SEC To Start Cracking Down On Non-Compliant Crypto Firms In 2023

By Kevin • December 27, 2022 1:33 pm • Comments

It looks like the SEC intends to continue to bring strict regulation on the crypto industry in the United States as chairman Gary Gensler stated that the agency will be exploring all options to make crypto platforms compliant.

Whether or not the SEC can actually enforce Gensler’s grand vision is questionable, but it seems that Gensler is not willing to back down on his stance against crypto.

As expected, the SEC is already using the downfall of FTX as a reason for why the industry needs more regulation in order to protect investors.

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That event will likely continued to be used by lawmakers as a reason to put even more restrictions, but it still does not solve the underlying problem that exists today.

The real problem is that the current regulations do not even provide clear guidelines for crypto assets and thus leaves it open to the SEC’s interpretation.

Because of this, winners and losers in the crypto market may be picked by the SEC instead of letting the market decide.

Bitcoin.com reports:

SEC Chairman Gary Gensler stressed the importance of bringing crypto platforms into compliance after the securities regulator filed charges against former Alameda Research CEO Caroline Ellison and former FTX executive Gary Wang for their role to defraud equity investors.

The SEC boss tweeted Wednesday:

Until crypto platforms comply with time-tested securities laws, risks to investors will persist. It remains a priority of the SEC to use all of our available tools to bring the industry into compliance.

In an interview with Bloomberg Thursday, Gensler indicated that the SEC is just getting started with its crackdown on crypto firms that are not in compliance with its rules.

“The runway is getting shorter” for crypto firms to come in and register with the SEC, Gensler explained, emphasizing: “The casinos in this Wild West are non-compliant intermediaries.”

One of the other focuses that the SEC is talking about is the intention to get proof of reserves by crypto firms such as Binance.

The concern is that some of these businesses may not actually have enough funds to fulfill customer withdrawals which causes some concerns for investors.

However, such a problem could be mitigated by withdrawing crypto into private cold storage instead of leaving it on an exchange.

Now that the SEC has revealed that they intend to achieve this goal, it is still not clear how exactly they will enforce it.

Based on the history of the SEC, they have primarily followed a “regulation by litigation” policy which creates a lot of uncertainty for the crypto markets.

The regulatory landscape still remains uncertain, but it is clear some things will change after the FTX fallout either for better or worse.

Bitcoin.com concludes:

Congressman Tom Emmer (R-MN) tweeted Thursday: “Gary Gensler and the SEC had more meetings with SBF and FTX/IEX than anyone else in crypto, allegedly to craft a special regulatory framework designed to benefit FTX alone.” The lawmaker further wrote:

Making backroom regulatory deals with bad actors is not a tool in the SEC’s toolbox.

Congressman Emmer said last month that the FTX fallout is not a crypto failure but the failure of the SEC and Chair Gensler. The lawmaker from Minnesota has called on Gensler to testify before Congress about the cost of his regulatory failures.

Last week, the SEC chief stressed the importance of regulating crypto issuers and intermediaries. He previously said that most crypto tokens are securities but the crypto field is significantly non-compliant.

The securities regulator recently published its strategic plan for the next four years and crypto is among its top priorities. Gensler said in November that the SEC’s Enforcement Division remains focused on crypto.

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