As the U.S. Securities and Exchange Commission continues to scrutinize the crypto industry, the agency’s director of enforcement, Gurbir Grewal, says the regulator is not concerned with labels or technology, but whether securities are sold in a format that complies with the existing laws.
During an interview at an event hosted by Rutgers University’s School of Law and law firm Lowenstein Sandler last Friday, Grewal said the SEC is “concerned about supply” in crypto markets.
“When we look under the hood, when we kick the tires, we’ve seen a lot of DeFi products [and] DeFi offerings that are not decentralized or financial, just pure fraud,” Grewal said. “We have seen many stablecoins that are neither stable nor coins, but [are] fraudulent.”
The director of enforcement also stressed that crypto products and services such as protocols and smart contracts should protect against market manipulation and fraud, but failed to do so. “You can call it crypto… it doesn’t matter what you call it. It is the content and reality of what you offer. And if that offer has to be registered and you don’t register it, we will hold you accountable,” he said.
Earlier this month, the SEC sued the two largest crypto exchanges, Binance and Coinbase, for securities law violations in back-to-back cases, as well as other charges.
Grewal said the agency pursued the exchanges because it “has to be thoughtful about the cases we file that will have the most impact and deter other bad actors. [while] promoting compliance.”
More broadly, he sees the risks in the crypto market as “too great as we see a rapid decline in the crypto markets, and investors are getting hurt on the back end of it.”
While many people in the crypto industry are calling the actions “regulation through enforcement,” Grewal doesn’t feel that way. “It’s a catchy but tired chorus. What we do is enforce existing rules and regulations.”
Many companies in the web3 space disagree.