More than 50% Increase in SEC Cryptocurrency-Related Enforcement Actions in 2023 over 2022
The Securities and Exchange Commission (SEC) continues to prioritize enforcement actions related to cryptocurrencies, with a significant increase in actions taken in 2023. According to a new report from Cornerstone Research, the SEC brought 46 enforcement actions against various digital-asset market participants in 2023, marking a 53% increase from the previous year and the highest number since 2013.
Surge in Enforcement Actions: Highest Number since 2013
In 2023, the SEC brought 46 enforcement actions related to cryptocurrencies, representing a significant surge from the previous year. This marks the highest number of actions taken by the SEC in the cryptocurrency space since 2013. Additionally, the first quarter of 2023 alone saw the highest number of actions brought in a single quarter, with a total of 20 enforcement actions.
Litigations and Administrative Proceedings: A Closer Look
Of the 46 enforcement actions brought by the SEC in 2023, 26 were litigations in U.S. federal courts, while the remaining 20 were administrative proceedings. This indicates a notable increase in the number of administrative proceedings compared to the previous year. In terms of settlements, the SEC imposed $281 million in monetary penalties for the settlements reached in 2023.
Focus on Initial Coin Offerings (ICOs) and Non-Fungible Tokens (NFTs)
Approximately 37% of all the enforcement actions initiated by the SEC in 2023 were related to initial coin offerings (ICOs), a decrease from the previous year. However, 82% of these ICO-related actions involved allegations of fraud. Moreover, for the first time, the SEC initiated two administrative proceedings specifically related to non-fungible tokens (NFTs), citing the U.S. Supreme Court’s Howey test in bringing these actions.
SEC’s Focus on Implementation of the Howey Test
The SEC’s enforcement actions in 2023 were largely driven by the implementation of the Howey test. The agency focused on trading platforms, particularly in relation to their crypto lending and staking programs, as well as allegations of failure to register as an exchange, broker-dealer, or clearing agency. This demonstrates the SEC’s increased scrutiny of these platforms operating in the cryptocurrency space.
Individuals and Firms Facing Enforcement Actions
In 2023, the SEC charged a total of 124 defendants or respondents in cryptocurrency enforcement actions. Of these, 54% were individuals and 46% were firms. There was a decrease in the proportion of enforcement actions targeting solely individuals compared to the previous year, highlighting the SEC’s efforts to hold both individuals and firms accountable in the cryptocurrency industry.
As the SEC continues to prioritize enforcement actions in the cryptocurrency space, the industry awaits further developments in 2024, especially considering the recent approval of the first Bitcoin exchange-traded funds (ETFs) by the regulatory body. The increase in enforcement actions demonstrates the SEC’s commitment to maintaining investor protection and promoting fair and transparent practices within the evolving cryptocurrency landscape.
SEC Cryptocurrency Enforcement
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Neutral news. Analyst’s view: The surge in SEC enforcement actions in the cryptocurrency space indicates increased scrutiny and commitment to investor protection. The market may experience greater regulatory oversight and potential market consolidation as the SEC continues to prioritize enforcement actions in 2024.
