On May 3, 2022, the U.S. Securities and Exchange Commission (SEC) announced in a press release that it is nearly doubling the size of its enforcement unit overseeing cryptocurrency markets and cyber-related threats to 50 dedicated positions. The SEC is also renaming the unit within the Division of Enforcement as the Crypto Assets and Cyber Unit (formerly known as the Cyber Unit). SEC Chair Gensler states that, with the allocation of 20 additional positions to this unit, “the SEC will be better equipped to police wrongdoing in the crypto markets while continuing to identify disclosure and controls issues with respect to cybersecurity.” This unit has brought more than 80 enforcement actions relating to crypto asset offerings and platforms since 2017.

In his speech on April 4, 2022, Chair Gensler stated his desire for the SEC to play an increasing role in the oversight of crypto platforms, stablecoins, and tokens, and asked the SEC staff to propose appropriate new regulations in each of these areas. See April 7 GT Alert. Today’s announcement further solidifies and expands this stated intent, with the SEC marking six areas on which the expanded unit will focus:

  • Crypto asset offerings
  • Crypto asset exchanges;
  • Crypto asset lending and staking products;
  • Decentralized finance (DeFi) platforms;
  • Non-fungible tokens (NFTs); and
  • Stablecoins.

Given President Biden’s March 9, 2022, Executive Order on Ensuring Responsible Development of Digital Assets (see March 15 GT Alert) seeking a coordinated interagency approach to promote a “whole-of-government” policy of “responsible financial innovation,” the SEC continues to be in front of these issues, some of which may ultimately fall outside the scope of its jurisdiction as the Biden administration develops broader policy goals. For example, the secretary of the Treasury is charged with producing a report by July 7, 2022, on the future of money and payment systems, including the role of stablecoins.

The unit is also charged with continuing to tackle cyber-related threats. The release notes that the unit has brought numerous actions against SEC registrants for failing to maintain adequate cybersecurity controls or for failing to provide adequate disclosure in their registration statements and periodic reports of cyber-related risks and incidents.

As the regulatory scrutiny continues to evolve in the United States in response to both the March executive order and individual agency initiatives, market participants may wish to heighten their attention to existing regulatory guidance as well as dicta in press releases to reduce the risk of running afoul of U.S. regulators while the overall industry seeks clarity.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Barbara A. Jones Barbara A. Jones

Barbara A. Jones is a member of the firm’s Global Securities practice group and serves as Co-Chair of the firm’s interdisciplinary Blockchain & Cryptocurrency practice group. She is also co-coordinator of the firm’s interdisciplinary Conflict Minerals Compliance Initiative. Barbara maintains a diverse corporate

Barbara A. Jones is a member of the firm’s Global Securities practice group and serves as Co-Chair of the firm’s interdisciplinary Blockchain & Cryptocurrency practice group. She is also co-coordinator of the firm’s interdisciplinary Conflict Minerals Compliance Initiative. Barbara maintains a diverse corporate and securities law practice across industry groups, emphasizing complex international and domestic transactions, including blockchain and cryptocurrency transactions, private and public financings (including token offerings), dual listings, mergers and acquisitions, strategic collaborations and joint ventures, and licensing transactions. Her practice includes serving as a trusted advisor to public and private company boards of directors on governance and complex regulatory reporting and compliance issues. Barbara’s clients include financial institutions, private equity and venture capital groups, and companies in blockchain, life sciences and biotechnology, information technology, energy (traditional and renewable), mining, defense and security, telecommunications, media, entertainment and sports. Barbara is also active in the representation of Olympic athletes and sports-related organizations.

Barbara practiced U.S. law in London from 1990 through 2003, and headed the international capital markets practice of a major U.S. law firm from 1999 to 2003 before relocating to Boston. From 1997 to 1999, she served as Vice-President, Assistant General Counsel and Regional Counsel for capital markets with J.P. Morgan Securities Ltd. in Europe, the Middle East and Africa. Since returning to the U.S., she has continued to actively represent public and private companies, private equity groups and investment banks in the European, Scandinavian, African and greater Asian markets, including China.

Barbara is a past chair of the ABA’s Subcommittee on International Securities Matters. She is a frequent speaker at conferences relating to cross-border securities matters and strategic alternatives.