In his appearances between lawmakers after becoming the chief of Securities and Exchange Commission (SEC), Chairman Gary Gensler referred to the cryptocurrency ecosystem as a “Wild West” and requested greater authority and funding to police it.
In a press release yesterday, the agency said it was adding 20 new positions to its Crypto Assets and Cyber Unit. The new additions bring the total number of unit officials to 50. Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said “the bolstered Crypto Assets and Cyber Unit will be at the forefront of protecting investors and ensuring fair and orderly markets.”
Even before yesterday’s announcement, the SEC was already on the crypto case. The agency stated that it has brought more than 80 enforcement actions against crypto criminals since 2017. An expansion of its team likely means greater oversight, and more cases, against bad actors in an ecosystem that has sprawled in recent years to include entertainment, finance, and sports. Funding for Web3 and crypto projects has ballooned to reach new records as have the number of hacks and unsavory elements attracted to its easy money.
The additions to the SEC’s roster will focus on six key areas for enforcement including cryptocurrency exchanges, decentralized finance (DeFi) platforms, and non-fungible tokens (NFTs). This means that many crypto businesses in these sectors are at risk of being summoned or fined by the agency.
Some of the biggest names in cryptocurrency have already felt the heat of SEC actions against them. For example, Coinbase, North America’s biggest publicly traded crypto exchange, paid a $6.5 million fine, just before it went public, to the agency for reporting inaccurate trading volume and wash trading. Payments platform Ripple is locked in a case against the SEC over the status of its token XRP, which the SEC claims is a security. In the past, Chair Gensler has also said that he agrees with his predecessor Jay Clayton’s assessments of many cryptoassets being securities, meaning the agency could further step up its action in this regard.
There is an upside to the SEC taking greater interest in the cryptocurrency ecosystem. It could bring clarity in regulation for the asset class. For years, crypto enthusiasts have been clamoring for regulatory guidance about the status of cryptoassets. But the agency has not provided many clues to its thinking. More staff could mean more dialogue between crypto businesses and regulators. Additional rule making could follow as the crypto ecosystem moves towards decentralizing its workings.