Global regulators look for US guidance on crypto, says SEC official

The Unit­ed States has always been a glob­al leader in secu­ri­ties reg­u­la­tion — and cryp­to is no excep­tion — accord­ing to Kristin Pauley, assis­tant direc­tor of the Cryp­to Assets and Cyber Unit at the US Secu­ri­ties and Exchange Commission.

“Many reg­u­la­tors look to the US for guid­ance and leadership…that’s def­i­nite­ly what we’ve seen in the cryp­to space as well,” Pauley said Tues­day after­noon dur­ing a pan­el dis­cus­sion at the Secu­ri­ties Enforce­ment Forum Cen­tral con­fer­ence in Chicago. 

Inter­na­tion­al coop­er­a­tion between reg­u­la­tors is com­mon, Pauley added. The SEC often leans on the Inter­na­tion­al Orga­ni­za­tion of Secu­ri­ties Com­mis­sions — a glob­al effort with more than 200 mem­ber nations — to assist on enforce­ments against indi­vid­u­als and com­pa­nies in oth­er countries. 

“One chal­lenge we often face is that these cryp­to firms…can claim over­seas juris­dic­tion, even when offer­ing prod­ucts to US investors,” Pauley said. 

The com­ments come as the agency ramps up its cryp­to enforce­ment arm, bring­ing 30 cryp­to-relat­ed enforce­ment actions in 2022 and more than 25 so far in 2023. SEC Chair­man Gary Gensler has pur­sued an aggres­sive dig­i­tal asset agen­da, not­ing on sev­er­al occa­sions that the “vast major­i­ty” of tokens fall with­in his agency’s jurisdiction. 

Abe Cher­min, vice pres­i­dent at Cor­ner­stone Research and fel­low pan­elist along­side Pauley, not­ed that often­times, tokens are immune to neg­a­tive price move­ments fol­low­ing some of these charges and law­suit announcements. 

In two recent SEC lit­i­ga­tions — the Bit­trex case and the agency’s charges against a for­mer Coin­base employ­ee for alleged insid­er trad­ing — var­i­ous tokens were named and list­ed as secu­ri­ties by the SEC, but no sig­nif­i­cant price moves were observed. 

“Sur­pris­ing­ly, a token gets named in a big law­suit, not a lot of price change,” Cher­min said. 

Cher­min added that the health of a token’s under­ly­ing net­work is far more indica­tive of any pos­i­tive or neg­a­tive price movements. 

Kather­ine Kirk­patrick Bos, chief legal offi­cer, Cboe Dig­i­tal, agreed with Cher­min that these find­ings are sur­pris­ing, and she also not­ed that the cryp­to indus­try as a whole is large­ly an anomaly. 

“It doesn’t seem like any­one is afraid to engage with Coin­base right now,” Kirk­patrick Bos said, refer­ring to the cryp­to exchange’s ongo­ing law­suit with the SEC over alleged secu­ri­ties laws violations. 

“The lev­el of insti­tu­tion­al engage­ment with a com­pa­ny that’s being sued by a reg­u­la­tor… it’s break­ing the mold,” Kirk­patrick Bos added. 

The indus­try should keep an eye out for more cryp­to enforce­ment actions in the near future, David Hirsch, head of the SEC Cryp­to Assets and Cyber Unit, said Tuesday.

The SEC and CFTC’s fis­cal years close at the end of the month, giv­ing reg­u­la­tors less than two weeks to file charges.

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