The Securities and Exchange Commission is nearly doubling the size of its crypto enforcement team, the federal agency announced Tuesday, as the federal agency rushes to better protect investors in the quickly growing, scam-ridden, and oft-unregulated world of cryptocurrency and tokens.
“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,” SEC chair Gary Gensler said in a statement accompanying the news.
The agency will create 20 new positions in its Cyber Unit to deal with the growing crypto industry, bringing the unit’s total number up to 50, as well as rename the group the “Crypto Assets and Cyber Unit” to reflect its growing focus on the world of cryptocurrency.
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Gensler said that with the additional positions, “the SEC will be better equipped to police wrongdoing in the crypto markets while continuing to identify disclosure and controls issues with respect to cybersecurity.” The unit will focus on investigating NFTs, decentralized finance (or “DeFi”) platforms, stablecoins, crypto assets and exchanges, and crypto asset lending and staking products.
“This is unprecedented,” John Reed Stark, crypto critic and former chief of the SEC’s Office of Internet Enforcement, said of the announcement. “For promoters of Crypto, DeFi, NFTs, stablecoins and other Web3 nonsense, get ready for an SEC enforcement onslaught.”
Gensler has made it a priority to bring the industry, which he has described as the modern “wild west,” into compliance with the country’s century-old securities laws, part of President Biden’s broader “whole-of-government approach” to tackling illegal activity in the crypto sector. The renamed SEC unit, first created five years ago, has since brought forward dozens of enforcement actions and won related to the crypto market, which has been plagued with fraud artists and chock-full of unregistered securities.
But the agency has had its hands full with an industry that has morphed in a little over a decade into a $3 trillion juggernaut. In recent years, more than 200 members of the Washington D.C. political world have taken jobs in and around the crypto world, including former SEC chairs Jay Clayton and Mary Jo White, of the Trump and Obama eras, respectively, and crypto companies have aggressively lobbied Congress and fought with the SEC over the rules by which they believe they should be governed.
“You just don’t normally have industries this new accumulate this much hard and soft power in Washington,” Jeff Hauser, the executive director of the progressive Revolving Door Project, told the Wall Street Journal earlier this year.
Gurbir Grewal, the director of the SEC’s Division of Enforcement, said in a statement that retail investors have borne “the brunt of abuses” in the crypto space as the industry has exploded in popularity.
The newly renamed unit would “be at the forefront of protecting investors and ensuring fair and orderly markets in the face of these critical challenges,” Grewal added.
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