In a recent speech at the 2023 Securities Enforcement Forum, United States Securities and Exchange Commission (SEC) Chair Gary Gensler laid out the agency’s milestones for the year.
Significantly, the SEC has filed more than 780 enforcement actions, including over 500 standalone cases. These efforts have culminated in judgments and orders amounting to $5 billion, with $930 million already distributed to investors adversely affected by financial misconduct. Gensler noted that since December 2021, the SEC has sued 40 firms for regulatory violations, leading to penalties exceeding $1.5 billion. Moreover, he added that the SEC settled recordkeeping-related charges with 23 firms in the last fiscal year.
Gensler’s criticism of the cryptocurrency market sparks debate
However, it was Gensler’s candid remarks on the cryptocurrency market that caught the attention of many, especially those in the crypto community. Gensler notably declined to enumerate the individuals charged in the crypto space in his speech, describing it as a “highly noncompliant field.”
He maintained that the majority of crypto assets should fall under the jurisdiction of securities regulations. Gensler’s explanation centered on the broad definition of an investment contract, suggesting that many crypto assets would meet this criterion, thus requiring governance under existing securities laws.
Gensler drew parallels between today’s crypto ecosystem and the financial scenario of the 1920s, a time when securities laws were conspicuously absent. He argued that similar to that era, the contemporary crypto market suffers from a lack of regulations, which, in turn, has led to scams, frauds, and bankruptcies. Consequently, Gensler reiterated his long-standing view that stricter regulations are indispensable for the crypto market.
Besides spotlighting the SEC’s accomplishments, Gensler emphasized that the agency’s work impacts the broader economy. The regulatory actions, in his view, protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Hence, the SEC’s enforcement actions and judgments represent a crucial aspect of its role in economic governance. Additionally, the $930 million already reimbursed to harmed investors underscores the SEC’s commitment to justice in financial markets.
Members of Congress, key U.S. businesses, and individuals in the crypto community have urged Gensler to provide more clarity on cryptocurrency regulations. While Gensler’s critique of the crypto market is consistent with his past views, the call for greater regulatory transparency remains a contentious point. Moreover, with penalties exceeding $1.5 billion since December 2021 for various firms, the SEC’s enforcement strategy shows no signs of relenting.
