The head of the SEC’s Crypto Assets and Cyber Unit, David Hirsch, has issued a stern warning to the cryptocurrency industry, emphasizing the agency’s intent to bring charges against exchanges.
- David Hirsch, head of the SEC’s Crypto Assets and Cyber Unit, recently issued a stern warning to centralized and decentralized crypto entities.
- Hirsch emphasized that the SEC will bring charges against exchanges and dApps that fail to comply with securities law.
- High-profile lawsuits against Coinbase, Binance, and Ripple Labs are shaping the future of crypto regulation in the US.
The head of the US Security and Exchange Commission (SEC)’s Crypto Assets and Cyber Unit, David Hirsch, recently delivered a chilling warning to the crypto industry during his speech at the Securities Enforcement Forum Central in Chicago. Hirsch revealed that along with Coinbase and Binance, two major cryptocurrency exchanges that the agency has already sued, there are other centralized exchanges and decentralized finance (DeFi) protocols that are not complying with securities law.
Head of U.S. SEC Encryption Enforcement: SEC has not stopped pursuing exchanges and DeFi projects
David Hirsch, the head of the U.S. Securities and Exchange Commission's (SEC) crypto enforcement office, has stated that the SEC will relentlessly pursue crypto exchanges and DeFi…
— Whale Onchain (@whaleonchains) September 20, 2023
The DeFi Warning
Hirsch stated that the SEC will “continue to bring charges” against several other businesses that operate similarly to Coinbase and Binance. This announcement raises concerns for decentralized applications (dApps) as well, even though they operate differently from centralized exchanges. Hirsch emphasized that the SEC will not be deterred by the label of DeFi and will actively conduct investigations and enforcement actions in this space.
While decentralized applications run on smart-contract-enabled blockchains like Ethereum, they operate in a borderless and open-source manner, with all transactions recorded on the blockchain for transparency. Despite the SEC’s recent crackdown on the US crypto industry following the FTX disaster in November 2022, Hirsch admitted that the agency has limited capacity and cannot pursue all non-compliant businesses. With thousands of tokens in existence, the SEC lacks the resources to address them all directly. Additionally, there are numerous centralized platforms acting as unregistered exchanges.
SEC Losing Ground
The SEC is currently involved in several high-profile lawsuits against major players in the crypto industry. The agency filed a lawsuit against Ripple Labs over its issuance of $1.3 billion worth of XRP tokens in 2020. However, the SEC seems to be losing ground in this case, as a judge ruled earlier this year that Ripple’s sales of XRP may not have been a security offering.
More recently, the SEC sued Binance and Coinbase, and the outcomes of these lawsuits will shape the regulatory landscape for US crypto exchanges in the years to come. If the SEC prevails, tokens will face more significant hurdles to be listed on any US-based exchange.
To Sum it All Up….
The SEC has also argued that tokens like Cardano (ADA), Solana (SOL), and Polygon (MATIC) are securities, even though it hasn’t directly targeted many token issuers. This classification casts uncertainty on the demand for these tokens in the US. If the SEC succeeds in arguing that these tokens are securities in the Coinbase and Binance lawsuits, exchanges that want to list them will encounter more stringent compliance requirements.
In conclusion, the SEC’s Crypto Assets and Cyber Unit is intensifying its actions against the crypto industry, warning not only centralized exchanges but also decentralized finance protocols and applications. As the lawsuits against major players unfold, the regulatory landscape for tokens and exchanges in the US hangs in the balance.