The U.S. Securities and Exchange Commission is adding 20 more officials to a team dedicated to policing crypto markets, the latest move by Wall Street’s main regulator to crack down on digital tokens that may run afoul of its rules.
The additions will bring the SEC’s Crypto Assets and Cyber Unit to 50 people, the agency said Tuesday in a statement. The focus of the expanded enforcement group will include virtual-currency offerings, decentralized finance and trading platforms, as well as stablecoins, according to the regulator.
Over the past year, the SEC has moved aggressively to expand oversight of digital-assets with Chair Gary Gensler frequently saying he considers many of them to be securities and subject to his agency’s rules.
Sec scrutinizes nft market over illegal crypto token offerings
First, stablecoins raise public policy considerations around financial stability and monetary policy. Such policy considerations underlie regulations that banking regulators have with respect to deposits and that we at the SEC have with respect to money market funds and other types of securities. Many of those issues are discussed in the recent President’s Working Group Report. For instance, what backs these tokens so we can make sure that these holdings can actually be converted to dollars one-to-one? Further, stablecoins are so integral to the crypto ecosystem that a loss of the peg or a failure of the issuer could imperil one or more trading platforms, and may reverberate across the wider crypto ecosystem.
Second, stablecoins raise issues on how they potentially can be used for illicit activity.
Sec scrutinizes nft over crypto token
The Ripple-SEC lawsuit has dragged on for years and is believed to have slowed down Ripple’s development, as well as XRP’s price action.
The company revealed that it is pushing aggressively for the SEC lawsuit to be resolved. It also noted that the lack of regulatory clarity has been a major hurdle that is not only affecting Ripple but one that is a challenge for the entire crypto market.
The SEC lawsuit has not stopped Ripple from pursuing growth opportunities.
In February, the commission and state regulators levied a record $100 million fine against BlockFi, a popular virtual-currency exchange, for failing to register products that pay customers high interest rates to lend out their digital tokens.
As part of its review, the SEC is seeking information on so-called fractional NFTs, which involve breaking down the assets into units that can be easily bought and sold, said the people, who asked not to be named as the probe hasn’t been disclosed publicly.
The SEC declined to comment. Information requests from the regulator don’t always lead to enforcement actions.
The NFT market exploded last year, drawing attention for multi-million dollar sales and buy-in from celebrities, whom some of the assets depict.
It further demonstrates the Commission’s willingness to work with crypto platforms to determine how they can come into compliance with those laws.
BlockFi agreed to attempt to bring its business into compliance with the Investment Company Act, and its parent company announced that it intends to register under the Securities Act of 1933 the offer and sale of a new lending product.
The second area is the $183 billion (and growing) stablecoins market. Outside of use on crypto platforms, stablecoins generally are not used for commerce. Generally, you’re not using them to get a cup of coffee at Good Karma on your way to class from Center City.
Issuers of all kinds across a variety of markets successfully register and provide disclosures every day. If there are, in fact, forms or disclosure with which crypto assets truly cannot comply, our staff is here to discuss and evaluate those concerns. Any token that is a security must play by the same market integrity rulebook as other securities under our laws.
In conclusion, new technologies come along all the time; the question is how we adjust to that new technology.
But make no mistake: We already live in a digital age. That’s not what’s new here. We already can buy a cup of coffee with money stored in an app on our smartphones. The days of physical stock certificates ended decades ago.
There’s nothing new about people raising money to fund their projects.
It’s at the core of what makes markets work.
Some have asked if the current exemptions for so-called alternative trading systems (ATSs) could be generally available to crypto platforms. ATSs for the equity and fixed income markets, though, are generally used by institutional investors. This is quite different than crypto asset platforms, which have millions and sometimes tens of millions of retail customers directly buying and selling on the platform without going through a broker.
Thus, I’ve asked staff to consider whether and how the protections that are afforded to other investors on exchanges with which retail investors interact should apply to crypto platforms.
Second, crypto platforms currently list both crypto commodity tokens and crypto security tokens, including crypto tokens that are investment contracts and/or notes.
NFTs, and companies behind crypto-lending products.
Read More: SEC Scrutinizes NFT Market Over Illegal Crypto Token Offerings
“By nearly doubling the size of this key unit, the SEC will be better equipped to police wrongdoing in the crypto markets while continuing to identify disclosure and controls issues with respect to cybersecurity,” Gensler said in the statement.
The SEC team, which was previously known as the Cyber Unit, has brought more than 80 enforcement actions since its inception in 2017, the agency said.
To contact the editor responsible for this story: Ben Bain at [email protected]
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“If we have to summarize what are we trying to solve here, it’s ownership. We now have an opportunity to express ownership digitally,” Soto-Wright said. “The key word of this year will be royalties — the idea that you can take this intellectual property and you can monetize it.”
Regulators are left to make sense of it all. In March, Bloomberg News reported that attorneys at the SEC had sent subpoenas demanding information about certain token offerings as part of a larger effort to scrutinize creators of NFTs and crypto exchanges.
Names include Ashton Kutcher, Bruce Willis, Gal Gadot, Gwyneth Paltrow, Jason Derulo, Mindy Kaling, Shawn Mendes, Matthew McConaughey and Steve Aoki.
For MoonPay CEO Ivan Soto-Wright, it’s clear why artists and musicians are so attracted to NFTs: Web3 and the blockchain technology that underpins NFTs have the potential to disrupt how creators and artists manage their royalties without the help of middlemen, he said. Soto-Wright compared this disruption to artists who got into streaming early and benefited as a result.
NFTs have the potential to change the way films are made, produced and distributed by allowing film creators to maintain their royalties and bypass Hollywood’s existing order of financing by selling tokens. This system would also allow films to be owned by fans, the NFT owners.