SEC Over-Regulation Shows As Agency Issues Dozens Of Enforcement Actions

February 22, 2023 11:16 am Comments

In the past few months, the data has showed that the SEC has now issued dozens of new enforcement actions on the crypto industry.

This signals that the SEC intends to become much more aggressive on regulation which it had stated that it would do after the crypto meltdown that happened last year.

With that being said, this is concerning for many investors as it creates unpredictability within the markets and may ultimately slow down growth and innovation in the country.

Also, the SEC seems to be the only government agency that is involved in regulating the space right now as other agencies like the CFTC are still not that actively involved.

Only Congress and the Supreme Court may be able to correct the SEC’s role and authority which is what many are hoping for.

CoinDesk reports:

Late last year, a what-is-the-SEC-waiting-for sense started building among industry insiders, because the crypto enforcement cases had seemingly slowed. Many wondered whether the commission was waiting for the outcome in its key court case with Ripple before forging further into legal battles with crypto firms.

But the SEC leapt out of the gates in 2023 with a series of actions and policy decisions with huge potential implications for digital assets.

“It’s been quite deliberate in an attempt to reach more kinds of participants in the market, and have an ability to bring enforcement action across a wider range of targets,” said Amy Jane Longo, a former trial lawyer for the SEC in Los Angeles who now works at Ropes & Gray.

Apart from its campaign against token issuers and platforms, her former agency has been tackling everything from staking services to stablecoins to celebrity promotions.

The SEC has also been very aggressive when it comes to categorizing digital assets as securities lately despite its ongoing lawsuit with Ripple which has not been going well for the agency.

A stable coin was recently accused as being a security which had shocked many within the industry due to the fact that a stable coin is not used for generating profits.

As a result, many are speaking out against the decision and much of the crypto community is refusing to comply with the SEC’s demands.

A follow-up concern is if the SEC will start to force exchanges within the country to delist some of these assets which will certainly limit the freedom of many crypto investors.

It is expected that this enforcement surge will continue in the near future despite the market being expected to make a recovery soon after the crypto winter.

CoinDesk concludes:

While Gensler continues to warn about the compliance runway growing ever shorter, recent weeks have seen a surge in SEC cases that could further tip the scales.

The agency piled onto the litany of civil and criminal accusations against fallen crypto platform FTX by saying its exchange token, FTT, is an investment contract that should be in the hands of SEC oversight.

The regulator then pursued cases against Gemini Trust and Genesis Capital for yield products it also considers securities (like BlockFi’s), and against Kraken, arguing the firm’s staking service fit that same bill. (Genesis is a subsidiary of Digital Currency Group, CoinDesk’s parent company.)

The next in line for the SEC’s securities scrutiny could be Paxos, which received a notice from the agency that it may be in trouble for issuing the Binance USD token as an unregistered security – an accusation Paxos denies.

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