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The securities and Exchange Commission (SEC) announced on Tuesday that it will strengthen its enforcement department against cryptocurrency, add another 20 positions to the cryptoasset and network C team, increase the total number of staff from 30 to 50, and increase the agency's ability to investigate and prosecute securities law violations related to cryptocurrency products.
In a press release, the securities and Exchange Commission cited the booming period of the cryptocurrency market and its corresponding responsibilities to ensure that investors are protected from the risk of growing fraudulent investment plans.
"The cryptocurrency market has exploded in recent years, with retail investors bearing the brunt of abuse in this area. At the same time, cyber related threats continue to pose risks to our financial markets and participants," said gurbir s. Grewal, chief of enforcement at the U.S. Securities and Exchange Commission. "The strengthened encrypted assets and network supervision team will be at the forefront of protecting investors and ensuring the fairness and order of the market in the face of these key challenges."
As cryptocurrency is increasingly accepted by retail investors, fraud and abuse have kept pace. A prominent scam is called "pulling the carpet", in which the operator of a project solicits investment, promises high returns, and then simply absconds with the money - a classic pattern that recently occurred on a 3D avatar collection called frost and an encrypted token inspired by Netflix's popular program "squid game".
In its announcement, the securities and Exchange Commission expressed special concern about crimes related to mortgage and lending platforms, decentralized financial (defi) services, stable currency and NFT. The SEC said the new staff positions would include investigative lawyers, trial advisers and fraud analysts.
"Law enforcement's crypto assets and cyber stocks have successfully filed dozens of cases against those who try to use investors in the cryptocurrency market," sec chairman Gary Gensler said in a statement. "By nearly doubling the size of this key sector, the securities and Exchange Commission will be better able to regulate illegal acts in the cryptocurrency market, while continuing to address disclosure and control issues in cybersecurity."
Since becoming Chairman of the SEC in 2021, Gensler has often stressed the need for more power and resources to regulate cryptocurrencies. In August 2021, he described the industry as a "wild west" in investor protection and called on Congress to expand the agency's regulatory power over trading and lending platforms. Soon after, the securities and Exchange Commission of the United States filed its first complaint against the defi platform, accusing the operator of blockchain credit partners, headquartered in the Cayman Islands, of selling more than $30 million of securities without registration.
Although the expansion of the cryptocurrency enforcement team is a blessing for Gensler, it is unclear whether it is sufficient to meet the agency's full ambitions in this field. Earlier, Gensler highlighted a large number of new products and services that may fall within the scope of the SEC's jurisdiction and listed 6000 new projects that need to be evaluated to determine whether they comply with securities under U.S. law.