US SEC Intensifies Pursuit of Crypto Exchanges and DeFi Projects

The U.S. Securities and Exchange Commission (SEC) continues to amplify its scrutiny on crypto exchanges and decentralized finance (DeFi) platforms, asserting that many may be in violation of securities laws.

Beyond Coinbase and Binance

David Hirsch, the chief of the SEC’s specialized Crypto Assets and Cyber Unit, has publicly commented on the ongoing investigations of crypto exchanges. Hirsch noted at the Securities Enforcement Forum Central in Chicago that their focus doesn’t stop with just Coinbase and Binance. He highlighted that there are other exchanges and DeFi platforms, whose operations could potentially skirt the laws, and they are equally under the lens.

Stepping Up Enforcement

The SEC, which traditionally employed a more laid-back enforcement approach, particularly towards well-established financial institutions, seems to have adopted an aggressive stance when it comes to crypto businesses. These entities, when charged, often confront the SEC in court, as these charges pose existential threats.

Hirsch’s division has been on a litigation spree, taking on more cases than is customary for the SEC. Notably, even though they have faced challenges like the recent Ripple case appeal, their zeal remains undeterred.

All-Inclusive Scrutiny

The SEC’s concerns stretch well beyond renowned exchanges. Hirsch stated, “Our endeavors span across intermediaries, whether they be brokers, dealers, exchanges, clearing agencies, or any other entities in the crypto space that fall within our jurisdiction.” He emphasized that failure to adhere to registration requirements or provide full disclosures will not be taken lightly.

Furthermore, the rise of DeFi doesn’t place it beyond the SEC’s gaze. Hirsch warns that merely tagging a platform as ‘DeFi’ won’t shield it from regulatory scrutiny. The enforcement division remains vigilant, poised to delve into investigations as needed.

Limits of Enforcement

While the SEC’s endeavors are commendable, they do have limitations. Hirsch accepted the observation of the event’s moderator, A. Kristina Littman, former SEC’s crypto enforcement head, who pointed out the potential capacity constraints of the commission.

Highlighting the vastness of the crypto realm, Hirsch acknowledged, “With potentially over 20,000 to 25,000 tokens in existence and numerous centralized platforms, some potentially acting as unregistered exchanges, it’s challenging to chase them all.”