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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