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SEC Doubles Size of Crypto Enforcement Unit
The SEC released a statement yesterday that announced the Crypto Assets and Cyber Unit would increase its dedicated positions by 20, bringing the total to 50 dedicated positions within the unit.
"The U.S. has the greatest capital markets because investors have faith in them, and as more investors access the crypto markets, it is increasingly important to dedicate more resources to protecting them," said SEC Chair Gary Gensler. "The Division of Enforcement’s Crypto Assets and Cyber Unit has successfully brought dozens of cases against those seeking to take advantage of investors in crypto markets. By nearly doubling the size of this key unit, the SEC will be better equipped to police wrongdoing in the crypto markets while continuing to identify disclosure and controls issues with respect to cybersecurity." [SEC]
This release highlights crypto's growth and increasing seriousness over the past year.
“Crypto markets have exploded in recent years, with retail investors bearing the brunt of abuses in this space,” says Gary Gensler later in the release.
This announcement is also part of the jockeying between the SEC, the CFTC, and other agencies for regulatory control over the crypto markets—hence the repeated references to “protecting investors” as the prerequisite for additional oversight.
Most notable is the broad scope of the unit’s enforcement focus. The unit will investigate “securities law violations” in crypto asset offerings, exchanges, lending and staking protocols, DeFi, NFTs, and stablecoins.
Essentially: all of crypto.
It also signals the SEC’s desire to classify most (if not all) crypto offerings as securities. To date, the agency has not been clear in outlining its interpretation of securities law in the crypto space. Leaving many companies to proceed in the face of regulatory uncertainty.
Attempts to work hand in hand with the SEC have backfired. As in the case of Coinbase's rejected lending product, aptly named, “Lend.” The company attempted to work with the SEC for nearly six months before its release.
The SEC provided little to no feedback on the product, then made known its intent to sue Coinbase if it launched Lend. Coinbase was forced to indefinitely shelve the product.
The SEC never offered an explanation for its intention to sue.
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