Paul Atkins Blames US Government for FTX Collapse, Promises Transformation in Cryptocurrency Regulation

• Paul Atkins blames US laws for FTX collapse.
• Soft SEC regulation could speed up ETF approvals.
• Appointments promise advancement in crypto governance in the US.

Paul Atkins, former commissioner of the US Securities and Exchange Commission (SEC) and current CEO of consultancy Patomak Global Partners, attributed the collapse of FTX to cryptocurrency laws outdated in the US, arguing that the government has failed to adapt to new technologies. Atkins, known for his advocacy of cryptocurrencies, has argued that the US regulatory environment has failed to accommodate blockchain, contributing to one of the most notorious meltdowns in financial history.

While he doesn’t deny the fraudulent behavior of FTX founder Sam Bankman-Fried, Atkins suggests that the government also has its share of responsibility. In a podcast, he said: “The collapse of FTX was this international disaster that happened because, I think, the US didn’t make our rules appropriate for this new technology.”

Atkins’ consultancy, Patomak Global Partners, had direct ties to FTX. Court documents reveal that Patomak was listed as a creditor in FTX’s bankruptcy, related to a consulting agreement signed in January 2022, just ten months before the collapse. The firm also acted as a lobbyist for FTX.

Despite these connections, Atkins continues to criticize the U.S. regulatory approach, noting that unclear and overly restrictive rules have forced major players like Binance to operate overseas. Binance, the world’s largest cryptocurrency exchange, has had to pay $4 billion in fines to resolve allegations of violating money laundering and sanctions laws in the U.S.

Atkins proposes solutions, supporting SEC Commissioner Hester Peirce’s Token Safe Harbor Act, which would grant blockchain developers a grace period to build decentralized networks before facing federal securities laws. Peirce, a longtime ally of Atkins, has publicly praised his appointment, calling him an “ideal choice” to lead the SEC.

The Trump administration, once skeptical of digital currencies, has pledged to defend the cryptocurrency industry, contrasting with the Biden administration’s hardline stance. With Atkins at the helm, the SEC is expected to take a more lenient approach to regulating cryptocurrencies. Hours after his appointment was announced, Bitcoin surpassed $100.000 for the first time in history.

However, critics warn that Atkins’ pro-crypto stance could embolden bad actors, leading to fewer enforcement actions against cryptocurrency companies. Ongoing cases against Coinbase and Kraken could still proceed. John Reed Stark, the SEC’s former chief enforcement officer, said Atkins will likely “review a spreadsheet of all active litigation” to decide which cases to dismiss, settle or move forward.

Under Atkins’ leadership, the SEC is expected to take a more supportive approach to approving digital asset ETFs. Michele Neitz, a professor and founding director of the Center for Law, Technology and Social Welfare at the University of San Francisco, believes that approvals for ETFs like Solana’s will likely be accelerated. “ETF approvals will likely be much easier under Atkins’ leadership. While the SEC’s focus will still be on investor protection and disclosure, an Atkins-led SEC will likely move more quickly toward approval than a Gensler-led SEC,” Neitz said.

Additionally, Atkins is expected to change the SEC’s approach to enforcement. Neitz predicts the agency may drop its appeal in the Ripple case and reconsider other high-profile enforcement actions, such as those against Coinbase.

The Financial Innovation and Technology Act, pending in Congress, could provide much-needed clarity by establishing federal definitions for digital assets. According to Belle, this legislation could create a unified regulatory framework that fosters innovation while protecting consumers.

The appointments of Atkins and Sacks signal a potential realignment of U.S. crypto policy, shifting from punitive enforcement to collaborative innovation. As the Trump administration takes shape, the crypto industry awaits a clearer regulatory framework that can finally unlock its full potential.