SEC's Gurbir Grewal Defends Crypto Regulations amid Industry Criticism
Summary:
Gurbir Grewal, Enforcement Division Director at the U.S Securities and Exchange Commission (SEC), has defended the regulator against claims that crypto rules are being made up as they go along. In a speech at the SEC Speaks event, he outlined crypto companies' creative plans to dodge the SEC's jurisdiction. Using the fraud case of former FTX CEO Sam Bankman-Fried as an example, Grewal emphasized the necessity for enforcement actions in the sector. He maintained that the SEC's standards for security determination under the Howey test have been consistently applied and that these analyses are open to the public. The remarks followed criticisms from industry participants over the SEC's seemingly unpredictable crypto enforcement approach and SEC Commissioner Hester Peirce’s critique of the regulator’s crypto asset accounting guidelines.
Gurbir Grewal, Enforcement Division Director of the U.S. Securities and Exchange Commission (SEC), has responded to allegations that the SEC is creating crypto rules on an ad-hoc basis. In a speech prepared for an event called SEC Speaks on April 3, Grewal stated that numerous innovative attempts have been made by companies in the cryptocurrency industry to stay beyond the regulator's reach, all while conducting business in America. The enforcement director refuted claims suggesting the SEC was overstepping its bounds or governing through court actions, as seen in lawsuits brought against crypto companies.
Using the case of the former CEO of FTX, Sam Bankman-Fried, as an instance of necessary enforcement, Grewal talked about the fraud committed by Bankman-Fried, which led to a 25-year federal prison sentence. This fraud resulted in significant losses for the exchange's investors, causing some to sell their property or take up second jobs to cover the deficit.
Grewal expressed his hope that given the increasing number of courts supporting SEC's right to regulate crypto markets, the focus could shift to the actual risk-filled areas for investors in the crypto industry including fraud, asset co-mingling, conflicts of interest, lack of oversight, and absence of transparency.
In a victory for DeFi, Coinbase Wallet triumphs over SEC allegations, the enforcement director clarified that the SEC's criterion for deciding a security under the Howey test has always been consistently and transparently applied. He did not comment specifically on indications of the SEC considering classifying Ether (ETH) as a security rather than a commodity, which falls under the expertise of the U.S. Commodity Future Trading Commission.
Grewal emphasized that their examinations were not confidential but publicly accessible documents. He mentioned that even those debating in court that their actions were unrelated to federal securities laws, had historically utilized the Howey framework to assess crypto offerings.
The SEC was earlier heavily criticized for its seemingly arbitrary enforcement approach towards crypto firms and exchange-traded funds, with many in the industry believing this might cause many firms to leave the U.S. In March, a Utah judge sanctioned the SEC for acting in "bad faith" in a lawsuit filed against Debt Box, a firm.
These remarks from the enforcement director followed criticisms voiced by SEC Commissioner Hester Peirce on April 2. Peirce took issue with the SEC's accounting guidelines for institutions looking to guard cryptocurrency assets. Other staff and commissioners, including Peirce, will address the SEC Speaks event ending on April 3.
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Published At
4/3/2024 9:04:46 PM
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