By Pradeep Saran, September 20,2023
The U.S. Securities and Exchange Commission (SEC) is set to broaden its regulatory oversight, extending its scrutiny beyond Coinbase and Binance.US to encompass various cryptocurrency exchanges, intermediaries, and decentralized finance (DeFi) entities, according to David Hirsch, the head of the agency’s crypto assets and cyber unit. Hirsch made this announcement during a forum held in Chicago, emphasizing several key points:
- The SEC is actively investigating other companies suspected of engaging in similar violations as Coinbase and Binance.US. Hirsch confirmed this ongoing investigation during his remarks at the Securities Enforcement Forum Central in Chicago.
- Hirsch expressed the SEC’s commitment to pursuing charges against entities that fail to comply with regulations. He specifically mentioned that intermediaries such as brokers, dealers, and clearing agencies would not be exempt from the SEC’s enforcement efforts if they were found to be neglecting their regulatory obligations.
- In June, the SEC filed lawsuits against both Coinbase and Binance.US. The allegations centered on the accusation that these major cryptocurrency platforms were offering unregistered securities, which left investors without the necessary safeguards against conflicts of interest and other associated risks.
- The SEC’s protracted legal battle with Ripple Labs is centered on the agency’s assertion that the sale of XRP tokens constituted an unregistered offering of investment contracts.
- Hirsch underscored that merely attaching a “DeFi” label to an operation would not shield it from the SEC’s regulatory reach. The agency remains committed to enforcing its rules and regulations regardless of the labels applied by DeFi entities.
- Gurbir Grewal, the SEC’s enforcement director, emphasized in the context of the SEC’s actions against the Stoner Cats non-fungible token (NFT) project that the classification of an offering as a financial security hinges on the “economic reality” of the offering itself rather than the labels used to describe it.
In summary, the SEC is poised to extend its regulatory oversight to a broader spectrum of cryptocurrency exchanges, intermediaries, and DeFi entities, continuing its pursuit of companies that allegedly breach securities regulations, similar to Coinbase and Binance.US. The agency’s commitment to enforcing its rules remains unwavering, irrespective of the labels employed within the DeFi space, as evidenced by its actions in various high-profile cases.