The U.S. Securities and Exchange Commission (SEC) has revealed that there are benefits for cryptocurrency companies to self-report their violations of securities laws to the regulator. While noting that there will be no amnesty, the SEC enforcement director said, “We’ll view their conduct more favorably if they come in — such as what the remedies will look like.”
No amnesty for crypto companies
Cryptocurrency companies that self-report security law violations to the U.S. Securities and Exchange Commission (SEC) cannot expect amnesty, but there are some benefits, said Gurbir Grewal, the agency’s chief enforcement officer, told Reuters on Monday.
The director elaborated:
Our message to them is not, ‘Register your product and we’ll just ignore the billions you have under management in this crypto lending product and your violations of the securities laws.’
SEC Chairman Gary Gensler has repeatedly urged companies in the crypto industry to come and discuss their products with the SEC in order to bring them under securities laws.
However, some crypto companies have voiced concerns that the rules are unclear.
Nasdaq-listed cryptocurrency exchange Coinbase, for example, brought its loan product to the SEC last year. However, the SEC threatened to sue the exchange if it went ahead with the launch. Coinbase then shelved its product. The exchange said at the time: “We don’t know why… We haven’t received an explanation from the SEC.”
Earlier this month, the SEC “charged Blockfi Lending LLC with failing to register the offers and sales of its retail crypto lending product, Blockfi Interest Accounts (BIAs).” The agency called it a first-of-its-kind action. Blockfi agreed to pay $100 million to settle the charges with the SEC and state regulators.
The SEC Director of Enforcement added:
Our message is that we will look more favorably on their conduct if they intervene, such as what remedies will look like, including penalties, and finding a way to comply with securities laws. This is the benefit entities get by reporting violations themselves and working with us.
Chair Gensler has named cryptocurrency regulation a priority for the SEC. He often stressed the need to put in place “basic investor protection.” He believes that many cryptocurrency exchanges are offering unregistered securities.
