The U.S. Securities and Exchange Commission (SEC) announced Tuesday that it will close to double its cryptocurrency enforcement, adding an additional 20 positions to the Crypto Asset and Cyber Unit – which was recently renamed the “Cyber Unit”. The total number of employees will rise from 30 to 50, increasing the agency’s ability to prosecute securities infringements related to new cryptocurrencies.
In press releasethe SEC cited a prosperous period for crypto markets and a responsible responsibility to keep investors safe from the growing risk of fraudulent investment schemes.
“Crypto markets have exploded in recent years, with retail investors carrying most of the abuses in this space. Meanwhile, cyber-related threats continue to pose existential risks to our financial markets and participants,” said Gurbir S. Grewal, director from the SEC’s Enforcement Division. “The enhanced 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,” Grewal said.
As cryptocurrency became more available to retail investors, fraud and abuse continued. One prominent type of scam is known as carpet pull, where project operators ask for an investment, promise big profits and just run away with the money – as happened recently with a collection of 3D avatars called Frosties and a crypto token inspired by Netflix’s hit show Squid game.
In its announcement, the SEC expressed particular interest in crimes related to staking and lending platforms, decentralized financial services (DeFi), stable currencies and NFTs. The newly created staff positions would include investigative lawyers, trial counsel and fraud analysts, the SEC said.
“The Crypto Assets and Cyber Unit of the Enforcement Division has successfully brought dozens of cases against those aimed at taking advantage of investors in crypto markets,” SEC President Gary Gensler said in a statement. “By nearly doubling the size of this key unit, the SEC will be better equipped to control vulnerabilities in the crypto markets while continuing to identify overt and covert cybersecurity issues.”
Since taking office as SEC chair in 2021, Gensler has often emphasized the need for more power and resources to regulate cryptocurrency. In August 2021, he described the industry as the “Wild West” in terms of investment protection, calling on Congress to expand the agency’s authority to regulate trading and lending platforms. Shortly afterwards, the SEC filed its first charges against a DeFi platform, accusing the operators of the Cayman Islands-based Blockchain Credit Partners of unrecorded sales of more than $ 30 million in securities.
While the expansion of the cryptocurrency enforcement team is a boon for Gensler, it is unclear whether it will be enough to meet the full range of the agency’s ambitions in the field. Earlier, Gensler highlighted the huge number of newly launched products and services that could be categorized under the SEC’s mandate, citing 6,000 new projects in need of evaluation to determine whether they qualify as securities under U.S. law.