidelines from Congress. The consequences of the SEC's enforcement-centric approach include ventures that never materialize, investments that are not made, and innovation redirected to more welcoming international jurisdictions. To maintain its position as a global financial leader, the US needs to balance innovation and regulation effectively. A policymaking process driven by stakeholder input is necessary, as regulation by enforcement wastes resources, harms investors, stifles innovation, and pushes capital out of the country. The SEC must change its approach to avoid losing its competitive edge in the digital economy.



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