SEC Hires Cryptocurrency Cops To Investigate Illicit Activity

In light of the rapid rise of cryptocurrency and the massive adoption of digital assets by novice investors, the Securities and Exchange Commission (SEC) announced this week that the agency would add approximately 20 additional positions. This is in response to the cryptocurrency market, which over the past few years has skyrocketed to over $2 trillion in market valuation.

These important roles will be based within the division responsible for protecting investors who buy, sell and trade digital assets in the crypto markets. The new hires will also be responsible for investigating cybersecurity threats, ensuring that adequate cybersecurity controls are in place, and that SEC registrants and public companies are transparent in disclosing breaches of the cybersecurity.

Crypto Cops

The Division of Enforcement’s Crypto Assets and Cyber ​​unit will grow to approximately 50 dedicated positions from approximately 30 white-collar regulatory professionals. The new staff will contribute to the agency’s ability to review, investigate, audit, review and potentially prosecute violations of securities law related to these new crypto products and trading activities.

SEC Chairman Gary Gensler said of the hires: “The United States has the largest capital markets because investors trust it, and as more investors get into the markets of cryptography, it is increasingly important to devote more resources to their protection.”

Gensler has previously raised concerns about this new risky asset class. He said of bitcoin and other tokens, “If you want to invest in a rare, speculative, digital store of value, that’s fine. Bona fide players have been speculating on the value of gold and silver for thousands of years.

He then warned, “At the moment, we just don’t have enough investor protection in crypto. Frankly, at that time, it was rather the Wild West. This asset class is full of frauds, scams and abuses in certain applications. There is a lot of hype and spin about how crypto assets work. In many cases, investors are unable to obtain rigorous, balanced and complete information. If we don’t address these issues, I’m afraid a lot of people will be hurt. »

Gensler has a solid resume for the position. He was a partner at Goldman Sachs, served as Chairman of the Commodity Futures Trading Commission in President Barack Obama’s administration, Under Secretary of the Treasury for Home Finance, Assistant Secretary of the Treasury for Financial Markets, former professor at MIT and chief financial officer of Hillary Clinton’s presidential campaign.

What was Trump doing to regulate Wall Street and cryptocurrencies?

Gensler’s choice by President Joe Biden was a departure from former President Donald Trump’s stance on regulation. Under Gensler, the United States will see a more proactive SEC, after four years of deregulation.

When Trump first took office, he made it clear that his administration would be relatively passive toward Wall Street. Bureaucracy and bureaucratic rules were anathema to Trump. He was a firm believer that too many laws would be obstacles to economic growth. Trump said at least two existing regulations should be removed for every new regulation proposed. He even signed an executive order ordering federal agencies to reduce “unnecessary regulations that are hampering economic recovery,” Trump said, a move that would help the economy recover from the impact of the coronavirus outbreak.

Trump said at the time, “I call on the agencies to review the hundreds of regulations we have already suspended in response to the virus and make those suspensions permanent where possible … to use any authority to waive, suspend and eliminate unnecessary regulations that hinder economic recovery.” He added: “I also direct agencies to use emergency authorities to expedite regulatory cuts or new rules that will create jobs and prosperity and get rid of unnecessary rules and regulations.”

The town’s new sheriff springs into action

Given light regulation under the previous administration, coupled with constraints caused by the virus outbreak, there may be plenty of work for new SEC recruits. Despite the difficulties, action has been taken. Gensler said, “The Division of Enforcement’s Crypto Assets and Cyber ​​Unit has successfully filed dozens of lawsuits against those who seek to take advantage of investors in the crypto markets.” He added: “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 cybersecurity disclosure and oversight issues.”

The newly upgraded Crypto Assets and Cyber ​​Unit will ensure investor protection in the crypto markets. The focus will be on investigating violations of securities laws related to crypto-asset offerings and exchanges, crypto-asset lending and staking products, decentralized financial platforms, non- fungible (NFT) and stablecoins.

Why the sudden interest in NFTs, tokens and digital assets?

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said of the situation, “Crypto markets have exploded in recent years, with retail investors bearing the brunt of abuses in this space. Meanwhile, cyber threats continue to pose existential risks. to our financial markets and our participants.” Grewal added: “The strengthened Crypto Assets and Cyber ​​Unit will be at the forefront of protecting investors and ensuring fair and orderly markets in the face of these critical challenges.”

Adding investigative attorneys, trial attorneys, and fraud analysts to SEC headquarters and regional offices in Washington, D.C. will help the agency catch up on what’s happening in that space. .

Compliance, legal, audit and regulatory professionals will be sought

Regulators will likely try to find out if there are a lot of issues that have been swept under the rug during Trump’s tenure. It is likely that there will be both examinations and precautionary audits – which have slowed down during the pandemic – to uncover any previous abusive and violent practices that have taken place or are currently taking place.

The expansion of SEC personnel will have a significant ripple effect. This sends a message to the financial community that the days of light regulation are over and there is a new sheriff in town.

In response to increased surveillance, a substantial number of new private sector jobs will most likely be created. Once regulators begin conducting reviews, audits, and investigations of crypto exchanges, NFT platforms, fintech startups, and related trading platforms, as well as traditional banks and brokerage firms , these entities will need a significant workforce to deal with this next wave of regulatory scrutiny. Professionals, such as compliance officers, lawyers, risk managers, auditors and investigators, will be in high demand. This could soon become a hot and sexy growth area.

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SEC Hires Cryptocurrency Cops To Investigate Illicit Activity

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