According to a recent Wall Street Journal (WSJ) report, U.S. cryptocurrency exchanges list over a dozen digital coins that regulators deem illegal. The number of cryptocurrencies classified as such by the Securities and Exchange Commission (SEC) has almost tripled in the past year. According to SEC Chairman Gary Gensler, the SEC can only regulate digital coins considered securities, with most cryptocurrencies falling under this category.
The WSJ report states that many of these tokens have been distributed illegally since securities can only be sold to the public after being registered with the SEC and accompanied by financial and risk disclosures. Since late 2017, the SEC and U.S. courts have identified 76 cryptocurrencies as securities, with 16 available for trading on one or more major U.S. crypto exchanges.
This report emerges amid an ongoing dispute between the SEC and cryptocurrency companies, who argue that the U.S. lags behind other countries regarding digital asset regulations.
U.S. falling behind in crypto regulations
Ripple CEO Brad Garlinghouse, speaking at the Dubai Fintech Summit, expressed his concerns about the U.S. being overshadowed by other countries in the field of digital asset regulations. He mentioned that by the time the SEC lawsuit filed against Ripple in December 2020 is resolved, the company will have spent $200 million in defense.
Garlinghouse lamented the situation, stating that the U.S. is being outpaced significantly by other nations. While the United Arab Emirates has the Virtual Asset Regulatory Authority and the European Union has the Markets in Crypto Assets (MiCA), the U.S. has prioritized “politics ahead of policy.” Due to recent events, leading American exchanges such as Kraken Digital Asset Exchange and Coinbase opted to delist XRP, thus rendering it unavailable to users.
Increased enforcement against crypto companies
Under Gensler’s leadership, the SEC has intensified its enforcement actions against cryptocurrency companies. In 2022, the agency brought 30 cryptocurrency-related enforcement actions, a 50% increase from the previous year. In the first months of 2023, the SEC has already handed out 13 enforcement actions, putting it on track for an increase of over 25% compared to last year’s figures.
Gensler has shifted the focus from individual tokens to trading platforms catering to U.S. investors and increased the number of enforcement attorneys in the SEC’s crypto unit. Observers believe that these moves signal the SEC chair’s intention to execute further charges in the coming months as the agency seeks to cast as wide a net as possible.
