In the wake of the high-profile bankruptcy of cryptocurrency exchange FTX, the United States Securities and Exchange Commission (SEC) has significantly intensified its crackdown on the crypto industry. An analysis of SEC press releases and news reports reveals that enforcement actions related to cryptocurrencies surged by a staggering 183% in the six months following FTX’s collapse, compared to the preceding period.
However, this data does not even include the recent lawsuits the SEC filed against major exchanges Binance and Coinbase, further fueling speculation that the regulator is striving to compensate for its alleged failure to adequately supervise FTX. Critics argue that the SEC’s recent actions are an attempt to save face rather than genuinely safeguarding investors and the market.
U.S. Representative French Hill voiced skepticism regarding the SEC’s motives, branding the recent crackdown as a “cover your ass” move by SEC Chair Gary Gensler. Speaking at an event in Washington, D.C., Hill criticized Gensler for prioritizing other matters, such as criticizing Kim Kardashian’s involvement in crypto promotions, over overseeing FTX. He argued that the sudden surge in enforcement actions during 2023 seems like an attempt to deflect attention away from the regulator’s handling of the FTX situation.
A prominent news publishing house reported Hill’s comments and highlighted the growing sentiment among industry observers that the SEC is trying to redeem itself in the eyes of the public. The debacle surrounding FTX has seemingly left some regulators and industry leaders feeling embarrassed for failing to detect the issues plaguing the exchange.
Markus Thielen, Head of Research and Strategy at Matrixport and author of the book “Crypto Titans: How trillions were made and billions lost in the cryptocurrency markets,” believes that a sense of embarrassment lingers among those who overlooked the problems at FTX. Thielen emphasizes the importance of regulators proactively identifying and addressing potential risks within the cryptocurrency sector.
Ripple CEO Brad Garlinghouse took to Twitter to echo the sentiment, suggesting that the SEC’s recent lawsuits are merely an attempt to divert attention from its own shortcomings in handling the FTX case.
The increased enforcement actions by the SEC, including the recent lawsuits against Binance and Coinbase, carry significant implications for the U.S. cryptocurrency sector. Investors and market participants now face a more stringent regulatory environment, with greater scrutiny placed on compliance and potential consequences for non-compliant behavior. As the SEC continues to ramp up its efforts, industry players will be compelled to adapt and ensure that their operations align with evolving regulations.
The FTX bankruptcy serves as a cautionary tale for regulators, reminding them of the need to exercise due diligence and vigilance in overseeing the rapidly evolving crypto industry. The aftermath of this incident, coupled with the SEC’s intensified enforcement actions, underscores the growing recognition that stronger measures are required to safeguard the interests of investors and maintain market integrity in the realm of cryptocurrencies.