SEC supercharges crypto enforcement, making room for 20 more investigators

The SEC announced the expansion of the Cyber Unit, drawing mixed reactions from the crypto community.

Digital market investigator at work

The Securities and Exchange Commission (SEC) announced Tuesday that the Division of Enforcement’s Cyber Unit would be renamed Crypto Assets and Cyber Unit (CACU), signaling a major shift in focus.

Currently, the unit has 30 investigators, but the SEC plans to add 20 more, including supervisors, investigative staff attorneys, trial counsels, and fraud analysts. The CACU will be responsible for “investigating securities law violations” in crypto offerings, exchanges, lending and staking solutions, but also in DeFi platforms, NFTs, and stablecoins.

The ostensible goal of the CACU will be to protect retail investors, something that SEC Chair Gary Gensler considers the Commission's priority. In a statement, Gensler praised the move, saying that the expansion would eventually make the SEC “better equipped to police wrongdoing in crypto.”

Gensler has repeatedly expressed concerns about the booming crypto sector in the US, likening it to the dotcom bubble, and vowed to extend TradFi investor protections to crypto assets holders.

Crackdown in progress

Over the past months, it’s become increasingly clear that the SEC is preparing for a wider crackdown on crypto, but the lack of clear regulations makes it difficult to imagine what the newly renamed Crypto Assets and Cyber Unit would do.

In the statement announcing the unit’s expansion, the SEC boasted over 80 enforcement actions “related to fraudulent and unregistered” crypto firms that the unit has completed since its formation in 2017, suggesting that the CACU would continue on that path.

However, investigating securities law violations in crypto in an orderly manner requires a clear understanding of which crypto assets can be described as securities, something the SEC and the Commodity Futures Trading Commission (CFTC) are still debating.

A draft of sweeping crypto regulations could be coming soon following President Biden’s executive order, which initiated a joint government effort to address the regulatory issues in crypto, but there’s no specific timeline.

Meanwhile, the SEC is headed for swift action.

“Leading with enforcement”

The Tuesday announcement drew the ire of a big part of the crypto community, which has long questioned the SEC’s fitness to regulate and investigate crypto companies. Hester Peirce, a SEC Commissioner whom crypto enthusiasts like to call “Crypto Mom,” also expressed skepticism.

At the same time, the SEC’s decision fueled bullish sentiment about crypto as a whole as multiple Bitcoin enthusiasts argued that it suggests cryptocurrencies are being taken seriously, passing a key threshold on the way to mainstream.