US President Joe Biden’s call to allocate $2.4bn to the Securities and Exchange Commission (SEC) is a signal that the country is finally taking the regulation of the crypto industry seriously.
The move has been welcomed by SEC chair Gary Gensler who stated in his testimony at Wednesday’s budget meeting with the House Appropriations Committee that it was much-needed to tackle the misconduct in the emerging and new areas, especially in the crypto space. He added that the SEC needs new tools, expertise, and resources to address the issue.
The increased budget will enable the SEC to hire an additional 170 staff, with most of those positions in the agency’s enforcement and examination divisions. Gensler further stated that the 2022 budget would allow the agency to increase its staff levels above its headcount from 2016 for the first time, but the SEC remained stretched thin. The SEC chair emphasized that the crypto industry is akin to the wild west and rife with non-compliance, and urged for the SEC to grow along with the expansion and increased complexity in the capital markets.
In 2022, the SEC has already announced more than 750 enforcement actions, with 30 of them directly related to the crypto industry, representing only 4% of the total actions taken. However, there has been a 36% increase in the number of enforcement actions compared to 2021, which saw 22 actions announced. Fines issued for crypto offenses amounted to $242 million. Gensler reiterated his stance that most cryptocurrencies are securities and added that overseas entities that sell to US investors must come under their securities law.
Following the hearing with the House Appropriations Committee, Gensler also highlighted that the SEC takes the lead in defining what security is, not necessarily legislation, and that existing securities laws cover most of the activity happening in the crypto markets. With the additional funding, the SEC can better equip itself to combat the misconduct in the crypto industry and strengthen the enforcement of securities laws. This development sends a strong signal that the US authorities are stepping up to regulate the crypto industry, which could bring much-needed stability to the sector.
