On Tuesday (May 3), the Securities and Exchange Commission (SEC) announced the expansion of its Crypto Assets and Cyber Unit with 20 additional positions, for a total of 50 dedicated positions.
This hiring spree, doubling the size of the team, is likely a prelude to more enforcement actions by the agency, which has brought more than 80 cases related to fraudulent and unregistered cryptocurrency assets offerings and platforms since 2017. That’s around 15 cases every month since the unit was created.
The last two cases were announced on Friday (May 6). In the first case, the SEC charged MCC International in connection with the unregistered offerings and sales of investment plans called mining packages. In the second case, the SEC imposed a $5.5 million fine on Nvidia for inadequate disclosures concerning the impact of crypto mining on the company’s gaming business.
The expansion of the team may mean a quicker response to the burgeoning growth of the crypto market. The SEC must deal with new products and services like non-fungible tokens (NTFs), crypto asset lending and staking products, stablecoins and decentralized finance (DeFi) platforms. “By nearly doubling the size of this key unit, the SEC will be better equipped to police wrongdoing in the crypto markets,” SEC Chair Gary Gensler said.
Yet, the first voice of concern came from within the agency, when Commissioner Hester Peirce tweeted: “The SEC is a regulatory agency with an enforcement division, not an enforcement agency. Why are we leading with enforcement in crypto?”
The SEC is a regulatory agency with an enforcement division, not an enforcement agency. Why are we leading with enforcement in crypto?
— Hester Peirce (@HesterPeirce) May 3, 2022
With over 4,800 employees working at the SEC, a team of 50 people working on the cryptocurrency unit could hardly be seen as an attempt to turn the agency into an enforcement agency, but Pierce has made a valid point. In cryptocurrency, the number of enforcement actions — currently standing at 80 — clearly outweighs the new regulation or guidance adopted by the agency, which is close to none.
The SEC has been criticized for regulating the cryptocurrency industry by enforcement, rather than passing clear rules that establish when a crypto asset company must register and disclose its activities. In the future, some legal experts argue, joint investigations between the SEC and the Commodity Futures Trading Commission (CFTC) are likely, given the overlaps in regulatory oversight and the products that companies are offering.
Read more: SEC Crypto Enforcement Approach May Not Be Enough in the Long Term
This enforcement trend isn’t likely to slow down, particularly after the new hires, but the SEC could use its rulemaking powers to offer more clarity in certain areas to reduce the need for enforcement, at least until Congress defines the agency responsibility for crypto oversight.
This may be happening sooner rather than later. U.S. lawmakers are introducing new legislation to clearly define the roles of the SEC and the CFTC on cryptocurrency oversight. On April 28, Republican and Democratic lawmakers introduced the Digital Commodity Exchange Act of 2022 in the House, which would extend the CFTC oversight powers to cryptocurrency activities via digital commodity exchanges.
This bill, however, doesn’t go as far as providing the CFTC with authority to supervise any type of digital asset, as the SEC still has jurisdiction over cryptocurrency assets deemed securities or over digital assets that represent some form of ownership or investment in a business.
See also: Bipartisan Bill Paves the Way for CFTC’s Crypto Oversight
Another long-awaited bill is the one to be introduced by Sen. Cynthia Lummis, R-Wyo. A longtime bitcoin owner, Sen. Lummis is expected to introduce a crypto-friendly bill in the coming weeks that will include detailed regulation on taxation, payments and most importantly, on digital asset definition that would help define the roles of the different overseeing agencies.
You may like: Bitcoin-Friendly Senator Reveals Details of Crypto Regulation Bill
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More