The U.S. Securities and Exchange Commission (SEC) under Chair Gary Gensler has been cracking down on the crypto industry. And since Sam Bankman-Fried’s FTX collapse in November 2022, Wall Street’s top cop has only upped the ante in the enforcement battle. In June this year, the regulator went after Binance and Coinbase – two of the world’s largest crypto exchanges – simultaneously, taking the markets by storm.
It appears that the SEC’s enforcement war against exchanges is far from over. David Hirsch, chief of the agency’s Crypto Assets and Cyber Unit, said on Tuesday that the industry’s compliance breaches “hold true well beyond any two entities.”
Speaking at the Securities Enforcement Forum Central in Chicago, Hirsch said his enforcement office is actively investigating exchanges and decentralized finance (DeFi) projects that it thinks are violating securities law along the same lines as Coinbase and Binance. Hirsh issued a stern warning, saying that the SEC is “going to continue to bring those charges” against businesses that are flouting the law.
And it’s not just high-profile exchanges that are under the SEC’s radar. US SEC’s crypto enforcement head warned that the regulator is determined to take action against “brokers, dealers, clearing agencies,” among other stakeholders in the crypto ecosystem, who are “not meeting their obligations, either through registration or failure to provide adequate or complete disclosures.”
DeFi projects won’t be able to breathe easier, either, said Hirsch. “We’re going to continue to conduct investigations, we’re gonna be active in the space, and adding the label of DeFi is not going to be something that’s going to deter us from continuing our work.”
Hirsch’s remarks come at a time when the U.S. securities regulator is navigating several complex crypto cases in federal courts, and – as demonstrated by the landmark Ripple ruling – doesn’t have a 100% success rate. Hirsch himself conceded that the agency has its litigation plate full at the moment. Additionally, the SEC official noted that unlike companies with deep pockets, the agency has a limited enforcement budget, and therefore, it “can’t go after everything”.
“There are more tokens extant — I think maybe 20,000, 25,000, last I read — 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,” Hirsch said.
The statement comes a week after the U.S. SEC Chair Gary Gensler told lawmakers that the agency was “reviewing” the Grayscale ruling, along with several other Bitcoin spot exchange-traded fund (ETF) applications. Meanwhile, the SEC has urged a D.C. court to order an inspection into Binance.US, citing “shaky” asset custody.