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- 1 The SEC is once again pursuing crypto exchanges and DeFi projects for potential securities law violations.
- 2 David Hirsch recently said that the SEC will continue active actions against intermediaries.
The head of the crypto assets and cyber unit of the U.S. Securities and Exchange Commission (SEC), David Hirsch, issued a warning. This “stern warning” is for cryptocurrency exchanges and Decentralized Finance (DeFi) projects. According to Hirsch, “the U.S. SEC is considering more enforcement actions against crypto exchanges, brokers, and DeFi projects that fail to make suitable disclosures or register with the agency.”
SEC Ready with Another Plan
The U.S. SEC will spread its regulatory enforcement beyond two leading U.S.-based crypto exchanges onto other crypto exchanges, intermediaries, and DeFi projects. On September 19, 2023, Tuesday, David Hirsch shared this information at the Securities Enforcement Forum Central in Chicago.
According to Hirsch, the SEC is currently investigating other companies that have allegedly conducted similar breaches as two leading crypto exchanges. Hirsch “We’re going to continue to bring those charges.” He further added that “intermediaries such as brokers, dealers, and clearing agencies that are not fulfilling their obligations will not escape the regulator’s reach.”
Hirsch further stated that adding a “DeFi” label to an operation will not help circumvent the agency’s enforcement. He conceded also that “We do have a lot of litigation going on.” Hirsch also added that the SEC can only reach so far.
David Hirsch said, “There are more tokens extant than the SEC or any agency has the resources to pursue directly, and similarly there are a number of centralized platforms out there, some that are acting as unregistered exchanges.”
The Agency’s Previous Action
In June, the SEC sued the two leading U.S.-based crypto exchanges including Coinbase. The agency’s action was based on accusations that “the two major crypto platforms were offering unregistered securities, which deprived investors of protection against conflicts of interest and other risks.”
Moreover, the longstanding legal battle of the SEC with Ripple Labs is also focused on its claim. As the agency said, “the sales of XRP constituted the unregistered offering of investment contracts.”
On the other hand, in the SEC’s enforcement action against the Stoner Cats non-fungible token (NFT) project, SEC enforcement director Gurbir Grewal said the “economic reality of the offering” determines “an offering as a financial security, not its labels.”
According to a media outlet report, the SEC has previously been accustomed to a relatively sedate approach to enforcement. In which the agency “targets misdeeds at regulated businesses, often large Wall Street companies with extensive legal departments, that quickly begin negotiating settlements.” As the charges against the crypto companies “routinely threaten their existence, they tend to take the agency to court.”
Notably, the agency has “a finite enforcement budget that is often less than the financial leaders it’s used to facing, so its bandwidth is limited.”
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
