The SEC Is Hiring Experts to Combat Crypto Fraud. How Might This Help Investors?

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  • The SEC’s crypto unit will almost double in size, but the unit has been enforcing certain crypto securities since 2017.
  • Future plans to protect investors include the registration and regulation of crypto platforms and a partnership with the Commodity Futures Trading Commission.
  • Investors can now be more confident in the SEC’s ability to investigate potential federal security laws violations related to cryptocurrency.

Crypto investors may be better protected as the SEC prioritizes security and increases investigation and enforcement resources.

The Crypto Assets and Cyber Unit of the Securities and Exchange Commission (SEC), formally known as the Cyber Unit, aims to fill 20 additional positions, growing to 50 total. Although the new hires will provide the unit with more resources to fight against crypto scams and fraud, the SEC is not new to crypto security. The group has been policing cryptocurrency exchanges and coin offerings since its creation in 2017. Since then, it has brought more than 80 enforcement actions related to crypto fraudulence, resulting in over $2 billion of monetary relief.

However, with the cryptocurrency market becoming increasingly popular with investors, the SEC has recognized the importance of security enforcement. In a May 3 press release, SEC Chair Gary Gensler said, "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.”

Future plans for security

Gensler recently shared plans to provide more effective and comprehensive security for investors in cryptocurrency markets. Gensler confirmed the SEC’s plans to register and regulate crypto platforms, and he coupled that with a promise to work toward separating out the custody of assets, minimizing risk. In addition, the SEC plans to create a more comprehensive security unit by partnering with the Commodity Futures Trading Commission. The partnership will address trading platforms for both crypto-based security tokens and commodity tokens.

New positions named by the SEC include investigative staff attorneys, fraud analysts, and trial lawyers.

What this means for crypto investors

With this change, investors may be able to gain more confidence in the growing cryptocurrency market. As it adds more staff and resources, the Crypto Assets and Cyber Unit should be able to conduct more investigations and take action against those who have violated federal securities laws.

There is a high chance that with increased staff, the unit will have the ability to intensify investigations, moving from generalized areas of fraud to more specific areas monitoring NFTs, DeFi platforms, and stablecoin disclosures and reserves. With these new resources, the unit may also have opportunities to use its software and artificial intelligence to do a more thorough analysis into cryptocurrency markets and company disclosures.

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The bottom line

In 2017, the SEC began policing cryptocurrency exchanges and coin offerings through its Cyber Unit. Now, as the SEC adds new hires to the team, investors can likely count on more in-depth investigative and enforcement actions reaching outside of the group's original focus and into more nuanced areas of the cryptocurrency market. Hopefully, that will lead to increased protection for investors.

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