SEC Almost Doubles Its Cyber Enforcement Team in Advance of Crypto Regulation

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  • The U.S. Securities and Exchange Commission (SEC) announced today it's adding 20 positions -- for a total number of 50 personnel -- to its newly reconfigured Crypto Assets and Cyber Unit within the Division of Enforcement.
  • The former group used to focus solely on cybercrimes, but the updated unit will now also address a broad range of crypto areas including: lending, NFTs, deFi, stablecoins, and crypto trading exchanges.
  • The move appears to be in advance of crypto regulatory guidance expected later this year.

The SEC plans to police crypto assets, exchanges, stablecoins, deFi, NFTs, crypto lending, and more.

Today, the SEC clearly delineated its intentions to be the leading enforcement branch regarding cryptocurrency regulation and oversight within the U.S. In its public statement, the governing agency for equities, bond, and commodities trading stated that it's nearly doubling its number of enforcement personnel from 30 to 50 to expand its remit into crypto. The former version of the group used to only focus on cybercrimes, but under its reconfigured remit the team is now called the Crypto Assets and Cyber Unit within the SEC's enforcement division.

What's the goal behind the change?

"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 stated in the announcement. "The Division of Enforcement's Crypto Assets and Cyber Unit has successfully brought dozens of cases against those seeking to take advantage of investors in crypto markets. By nearly doubling the size of this key unit, the SEC will be better equipped to police wrongdoing in the crypto markets while continuing to identify disclosure and control issues with respect to cybersecurity."

The announcement has a laundry list of areas the SEC plans to target, first and foremost, crypto assets and cryptocurrency exchanges. It also claimed enforcement jurisdiction over stablecoins, NFTs, deFi, virtual currency lending using automated "smart contracts," the practice of "staking," -- which provides interest for unused crypto assets deposited on websites for trading liquidity or lending -- as well as other areas.

SEC seems to be jockeying for prime role enforcing crypto regs

This announcement seems to come out of nowhere, citing how the growth of crypto assets has "exploded" in recent years with retail investors suffering the most from abuses such as scams and fraudulent behaviors within the space. It's just odd because the digital crypto market has been around for more than a decade, so why is the SEC announcing this now?

It's most likely a bit of political gamesmanship to mark out oversight and enforcement territory for the SEC in advance of readouts from all other federal agencies that were tasked to research and recommend respective crypto policy possibilities under Biden's executive order in March.

We'll have to see what transpires, but this appears to be a regulatory land grab by the SEC, and I don't mean in the virtual sense of cyber land plots in the metaverse.

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