Crypto Assets High on SEC Exam Radar in 2023 ⋆ ZyCrypto

On February 7, 2023, the Examination Division of the US Securities and Exchange Commission (SEC) released its list of examination priorities for 2023. According to SEC Chairman Gary Gensler, the focus remains on protecting investors and ensuring compliance with federal securities laws and regulations. “Emerging Technologies and Crypto-Assets” is on the priority list for 2023.

According to the SEC press release on February 7, 2023, brokers and registered investment advisers (RIAs) using emerging financial technologies will be investigated on their processes for trading crypto or crypto-related assets and against their compliance, disclosure and risk management. practice.

On February 9, 2023, the SEC announced that it had charged Payward Ventures Inc, which trades as Kraken, with failing to register the offering and sale of its crypto asset service. Kraken paid a US$30 million fine and immediately stopped offering its crypto-asset staking services to US customers.

“Whether through staking-as-a-service, lending or other means, crypto-intermediaries, when offering investment contracts in exchange for investors’ tokens, must provide the proper disclosures and safeguards required by our securities laws,” the SEC chief said. Gary Gensler. “

In January 2023, the SEC charged Nexo Capital Inc US$22.5 million for failing to register its crypto lending product to its US investors. Nexo also agreed to stop offering its crypto asset lending product.

The SEC is involved in several lawsuits with various individuals and crypto companies. Unconfirmed reports indicate that the SEC may sue blockchain infrastructure platform Paxos for issuing Binance USD (BUSD) as an unregistered security.

In October 2022, the SEC charged Kimberley Kardashian with promoting a crypto-asset on her social media account and not disclosing the compensation of around US$250,000 from the issuer of the security. The SEC charged Kardashian with $1.26 million in penalties, disgorgement and interest.

In a lawsuit against Ripple started in 2020, the SEC alleged that Ripple sold its XRP tokens to investors without registering them as a security. It is still uncertain when a conclusion in this case will be made.

The Investigations Division of the SEC is doubling down on its mission to protect investors, ensure market integrity, and support responsible capital formation through risk-focused strategies.

Opinions are divided on the SEC’s approach to enforcement, with some labeling it “regulation by enforcement.” The full extent of the roles to be played by federal regulators or agencies on crypto regulation is still pending in Congress.

Innovation and growth within the crypto industry will benefit when there is more clarity in expectations from regulators and as soon as crypto regulations are finalized.