The Securities and Exchange Commission will continue to investigate and prosecute wrongdoing in the crypto-asset space, despite a spate of complaints about the extent of the industry’s scrutiny, a senior official said.
The SEC has heard the “jeremiads” from crypto industry participants about unfair attacks, but has no intention of backing down, Enforcement Director Gurbir Grewal told a conference in Washington on Friday. He added that otherwise, those harmed by adverse events in the market, including many poor and non-white investors, would be left in the lurch.
“Critics are upset because we don’t stop crypto from applying established regulations and precedent,” Mr Grewal said.
““If we want to maintain our mandate, we cannot just leave the field when we are faced with potentially novel problems.””
“If we want to maintain our mandate, we cannot just leave the field when faced with potentially novel problems,” he said. “Failure to enforce… would be breach of trust. That is not an option for us.”
Mr. Grewal’s comments underscored his agency’s recent scrutiny of digital assets. They followed a speech Thursday by SEC Chairman Gary Gensler, who signaled his support for Congress to give the Commodity Futures Trading Commission some authority over cryptocurrency oversight. However, during his speech, Mr. Gensler also emphasized his view that most crypto assets should be considered securities that are regulated by law by the SEC.
Some crypto industry participants have accused the SEC of pursuing a “regulation through enforcement” agenda in an uncertain legal environment. Mr Grewal said Friday that he has a responsibility to bring cases on behalf of investors, including those who have lost money in the turbulent crypto market.
The turmoil in the crypto market has had an outsized impact on non-white and low-income investors, who may have been drawn to crypto investing due to skepticism about the financial system and regulators that have failed or ignored them in the past, Mr Grewal said.
“Restoring confidence in the regulatory system and its institutions cannot begin with us failing entire classes of investors by simply declaring our long-standing and well-established rules null and void for enforcement purposes,” he said.
SEC Chief Litigation Counsel Olivia Choe, on the same panel, said the agency had had a “very active” year taking companies in the crypto-asset space to court and intends to continue “aggressively suing.”
In May, the SEC said it nearly doubled the size of its enforcement unit, which focuses on crypto assets and cyber threats.
Jake Chervinsky, head of policy at crypto lobby group Blockchain Association, said Friday that accusations of regulation through enforcement are not an “unfounded mantra.”
“It is an undeniable feature of the SEC’s efforts to extend its own jurisdiction beyond the bounds of law,” Mr. Chervinsky said. “For many years, the SEC has guided its entire crypto strategy through Director Grewal’s Enforcement Division while refusing to provide guidance or propose rules clarifying how bona fide crypto companies can meet their expectations.”
Some digital asset companies have vigorously resisted the SEC’s enforcement agenda. The Chief Legal Officer for Coinbase Global inc,
which operates a leading cryptocurrency platform, published a blog post in July accusing the agency of using one-off enforcement actions to attempt to bring all digital assets — not just securities — under its jurisdiction.
The post of Coinbase Chief Legal Officer, Paul Grewal, came after the SEC filed securities fraud charges against a former Coinbase employee. The company claimed that the digital assets listed on its platform, which the charges focused on, are not securities and has separately pressed the SEC to issue formal rules on the matter.
write to Richard Vanderford at firstname.lastname@example.org
Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8
Appeared in the September 10, 2022 print edition as “SEC Says No Free Pass for Crypto”.