The U.S. Securities and Exchange Commission (SEC) is intensifying its efforts to crack down on crypto exchanges and decentralized finance (DeFi) projects that it believes are in violation of securities laws. David Hirsch, the head of the agency’s Crypto Assets and Cyber Unit, made this clear at the Securities Enforcement Forum Central in Chicago.
According to Hirsch, the enforcement office of the SEC is investigating several other firms involved in activities similar to those seen at major platforms Coinbase and Binance. He emphasized that compliance breaches in the industry extend beyond just these two entities. The agency is actively pursuing charges against businesses in the crypto space and has a number of other companies on its radar.
Hirsch highlighted that the SEC’s interest in crypto extends beyond high-profile exchanges. The agency intends to also monitor and take action against other intermediaries such as brokers, dealers, and clearing agencies that operate within its jurisdiction and fail to meet their obligations. This includes the need for registration and the provision of adequate disclosures.
Notably, the SEC’s enforcement division is also keeping a close eye on DeFi projects. Hirsch emphasized that the label of DeFi will not deter the agency from conducting investigations and taking action where necessary.
Traditionally, the SEC has taken a relatively sedate approach to enforcement, targeting misdeeds at regulated businesses that often lead to settlements. However, charges against digital assets companies frequently threaten their existence, prompting them to take the agency to court. This has resulted in an increase in litigation for the SEC.
Hirsch acknowledged the limitations of the SEC’s resources and budget. With a finite enforcement budget that is often smaller than those of large financial institutions, the agency’s bandwidth is limited. However, it remains committed to actively pursuing cases in the crypto space.
Hirsch stated that there are numerous tokens in existence, far beyond what the SEC has the resources to directly pursue. Similarly, there are centralized platforms acting as unregistered exchanges. While the SEC may not be able to address all these cases directly, it is clear that the agency is determined to address securities law violations in the crypto industry.
As the SEC continues its enforcement actions, it will be interesting to see how the industry responds and adapts to regulatory scrutiny. Compliance and proper disclosure will become increasingly important for crypto platforms and intermediaries to avoid legal repercussions.