SEC Down to Two Decision-Makers — US Crypto Regulation Enters the “Era of the Few”

Peirce’s departure leaves the SEC with just two commissioners, and a quiet amendment to the quorum rule lets a single commissioner settle matters; in the same week FinCEN withdraws its crypto-mixing reporting proposal. With legislation stalled, America’s crypto rules are being set by ever fewer people, at ever greater speed.

Rewriting the Quorum: From “Three Out Is Workable” to “One Can Decide”

On October 2, Peirce’s resignation took effect. In the letter she submitted on September 21, she said she trusted that Atkins, Uyeda and SEC staff would continue to balance “individual choice with reasonable regulatory protections.” That leaves the SEC’s commissioner roster at just two, down from the traditional five: Chairman Paul Atkins and Commissioner Mark Uyeda. The agency’s official service table records Peirce’s term as ending October 2.

What practitioners should really note is a procedural amendment effective the same day. A modification to 17 CFR 200.41, signed September 30 and effective October 2, adjusts the rules for constituting a quorum. The existing rule already let the number of sitting commissioners form a quorum when vacancies dropped the roster below three, so two sitting members could still keep the SEC operating. The new amendment extends the disqualification exception from “two eligible commissioners” to “one eligible commissioner”: if every other sitting member is disqualified from a particular matter, the single remaining eligible commissioner alone constitutes a quorum for that matter.

The order frames this in terms of “flexibility” and “finality” in internal management, but the practical effect is a sharp concentration of decision-making. Under the current roster, if Atkins is disqualified from a matter, Uyeda alone can form a quorum; and vice versa. The SEC is careful to draw a line: one commissioner’s “disagreement” with a proposal does not satisfy the disqualification condition — only a genuine conflict of interest as determined under 17 CFR 200.60 qualifies. Absence, non-attendance and recusal are not interchangeable. So the rule does not expand regulatory authority out of thin air; rather, it makes “one person can still decide” a institutional reality rather than a technical possibility.

The Queued Agenda: Custody Rules, Reg Crypto Assets and Tokenized Stocks

The slimmed-down SEC still carries a stack of crypto rules. On October 1, Atkins, Peirce and Uyeda — all three, before Peirce left — unanimously approved the custody rule proposal (release IA-7023), covering how regulated investment companies and registered investment advisers custody crypto securities; its public comment period is now extended to December 7. The earlier Reg Crypto Assets (issued August 18, published August 21) would create offering exemptions for certain investment contracts involving crypto assets — a one-time “startup” exemption (up to $5 million over four years) and a “fundraising” exemption (up to $75 million per 12-month period) — plus a conditional safe harbor on the definition of “investment contract,” with comments due October 20. Both remain proposals, not operative rules.

By contrast, tokenized-stock trading is already live through the September 17 Innovation Exemption — a temporary conditional exemptive order that lets qualifying “Tokenized Securities Venues” (TSVs) trade tokenized NMS stocks on public, permissionless distributed ledgers using permissioned automated market makers (AMMs), lasting five years through September 17, 2031. It requires tokens to confer the same dividend and voting rights as the traditional stock, gives issuers a written objection right for third-party tokenization, mandates that trading halt when the underlying stock halts, and sets scale limits such as 75 tier-one symbols and no more than 0.25% of monthly volume per security. These measures were introduced with three members present; they now enter a regime where “two, or even one, person can handle the follow-up.”

FinCEN Withdraws the Mixing Proposal: A Rare Pivot on Privacy Policy

The same week brought an equally telling signal on the agency side. On October 6, the Treasury’s Financial Crimes Enforcement Network (FinCEN) formally withdrew the 2023 “primary money laundering concern” finding under Section 311 of the USA PATRIOT Act, and the associated crypto-mixing reporting rule. The proposal would have classified international convertible-currency mixing as a class of transactions of primary money laundering concern, requiring covered financial institutions to file reports when they knew, suspected, or had reason to suspect a crypto transfer involved mixing. Its definition of mixing was broad enough to cover fund pooling, code-based splitting, routing through single-use wallets, asset-type swaps and user-initiated delays; reports would have captured transaction hashes, wallet addresses, IP addresses and customer identity information.

FinCEN acknowledged in the withdrawal that public comments warned the “expansive definition of CVC mixing” could chill legitimate activity and impose a substantial reporting burden. It cited a July 2025 report from the President’s Working Group on Digital Asset Markets (established under Executive Order 14178), which supported the right of lawful users to transact privately on public blockchains while conceding that criminals use mixers to launder funds, and recommended Treasury reconsider the proposal. On the same day, FinCEN also withdrew the December 2020 proposal that would have required banks and money services businesses to verify identities and keep records on certain unhosted-wallet transactions. The withdrawal is not a free pass: FinCEN said it will keep monitoring mixing activity, and existing Bank Secrecy Act obligations, money transmitter registration and suspicious-activity reporting remain in force.

But the regulatory side is not retreating wholesale. In the same week FinCEN withdrew, the US Justice Department’s criminal case against Tornado Cash co-founder Roman Storm continued to advance: on October 5, federal prosecutors in the Southern District of New York filed a new venue motion relying on the September 25 United States v. Sterlingov appellate ruling. Storm’s retrial is set for April 26, 2027, and conviction on the two open counts (money laundering and sanctions evasion) could carry up to 40 years. This draws a sharp line: administrative regulators are willing to relax compliance obligations on privacy tools, but criminal enforcement has not softened in tandem. For practitioners, “regulatory compliance risk” and “criminal legal risk” are being deliberately treated as two separate logics.

CFTC Enters the Picture and the Administrative Path Accelerates

Zooming out, the SEC downsizing and the FinCEN withdrawal are part of a larger picture. After the CLARITY Act fell short of the 60-vote threshold at 49:50 in the Senate on September 15, rulemaking shifted from Congress to the agencies. CFTC Chairman Selig has launched a crypto market-structure ANPRM with a 60-day comment window, aiming to build a “fit-for-purpose” framework for retail crypto transactions (CTXs) under existing statutory authority — Selig was explicit that the CFTC lacks authority to impose a mandatory CFTC-platform requirement without congressional action, and left open questions about whether FCM segregation rules and 17 C.F.R. Part 190 bankruptcy rules apply to CTXs, and whether customer assets would receive protection equivalent to commodity contracts. On the SEC side, the October 20 comment deadline for Reg Crypto Assets is near, and the December 7 deadline for the custody rule has been published.

The key judgment is that these administrative rules are far less stable than legislation. As Baker Botts put it, a crypto framework built through agency rulemaking and exemptive action is “more susceptible to modification by future Commissions than a framework established by Congress.” In other words, the more rules are settled by one or two commissioners or a single agency, the lower their predictability — today’s “lenient exemption” can be tomorrow’s “tightening target.” For practitioners with a long-term view, this is both a window and a sword hanging overhead.

Implications for Practitioners