The U.S. Securities and Exchange Commission (SEC) has signaled a significant policy shift by including cryptocurrency in its 2024 examination priorities. The development is pivotal for the digital asset industry, which operates outside the SEC’s regulatory purview.
The SEC’s Announcement
In a press release dated October 16, 2023, the SEC outlined the areas of emphasis for its 2024 examinations. Among those was the crypto sector, a space notorious for its lack of regulatory clarity. The Division of Examinations will scrutinize practices, products, and services believed to present “potentially heightened risks to investors or the integrity of the U.S. capital markets.”
Fox Business journalist Eleanor Terrett raised an interesting point—most cryptocurrency companies are not registered with the SEC and do not pay the requisite Section 31 fees that fund the agency. Terrett questioned whether SEC Chairman Gary Gensler is utilizing resources paid for by traditional, regulated entities to scrutinize an industry that the SEC has not yet been explicitly authorized to oversee.
The SEC’s focus on cryptocurrency intersects with a broader dialogue about the delicate balance between oversight and innovation. Regulatory attention can bring legitimacy to the crypto industry, potentially attracting more institutional investment. However, overly stringent regulation could stifle creativity and limit growth in a sector that prides itself on its disruptive potential.
Does the SEC’s 2024 crypto focus signal more registrations?
Eleanor Terrett’s query also poses a future-focused question: does the SEC’s 2024 priority list signal an expectation that more cryptocurrency companies will register with the agency? If so, the implications are significant. Compliance requirements, potential audits, and other regulatory measures could usher the crypto world into a new era of transparency and oversight.
The SEC also delved into particular aspects it aims to examine within the crypto space. These include customer advice standards, understanding products offered, custody requirements under the Advisers Act, and risk management concerning blockchain and distributed ledger technology. The agency also noted that examinations would be extended to transfer agents servicing crypto asset securities issuers or employing emerging technologies.
As the crypto industry rapidly evolves, the SEC’s 2024 exam priorities could pave the way for much-needed standardization or be seen as a controversial misallocation of resources, marking a pivotal moment in the sector’s regulatory landscape.
