The U.S. Securities and Exchange Commission’s enforcement director has reportedly said cryptocurrency companies will not receive amnesty for reporting themselves for possible violations of securities laws.
According to a Monday report from Reuters, the SEC director of the agency’s division of enforcement, Gurbir Grewal, said the agency may view crypto companies’ conduct “more favorably” if they reach out first for self-reporting securities law violations. However, he added that though firms may face smaller penalties, they will not be completely off the hook.
“Our message to [crypto companies] is not, ‘Register your product and we’ll just ignore the billions you have under management in this crypto lending product and your violations of the securities laws,’” said Grewal.
The SEC enforcement director joined the agency from the New Jersey Attorney General’s office in July 2021. In November, he pushed back against criticism that the SEC would employ “regulation by enforcement” with respect to crypto and other securities:
“Let me first be clear that we encourage and welcome the use of new technologies for capital formation. They have the potential to make our markets more efficient and dynamic, and to increase access for investors. But — equally importantly — all securities offered or sold to U.S. investors – regardless of their form or name — must comply with the U.S. securities laws.”
Grewal’s reported statement seemingly stands in contrast to that of SEC chair Gary Gensler, who has repeatedly asked crypto firms to “come in and talk” — i.e. register their securities with the regulatory body. Gensler has said that many crypto firms and their products may fall under the regulatory purview of the SEC and need to be registered to ensure investors are protected. However, SEC Commissioner Hester Peirce, known by many in the space as “Crypto Mom”, has previously criticized the agency for its lack of regulatory clarity with respect to crypto firms and possible securities law violations.
Related: Powers On… The SEC takes reactionary moves against crypto lending
The SEC has seemingly stepped up its enforcement actions against crypto firms as the space continues to grow. In August 2021, the agency charged two individuals and a Cayman Islands-based company in a $30 million fraud case involving securities using DeFi technology. This month, crypto lending firm BlockFi said it would pay $50 million as part of a settlement with the SEC as well as $50 million in state-level enforcement cases over its alleged failure to register high-yield interest accounts.