- J McGlynn and M Bacina
US SEC doubles down enforcement team for crypto markets and the cyber-sphere
The United States Security and Exchange Commission has announced that it will be doubling the size of its unit responsible for "safeguarding" investors in cryptocurrency markets and against cyber threats, the Crypto Assets and Cyber Unit.
The increase in personnel is a move by the SEC to play catch-up with a growing number of participants in the crypto-market.
SEC Chair Gary Gensler said:
The U.S. has the greatest capital markets because investors have faith in them, and as more investors access the crypto markets, it is increasingly important to dedicate more resources to protecting them
Historically, the SEC has used its cybersecurity unit to target what it views as bad actors in the industry, and has been ramping up its operations since its formation in 2017. In 2021 the Cyber Unit imposed over $2 billion in sanctions and brought 20 enforcement actions.
The increase will see 20 new positions created, raising the total team to 50. The SEC says they intend to leverage the increase in manpower to ensure investors are protected in the crypto markets, with a focus on investigating securities law violations related to:
Crypto asset offerings;
Crypto asset exchanges;
Crypto asset lending and staking products;
Decentralized finance ("DeFi") platforms;
Non-fungible tokens ("NFTs"); and
While it’s encouraging to see a regulator investing in staff focused on blockchain technology, the emphasis on "investor protection" as a priority over developing pathways for compliant crypto business offerings is concerning concerning to many - particularly given how the SEC sets the tone for regulators globally. Unless regulators provide a path of possible compliance, all the enforcement teams in the world won't support a safer crypto space for participants.