The future of the U.S. federal securities regulator, and perhaps the direction of cryptocurrency policy, is up in the air.

Last week, President Donald Trump announced his intention to nominate Securities and Exchange Commission Chairman Jay Clayton to the post of U.S. Attorney for the Southern District of New York, asking Congress to approve the one-time corporate lawyer to become one of the nation’s most powerful financial crimes prosecutors.

If – and that is a big if – he is confirmed to become the new U.S. Attorney for the Southern District of New York, the president will likely appoint one of the remaining SEC commissioners as acting chair until Clayton’s successor is confirmed.

Traditionally, the acting chair is the senior-most commissioner who belongs to the same party as the president, said Jerry Brito, Executive Director of industry advocacy group Coin Center. 

In this case, that would be Commissioner Hester Peirce, known to many as “Crypto Mom” for her open-minded stance on the technology. 

In other words, there is a possible timeline ahead where three of the top U.S. financial regulators – the SEC, the Commodity Futures Trading Commission and the Office of the Comptroller of the Currency – would be headed by industry-friendly faces. Already, CFTC Chairman Heath Tarbert has taken steps to bring some regulatory clarity to crypto, approving ether futures and defining certain regulatory questions. Acting Comptroller Brian Brooks, who began the year at Coinbase, proposed a federal payments charter for crypto exchanges just weeks into his then-deputy role. 

Calm down, though. “Possible” does not mean “probable.” It does not mean “likely.” And it sure doesn’t mean “guaranteed.”

For one thing, Clayton’s nomination is contentious, and he might well not be confirmed to the new role, for reasons explained below. 

Further, the succession pattern Brito described is “not automatic,” he said. “There’s no rule that makes it automatic. That’s just custom.” 

It is also possible Commissioner Elad Roisman could get the nod. Commissioner Allison Herren Lee, a Democrat, is unlikely to become acting chair, owing to her party affiliation.

At stake is the potential future for crypto regulation. Clayton has at various points in time expressed concerns about market manipulation and maturity, security and consumer protection. Peirce, in contrast, has advocated for a more relaxed approach, and has come out in favor of exchange-traded funds (of which Clayton’s SEC most definitely is not) and a safe harbor for crypto token projects to build before having to consider securities laws.

U.S. Attorney General William Barr announced June 19 that Clayton would take over for the now-former U.S. Attorney, Geoffrey Berman, who Barr said was stepping down. Berman immediately announced he was not stepping down, to which Barr responded that President Trump had fired him, to which the president said he hadn’t. 

Ultimately Berman resigned on June 20.

A spokesperson for Clayton did not respond to a request for comment. However, Clayton said during previously scheduled congressional testimony he did not believe the nomination process would distract him from running the SEC.

He said he put his name forward for the U.S. Attorney role around June 12, a week before Barr announced the nomination, but that he would remain “fully committed” to the SEC until the Senate moved on his nomination.

“It was entirely my idea. It's something I've been thinking about for several months as a continuation of my public service,” he said. "It's a position that's very attractive to me."

Seth Bloom, a longtime general counsel to the U.S. Senate Judiciary Committee’s Antitrust Subcommittee, told CoinDesk that Democratic senators are unlikely to approve moving Clayton’s nomination to the Senate floor. 

It’s “very unlikely” Clayton is confirmed, he said. The sentiment was echoed by two other Washington, D.C., insiders, one of whom pointed out there are few legislative days left before this year’s presidential election. 

“We’re not talking a lot of days before the election,” said one lobbyist, who works with lawmakers and asked for their identity to be withheld. “Congress isn’t going to be in town very much. It’s July and some of September.”

If Trump wins the election, then “we can have a real conversation around that.”

Clayton’s nomination might also be held up by the Senate’s “blue slip” practice. 

Traditionally, when a candidate is nominated to a position requiring U.S. Senate confirmation, the senators representing the position’s home state turn in blue slips expressing an opinion of the candidate to the committee overseeing the initial process, in this case the Senate Judiciary Committee.

“The senators aren’t likely to turn it in, they already said they wouldn’t,” Bloom said, referring to New York's Chuck Schumer and Kirsten Gillibrand, both Democrats. “The nomination is stymied right now unless they can convince Schumer and Gillibrand to turn in those slips.”

Another D.C. insider said Senate Judiciary Committee Chair Lindsey Graham (R-S.C.) could ignore the blue slip tradition, but he has already said he wouldn’t and doing so “would be highly controversial.”

Clayton hasn’t even been formally nominated. While Barr said the president intends to nominate the SEC chair, the White House still needs to prepare the paperwork. 

Typically the White House conducts a background check in preparation for formally nominating a candidate, though this might be easier given Clayton was vetted for his SEC role, the insider said.

Other objections could include the fact that Clayton has never been a prosecutor, though he told Congress he oversees more than 1,000 enforcement agents at the SEC. 

Chester Spatt, a professor of finance at Carnegie Mellon and former chief economist at the SEC, told CoinDesk that Clayton does have experience managing complex financial issues and large teams dealing with these issues, both traits he could apply to running the U.S. Attorney’s office.

Back to the SEC: In the (by no means guaranteed) scenario where Clayton vacates the chairmanship, a full-time successor would need to be confirmed by the Senate, after being nominated by the president. 

Only one of the existing commissioners can be named acting chair; the president cannot designate a non-commissioner, such as an SEC staffer, to the post.   

“Whether he’ll nominate someone in the near term while [Clayton's] nomination is pending is unclear to me,” Carnegie Mellon’s Spatt said. 

He told CoinDesk past and present commissioners and senior officials are likely places to look for a nominee to serve as the new chairperson, though that isn’t a formal requirement. 

Clayton himself was not an SEC staffer or commissioner prior to his nomination as chairman, Spatt noted. 

“There could be somebody who’s ... running a securities practice in a law firm, or who has a major leadership role in a Wall Street firm or who has experience at the [Federal Reserve],” he said. “These are all places that would be natural places for a president to try and identify a potential chair.”

Brito noted Peirce had recently been renominated for a second term at the Commission, meaning she will have to be confirmed regardless. If she happens to be named Chair after her Commissioner confirmation hearing, she will likely have to sit for a second hearing.

“That doesn’t tell you anything about whether that makes her more or less likely to be appointed by the President to chair so don’t read anything into that but that’s just a fact that she’s going to go through her confirmation again in the next couple weeks,” Brito said.

(Also, it’s actually possible the president doesn’t have the legal authority to name the SEC chair, but it’s just now accepted as tradition, tweeted Coin Center Director of Research Peter Van Valkenburgh after looking into how that role came about.)