In 2023, the U.S. Securities and Exchange Commission (SEC) saw a significant surge in crypto-related enforcement actions, marking a notable uptick of over 50% compared to the preceding year. A report released by Cornerstone Research highlighted that the SEC’s intensified focus on digital assets led to 46 enforcement actions against various participants in the digital asset markets, marking the highest number since 2013 and a substantial 53% increase from 2022.
SEC crypto enforcement rose drastically in 2023
During the first quarter of 2023 alone, the agency initiated 20 actions, setting a new record for the highest number of enforcement actions in a single quarter. The report delineates that out of the 46 enforcement actions, the body pursued 26 litigations in U.S. federal courts and 20 administrative proceedings in 2023. Notably, there was a threefold increase in administrative proceedings compared to the previous year, with a slight uptick in the number of litigations. In total, the SEC imposed $281 million in monetary penalties for settlements reached during this period.
A significant aspect of the SEC’s enforcement actions in 2023 was the notable shift in the types of cases pursued. While 37% of the enforcement actions were associated with initial coin offerings (ICOs), indicating a decrease from the 47% reported in 2022, a remarkable 82% of the 17 ICO-related actions involved fraud allegations. Interestingly, the agency also initiated two administrative proceedings related to non-fungible tokens (NFTs) for the first time, underlining the evolving nature of regulatory scrutiny in the cryptocurrency space.
NFTs and a notable emphasis on firms in the sector
Chair Gensler, who has emphasized that ‘enforcement is a tool, not the destination,’ underscored the increasing momentum in the agency’s enforcement actions within the crypto space over the past two years. In 2023, the body brought charges against a total of 124 individuals or entities in cryptocurrency enforcement actions. Notably, 54% of these cases involved individuals, while 46% represented firms. It is noteworthy that the proportion of enforcement actions solely targeting individuals decreased from 50% in the previous year to 39%, signaling a shift in the body’s approach.
The body’s commitment to addressing cryptocurrency-related violations is further exemplified by the substantial monetary penalties imposed. In addition to the overall increase in enforcement actions, the SEC’s imposition of $281 million in penalties reflects the severity with which regulatory bodies are responding to non-compliance within the crypto industry. The report sheds light on the evolving dynamics within the SEC’s enforcement landscape, portraying a nuanced picture of regulatory actions against digital asset market participants.
As cryptocurrencies and related technologies continue to gain traction, regulatory bodies are adapting to the changing landscape, employing a mix of litigations and administrative proceedings to address a diverse range of issues, from ICO fraud to the emergence of NFTs. The SEC’s heightened focus on crypto-related enforcement actions in 2023 underscores the increasing importance of regulatory oversight in the evolving digital asset landscape. The surge in litigations, administrative proceedings, and monetary penalties indicates a proactive stance by the SEC in addressing potential risks and ensuring compliance within the rapidly expanding cryptocurrency market.
