EXCLUSIVE U.S. SEC's enforcement cop says crypto company amnesty is not on the table
WASHINGTON, Feb 28 (Reuters) - The U.S. Securities and Exchange Commission (SEC) will not offer amnesty to cryptocurrency companies that self-report violations of securities laws, although they may face smaller penalties, the agency's enforcement director told Reuters.
Gurbir Grewal's first remarks on crypto in an interview provide greater clarity as to how cryptocurrency companies can expect to be treated under the SEC's new Democratic leadership. The industry has complained that the agency has left it in the dark about how to comply with U.S. rules.
His comments, though, will disappoint some in the industry who had hoped the SEC would encourage companies flouting its rules to voluntarily come under its oversight by giving them a one-time free pass.
"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,’" said Grewal, who joined the SEC in July.
The agency has toughened its cryptocurrency clamp-down under Chair Gary Gensler, who has said many cryptocurrency products and platforms are governed by existing SEC rules.
Earlier this month, the SEC charged a subsidiary of crypto company BlockFi Inc with breaking the rules by offering an interest-bearing account. But it also created a pathway for the company to register a similar product with the SEC. The settlement laid out a road map for other companies with similar products. read more
Many in the industry had hoped the SEC would launch a self-reporting amnesty, according to attorneys, but Grewal said that was not on the table.
"Our message is that we’ll view their conduct more favorably if they come in - such as what the remedies will look like, including penalties, and finding a path to complying with the securities laws. That’s the benefit entities get from self-reporting violations and working with us."
Last year, BlockFi competitor Coinbase Global Inc (COIN.O) abandoned its efforts to launch a crypto-lending product after a public spat with the SEC over whether it should be deemed a security and fall under the SEC's oversight. The same state regulators that ordered BlockFi to cease offering its lending product issued a similar order to Celsius Network LLC. read more
Gensler, who taught a class at the Massachusetts Institute of Technology on the blockchain technology behind cryptocurrencies before joining the agency in April 2021, has described the industry as a "Wild West" rife with investor risk. Under his leadership, the SEC has shifted focus from coin offerings to platforms offering access to digital assets.
But with endorsements from celebrities including actor Matt Damon and basketball star LeBron James, investing in digital assets continues to grow in popularity.
Last year, the value of all cryptocurrencies surged past $3 trillion, according to crypto price and data aggregator CoinGecko, and BlockFi's crypto-lending product had as much as $14.7 billion in assets at its peak last year. A November 2021 Pew Research poll found that 16% of U.S. adults have invested in, traded or otherwise used cryptocurrencies.
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