A mixed weekend for crypto
Partner and co-chair of Herrick's Securities Litigation and Enforcement Group, Arthur G. Jakoby, spoke with Banking Dive about the Securities and Exchange Commission ("SEC") abandoning its enforcement actions against two cryptocurrency exchanges.
The article noted that this "marks an end to the SEC’s yearlong pursuit of Robinhood, and its multi-year pursuit of Coinbase." According to Arthur, it also marks an end of what the crypto world has long called "regulation by enforcement" – a time of few crypto-specific regulations but lots of regulatory hammer drops.
"The era of regulation by enforcement is dead," Arthur said. "It’s over."
Closing the book on cases against crypto firms "makes perfect sense" when current SEC leadership differs so greatly from the leadership during the prior administration, Arthur said.
"Now, we don’t even have proposed rules and regulations yet. Not only do we not have proposed rules and regulations, Congress hasn’t debated them – but if the SEC is convinced that there are going to be new rules or regulations, it really doesn’t make any sense to continue prosecutions against rules that are going to become extinct," he said.
The article highlighted the SEC announcing the creation of the Cyber and Emerging Technologies Unit, which has been tasked with combating cyber-related misconduct, including fraud tied to crypto. But with crypto enforcements "expected to fall off a cliff" – the SEC imposed monetary penalties of approximately $5 billion in crypto-related enforcements last year alone – Arthur said he expects significant reductions in enforcement staff, with remaining staff directed to address specific crimes.
"A smaller SEC will likely focus on fraud cases where there are identifiable victims who have suffered monetary losses, rather than cases where it’s difficult to identify the victims," Arthur concluded.