Recently, the regulators in the United States have started a regulatory war on crypto with an expected avalanche of enforcement actions from various departments.
Sources reveal that the latest enforcement action by the U.S. Securities and Exchange Commission (SEC) targeted the Kraken crypto exchange. On Thursday, the SEC accused the company of selling unregistered securities through its staking-as-a-service product. As a result, Kraken was hit with a $30 million fine and ordered to shut down its staking services.
On Friday, Marion Nawfal, founder of IBC Group, an international blockchain consulting group, speculated that a ‘myriad of enforcement actions targeting exchanges, banks, and tokens was coming.
Reportedly, the SEC is not the only regulating agency cracking down on crypto. Sources reveal that the New York Department of Financial Services (NYDFS) is investigating stablecoin issuer Paxos, the company behind the issuance of the third-largest stablecoin, Binance USD (BUSD).
However, details of the probe were not clear, but a spokesperson from the regulating body briefed the media that:
The department is in continuous contact with regulated entities to understand vulnerabilities and risks to consumers and the institutions themselves from crypto market volatility we are experiencing.
Furthermore, there have been reports of the Office of the Comptroller of the Currency (OCC), a federal bank regulator, asking Paxos to withdraw its application for a national trust bank charter. On Thursday, Paxos refuted the rumors.
In recent times, the financial regulators in the U.S. have been accused of a heavy-handed approach and regulating crypto by enforcement. Earlier this week, Coinbase’s CEO cautioned that there would be a departure of talent and innovation from the country if this continues. On Feb. 9, he warned about the SEC’s staking crackdown just before Kraken was hit.
We’re hearing rumours that the SEC wants to eliminate crypto staking in the U.S. for retail customers. I hope that’s not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen.
On Feb. 10, SEC commissioner Hester Pierce took to social media to scold her agency, stating, “using enforcement actions to tell people what the law is in an emerging industry is not an efficient or fair way of regulating.”
Crypto markets have slumped following the news, with total capitalization shedding 5.2% on the day. As a result, the total crypto market cap had fallen to $1.06 trillion, and many altcoins saw double-digit losses.
While there has been a constant demand for clarity in the crypto regulation, SEC has been particularly active. On Tuesday, the Division of Examinations of the SEC announced the list of topics that are a priority for this year. The regulator named “crypto assets” and other evolving technologies as one of the top priorities for this year.
Todayq News reported in January that the SEC brought a record number of crypto-related enforcement actions last year. Figures from 2022 have been about 50% up from 2021. In 2022, SEC had about 30 crypto-related enforcement actions, close to 2020, when it brought 29 such actions. The firm stated that the most common allegations amongst these actions were fraud and unregistered securities.