SEC Faces Crypto Regulation and Staffing Challenges, OIG Report Reveals
Summary:
The U.S. Securities and Exchange Commission's (SEC) Inspector General's Office (OIG) highlighted cryptocurrency challenges in their annual report. This includes the frequent violations of securities laws by cryptocurrency market participants and regulation gaps for non-securities cryptocurrencies and certain stablecoins. It also remarked on the SEC's staffing issues, where attempts to hire crypto-specialist professionals are met with challenges due to heavy competition and potential candidates' reluctance to divest their cryptocurrency assets. The OIG also plans to closely examine SEC's hiring procedures in the future.
The U.S. Securities and Exchange Commission's (SEC) Inspector General's Office (OIG) published its annual report, outlining the biggest challenges in management and performance confronting the organization. Cryptocurrency issues were unsurprisingly featured prominently. The OIG's review emphasized the SEC's previous critique about inadequate disclosure and frequent violations of existing securities laws by cryptocurrency market players. Gaps in regulation associated with non-security cryptocurrencies and certain stablecoins were pointed out. Pleas have surged for comprehensive laws and collective efforts among agencies.
The study also touched on the developing yet limited court decisions on the application of securities laws to cryptocurrencies. Not as widely known are the SEC's ongoing staffing issues. The SEC has been orchestrating to recruit cryptocurrency specialists to bolster its examination, trading, markets, and enforcement departments. The General Counsel's Office and the International Affairs Office are also looking to recruit new personnel for crypto-related positions.
On the flip side, the SEC's recruitment drives are hindered by a limited applicant pool and intense competition from the private sector for cryptocurrency experts. A significant number of potential candidates own cryptocurrency assets, which disqualifies them from working with the SEC under Office of Ethics Counsel's directive. This notion has made many candidates reluctant to offload their crypto assets to join the SEC. The OIG addressed its plan to scrutinize the SEC's recruitment strategies more intensely in Fiscal Year 2024.
The OIG responds to external investigation requests while conducting internal audits. However, responses typically come at a slow pace. The OIG was urged to investigate a potential conflict of interest involving William Hinman, the former corporate finance director whose classification of Ether as non-security has been widely acknowledged. Hinman's financial ties to Simpson Thacher & Bartlett law firm, a member of the Enterprise Ethereum Alliance (EEA), was considered questionable by Empower Oversight, a civic-watch group who brought this matter to the OIG's attention in 2022. Although a proposal was made by lawyer John Deaton in a 2023 interview with Cointelegraph to reevaluate the OIG's assessment of the Hinman speech, no investigation has been carried out as of June 2023.
Published At
11/6/2023 9:48:28 PM
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