SEC Continues Pursuit of Crypto Exchanges and DeFi Projects Violating Securities Laws

by Tareq Sikder
  • SEC's expands list of Investigations beyond Coinbase and Binance.
  • It shifts approaches from settlements to court battles.
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The U.S. Securities and Exchange Commission (SEC) is showing no signs of slowing down in its efforts to enforce securities laws within the cryptocurrency space, according to David Hirsch, the head of the agency's Crypto Assets and Cyber Unit.

Compliance Issues in the Cryptocurrency Industry

Speaking at the Securities Enforcement Forum Central in Chicago, Hirsch emphasized the SEC's commitment to scrutinizing crypto exchanges and decentralized finance (DeFi) projects, following the recent legal actions against Coinbase Inc. and Binance.

Hirsch's enforcement office has been unusually active, and he made it clear that they are actively investigating other firms engaged in activities similar to those observed at Coinbase and Binance. He noted that compliance issues within the industry extend beyond just these two entities.

"We're going to continue to bring those charges," stated Hirsch, underscoring the SEC's determination. He mentioned that the agency has several other businesses within its crosshairs that are operating in ways similar to the aforementioned exchanges.

A Shift in Enforcement Approach: SEC's New Strategy in Cryptocurrency Cases

The SEC has already been involved in complex crypto-related cases in federal courts, acknowledging that success has not always been guaranteed, as evidenced by the ongoing appeal in the Ripple case.

Hirsch stressed that the SEC's interest in the cryptocurrency space goes beyond high-profile exchanges. "We're going to continue to be active as to intermediaries," he stated.

"That can be brokers, dealers, exchanges, clearing agencies, or any others who are active in this space, are within our jurisdiction and not meeting their obligations, either through registration or failure to provide adequate or complete disclosures."

Moreover, Hirsch made it clear that DeFi projects would not escape the SEC's scrutiny. "We're going to continue to conduct investigations, we're gonna be active in the space, and adding the label of DeFi is not going to be something that's going to deter us from continuing our work," he affirmed.

The SEC's approach to cryptocurrency enforcement represents a significant departure from its traditional approach, which usually involved targeting misdeeds at regulated businesses, often large Wall Street firms with substantial legal resources, that quickly required settlements.

However, crypto companies, facing charges that could threaten their very existence, have been more inclined to contest the SEC in court.

One challenge for the SEC in this domain is its finite enforcement budget, which is often dwarfed by the financial giants it typically faces, limiting its capacity to pursue cases aggressively.

Hirsch acknowledged this limitation, stating, "We do have a lot of litigation going on."

The event's moderator and a former SEC crypto enforcement chief, A. Kristina Littman, commented, "It feels like you're at capacity."

The SEC's unwavering pursuit of crypto exchanges and DeFi projects demonstrates its commitment to regulatory oversight within the evolving digital asset landscape, setting the stage for continued legal battles and potentially shaping the future of crypto regulation in the United States.

The U.S. Securities and Exchange Commission (SEC) is showing no signs of slowing down in its efforts to enforce securities laws within the cryptocurrency space, according to David Hirsch, the head of the agency's Crypto Assets and Cyber Unit.

Compliance Issues in the Cryptocurrency Industry

Speaking at the Securities Enforcement Forum Central in Chicago, Hirsch emphasized the SEC's commitment to scrutinizing crypto exchanges and decentralized finance (DeFi) projects, following the recent legal actions against Coinbase Inc. and Binance.

Hirsch's enforcement office has been unusually active, and he made it clear that they are actively investigating other firms engaged in activities similar to those observed at Coinbase and Binance. He noted that compliance issues within the industry extend beyond just these two entities.

"We're going to continue to bring those charges," stated Hirsch, underscoring the SEC's determination. He mentioned that the agency has several other businesses within its crosshairs that are operating in ways similar to the aforementioned exchanges.

A Shift in Enforcement Approach: SEC's New Strategy in Cryptocurrency Cases

The SEC has already been involved in complex crypto-related cases in federal courts, acknowledging that success has not always been guaranteed, as evidenced by the ongoing appeal in the Ripple case.

Hirsch stressed that the SEC's interest in the cryptocurrency space goes beyond high-profile exchanges. "We're going to continue to be active as to intermediaries," he stated.

"That can be brokers, dealers, exchanges, clearing agencies, or any others who are active in this space, are within our jurisdiction and not meeting their obligations, either through registration or failure to provide adequate or complete disclosures."

Moreover, Hirsch made it clear that DeFi projects would not escape the SEC's scrutiny. "We're going to continue to conduct investigations, we're gonna be active in the space, and adding the label of DeFi is not going to be something that's going to deter us from continuing our work," he affirmed.

The SEC's approach to cryptocurrency enforcement represents a significant departure from its traditional approach, which usually involved targeting misdeeds at regulated businesses, often large Wall Street firms with substantial legal resources, that quickly required settlements.

However, crypto companies, facing charges that could threaten their very existence, have been more inclined to contest the SEC in court.

One challenge for the SEC in this domain is its finite enforcement budget, which is often dwarfed by the financial giants it typically faces, limiting its capacity to pursue cases aggressively.

Hirsch acknowledged this limitation, stating, "We do have a lot of litigation going on."

The event's moderator and a former SEC crypto enforcement chief, A. Kristina Littman, commented, "It feels like you're at capacity."

The SEC's unwavering pursuit of crypto exchanges and DeFi projects demonstrates its commitment to regulatory oversight within the evolving digital asset landscape, setting the stage for continued legal battles and potentially shaping the future of crypto regulation in the United States.

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