According to David Hirsch, head of cryptocurrency enforcement at the SEC, the recent crackdown on Coinbase and Binance is just the tip of the iceberg.
Hirsch spilled the beans and revealed that they are currently on the prowl, investigating other exchanges and DeFi platforms that might be tiptoeing around legal boundaries. It’s not just the big names that have caught their attention: they have a whole list of suspects.
What is the SEC Planning?
The SEC’s Cyber and Crypto Assets Unit, led by Hirsch, is working tirelessly to ensure everyone follows the rules in this rapidly evolving space. So if crypto stock has declined, what’s coming next is even worse.
Hirsch said the SEC will cover all brokers, dealers, and clearing agencies in the crypto space. All entities under the jurisdiction of the SEC must comply with regulatory obligations, including registration and disclosure. This includes DeFi projects, which show a comprehensive application approach.
While addressing the Securities Enforcement Forum Central in Chicago on September 19, he stated the following:
“We are going to continue to be active in terms of intermediaries, they can be brokers, traders, exchanges, clearing agencies or anyone else who is active in this space, is within our jurisdiction and does not comply with their obligations, whether through registration or for failing to provide adequate or complete disclosures.”
Hirsch revealed that the agency is currently investigating several companies involved in activities similar to those seen at Coinbase and Binance. That is, trading assets considered securities without proper authorization from the regulator. In this sense,
Hirsch highlighted that the industry’s compliance violations go beyond these two organizations. In addition to Coinbase and Binance, the SEC also has open proceedings against Ripple and its executives over XRP. “We will continue to make these accusations,” Hirsch said without elaborating.
The SEC has traditionally sought settlements with regulated companies, typically large companies, to resolve regulatory violations. However, today, when charges can have a significant impact on the existence of companies, the SEC is more inclined to pursue litigation. Hirsch acknowledged that the SEC’s resources are limited, limiting its ability to address each token or platform directly.
Clamping Down on SEC’s Dexterity in DeFi Projects
Recently, regulatory bodies such as the SEC and CFTC have made it clear that they consider DeFi within their authority. In 2022, the CFTC took legal action against Ooki DAO, resulting in its operations being discontinued. However, the CFTC also settled with three DeFi platforms in September 2023, which had ties to associated companies. Additionally, the SEC issued a subpoena to SushiSwap this year, although no charges have yet been filed and associated companies could be a direct focus.
On September 19, Ripple lawyer John E. Deaton posted the following on X:
“Mark my word, @SECEnfDirector along with @GaryGensler and this Crypto Chief, David Hirsch, are going to lose the long game because they don’t have the most important and necessary thing on their side: the law. Btw, what happened to the SEC’s former Crypto Czar, Valerie Szczepanik?”
Deaton, a vocal critic of the SEC, believes that the commission’s regulatory stance is legally questionable. As the SEC continues its enforcement efforts, questions are being raised about its ability to prevail in cases against the industry.
By Leonardo Pérez
