Tue. Jul 5th, 2022

sec cryptocurrency

If the SEC is regulating crypto assets, it may be possible to see fewer cases of disgorgement. In the coming years, the SEC is likely to continue its regulation of crypto assets, particularly if the companies involved do not raise money fraudulently or incur illegitimate business expenses. However, a few recent SEC actions have led to increased consumer protection for crypto assets. Read on to learn about these recent actions. Also, find out what the SEC’s future plan is for crypto assets.

Regulation of cryptocurrencies

Regulators around the world are grappling with how to regulate cryptocurrencies. While there are some benefits of more regulation, others raise concerns about the potential negative impact on trading volumes and the nascent segment. The more rigorous regulation of cryptocurrencies could stifle innovation and send some industry participants to jurisdictions with less stringent laws. The opposite may also be true, however: tighter regulation could purge the industry of bad actors and foster trust, allowing it to flourish.

Japan has taken the lead in regulating cryptocurrencies, and the country’s Financial Services Agency has stepped up its efforts to create a secure regulatory environment. In Japan, cryptocurrency exchanges must register with the FSA (Financial Services Agency) before operating. The registration process may take up to six months. New rules include stringent AML/CFT requirements and cybersecurity requirements. Mid-2019 amendments to the law also include requirements for custodian services providers.

Coinbase’s Lend program

As the SEC continues to push for a greater level of transparency in the crypto space, Coinbase’s CEO Brian Armstrong has taken the high road, publicly denouncing the SEC for their intimidating tactics and sketchy behavior. His Twitter tirade of Sept. 7 has garnered praise from crypto enthusiasts, garnering eighty-five thousand followers and earning him widespread acclaim. Coinbase is following in the footsteps of Elon Musk, who has also been fighting the SEC with similar gusto.

As a leading cryptocurrency exchange, Coinbase isn’t the only company whose Lend program is under scrutiny by the SEC. BlockFi, a cryptocurrency lending platform, is under investigation for violating state securities laws in three U.S. states. The SEC’s recent Wells notice is causing a big fall in token prices of decentralized finance companies. This new regulatory crackdown could set a precedent for the industry.

Ripple’s unregistered sales of XRP

This case concerns Ripple’s unregistered XRP sales. The company sold XRP units to investors for non-cash consideration, including labor and market-making services. The SEC alleges that Ripple failed to register sales of XRP and failed to protect investors. The firm allegedly created an “information vacuum” in the market, which allowed insiders to profit from the vacuum.

In response to the SEC lawsuit, Ripple’s CEO Brad Garlinghouse argued that XRP was not a security and that other countries had already designated it as such. The company’s founders never registered XRP as a security, instead finding it to be a utility currency. By contrast, the second-largest cryptocurrency, Ether, was declared a commodity by the SEC. Both are traded on hundreds of exchanges worldwide.

SEC’s recent enforcement actions against crypto companies

As the crypto industry has boomed over the past five years, the SEC’s enforcement division has launched 80 enforcement actions against crypto companies. Since the launch of the unit, the agency has secured over $2 billion in fines. Unfortunately, the cryptocurrency industry has seen its share of abuses, with retail investors bearing the brunt of those abuses. In response to this growing problem, top crypto companies have advocated for greater SEC oversight of the industry and have urged Congress to give it more powers.

A recent SEC enforcement action against a crypto company involved allegations of non-use of investor money. The amounts raised in these cases were trivial compared to earlier cases involving crypto assets. However, the SEC alleged that 30 percent of the funds raised in the companies were from United States investors. The agency is investigating the matter and is seeking information from relevant individuals. In an effort to ensure investors are getting the best possible information, it is critical to monitor and investigate the company’s operations.

Future enforcement actions

There are several recent SEC enforcement actions related to cryptocurrency. The SEC has recently doubled the size of its Crypto Assets and Cyber Unit. Since 2017, the unit has filed more than 80 investigations and collected more than $2 billion in monetary penalties. The SEC has increased its staff of dedicated fraud analysts, investigative attorneys, and trial counsel. This will likely result in more crypto regulations in the future. However, there are some things investors should know before investing in crypto.

While the SEC has dramatically expanded its Crypto Assets and Cyber Unit, there are still many lingering questions regarding the future of the cryptocurrency market. Gensler argues that crypto platforms, stablecoins, and tokens are just like traditional stock exchanges and investors should be protected as they trade these virtual currencies. SEC Director Gurbir Grewal noted that the growth of the cryptocurrency market has led to the abuses of retail investors.

CFTC’s view of crypto as a security

Unlike the SEC, the CFTC has been much more accommodating towards cryptocurrency as an asset. In 2017, it allowed the creation of bitcoin futures products, which allow investors to bet on the price of crypto assets a year in advance. However, the SEC has consistently delayed or rejected efforts to develop bitcoin-based funds. CFTC approval of such funds has been a significant step forward.

In fact, many CFTC staff members and Republican SEC commissioners have voiced concerns about the lack of oversight and regulatory oversight on cryptocurrency. While the SEC has led the crusade for tighter crypto rules, the SEC is not the agency responsible for the spot market for commodities. The CFTC regulates the institutional markets. The SEC’s proposed rules would hand too much power to the CFTC.